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Did General Motors' Second-Quarter Sales Drive a Good Profit?

By John Rosevear - Jul 11, 2019 at 4:06PM

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There are concerns.

General Motors ( GM 2.82% ) said that its U.S. sales fell 1.5% in the second quarter, as planned downtime at a key SUV factory and the slow roll-out of its all-new pickup trucks more than offset another set of strong results for the company's crossover SUVs.

Year to date, GM's domestic sales were down 4.2%.

Overall, U.S. light-vehicle sales fell 1.7% in Q2, according to figures from Automotive News, meaning that GM's 1.5% decline was slightly stronger than the market's result. Below are the Q2 sales results for the six largest-selling automakers in the U.S. market. 

Automaker Q2 2019 U.S. Sales YOY Change
General Motors 746,659 (1.5%)
650,336 (4.1%)
608,392 (1.4%)
Fiat Chrysler
597,685 (0.5%)
407,208 (4.3%)
351,185 (3.7%)

Data sources: The automakers, Automotive News. 

A blue 2019 Chevrolet Silverado crew-cab pickup truck.

GM is getting strong prices for its all-new Chevrolet Silverado pickup line, but sales totals have lagged. Image source: General Motors.

The high and low points of GM's Q2 U.S. sales report

The high points:

  • GM's overhauled lineup of crossover SUVs continue to sell well. Sales of the group were up 17% year over year, with good gains for the popular Chevrolet Equinox (up 15.8%), midsize Buick Envision (up 28.4%), and GMC Acadia (up 41%). Also contributing: The compact Cadillac XT4, which was new in the second half of 2018. 
  • GM's big (and hugely profitable) truck-based SUVs posted good gains, with sales of the Chevrolet Tahoe and Suburban and GMC Yukon XL all up more than 20% from a year ago. All-new versions of the vehicles in the group, including the GMC Yukon and the big Cadillac Escalade, are expected to debut next year. 
  • GM is still rolling out its all-new full-size pickups, but it said that sales of "crew-cab" versions of the Chevrolet Silverado and GMC Sierra were up 12% from a year ago. With its new trucks, GM has worked to boost output of the highly profitable crew-cab versions. 
  • GM's average transaction price (ATP), which is net of incentives, rose by about $1,575 from a year ago, to $37,126, according to J.D. Power PIN figures reported by GM. GM's incentive spending as a percentage of ATP fell to 12.6% from 13.4% a year ago.
  • The Chevrolet Bolt EV continues to find new buyers. GM sold 3,965 Bolts in the U.S. in Q2, up 13.8% from a year ago.
An orange 2019 Cadillac XT4, an upscale compact crossover SUV.

The compact Cadillac XT4 has sold well since its launch in the second half of 2018. Image source: General Motors.

The low points:

  • Although GM said that inventory levels of its big-selling light-duty pickups were close to targets as of the end of June, GM's slow pickup rollout left it lagging in the sales race for the quarter. Sales of the light-duty versions of the Silverado and Sierra were down 6.9% and 4.7%, respectively. Production of the all-new heavy-duty versions began in June, and will ramp up in Q3. 
  • Sales of GM's major sedan models continued to decline sharply, with the Chevrolet Malibu down 26.7%, the Buick LaCrosse down 38.6%, and the big Cadillac CT6 down 23.3%. A bright spot: Sales of the Cadillac XTS, a popular model with fleets, rose 46.2%.

The upshot: GM had a solid quarter, but there are concerns

Looking ahead to GM's Q2 earnings, the results from the U.S. are mostly encouraging. Strong sales of crossovers and good pricing on GM's new pickups helped drive the ATP increase, which in turn is a good sign for profitability. But the year-over-year sales decline for the light-duty pickups is a point of concern: Pickups are a huge contributor to GM's profits in North America and overall. 

Long story short, GM is still doing well in the United States, and I expect a solid profit for its North America region. But the situation around its pickups will bear watching as the year goes on.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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