General Motors' June Sales Defy Logic As Its Recall Count Piles Higher


Source: General Motors.

General Motors (NYSE: GM  ) just stunned the world, yet again, with another massive recall. General Motors' most recent recall was to the tune of 7.6 million vehicles in the United States alone. If you add that into the automaker's massive running total through the first half of 2014 alone, all 54 individual recalls cover more than 25.6 million vehicles in the U.S. and nearly 29 million globally.

With that massive recall total in mind, the consumers have spoken: They don't mind. The endless recall saga appears to have had little, if any, impact on General Motors' sales, and that was further proven this morning when GM released its June sales report.

By the numbers
General Motors' sales in June increased 1% to 267,461 vehicles, compared to last year. That was far better than Edmunds.com's prediction that GM's sales would decline 8.5% in June, compared to last year.

That doesn't even tell the full story, as GM's sales last month were actually better than they appear. Investors should take into account the number of selling days between comparable months: Last year's June had 26 selling days compared to last month's 24 selling days.

When you adjust for the two fewer selling days, General Motors' sales gain in June, compared to last year, jumps from a 1% gain to a 9% increase.

Back to unadjusted figures, Chevrolet continued to carry the entire General Motors sales figure. Chevrolet posted a 2.5% sales decline in June, compared to last year, yet its 188,567 units sold accounted for more than 70% of General Motors overall sales total.

GMC and Buick improved over last year's June total with a 10.6% and 18.4% gain to 43,550 and 21,403 units sold last month, respectively. That sales performance was GMC and Buick's best June since 2006. Cadillac's struggles continued in June with sales up only a tenth of a percent, and through June, the brand's sales have declined 4.5%, compared to last year.

"June was the third very strong month in a row for GM, with every brand up on a selling-day adjusted basis," said Kurt McNeil, U.S. vice president of Sales Operations, in a press release. "In fact, the first half of the year was our best retail sales performance since 2008, driven by an outstanding second quarter."

Sales of Chevrolet's Silverado remain unimpressive. Source: General Motors.

Disappointing results
While June was overall a success for General Motors, especially since Detroit's largest automaker has faced months of negative press regarding recalls, one consistent disappointment has been sales of GM's most profitable products: full-size pickups. 

This was supposed to be General Motors' window of opportunity before America's best-selling truck, Ford's F-Series, launched its all-new 2015 F-150. Unfortunately, sales of the Chevrolet Silverado were only up 0.6% last month and remain 0.8% lower through the first half of 2014. The story is similar for GM's other full-size pickup, the GMC Sierra. Sales of the Sierra were down 7% last month, but are up 6.3% through the first half of 2014.

Originally, General Motors' strategy was to take advantage of the all-new Silverado and Sierra designs and maximize profits by not offering many discounts. That strategy led to months of double-digit sales declines earlier this year and forced the automaker to increase incentives and deals as the historically strong summer months approached.

Investors would be wise to keep an eye on incentives and market share of competing trucks when Ford's next-generation F-150 hits the dealerships later this year. The F-150's arrival could have a direct impact on GM's profits if the latter is forced to substantially increase incentives to compete, or if it refuses to increase incentives, it could lead to another dramatic sales decline.

Bottom line
Ultimately, General Motors' sales increase of 1%, or 9% on a selling-day adjusted basis was a pleasant surprise compared to analyst estimates. Thus far, General Motors' sales have seemingly been unaffected by the negative attention surrounding the automaker's recall debacle, but investors will have to deal with another massive charge of $1.2 billion in GM's second-quarter results because of rising costs associated with recall repairs.

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Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 02, 2014, at 9:46 AM, pondee619 wrote:

    Another fool article which conviently forgets that people died over GM intentional disreagrd of a known defect. GM vehicles had a defect. That defect was known to GM. That defect was intenionally left unaddressed. PEOPLE DIED! This Fool talks only about money.

    GM is a homicidal Corporation whose reckless/intentional disregard for human life caused the death of, at least, 13 people. Yet consumers and investors don't mind. The Fool writing this article apparently doesn't care either. Ignore the deaths long enough, throw enough money at the situation, it will go away. Human life is paid for by money and a Corporation whose intentional disregard for human life caused deaths continues merrily along.

    What else is there to do? Break GM up into its component parts. Perhaps the added competition will counteract the laziness, arrogance, recklessness or just plan uncaring of human life that caused these poor people's deaths. Of course, people are still buying GM cars and investors are still investing in GM. I guess we really don't give a damn about anyone, or even our own saftey, anymore. It's a shame.

  • Report this Comment On July 02, 2014, at 10:17 AM, TMFDanielSparks wrote:

    @pondee619 - D. Miller is having trouble posting. He asked me to post this comment on his behalf:

    Here's an idea: read more than one article before accusing me of forgetting people died in this tragic situation.

    http://www.fool.com/investing/general/2014/06/21/a-10-billio...

    I've been harsh on GM for the entire saga, it's the public that seems to have brushed this off.

    Daniel Miller

  • Report this Comment On July 02, 2014, at 12:07 PM, pondee619 wrote:

    I don't see it mentioned here. Why drop it? This article doesn't seem so "harsh". But, please, quote the line, or lines, in the current story showing GM's reckless neglect in causing the deaths of at least 13 people. It is this Author who has brushed, and is continuing to brush, this issue off. Perhas if he would stick to his "harshness" the public won't be so willing/able to forget.

    It's OK Dan, the public seems to be brushing off GM's crime, why rock the boat and keep the issue alive? Lives are easily paid off.

    Here's an idea, continue your "harshness" until and unless there is true justice achieved. One mention and then droing the issue in all future stories just lets GM off. GM knowingly neglected its duty for a decade. I guess you feel justified with one story.

    You stopped being part of the solution, Dan, know what that now makes you? Gave up with one story. Is it laziness, apathy, hopelessness, or do you truly believe that one story is enough?

    Do you truly believe that your cited story is "harsh"? Paying victims families off is nice, but where are the calls for penalitties against the tortfeasor/criminal? Would you treat an indivdual who killed 13 people so easily. If the Government was going to let that person off so easily would your pen remain as silent as it is re GM?

    It's the public brushing this off? Your fault, Dan. You've dropped the issue. Not me. I just called you on it.

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