GM will have to cut production or raise discounts as it deals with more than double a typical supply of trucks.
It is critical for GM to clear away that inventory as the new versions of the GMC Sierras and the Chevrolet Silverado are to be released in 2013 and represent the key to the automaker’s success in the following year. In 2011 GM’s big pickups accounted for 23% of the company’s US sales, being some of the most profitable models.
“If they continue to have these high inventories and then bring out the new product, that’s going to hurt the launch” of the new trucks, said Alan Baum, principal of auto-industry researcher Baum & Associates in West Bloomfield, Michigan. “It is more important to them that the new vehicles launch well.”
Adjusting production is of utmost importance for GM after its sales of the Chevrolet Silverado dropped 10% to 30,674 units in November and GMC Sierra sales fell 2% to 11,726 units. GM is expected to cut truck production by almost 50% in the first quarter of 2013 to 106,000 units from 210,000 last year, before the second quarter when the new trucks will start rolling off the assembly lines.