It was expected to be a bad quarter for General Motors. It ended up being abysmal.
GM reported that July auto sales crashed by a whopping 15%, nearly double Wall Street's already depressed expectations of a 8% drop, and with GM mothballing production across the country to catch up with lagging demand, it still sold only 226,107 vehicles as a result of double digits drops in Chevy, Build and Cadillac Sales of 15.3%, -30.5% and -21.7%, respectively. The only "good" performer was GMC, which dropped by "only" 7.3% Y/Y.
The company also reported that while the average transaction price was $36,000, or roughly $1,000 higher than a year ago, the incentive spending as a percentage of average transaction prices was 11.5%, near an all time high.
This is how the company explained this dramatic decline in production:
“We have strategically decided to reduce car production rather than increase incentive spending or dump vehicles into daily rental fleets, like some of our competitors,” Kurt McNeil, U.S. vice president of Sales Operations, says in a statement.
Which would be great, however judging by the almost negligible drop in dealer inventory, which saw the number of cars parked at dealer lots decline by just 40K to 939,831, resulting in a near record 104 days of sales, it appears that GM needs to shutter production for months on end to normalize GM's unprecedented channel stuffing.
Abysmal sales aside, however, the company remains quite optimistic: "Under the current economic conditions, we anticipate the second half of 2017 will be much stronger than the first half," Mustafa Mohatarem, GM chief economist says. Good luck with that anticipation chief GM economist.
And speaking of GM's "competitors", it wasn't any better there, with Chrysler reporting a July auto sales drop of -10.5%, also far below the 6.1% expected.
- Fiat brand -18%
- Chrysler brand -30%
- Jeep brand -12%
- Dodge brand -12%
- Ram brand sales were flat y/y
- Fleet sales -35%
And some other car makers:
- Ford down -7.4%, Exp. down -5.5%
- Volkswagen down -5.8%
- Honda down -1.2%
- Mazda down -3%
At this rate, the US auto sector could become the catalyst that finally tips the US economy over into recession.