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MarketScreener Homepage  >  Equities  >  Nyse  >  General Motors Company    GM

GENERAL MOTORS COMPANY

(GM)
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GM's U.S. Sales Up 6.3% in Third Quarter -- 3rd Update

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10/02/2019 | 04:10pm EST

By Nora Naughton

General Motors Co.'s U.S. auto sales climbed 6.3% in the third quarter on higher pickup-truck sales and strong demand for its sport-utility vehicles, signaling a United Auto Workers strike at its U.S. factories has so far had little effect on showroom traffic.

GM's quarterly sales gains contrast with flat results at Fiat Chrysler Automobiles NV for the same period and a 5.1% decline reported by Ford Motor Co. for the third quarter.

Shares of GM fell 4% and Ford's shares declined 3.3% Wednesday, worse than the decline in the overall market, amid growing concerns of an economic slowdown and signs of further weakening in the global car market. Fiat Chrysler shares dropped 1.9%, in line with the broader market.

Foreign auto makers on Tuesday reported worse-than-expected U.S. sales for September, with many of the Japanese auto makers posting declines of more than 10%.

The strike at GM, now in its third week, has brought the company's more than 30 U.S. factories to a standstill, denting third-quarter profits and limiting supplies to dealerships.

Still, new-vehicle buyers continued to snap up GM models, with pickup-truck sales at Chevrolet up 18% and up nearly 40% at GMC in the third quarter. The Detroit car company is benefiting from new, redesigned pickup trucks that started hitting dealer lots in larger supplies in the third quarter. Sales of large SUVs also increased, with the Chevrolet Traverse up about 25% and GMC's Acadia up 50%.

Stock levels at GM dealerships remain relatively healthy despite the work stoppage, with retailers carrying about 760,000 vehicles in inventory. Morgan Stanley estimates GM dealers have enough stock to last 81 days without replacement inventory, down from 84 a year earlier.

"We've got inventory to take advantage should GM run into some availability problems," said Mark LaNeve, Ford's U.S. sales chief.

GM's strength comes as the U.S. car market continues to soften overall, following a period of historically strong sales bolstered by a robust U.S. economy and low unemployment.

GM's U.S. sales for the first nine months slipped less than 1%, while Ford's sales fell 3.8% and Fiat Chrysler reported a 1% decline.

Among the Japanese car companies, Toyota Motor Corp. reported a 2.5% drop in U.S. sales for the first three quarters, while Honda Motor Co.'s U.S. sales were off less than 1%. Nissan Motor Co.'s U.S. sales dropped 7.1% in the first nine months compared with the same year-ago period.

Overall, U.S. auto-industry sales were down 1.4% in the January-to-September period, according to Cox Automotive.

U.S. auto-industry sales are expected to decline slightly this year, with analysts predicting they could fall short of 17 million, marking the first time they've dropped below that level in five years.

Rising car prices, which have helped boost auto-company and dealer profits in recent years, continue to dent demand for new vehicles as car buyers more often opt for cheaper, used models.

That's prompted more auto makers to deepen discounts on new models, especially those that have been sitting on the new-car lot for some time. Dealers have also struggled with bloated inventory levels this year as they've been slow to clear out older model-year stock.

Car-company spending on discounts and other sales promotions increased 6% in the third quarter as retailers pushed to sell down old inventory. Still, the average price paid for a new vehicle hit a quarterly record of $33,320 in the same period, according to J.D. Power, as buyers continued to gravitate to pricier pickup trucks and SUVs, moving away from lower-priced sedans.

While GM's sales have yet to be significantly affected by the strike, the auto maker's pickup production was completely suspended this week when it idled its truck plant in Mexico because of a lack of parts. The company's other two truck plants in the U.S. have already been temporarily shut down amid the walkout.

"The real story for the auto industry will be told in the coming weeks as Chevy and GMC dealers run low on pickup trucks to sell," said Michelle Krebs, an analyst with Cox Automotive.

While Mr. LaNeve said he isn't anticipating a UAW strike at Ford's plants, the company has a stockpile of new models, including larger trucks, that would help sustain dealers if a work stoppage were to occur.

At the beginning of the fourth quarter, the company had enough new-vehicle stock to last it more than two months if factory output were halted immediately, he added. The UAW is working to reach a new labor deal with GM first before turning its full attention to contract talks with Ford and Fiat Chrysler.

Ford attributed its softer sales results for the third quarter to its shift away from sedans and small cars, and delays rolling out a new Explorer SUV. Ford's passenger-car sales fell 24.5% as the company continued to sell down discontinued models. Its SUV sales declined 10.5% in the third quarter.

Fiat Chrysler's Ram brand continued to drive the Italian-American auto maker's U.S. sales results in the third quarter, offsetting declines among its other brands. Sales at its top-selling Jeep brand slipped 2% and the Chrysler division sank 23% on sharply lower sales of the Pacifica minivan.

Toyota, Honda and Nissan this week posted significant sales declines in September due in large part the fact that Labor Day weekend sales were included in the August tally. The holiday weekend is a major sales drive for car companies with many offering steep discounts to clear out old, unsold car inventory to make room for newer models.

Toyota's sales fell 16.5% in September, while Honda reported a 14% drop and Nissan was down 17% last month.

GM, Ford and Fiat Chrysler no longer report monthly sales, releasing results only on a quarterly basis.

--Mike Colias contributed to this article.

Stocks mentioned in the article
ChangeLast1st jan.
FIAT CHRYSLER AUTOMOBILES -1.17% 13.968 End-of-day quote.11.45%
FORD MOTOR COMPANY -1.35% 8.735 Delayed Quote.16.34%
GENERAL MOTORS COMPANY -2.61% 35.425 Delayed Quote.8.76%
HONDA MOTOR CO., LTD. -0.73% 3134 End-of-day quote.11.93%
NISSAN MOTOR CO., LTD. -0.06% 680.3 End-of-day quote.-20.53%
TOYOTA MOTOR CORPORATION -1.05% 7754 End-of-day quote.25.47%
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Financials (USD)
Sales 2019 137 B
EBIT 2019 8 580 M
Net income 2019 6 281 M
Finance 2019 4 076 M
Yield 2019 4,26%
P/E ratio 2019 8,26x
P/E ratio 2020 5,87x
EV / Sales2019 0,35x
EV / Sales2020 0,29x
Capitalization 51 979 M
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Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 47,15  $
Last Close Price 36,38  $
Spread / Highest target 86,9%
Spread / Average Target 29,6%
Spread / Lowest Target -6,54%
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Managers
NameTitle
Mary Teresa Barra Chairman & Chief Executive Officer
Mark L. Reuss President
Dhivya Suryadevara Chief Financial Officer & Executive Vice President
Randall D. Mott Chief Information Officer & Senior Vice President
Patricia Fiorello Russo Independent Director
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