GM Reducing Pick-up & SUV Production
For the first seven months of the year, General Motors’ pick-up truck and SUV sales dropped 9%, overall. Sales of the larger pick-up trucks dropped even more: sales of the larger Silverado models dropped 29%.
In response, GM has offered increasingly generous incentives on these models and predicts that it’s August pick-up sales will rebound. A GM spokesperson also said that large truck sales had increased “significantly.”
Even so, sales are below current production levels, so GM is cutting production by eliminating scheduled overhead at its truck and SUV plants for the balance of the year. That amounts to a 12% cut in production.
According to Tom Wickham, GM spokesman, the cuts are aimed at preventing the need for further incentives: “Reducing overtime production enables us to reduce pressure for excessive incentive spending, helping us keep brand and product residual values as high as we can.”
Toyota started the current truck incentive wars when it offered $2000 back to anyone who’d buy a Tundra. The war has escalated to the point that Chevrolet is offering $4000 back or five year interest free loans on some truck models. Overall, though, GM’s truck rebates have been lower than those of its competitors, including Toyota. Ford and Dodge have both offered substantial rebates because their models are older designs than those of General Motors. The GM SUV line is the newest in the industry.
As a corporate policy, GM has been attempting to avoid incentives. The company believes the long-term cost outweighs the short-term gain. While incentives bring buyers into the showroom, they also erode the brand’s resale value. That ultimately raises the cost of ownership, which makes the brand less attractive. In order to sell the, more incentives are required, and the process becomes an endless downward spiral.
All of the automakers understand this. But, at least in trucks, GM is the one that is in the best position to resist adding incentives. Past Tundra sales indicate that very few people want the Toyota, unless they’re paid to buy it. Dodge is stuck with the oldest design on the market until the new Ram is introduced next year. The Ford F-150 is also an older design, though not as old as the Dodge.
The plants affected are those in Janesville, Wisconsin; Arlington, Texas; Fort Wayne, Indiana; Flint, Michigan; Oshawa, Ontario; and Silao, Mexico. GM had previously cut truck production at its plant in Pontiac, Michigan.
So, if you’re thinking of buying or leasing a new GM pick-up, now might just be the market’s sweet spot