June Sales Underscore GM’s Game Plan

DETROIT – General Motors sales executives say the automaker plans to continue with a strategy emphasizing the retail side of its business over sales to rental customers, even if it comes at the cost of further market-share losses.

“We’re committed to it,” says Kurt McNeil, vice president-U.S. Sales Operations at GM.

The automaker’s U.S. market share in May dipped to a record-low 15.7% and last month GM grabbed 16.9%, compared with 17.6% year-ago, according to WardsAuto data. So far this year, GM’s market share stands at 16.7% vs. 17.7% in like-2015.

The market-share losses have come almost entirely on fewer deliveries to rental-car companies, a historically narrow-margin sales channel and one GM executives cite as a big factor behind the erosion of its brands, especially Chevrolet, over the years.

Cheaply contented rental cars can leave consumers with poor impressions of the product; compete against new GM products when rentals go to the secondary market; and weaken the resale value of GM products in general, a longtime lament of GM dealers.

GM sales strategy for long haul, McNeil says.

“You build brands with strong residual values,” McNeil says.

GM’s strategy last month resulted in 5,690 fewer sales to rental companies and the automaker’s overall fleet sales, including government and small businesses, dipped to 18.0% of its sales mix, compared with upwards of 25% in a given month historically. For the year, GM has trimmed more than 88,000 units from rental sales.

Retail sales, or deliveries to everyday customers, also provide much juicier profits to GM, the automaker says. Their stronger resale values directly correlate to the value of a dealer’s store, too.

“Franchise worth and residual values are directly related,” says Steve Hill, vice president-Sales, Service and Marketing at GM.

GM’s retail sales last month grew 0.1 percentage point to 17% on an industry basis, giving it retail market-share gains in 13 of the past 14 months dating back to 2015, the automaker says.

So far this year, GM says its retail deliveries are up more than 1.0% and the automaker’s retail share has grown 0.4 percentage point to lead all full-line sellers. GM’s volume Chevrolet brand has been the biggest winner, the automaker says, with retail sales up 3% this year and retail market-share 0.5 percentage point higher.

The strategy underpins GM’s hopes to become the industry’s most profitable, if not largest-selling, automaker.

But not everyone wins. Some dealers complain sales are being lost because the strategy also comes with tighter inventories, meaning there are fewer cars and trucks for customers to choose from. Investors also watch market-share numbers closely as a barometer of an automaker’s strength to control monthly industry sales trends.

However, McNeil says GM’s strategy looks beyond month-to-month results.

“We’re in it for the long haul,” he says.

GM’s game plan also calls for reducing incentive spending, which fell below the industry average in June, the automaker says. Average transaction prices grew to $35,423, or $1,800 above year-ago and $4,400 higher than the industry average in the month, GM says.

GM sales overall in June fell 5.4% on a daily basis to 255,210 units from 259,353 cars and trucks in the same period last year. There was one additional selling day in the month compared with last year.

Dealers win with retail focus, Hill says.

Trucks outsold cars 173,013 to 82,197, reflecting an ongoing industry trend. The Chevy Silverado large pickup led all products on volume of 49,662, but down 7.4% from 51,548 last year. Sales of the Chevy Tahoe large SUV increased 2.7% to 7,891 from 6,192 to push the brand’s overall volume for the month up slightly to 181,387 from 181,256 but down 3.8% on a daily basis.

Chevy car sales were paced on volume basis by the Cruze compact car at 18,666, although year-over-year deliveries tumbled 20.7% from 22,647. Sales of the Malibu midsize car grew 1.9% to 16,138 from 15,228.

Buick sales tumbled 9.1% to 16,575 units from 17,531, while Cadillac deliveries edged up 1.5% to 14,263 from 13,515. GMC sales slipped 12.2% to 42,985 from 47,051.

Through the first half of the year, GM sales overall were down 4.4% to 1.4 million units from 1.5 million.

The automaker says inventories of some key products, such as midsize and large pickups, as well as small and midsize CUVs have been tight but production plans in the second half of the year should increase availability.

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