GM decided not to auction off a portion of its retired fleet vehicles last year and the decision ultimately caused an oversupply, which forced GM to lower prices. The low prices eventually took their toll and caused the company’s first quarter 2015 profits to drop by about $400-million, according to a report by Automotive News.
The cars were originally scheduled to hit the block late last year but GM decided to prioritize repairs to customer vehicles instead, delaying necessary repairs to the retired fleet vehicles. This lead to a “significant volume of past-model vehicles” heading to auction in the first quarter, said GM CFO Chuck Stevens.
The repairs caused a backup in the normal flow of auction vehicles in late 2014, which soon led to oversupply that caused prices to depress. As a result, GM sold 50,000 more “past-model” vehicles at auction in Q1 2015 than a year earlier.
Thanks to the oversupply, GM had to sell the vehicles at lower prices, lopping nearly a half a billion off its Q1 profits. However, GM probably isn’t too worried about it.
GM’s pretax operating profit in North America of $2.18 billion was the best first-quarter result since its 2009 bankruptcy, despite the $400-million hit.