The 2014 Chevy Silverado Is Becoming a Problem Child

Another month, another dismal sales performance for the 2014 Chevy Silverado.

This highly acclaimed truck was supposed to put General Motors (NYSE: GM  ) on an even footing with top rival Ford Motor (NYSE: F  ) in the pickup market. Instead, while GM has been able to entice some customers to buy the new Silverado without piling on big discounts, sales volumes have been discouraging in most months.

Many truck buyers seem to be holding out for bigger discounts -- or defecting to brands like Ram that are offering higher incentives. (Ram pickup sales are up 24% year to date.)

Ram hasn't been complaining about the weather -- sales are up 24% this year!

GM needs a new strategy that will help it move the 2014 Chevy Silverado without cutting into profitability too much. Unfortunately, nothing that it has tried so far has worked.

Market share sliding
While Ford's F-Series pickups have been the best-selling trucks in the U.S. for nearly four decades, GM was the overall market share leader not too long ago. Back in 2007, when GM's previous truck architecture was brand new, the company sold 618,257 Silverados and 208,243 GMC Sierras. The combined total of 826,500 pickups was well ahead of Ford's F-Series sales, which totaled 690,589 that year.

However, GM's market share relative to Ford slipped badly because of the Great Recession and GM's ensuing bankruptcy. By 2011, Ford F-Series sales had rebounded to 584,917, while combined Silverado and Sierra sales totaled just 564,300. Ford's F-Series widened its lead in 2012 with 10% sales growth, while GM's pickup trucks posted low single-digit growth.

A cure all?
The launch of the new 2014 Chevy Silverado last year was supposed to turn things around on two fronts. First, GM wanted to boost its average transaction prices in order to match Ford in terms of profit per truck sold. Second, GM wanted to make up ground in the market share battle.

The 2014 Chevy Silverado was supposed to help GM regain market share. (Photo: GM.)

In the first area, GM has seen some success. The company has cut down on discounting in the last year, and its average transaction prices are rising. This means that GM is making more profit on each truck it sells than was the case a year ago.

By contrast, on the sales front, the 2014 Chevy Silverado's performance leaves something to be desired. Last year, as GM moved from clearing out old 2013 models to selling new 2014 models, GM's pickup sales momentum tapered off.

Through August, combined Silverado and Sierra sales were up a sizzling 25%. In the last four months of the year -- when most of the 2013 models were already gone -- GM's pickup sales were down slightly, even as top rival Ford posted big gains. This trend has continued into 2014.

Ford has been extending its pickup market share lead. (Photo: Ford.)

Year to date, Ford F-Series sales are up 1.1% to 102,418. Meanwhile, Silverado sales have fallen 15% to 65,510. GMC Sierra sales have fared somewhat better, falling 6% year to date, to 25,350. Combined, GM's two pickups have racked up 90,860 unit sales so far in 2014: more than 10% behind the Ford F-Series.

The stakes
January and February aren't particularly big months for truck sales, so GM can still rebound and have a good year if it turns things around soon. However, if GM doesn't manage to boost its truck sales to at least last year's level, the company will probably be forced to cut production. While not disastrous, this does add to costs as valuable capital and labor resources sit idle.

The more disturbing news is that while GM began offering bigger incentives on certain versions of the 2014 Chevy Silverado and the 2014 GMC Sierra last month, the weak sales trend remained intact.

Bad weather certainly affected sales yet again, but Ford's F-Series still posted a small sales gain, and Ram pickup sales surged. Meanwhile, Silverado sales posted a third straight double-digit decline. In other words, bad weather isn't the only cause of this malaise.

It's noteworthy that while GMC Sierra sales have been nothing to write home about, the Sierra has sold better than the 2014 Chevy Silverado. (Last month, the Sierra actually posted a small sales gain.) The Sierra is positioned as a higher-end alternative to the Silverado, so it makes sense that Sierra buyers might be more willing to pay more for a new truck with better features.

However, the Silverado is the "volume model," representing 70%-75% of GM's total pickup sales. GM can't just abandon the low end of the market. Having failed to bolster sales with a step up in incentives in February, GM seems prepared to boost incentives on the 2014 Chevy Silverado once again in March.

GM CFO Chuck Stevens met with Wall Street analysts last week to try to convince them that the company has a plan to boost sales without cutting into profit margins too much. However, details were thin, according to reports from the meeting. As an investor, I'd like to see some tangible results before buying into GM's hype.

Foolish bottom line
Not too long ago, GM was the pickup market share leader. However, in the last few years Ford has opened up a significant lead. The 2014 Chevy Silverado was supposed to help reverse that trend. However, while the new trucks have helped GM boost its profit margin, those pricing gains have come at the expense of market share.

In fact, GM's pickup sales have declined noticeably in the last six months, allowing Ford to increase its market share lead (and Ram to catch up). Pricing gains are great for profitability, but GM needs to show that it can at least hold its market share. So far, that hasn't happened.

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Read/Post Comments (14) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On March 08, 2014, at 5:48 PM, lem2004 wrote:

    I think GM will catch up .They hadn't had a new design for quite a few years do to going bankrupt,so people were going to ford and dodge,when they need a new one they may switch to GM.I know a few people that switched to ford who now say they wished they hadn't.

