General Motors (NYSE:GM) said on Tuesday that its U.S. sales rose 6 percent in November, well ahead of Wall Street estimates, as very strong pickup sales helped offset weak sales of several key car models.
Sales of GM's two full-size pickups, the Chevy Silverado and GMC Sierra, rose a combined 34% in November -- and the two together outsold Ford's (NYSE:F) industry-leading F-Series by over 10%.
But looking beyond pickups, GM's results were a decidedly mixed bag.
A big month for two very important GM products
While GM's overall results were mixed -- more on that below -- we shouldn't downplay the importance of the General's big gain in full-size pickups. The Silverado and Sierra are among GM's most profitable products, and the Silverado alone is the second-best-selling vehicle in the U.S. after Ford's rival F-Series. Big gains in pickups should translate into good news for GM's bottom line.
Those big gains are being driven by a couple of different factors. First, the market for big pickups is very strong right now. That's not just due to falling gas prices, although they may be playing a role. It's because the businesses that buy a lot of pickups -- businesses like homebuilders -- are, on balance, doing quite well right now.
GM is also making hay from some challenges facing Ford right now. The Blue Oval is in the middle of a complicated, time-consuming conversion of its two truck factories to make its all-new 2015 F-150. That means significant factory downtime for Ford, which estimates that it will lose 90,000 units of production by the time it completes the work next spring.
And that means that inventories of Ford's outgoing 2014 models are being carefully managed, so that its dealers don't run out of trucks before the factories are making the all-new 2015s at full speed. Ford has lowered its truck incentives and is carefully managing shipments to dealers in order to make sure supplies last, but the upshot is that it's -- intentionally -- giving up some market share for the time being.
The good news for GM is that it's in a great position to take advantage of Ford's dilemma. The Silverado and Sierra are fresh products (new last year), they are well-regarded, and -- after some early missteps -- GM has priced them well. The result: Strong sales at prices that should generate good profits for GM.
But as noted above, the news for the rest of GM's lineup was mixed.
A Black Friday sale gave Buick and GMC a boost, but Chevy and Cadillac lagged
GM had some other impressive gains in November. The Chevy Tahoe SUV and Traverse crossover were up 10% and 14%, respectively. The compact Chevy Cruze sedan posted a 26% increase, while sales of Chevy's tiny Spark car jumped over 60%. But big declines for the brand's mainstay sedans, the midsize Malibu (down 17%) and large Impala (down 30%), held the Chevrolet brand's overall gains to just 3.2%.
Sales of car models across the industry have been relatively sluggish, as more buyers have moved to compact and midsize crossovers and SUVs. The current Malibu hasn't been a top contender in the tough midsize sedan segment -- but the Impala is widely seen as a class leader among large cars. Sales of both will be worth watching closely over the next few months.
Chevy didn't fare all that well, but the Buick and GMC brands both saw sales boom, up 27% and 23%, respectively, thanks in part to some aggressive Black Friday promotions. Both brands offered 20% off sticker prices on all models as part of a post-Thanksgiving special event. That clearly boosted sales, but its effects on GM's profits might not be so pronounced.
Meanwhile, Cadillac sales dropped almost 19%, with its vaunted ATS sedan down almost 34% -- and even its new-for-2014 CTS, last year's Motor Trend Car of the Year, down 7.5%. What's the deal there?
Cadillac sales are down, and may be down for a while
The deal there is this: Some of Cadillac's traditional customers seem to have been turned off by the significantly higher prices GM is asking for its (significantly improved) Cadillac sedans. But Cadillac isn't (yet) attracting significant numbers of buyers away from the German luxury brands. The upshot: Sales are down, and -- until recently -- Cadillac's inventories were getting bloated.
Cadillac president Johan de Nysschen says that the drop in sales isn't a surprise, and GM is willing to be patient as the Cadillac brand is repositioned -- a process that could take several years. Meanwhile, in an effort to reduce oversupply, de Nysschen recently cut production of the two sedans, and GM has put generous incentives on the 2014 models that remain in dealers' inventories.
Long story short: Cadillac is a big, complicated work in progress, and will be for a while.
The upshot: GM is in a pretty good position right now
The conventional wisdom is that lower gas prices should help sales of larger, less fuel-efficient vehicles like pickups and SUVs. That's probably true to some extent, but experts point to other factors favoring pickups and crossovers right now -- factors that aren't quite as dependent on cheap gas, like a rise in new-home construction and shifting buyer preferences toward crossovers.
Strong sales of GM's well-regarded crossovers, like the Buick Encore (up 72% last month) and GMC Terrain (up 13.4%), should give GM's North America unit a bottom-line boost this quarter. And GM's just-launched midsize pickups, the Chevy Colorado and GMC Canyon, should give the General a further boost as they arrive at dealers in quantity over the next couple of months.
GM still has work to do, of course. But right now, it has good, competitive products in many of the market's hottest segments, and that should set it up well for a solid fourth-quarter result.