For years, the thousands of U.S. dealers selling General Motors
Co. vehicles were saddled with large cars and trucks when customers
were looking for small vehicles. Now, as U.S. auto sales climb to a
record pace, many of these same dealers say they are begging for
pickup trucks and sport-utility vehicles.
"We absolutely have more customers that want trucks than trucks
to sell," Bill Fox, co-owner of Sharon Chevrolet in upstate New
York, said in a recent interview. Rich Walicki, vice president of
Jim Winter Buick-Cadillac-GMC in Jackson, Mich., said: "We could
have sold more trucks earlier in the year if we had more."
The mismatch is again costing GM precious U.S. market share. Its
current 16.7% chunk of the domestic market is a
more-than-three-decade low for the nation's largest auto maker. In
contrast, No. 2 U.S. auto maker Ford Motor Co. has crept up to
15.3% and should inch closer in June, say analysts.
While GM executives have pinned the decline on a decision to
sell fewer low-margin fleet vehicles, its inability to keep up with
sizzling demand for pickup trucks and sport-utility vehicles also
plays a major role in the decline.
It has been several years since domestic auto makers battled one
another in bloody market share wars. More recently they have
focused on boosting margins by operating fewer factories and
running leaner. GM argues the tack allows it to spend less money
discounting its cars and more on making them better.
Still, with retail demand recently showing signs of a peak, GM's
rapidly weakening market position raises questions about its
ability to keep pace with already-low investor expectations. GM
shares were trading around $28 Wednesday, below the 2010
initial-public-offering price of $33 a share despite delivering
record first-quarter operating profit this year.
The market-share slump isn't just an inventory problem. While
Mr. Fox's lack of Chevy trucks reflects production constraints from
the company's aggressive downsizing before it emerged from
bankruptcy in 2009, critical product launches—such as a new
Cadillac crossover wagon—also have been delayed, and GM has stale
products in areas such as midsize crossovers and SUVs.
GM also is underrepresented in the profitable commercial-van and
truck market, where GM lags behind rival Ford. GM is developing new
commercial-truck products in a move to catch up.
Among the top 10 companies selling vehicles in the U.S., GM is
the only one to have sold fewer light trucks through May—the
segment that includes crossover wagons, SUVs and pickup trucks—than
a year earlier. As gasoline prices hover around $2 a gallon
nationwide, auto sales in the U.S. were up 9.6% through the year's
five months. But GM's once-dominant share of that segment has
slipped to 19.7%; Fiat Chrysler's is 18.8% and Ford's is 18.3%,
according to data provider WardsAuto.com.
After 15 years as America's truck king, GM risks falling behind
Fiat Chrysler Automobiles NV and Ford if it can't rush more
Chevrolet and GMC pickups, Cadillac crossovers and similar products
to dealer lots. Ford is riding a wave of momentum provided by fresh
products, while Chrysler's cheaper Ram lineup and popular Jeep
portfolio are fueling gains.
Auto makers report June auto sales on Friday, and investors will
be watching closely to determine whether GM's disappointing 18%
year-over-year May volume decline—including a 14% slide in truck
sales—was an anomaly or the start of a trend.
John Stapleton, GM's North America chief financial officer, said
this month the company was adding weekend shifts at truck plants
and taking other measures to better meet demand, but it is avoiding
investing new capital ahead of a potential market cool down.
GM, more than its Detroit rivals, is placing bets on a rapid
transition in urban areas to ride-sharing from new-car ownership
while funding stock buybacks and international expansion. The
company has shelled out more than $1.5 billion to invest in Lyft
Inc., a ride sharing company, and purchased a small autonomous
vehicle developer based in San Francisco.
It costs about as much as those investments to build a new
plant, but that is a venture GM is reluctant to embark on after
years spent trying to whittle down its manufacturing footprint.
"They know the down cycle will come [and] ultimately sales will
decline," said Rick Kwas, a Wells Fargo Securities equity analyst.
"They know what can happen."
Still, GM's recent release of more new passenger cars indicates
the company was unprepared for the rapid growth in sales of light
trucks. Nearly 58% of its sales this year through May were to
light-truck buyers, up nearly 10 percentage points from the same
period in 2012.
GM is in the midst of launching several new sedans, small cars
and new electric cars as those market segments continue to sag. In
contrast, some rivals including Fiat Chrysler are working to lower
their reliance on those types of vehicles. Mr. Stapleton, speaking
at a Citi Industrials Conference earlier this month, said the
company has lost market share in smaller and midsize-SUVs because
the company's offerings there are in some cases six to eight years
old.
Mr. Stapleton indicated fresh products for these lines were on
the way.
Mr. Fox, the Chevy dealer in Auburn, N.Y., said the company
could help itself by churning out more of the products that people
want to buy. The Chevrolet Colorado, a midsize pickup thriving in a
segment that Ford and Chrysler abandoned several years ago, is in
short supply because the product is built alongside vans in a
jam-packed Missouri factory.
GM is making moves to boost Missouri's output—including boosting
line speed and contracting some of the van production to Navistar
International Corp.—but it doesn't want to spend on additional
bricks and mortar.
Other crucial product launches, meanwhile, have experienced
hiccups. The Cadillac XT5 crossover, a replacement for the GM
luxury division's best-selling and profit-rich SRX, was delayed by
a parts-supplier problem. GM didn't have enough SRX inventory to
bridge the gap.
As a result, Cadillac's sales of crossovers declined 15% through
May compared with the same period a year earlier, according to
Autodata Corp., compared with the market's 9.8% increase in
crossovers during that period.
Write to Gautham Nagesh at gautham.nagesh@wsj.com
(END) Dow Jones Newswires
June 29, 2016 14:55 ET (18:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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