General Motors U.S. sales dropped 11.92 percent to 171,486 units in January 2014, and the one aspect of the slumping sales numbers that is more concerning than anything else involves GM’s full-size pickup trucks — the Chevrolet Silverado and GMC Sierra, even though both trucks were recently completely redesigned and reengineered, and are therefore the newest offerings in the full-size pickup truck segment.
Sales of the Silverado dropped 18 percent year-over-year to 28,926 units in January, while those of the Sierra were off 13 percent to 11,118 units. Granted, January has historically produced the lowest sales numbers out of the year, but to see an all-new product post a year-over-year drop over an old and outdated model isn’t what most would expect. In fact, January 2014 was the weakest month for GM pickup truck sales since January 2012, when it sold 38,092 units of both the Silverado and Sierra. The results are particularly concerning considering that the offerings are core to GM’s financial success, since they’re extremely profitable and contribute more to GM’s bottom line than any of its other products. But The General doesn’t seem to be too concerned.
“We have major launches under way and we are going to accelerate brand-building and other growth initiatives, which include executing our winning strategy to sell more pickup trucks with larger cabs, more features and advanced technology,” Kurt McNeil, vice president-sales operations at GM, says in a statement.
For starters… cold. It was unusually cold and snowy in most parts of the US of A. When it’s cold and nasty out, most people simply want to stay at home, rather than bounce around from dealership to dealership shopping for vehicles.
But then there’s this: both the K2XX-based 2014 Silverado and Sierra have only recently become available with a full range of body styles and engine options. For a while, even today, the range-topping 6.2-liter L86 V8 wasn’t available across all cab and bed configurations, and the engine’s availability was otherwise very limited.
More importantly, the sales decline could be attributed to dollars, since GM’s pickups faced considerable pricing pressure from key competitors, which have been selling older-generation pickup models with sizable incentives. In fact, that’s exactly what GM was doing back in the year-ago period of January of 2013, when it sold last-gen GMT900-based Silverado and Sierras with huge discounts. As a result, sales volume rose, but per-unit profitability fell. Additionally, the high (but less profitable) sales volume seen in January 2014 also set the volume bar high; then, cold weather and significantly less attractive incentives for the all-new trucks led to the year-over-year sales decrease.
Speaking of incentives, GM executives have been vocal about their strategy to seek more profitable sales by not matching the generous offers incentive provided by competitors. For instance, half of the sales of GM’s light-duty trucks in the fourth quarter of 2013 were highly-contented models priced at $40,000 or more. By contrast, roughly 30 percent of the sales mix was priced at $40,000 or higher in Q4 2013, and only 20 percent in 2012. According to GM, the sales mix has climbed even further in January. In other words, GM is prioritizing profit or volume.
“One month of sales, that’s not how we’re running the place,” said former GM North America president and recently-appointed global product chief Mark Reuss to WardsAuto in January, adding: “We have a long-term view. We’re in it for the long haul. We’ve made a great truck and we’ll keep at it. We’re not going to over respond to incentives and temporary market tactics for a month’s victory.”
Reuss expects the pricing pressure to continue throughout much of 2014.
“We’ll keep our powder dry here and go as hard as we can,” he said.
Note note, GM’s January sales message stated that marketing of the trucks and other newly-launched products will accelerate in the coming weeks. GM aired two commercials during the 2014 Super Bowl (one for the 2015 Silverado HD and another for the Silverado 1500), and plans to carry the ad momentum into the Winter Olympics as well the NCAA “March Madness” and the Final Four basketball tournament. All events are expected to attract a sizable viewership.
GM also expects U.S. industry sales to be 16.0 to 16.5 million units in 2014, where it will have “modestly higher” market share. Having the newest and most desirable, although not the most affordable, product in the segment should achieve that goal.