  • Report this Comment On March 08, 2014, at 6:06 PM, specstrum wrote:

    people spending big bucks to buy a truck wants one that looks new

  • Report this Comment On March 08, 2014, at 6:44 PM, fryhead wrote:

    The problem is it is UGLY! If people are not going to spend 50k on a ugly truck

  • Report this Comment On March 08, 2014, at 7:17 PM, dwhit wrote:

    Why would anyone buy a gov't motors vehicle?

    They'll qualify for another bailout during 2014...

  • Report this Comment On March 08, 2014, at 7:33 PM, Acjlm wrote:

    I think the truck is good looking, I love the lines. It reminds me of the 2001 3/4 Chevy I had. I loved that truck, never gave me a lick of trouble, had the 6 liter engine and I still got 20 to 21 on the hi-way with synthetic oil of course. I think I'll buy me a new Chevy with the killer discounts they have now.

  • Report this Comment On March 09, 2014, at 8:50 AM, Taaron wrote:

    They are not selling because they are made in Mexico.They need to bring production back to U.S.

  • Report this Comment On March 09, 2014, at 9:01 PM, lschafroth wrote:

    This is probably the best looking truck on the road. I laugh when people say its ugly. Take a peek at the Ford or the Tundra. Both VERY, VERY ugly trucks. The Dodge looks nice and is a great second choice in design to the GM models.

  • Report this Comment On March 09, 2014, at 9:26 PM, RickJWag wrote:

    GM made a very strange decision when they started marketing campaigns that lean left politically.

    Truck sales go to 'red state' folks-- not usually liberals. Lefties do spend money like everyone else, but not very often on pickup trucks. (Also, they aren't a strong buying block for domestic cars.)

    Maybe it was a political necessity as a form of quid pro quo, but it shouldn't be any surprise when truck buyers quit showing up on Chevy lots.

  • Report this Comment On March 09, 2014, at 9:41 PM, McSniperliger wrote:

    It looks like a slightly modified version of the previous model year. Problem is with any truck....we allow the prices to skyrocket to nearly $40,000 for a stripped down model...when 7 years ago $40,000 could buy every option possible.

  • Report this Comment On March 09, 2014, at 10:00 PM, vet212 wrote:

    Not as much as the Fiat Ram and aluminum F-150 will be

  • Report this Comment On March 09, 2014, at 10:14 PM, Jhmartyns51 wrote:

    Bring back the Avalanche! It was unique! Now, all pick-ups look alike!

  • Report this Comment On March 09, 2014, at 10:25 PM, hammondhank wrote:

    I bought a brand new full size GMC 1500 pickup, same as the Chevy Silverado, in 1991. It was their basic work truck, stick, no air, AM radio. It was relatively cheap, just under $13k. Except for the weak bench seat rails and tailgate hinges prone to rust, it was a very dependable low-maintenance truck. I'd love to have another, but the price are too high. Moreover, our tax dollars bailed out GM, and they owe us better products at cheaper prices just for that alone. The fact that they produce many of their products overseas is a slap in the face of American taxpayers, and combined with other shoddy non-truck GM offerings, warranties that don't match up to other foreign brands, why would I spend my money on their products NOW?! I bought my first new vehicle since that truck in September 2012, my first foreign car, a KIA Soul. GM didn't want to share it's profits when it was in the black, nor should it have. But they, in collusion with our government, forced us all to absorb it's losses when it was in the red. They should have been allowed to fold instead. Economic times are hard now. We're not getting 'bailed out', we're getting piled on. Inflation, bailouts, Obamacare, more spending/more taxes/higher prices and most of us don't get union scale, either. My wife got a 0% raise this year, despite glowing reviews, like the rest of her comp[any. The company has been laying people off, so she feels fortunate to even have a job at this point. No union COLA for HER, don'tcha know. No stock options/dividends bonuses for HER. Americans should be absolutely livid about the special treatment GM got on our dime. Maybe THAT is part of the reason why GM's latest is being met with lukewarm results. They can pound sand as far as I'm concerned.

  • Report this Comment On March 10, 2014, at 5:35 AM, justice wrote:

    The truck is not good looking, I don't care what the above comments are!

    The truck industry in a whole is way over priced and people are not even using them for what they are intended for, which is driving the price up.

    The average mark up on a pick up truck is $11,000, that's $6,000 more than a car, which makes it a bad buy/investment.

    The last 2 Chevy's I had were lemons, falling apart and back to the dealer non stop.

  • Report this Comment On April 27, 2014, at 4:35 PM, lashbera wrote:

    If you see the strip of LEDs in the headlights or get a good look at those ugly fenders you can tell if it's a new truck, GM didn't do enough and as stated by most European car builders engine technology has improved so much that big V8 engines are a dyeing, GM should be doing what has made ford successful in the last few years and show proof they can be high tech. Ford in 2015 will out perform all truck builders with a very strong 2.7L engine that combined with the light but very strong military grade aluminum body will get fantastic fuel economy, I used to go big with engines but ford has shown me a much better way.

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Adam Levine-Weinberg

Adam Levine-Weinberg is a senior Industrials/Consumer Goods specialist with The Motley Fool. He is an avid stock-market watcher and a value investor at heart. He primarily covers airline, auto, retail, and tech stocks. Follow him on Twitter for the latest news and commentary on the airline industry!

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