GM Works to Protect Truck Profit Margins

As the top union official at General Motors’ truck plant outside Fort Wayne, IN, Rich LeTourneau, says he is used to fielding calls from dealers for the past couple of years, asking for “more trucks.”

Now, says LeTourneau, the shop chairman at UAW Local 2209, “They’re asking me to send them more customers.”

Six months ago, dealers could not get enough trucks but, as LeTourneau observes in a newsletter to Local 2209 members, the auto industry always has been – and as far as he can see, always will be – a cyclical business. But GM is reluctant to cut prices, he adds.

“I don’t think they anticipated 7.5% interest rates,” he says, which raises the monthly payments on a new Chevrolet Silverado built in Fort Wayne to between $1,500 and $2,000 per month as GM protects its margins.

Earlier this month in the Local 2209 newsletter, LeTourneau notes, “With the Feds increasing interest rates, it will put our trucks out of reach for most Americans. I don’t believe too many people can afford a $1,500 to $2,000 a month truck payment.

“The dealerships across the country that had been contacting me looking for more trucks are now contacting me looking for more customers to buy what’s on their lots. Although rumors were floating around pertaining to supply chain down time, I don’t believe anyone anticipated the lots would fill up this fast.”

The only way GM can avoid an oversupply is by adjusting their profit margins to offset high interest rates, he notes. “GM has publicly stated that in 2023 it anticipates slightly lower earnings of between $10.5 billion to $12.5 billion and they plan to maintain a 50-to-60-day supply of vehicles,” LeTourneau writes.

“As of today, GM has no intentions of offering rebates or incentives on our trucks at the dealerships. This might have been a good strategy for GM, but the timing couldn’t be worse for them,” he adds.

LeTourneau says in a telephone interview with Wards, “I do believe they’re going to have to offer rebates.” 

GM spokesman Dan Flores confirms in an e-mail the automaker is shutting down the Fort Wayne plant because it has too many trucks.

“Fort Wayne is taking two weeks of downtime in late March/early April – the Fort Wayne downtime is being taking to optimize inventory levels,” Flores writes.

Flores adds the GM truck assembly plant in Silao, Mexico,

“was down last week and this week due to a temporary part shortage. They are expected to restart next week. Oshawa (ON, Canada) and Flint (MI) are running regular production schedules. No planned downtime for those two plants,” Flores notes in his e-mail.

But LeTourneau says the Silao plant also was down for a week in February. Additionally, truck sales tend to drop in May, June, July and August and GM’s blue-collar workers are among the company’s best customers. But employees are not about to purchase a new truck with GM and the UAW heading into contract talks this summer.

“I know our people aren’t going to be going out to make any big purchases,” he says.

Analysts for Cox Automotive say higher interest rates have begun to take a toll on retail sales of new vehicles.

Cox’s Michelle Krebs observes the drop in the housing market brought on by rising interest rates is cooling off the demand for new pickups.

Sales of new single‐family houses in January 2023 were at a seasonally adjusted annual rate of 670,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. That’s 19.4% below the January 2022 estimate of 831,000.

Sales of pickup trucks traditionally rise and fall along with the housing market, Krebs says.

Meanwhile, turmoil in the banking sector, highlighted by the sudden collapse of the Silicon Valley Bank and reports of persistent inflation, make it appear unlikely the Federal Reserve Board will trim interest rates this spring.