GM Sees Less Downtime in 2018, Minus Pickups; Korea ‘Challenging’

General Motors expects its North American plants to be up and running more often in 2018 than in 2017, with the exception of its pickup assembly plants, as it will begin producing its next-generation models.

“I would look at this broadly speaking because it’s early days and we are always evaluating the best ways to optimize the downtime and everything else, but I would say overall there’ll be less downtime in 2018 vs. 2017 – significantly less, but trucks will be more, and whether that’s four weeks or five weeks or six weeks we will look toward optimizing that,” Chuck Stevens, GM’s chief financial officer, tells media today during a conference call to discuss third-quarter earnings.

GM shut down its pickup-truck assembly plants for six weeks in the just-ended third quarter to control inventory levels which ballooned in a slowing U.S. new-vehicle market.

The reduction in North American wholesale volume in the third quarter, 26% or 268,000 units, dropped dealer inventory by 160,000 units from June 30 to Sept. 30, although the majority of the volume and inventory reduction was due to slicing passenger-car builds, not pickups.

GM will begin building its next-generation large pickups and SUVs on the new T1 platform next year, and the shift from old-to-new generation models will take a couple of years as the automaker works its way through revising the broad range of variants it offers in the Chevy Silverado, Suburban and Tahoe and GMC Sierra and Yukon lineups.

“I think the biggest portion of that will be next year, and we’ll get that full benefit (of sales of the new-gen pickups and SUVs) in 2019, Stevens says.

He notes GM’s current pickup lineup has been able to maintain market share of 35% despite the current GMT-platform-based vehicles being in the twilight of their lifecycle. However, in WardsAuto's U.S. Large Pickup segment GM's entries were the only models trailing year-ago through September. Silverado volume dipped 1.6% and Sierra fell 6.1% in the 9-month period.

WardsAuto data shows GM’s U.S. light-vehicle market share in the third quarter rose to 17.7% from 17.4% in Q3 2016, and through September stood at 17.1% vs. 17.0% year-ago.

GM fine-tunes its year-end dealer inventory target in North America to 70 days, down from the 70-75-day range previously stated. Stevens predicts pickup days’ supply at the close of the year will be in the 80-day range, CUVs in the 60-day range and passenger cars in the 50-day range.

“I think that’s a good launch point when you think about 2018,” he says, adding the nominal number is expected to be roughly 800,000 units in dealer inventory, down from 860,000 at the end of 2016. GM says it had 821,000 units in North American dealer inventory on Sept. 30.

Meanwhile, as GM mostly exited Europe with the sale of Opel-Vauxhall to PSA – resulting in a Q3 2017 loss of nearly $3 billion relating to a $5.4 billion charge from the sale – it may be looking to shed more unprofitable business units.

Stevens adds a little fuel to the rumors GM may next exit South Korea, which he admits has been a “challenging market.”

“We have a strong presence there, we have a strong brand there, a healthy market share, but the cost structure that’s there, not only for us but (the) overall industry in Korea, has grown to where it’s not sustainable,” he says.

Stevens says there will be more news to come on GM’s position in South Korea, as the automaker is taking action to try and “build a viable, sustainable business.”

GM says Q3 2017 marked the first time since the fourth quarter of 2014 that all of its business segments were profitable, including in the also-challenging region of South America which had its first profitable quarter in nearly three years.

GM booked net income of $52 million in South America vs. a net loss of $118 million in Q3 2016.

“Fundamentally we reduced our breakeven point in South America by 40% vs. the prior peak, not only South America but importantly in Brazil,” Stevens says. “And you’re seeing that play out in the results that we’ve started to put on the board in the last two quarters.”

Stevens says a shift in production in Brazil away from its higher-cost Sao Paulo assembly plant to a lower-cost plant in Gravitai has helped, and he sees further benefits in the future from the shift of 90% of GM’s volume in the region to a new global architecture by 2020.

He praises the team in South America for enacting the kind of changes that worked in North America several years ago: “Right-sizing the business (helped, as did) driving more flexibility from a cost-structure perspective, and if you look at some of the answers and benefits they’ve got from the labor negotiations, (they’re) well out in front of the competition building more flexibility around that.”

China once again led in vehicle sales, with GM selling 982,311 vehicles in the country in Q3, up 12.3% from Q3 2016. In the U.S. GM delivered 781,056, compared with 773,000 year-ago. It notes its U.S. daily rental sales accounted for less than 10% of total sales for the second consecutive quarter. Yet it notes total U.S. fleet sales (which include sales to government and business entities) as a percentage of retail sales rose to 17.4% in Q3 in the U.S., up from 15.5% in the year-ago period.

On the hot topic of future mobility, GM CEO Mary Barra says the automaker is hoping to open Cruise Automation offices in the European market it will soon fully exit in a traditional business sense. Not only has GM sold Opel-Vauxhall, but in the fourth quarter GM will close the sale of its financial operations there to BNP Paribas and Peugeot Groupe.

“Absolutely,” Barra says when asked if Cruise Automation offices in Europe are being explored. “We’re working extremely hard on the technology to have self-driving vehicles. We’re working hard to lead in that area. And then we’re already evaluating what markets make the most sense to generate the most shareholder value.”

She also says GM is keeping “all options open” on mobility partnerships, including the possibility of partners investing in Cruise Automation. “We’re having a lot of conversations. Everyone is talking to everyone. We think this is a very significant business that is accretive.”

While GM is testing the third generation of its autonomous-vehicle technology, as part of the Cruise fleet in San Francisco, it now also is working on its fourth-generation autonomous vehicle.

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