GM boosts incentives for its old trucks Chevrolet Silverado and GMC Sierra to $5,000 per vehicle.
If last month GM was offering incentives of less than $4,000 per vehicle, in December the automaker has raised the sum to as much as $5,000 per pickup. GM said that by doing this it protects its profits through the end of the year, competing with other automakers’ traditional year-end deals. But offering big incentives to attract customers without scaring investors or threatening profits is a hard game to play.
“Everybody is trying to figure out: Is GM going to do something dramatic to deal with the supply situation in December?” said Jesse Toprak, an industry analyst with TrueCar, a website that tracks new-car deals.
Edmunds.com said that the incentives offered this month almost match the ones offered last year, when GM’s Silverado incentive was $4,500, much lower than the $8,200 incentive package offered on Dodge Rams, or $6,500 offered by Ford or $7,450 for Nissan’s Titan pickup. GM announced that if necessary it will cut production than going too far on incentives.
“We don’t control what our competitors are going to do from an incentive standpoint,” Kurt McNeil, GM vice president of sales operations, told analysts and reporters. “We’re trying to stay disciplined.”
In November sales for the Silverado and Sierra dropped 8.3% in the US to 42,400 units, while Ford’s F- Series line was up 18% to 56,299 units and Ram pickups increased 23% to 24,337 units. With sales down, GM’s truck inventories increased 4.4% to 245,853 units, ‘a little above’ the company’s target of 200,000-220,000 units inventory goal for this year.
Inventories continue to go up as GM continues to lose ground in other markets and only relies on the North American one, where operating income reached $5.48 billion during the first three quarters. After GM gave news about its inventory status, analysts began to cut the 2012 earnings estimates. Efraim Levy of Standard made cuts by 27 cents to $3.30, and James Albertine of Baltimore cut 52 cents from 57.
“We continue to monitor GM inventory levels, still considerably higher than peers, but we see upside potential to 4Q12 GMNA gross profit given GM’s industry-low incentive spending,” said James Albertine
GM’s incentive spending through November dropped 3.7% to $3,107 per vehicles, while Ford’s dropped 1.3% to $2,624 and Chrysler’s increased 1.9% to $3,248.