GM Not Worried But Ready for Gas Price Spike Just the Same

Rising gasoline prices won’t put a crimp in the U.S. market this year, General Motors officials predict, adding they believe the car maker is well-positioned to weather any short-term spike in demand for more fuel-efficient vehicles.

An ongoing release of pent-up demand and steady economic growth will continue to drive the industry toward what GM now thinks will be the higher end of its 13.4 million- to 14 million-unit light-vehicle forecast for 2012, says Don Johnson, vice president-sales operations.

“We do not believe short-term fluctuations in gas prices will curtail industry growth this year,” Johnson tells analysts and media in discussing GM’s February U.S. sales results. “Consumer sentiment and the economy are in much better shape than they were a year ago. If gasoline prices impact the mix of vehicles, we’ll be ready.”

Johnson points to GM’s expanding portfolio of fuel-efficient vehicles.

“Three short years ago, 16% of the vehicles we sold achieved at least 30 mpg (7.8 L/100 km) highway,” he says. “Today, that number is closer to 40%.”

GM inventories also are in good shape should consumers clamor for more high-mileage models, Johnson contends.

Car stocks ended the month at 245,000 units, or a 70-day supply, he says. The Chevrolet Cruze, which posted its sixth-straight month of year-over-year gains, is at a 65-day supply. The Chevrolet Sonic, recording its best month ever in February, is at a 48-day supply.

There’s also a roughly 3-month inventory of Chevrolet Volts, sales of which were up 264.1% in volume from year-ago. GM says it is beginning to fill the pipeline for the extended-range electric vehicles in California, where demand is expected to be “very strong” now that the Volt qualifies to travel the state’s high-occupancy lanes.

“I would say we’re fairly comfortable with that,” Johnson says of GM’s inventory mix.

He also defends the company’s strategy to pile up fullsize-pickup stocks ahead of an extensive changeover to a new model later this year, predicting rising gasoline prices won’t slow demand for the work trucks.

“We expect fullsize pickups to follow the usual seasonal trends, with higher sales in the second half,” he says, noting 2010 saw the sector account for 10.5% of industry sales in the first half and 11.6% in July-December. “We expect that seasonal difference to play out and end up in that range again this year.”

Even if gas prices put the brakes on overall industry sales or cause a mad rush by consumers to purchase higher-mileage vehicles, Johnson says the trend won’t last.

“If gasoline breaks through some technical barrier, people may hesitate, but once (the price) stabilizes they will come back to the market,” he says. “It’s typically a short-term phenomenon. That’s why we don’t think there will be an impact over the course of entire year.

GM sold 209,306 vehicles in February, down 2.9% on a daily basis from year-ago. Fleet sales rose 20%, primarily on a 35% increase in the commercial market, Johnson says. Rental fleet sales increased 15%.

GM’s overall fleet mix held at 25%, which it says is spot on with its long-term target.

The auto maker says its incentive spending declined both year-over-year and from January to February.

Cadillac sales were one of the dark spots in February, with overall volume declining 27.0%. The plunge is being blamed on an unfavorable comparison against year-ago, the brand’s best February on record, the phase out of the DTS and STS models and a strategic 81% reduction in rental-fleet sales in the month.

“As we get further into the year, the whole thing changes. We’ll introduce two brand-new vehicles and a significant mid-cycle enhancement to a third,” says Kurt McNeil, vice president-Cadillac sales and service. “So the immediate future is very bright. We’re just in this period now we find ourselves in.”

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