It didn't quite live up to analysts' expectations, but March was still a good month for General Motors (GM +3.89%). GM posted a 6% year-over-year increase in sales, likely ahead of the overall market.
GM's increase was driven largely by very strong results for the company's "crossovers", the SUV-like wagons that have accounted for an increasing percentage of GM's U.S. sales in recent years. Cadillac also posted impressive gains, powered by its compact ATS sedan.
But sales of GM's pickups lagged, and that could prove to be an expensive problem for the General.
Chevy's kid-haulers see surging sales
Sales of GM's midsized crossover trio, the Chevy Traverse, GMC Acadia, and Buick Enclave, were collectively up 62% over year-ago totals. These popular kid-haulers are GM's mainstream alternative to minivans, and sales have picked up as more and more families look for alternatives to gas-hungry SUVs.
All three of GM's midsized crossovers were "refreshed" for the 2013 model year, meaning that they were given revised body panels and updated features, and clearly the new looks are resonating with buyers. Like most automakers, GM's standard practice is to "refresh" models about halfway through their life cycles, which are typically five to seven years.
Cadillac continues to show signs of life
GM's luxury brand that is on the rise, Cadillac, also had a strong month in March, nearly doubling its year-ago U.S. sales. A key contributor was the compact ATS sedan, which wasn't yet available at this time last year – but which enjoyed its best U.S. sales month in March.
The ATS is a key component of GM's long-term plan to (re-)establish Cadillac as a credible global luxury-car brand. It may be GM's best product at the moment: The ATS's development team closely benchmarked the class-leading BMW (BAMXF 4.02%) 3-Series, and critics have given the latest baby Cadillac high marks.
Sales of the ATS were initially slower than GM seemed to have expected, but recent increases have suggested that the car may be finding its audience. While it has a long way to go to catch up with the 3-Series' sales totals, GM seems to be viewing the revival of Cadillac as a long-term project.
A point of concern: pickup sales
Rival Ford (F +2.08%) posted a 16% year-over-year gain in full-sized pickup sales in March, but GM's were much more subdued – just a 6% increase for the Chevy Silverado and GMC Sierra pair. More troubling was the rise in inventories: GM reported that it had 117 selling days' worth of pickups at the end of March, up from 97 days' worth at the end of February. That's almost 240,000 unsold pickups in stock around the country.
That surplus could end up costing GM big bucks. Here's why: All-new versions of the Silverado and Sierra are due to start arriving at dealers later this spring. That means the current pickups will have to be cleared out – and that means that GM is likely to have to resort to big discounts to move the metal.
Pickups are high-volume, high-margin products, and they're a crucial driver of profits for both Ford and GM. The need to sell so many pickups at a discount could make a big dent in GM's bottom line during the second quarter. Shareholders should keep a close eye on this one.
