General Motors Left with Oversupply of Pickups
Automaker General Motors (NYSE: GM) has not had the best of summers so far when it comes to selling pickup trucks. The company's dealers had a 122-day supply of Chevrolet Silverado and GMC Sierra pickups in June, more than 50 percent above the maximum dealers would be hoping for at that stage.
To put the number into perspective, Chrysler was at 93 percent, while Ford (NYSE: F) was at 79 percent.
The good news for consumers is that GM is likely to be offering great deals on pickups for the remainder of the year. The bad news for autoworkers is that two GM plants in Indiana and Michigan have effectively ceased production for the time being.
According to the Detroit Free Press, “[GM], 33% owned by the U.S. after its 2009 bankruptcy, has 280,000 Silverado and GMC Sierra pickups on dealers' lots around the country. If sales continue at June's rate, that would be enough to last until November. After GM's truck inventory swelled to 122 days' worth of average sales, the company said 100 to 110 would be normal going forward for such a large and complex line of vehicles, compared with 60 to 70 days for most models.”
The big concern is that General Motors is heading back to financial difficulty if it continues to fall into its old bad habit of producing more vehicles than the market can support. It is certainly an issue that needs to be addressed, and company execs will need to ensure that this is just a temporary blip.
GM announced that it was going to be closing the Detroit-Hamtramck plant where it makes the Chevrolet Volt between September 17 and October 15. The plant was previously idled in March of this year.
A GM spokesman told the Auto News last week that, “We don't comment on production schedules. We continue to match supply and demand."
However, the idle Hamtramck plant, plus the glut of pickups that the company has sitting around, suggests that General Motors' math has been a little off lately.
On Tuesday afternoon, General Motors traded at about $21, down roughly 0.85 percent.
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