General Motors (GM -6.14%) said its U.S. sales fell 5.2% in August, on an industrywide sales slowdown and what it characterized as "very tight" inventories of three hot-selling new crossover SUV models.
Despite the overall drop, good gains for some key products
The good news for GM (and GM shareholders) was that retail sales of some of its most profitable products continue to be very strong.
GM's crossovers and SUVs continue to shine bright. Retail sales of its biggest (and most profitable) truck-based SUVs were all up strongly, as were its small crossovers like the Chevy Trax and Buick Encore. Tight supplies of its three all-new midsize crossovers, the GMC Acadia, Buick Envision, and Cadillac XT5, held back sales growth to some extent. (But more are en route to dealers.)
GM's midsize Chevrolet Colorado and GMC Canyon pickups also posted strong retail sales gains, up 35% and 39% respectively. But overall sales of GM's big pickups were less impressive, as sales of the important Chevrolet Silverado line fell nearly 5%.
What else fell? Sedans. While GM's all-new compact Chevy Cruze managed a big year-over-year gain, its larger siblings did not: Sales of the new-last-year Malibu were off 5%, while the well-regarded, big Impala posted a 42% decline. Some of its upscale sedans didn't fare much better: The (also well-regarded) Cadillac CTS was off over 17%. But overall Cadillac sales were up 4%.
Despite the declines, GM has shown restraint on incentives and posted good pricing results. Its average transaction price (ATP) was $36,730 last month -- more than $2,500 higher than a year ago. Its incentives as a percentage of ATP were 11.1%, below the industry's 11.5% average, according to J.D. Power figures cited by GM.
Why GM now emphasizes its retail sales performance
GM relied heavily on fleet sales for many years, to the detriment of its bottom line. It has reduced its reliance on fleet sales over the last few years (greatly improving its profit margins). More recently, it has begun emphasizing retail sales in its monthly U.S. sales reports to drive home the message that it has changed its approach.
GM said its U.S. retail sales fell about 5% in August from a strong year-ago month, but noted that the drop was roughly in line with the overall industry's performance. It said that its mass-market Chevrolet brand likely gained 0.4 points of retail market share in August, its seventh monthly gain in eight months so far in 2016.
It also noted that its sales to daily rental fleets, traditionally a very low-profit business, are down 34% year to date. That's good news. Less-good news: Its more profitable commercial-fleet business, which consists largely of trucks, is running lower than expected.
The upshot for investors: GM is still on plan
After years of growth, it's probably jarring for auto investors to see the overall U.S. new-car market enter choppy waters. But up-and-down results are typical of a market that is at a cyclical plateau, as the U.S. market probably is now.
From a shareholder's perspective, GM is riding the chop pretty well. It continues to post good sales gains for some of its most profitable products and is slowly building its market share in the mass-market segments, all while getting strong pricing and resisting the temptation to crank up its incentives to chase sales volumes.
Here's what that adds up to: Despite the overall sales decline in August, I think we can still look forward to a very strong third-quarter for GM in North America.