Gm pressured by bloating inventories of trucks and suvs

Gm Pressured by Bloating Inventories of Trucks and Suvs

The continuous declining sales is felt not only by US automakers but even by German automakers such as BMQ the producer of BMW 325xi parts but unlike German automakers, US car manufacturers particularly GM is experiencing great pressures brought about by its bloating inventories of SUVs and trucks that remained unsold.

For this month the automaker is expecting a 19 percent drop as compared to the same period last year. GM sales have declined by 21 percent last June that is aside from the double digit dropped in sales of both full-size trucks and SUVs that were recently launched in the market.

Meanwhile two of GM’s rivals, Toyota and Ford appear to be having better luck in managing the depressing sales return of trucks and SUVs in the market. GM as a solution has tried to launch a blowout clearance campaigns like the one it has employed in the past years but unfortunately the automaker got stuck with an overabundance of inventory forcing it to raise incentives or to cut production.

The problem with cutting production is that GM’s book revenues are affected since it is based on the vehicle produced and stopping production could jeopardize the chance of the company to stabilize its earnings in North America. And that’s not all, an increase in incentives would also have an effect on profits.

According to consumer research firm, Toyota has been ramping up incentives for this month on year-over-year basis meanwhile its rivals Ford and GM has lessened spending on discounts and rebates.

It can be noted that the past incentive deals such as the 2005 employee-discounts-for-everyone together with last summer’s 0 percent financing for 72 months has been very costly for the automaker. Although those campaigns have boosted sales but it has greatly affected the figures in the final months of the year since people were pulled into the market sooner than the normal time that they would be purchasing for a vehicle.

Last June, according to Autodate Corp. GM had the most supply of pickup trucks and SUVs, it was 30 percent higher than what the automaker had last May and almost 40 percent higher than the entire industry.

Jon Rogers Citigroup analyst said in a note last Wednesday that the truck inventories that GM have appear to be high while production schedules remains to be optimistic. Other analysts say that excluding the blowout month in July, GM’s inventory levels will remain under pressure in the coming years.

GM is scheduled to announce its second-quarter financial results on Tuesday a day before the July auto sales data are released. The automaker has been in restructuring mode for the past two years now is hoping to report a profit for the latest period despite of the weak sales that it has gotten in North America. GM is also hoping to secure big concessions from the UAW to sustain its restructuring programs.

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