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 On Tuesday, Chuck Stevens, GM's new chief financial officer and a
key member of CEO Mary Barra's executive team, was dispatched to New
York to update Wall Street analysts on the automaker's financial
outlook, including the performance of its big trucks.
A key message, according to analysts: GM remains focused on
maintaining pricing "discipline," especially on the hugely
profitable full-size pickups in a highly combustible and fluid U.S.
market.
GM is "working on marketing strategies to gain traction at the lower
end of the (pickup) market without giving up pricing gains at the
high end," said UBS Securities in a Wednesday client note.
Analysts reacted guardedly to the message and observed that GM
revealed few details about recent incentives.
New data on February sales incentives, released to Reuters late on
Wednesday by two industry research firms, shows rising discounts on
GM trucks.
Average per-vehicle discounts on GM's 2014 Chevrolet Silverado
pickup jumped more than $500 to $4,218 in February, from $3,715 in
January, according to Autodata, even as Silverado sales fell 12
percent from February 2013 and Chevrolet's share of the full-size
truck segment dropped more than three percentage points to 22.5
percent.
In comparison, Ford Motor Co <F.N> sliced discounts in February on
its industry-leading F-series pickups to $2,835. F-series sales rose
nearly 3 percent from the previous year, commanding more than 34
percent of the segment.
GM redesigned the Silverado and GMC Sierra last summer. Ford plans
to introduced a redesigned F-150 late this year.
GM confirmed the meeting between Wall Street and CFO Stevens. A GM
spokesman, asked about the February incentives, said spending rose
in February to help reduce inventories of older heavy-duty versions
of the Silverado and Sierra as the redesigned heavy-duty versions
began to arrive at U.S. dealers.
The average truck incentives at GM were skewed by much higher
discounts averaging up to $5,972 on the heavy-duty Silverado 2500HD
and 3500HD models, which commercial buyers prefer, and lower
discounts of $3,593 on the light-duty Silverado 1500, aimed at
consumers, according to research firm Edmunds.com.
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GM has a bit more room to maneuver on sales incentives, including
rebates, because its average per-vehicle transaction prices, which
include any discounts, remain higher than Ford's.
In February, GM boasted one of the industry's highest average
transaction prices on its U.S. vehicles: $34,090, down a fraction
from $34,306 in January. In comparison, Ford's ATP rose slightly to
$32,625, from $32,307 in January, according to research firm TrueCar.
GM's pricing edge has an upside and a downside: While the automaker
says it still can't build enough of its more expensive high-end
trucks, sales of low-end V6 models are still weak.
Analysts left the meeting with the GM CFO without major concerns.
Barclays auto analyst Brian Johnson, in a Wednesday client note
after the GM briefing, said that GM's beefy transaction prices,
especially on high-margin pickups, "provide some room for increased
incentive use if needed" later in the year.
Both Chevrolet and Ford dealers have been offering fat discounts of
$9,000 and more on their big trucks, with dealers contributing a
portion of the savings.
GM's and Ford's full-size trucks are among the most profitable
vehicles in the industry, accounting for more than two-thirds of
U.S. automakers' global pre-tax earnings even though they make up
just 16 percent of North American vehicle production.
Goldman Sachs analyst Patrick Archambault, in a client note, said
"the stage (is) set for year-on-year margin acceleration" at GM in
the second and third quarters, driven in part by the recent launch
of the heavy-duty Silverado and Sierra pickups and companion
Chevrolet Suburban and Tahoe and GMC Yukon full-size SUVs.
(Reporting by Paul Lienert and Ben
Klayman in Detroit; editing by Peter Henderson)
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