Update: General Motors Trucks Have Banner Month, Large SUVs Soar

Sep. 3.14 | About: General Motors (GM)

Summary

GM's truck and large SUV sales are very strong, generic cars suffer from recall effects.

Author impressed with level of sales increases and low promotional spending, anticipated some mid-year recall effects.

Reiterate Buy on GM for value and dividend.

On Wednesday, September 3, August sales for the automakers were announced. General Motor's (NYSE:GM) headline was truck sales increasing by a robust 18%, with large SUV sales up by a whopping 38%. The Truck/SUV segment is GM's most profitable niche, and continued success in those products bodes extremely well for the Company and retention within its key customer base. Sales of cars were negatively impacted by fallout from the recent recall debacle, resulting in overall GM sales falling 1%. The Wall Street Journal reports a bright spot for the Company was the Chevy Sonic, whose sales increased 13%, and placed it in the number 2 slot among subcompact sales, an unusual spot for a GM product. Also of note, GM's incentive spending, at 10.4%, was the lowest of the domestic automakers as spending dropped by 1% compared to August 2013.

As a proponent of General Motors stock ("General Motors Upgraded To Buy: Why I Changed My Mind"), I was pleased to see sales increasing in the company's core truck sales increasing by a robust 18%, with large SUV sales up a whopping 38%. In an earlier article, I had predicted recall issues would impact auto sales in the middle of the year. It appears in the more generic vehicle segment we are seeing the impact of the reputational damage. However, in "core" products, GM appears to be doing well.

The Wall Street Journal, in an article on Wednesday, highlighted the link between low cost credit and auto sales. The article suggests we are in a sweet spot of cheap money, increasing employment and pent-up demand. My previous "Buy", published on August 8, was written when GM traded at $33.02. I am pleased with GM's August sales, concur with the Wall Street Journal article and continue to view GM as a bargain with a generous 3.5% dividend and am pleased to reiterate my "Buy".

This article reflects the author's opinions and is not meant to be the basis of an investors' buy or sell decisions. All investors should conduct their own due diligence and make investment decisions solely on their research.

Disclosure: The author is long GM.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.