Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

General Motors Company (NYSE:GM)

Sales Call

October 3, 2011 11:00 ET

Executives

Jim Cain – Communications

Don Johnson – Vice President, U.S. Sales

Analysts

Himanshu Patel – JP Morgan

John Murphy – Bank of America/Merrill Lynch

Chris Ceraso – Credit Suisse

Peter Nesvold – Jefferies

Adam Jonas – Morgan Stanley

Patrick Archambault – Goldman Sachs

Dan Galves – Deutsche Bank

Joe Spak – RBC Capital Markets

Colin Langan – UBS

Tom Krisher – Associated Press

Todd Lassa – Motor Trend

David Welch – Bloomberg News

Mike Colias – Automotive News

Chrissie Thompson – Detroit Free Press

Robert Schoenberger – The Plain Dealer

James Amend – Ward’s Auto

Ted Reed –The Street

Jeffrey Flock – Fox Business Network

Craig Trudell – Bloomberg News

Operator

Ladies and gentlemen, thank you for standing by and welcome to the General Motors’ Monthly U.S. Vehicle Sales Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Monday, October 3, 2011.

I would now like to turn the conference over to Mr. Jim Cain, General Motors’ Communications. Please go ahead, sir.

Jim Cain – Communications

Thank you and good morning everyone. Welcome to our September sales call. Joining us today is Don Johnson, our Vice President of U.S. Sales operations.

Before we begin, I just wanted to remind everyone that the discussion we’re about to have is covered by our forward-looking statements caution and if anyone has any follow-up questions after the call, they can contact me directly my phone and e-mail is in the press release.

And with that said, let me turn the floor to Don Johnson.

Don Johnson – Vice President, U.S. Sales

Well, thanks Jim and good morning everybody. Thanks a lot for joining us today. I presume by now, you’ve all had a look at the press release and you can see that September was another very strong month for General Motors and our U.S. dealers. When you look at the numbers compared to September 2010, our total sales were up 20% to 207,145 units and all four of our brands saw increases in sales.

Once again, it’s balanced portfolio of fuel efficient cars, crossovers, and trucks as well as the sustained momentum of the products that we launched really as far back as 2009, but right through the 2010 and into this year 2011 that’s helping drive our results. That includes a very strong truck sales at both Chevrolet and GMC and the continued success of products what the Chevrolet Cruze and Equinox, the Buick Regal and Enclave, the Cadillac CTS and SRX as well as the GMC Terrain.

And I think when you look at all of the sales reports that are going to come in today, you are going to see the September will mark the eighth month this year that General Motors has increased its total and its retail market share. So, let me give you high look at what happened and then I’ll get into a little bit more detail.

I’ll start with looking at the major segments. For the month, General Motors total passenger car sales increased 12% compared with September 2010. Our crossover sales increased 7% and truck sales and this includes pickups, SUVs as well as vans increased 34%. And across all of these three segments, retail sales were up 19% and totaled 74% of our mix, plus sales to fleet customers went up 22%.

And notably, the incentive spike in the industry that a lot of people have been talking about in the last few months and had predicted as the Japanese OEMs recovered from the supply destructions does not appear to have materialized in the industry. And then you look at us on an absolute basis, our spending in September was actually down about $50 per unit compared with August while our average transaction price improved by more than $400. And once again, we had the highest average transaction prices among our competitive staff.

Looking back on the quarter, our incentives as a percent of ATP were 9.8%, which reflects our competitive position and it exactly equaled to the industry average according to J.D. Power’s PIN.

So, let’s go a little bit deeper into the month of sales numbers. And we’ll start with Chevrolet, which really led the way this month. The Chevrolet, Equinox increased its sales 33% compared with September of 2010. And once again proving that small is big in the U.S. right now, the Chevrolet Cruze completed its first full year in the market in September with sales of more than 18,000 units and for that full year, the Cruze sold over 212,000 cars.

When you have a look at the seasonal factors that Cruze selling rate in September was right on pace with what it was in both July and in August. We are also right on track with rolling out the Chevrolet Volt nationwide by the end of the year. And in September, the Volt had its best month ever with 723 units sold and we now have almost 2000 demonstrators and 884 units for sale at dealers in 34 states. Our on the ground supply will continue to be tight for few months as we stock more dealers with both demonstrators and salable units, but what we are doing is positioning ourselves well for the 2012 model year overall.

And just as another quick highlight the first 2012 Chevrolet Sonics were being delivered to customers, so in terms of that launch we are right on plan and in the next couple of months we’re going to see a good increase over availability of all of our dealers. Over at Buick, Regal sales increased 87% as the launch continues to gather momentum with the addition of the Regal GS and the Regal Turbo. And in addition the Enclave, which has really been a continuing success story for Buick was up 10% in September.

On the GMC side, the Terrain was up 45% continuing its momentum and a Cadillac combined sales of the CTS van, coupe, and wagon increased 24%. And the SRX was up 22% in what looks like it’s going to be a bit of a softer luxury market in September. It is just on the SRX I’d like to pause for a moment underscore just how well that vehicle is doing. It’s done better month-over-month and it looks like this month for the first time ever the SRX will outsell the Lexus RX. Now, September was also very good month for our full-sized pickup trucks as we expected and as we’ve been talking about over the last couple of months.

At GMC, Sierra sales were up 26% and at Chevrolet Silverado sales were up 86%. We are seeing here are great trucks benefiting from historical patterns that favor higher pickup sales in the second half of the year. And the numbers tell a very consistent story. When you look at the industry, the full-size pickup segment share of the industry increased steadily from about 11% in July up to the 12% in August. And in this month, it was around 12.8% and the resulting upward trend in our business is also clear.

Sales of June full-size pickups have improved month-to-month since July contributing to our year-to-date market share gain of about a four percentage point. And this trajectory helped us to end September with full-size pickup inventory of 208,650 units or approximately an 88-day supply, that’s down from 212,500 or 170-day supply last month. And what this simply means is that we remain on track to end this year with a full-sized pickup inventory of roughly 200,000 units or 90-day supply.

Now, since September marks the end of the third quarter, what I’d like to do is share some of the calendar year highlights that chart our sustained momentum. Now as I said little bit earlier, we’ve now increased our total and our retail market share for eight of the last nine months. Through September, it looks like our total share will be up a full point to 19.6% for the year and our retail share will be up 1.4 points to 17.8%. And we’ve achieved this consistently high level of performance with strong products, disciplined incentives, and a good balance of both fleet and retail sales. Year-to-date, our fleet mix is at 27%, which is down three points from 2010.

And that calendar year to-date story has some familiar names to us. Our past year cars sales were up 22% based on the outstanding success of the Chevrolet Cruze, the entire Cadillac CTS line and the Buick Regal. Compact crossover sales are up 50% based on the sustained momentum of the Chevrolet Equinox and the GMC Terrain. And we now gained full-size pickup retail share in seven of nine months this year.

So these results clearly underscore the hard work by the entire GM team, including our dealers. Not only is our dealer network a lot healthier right now, but they are increasingly confident in our brand and our product strategy, , and in our collective plan to do an even better job of taking care of our customers.

And that is why our dealers are investing in their training, in their systems, and in renovating their facilities. Now just before I open up the floor for questions, let’s start a little bit about the 2011 industry sales rate, which has been on everybody’s mind all summer. Just like all of you, we are concerned about confidence. We are concerned about sentiment and about the budget battles in Washington. But having said that, we continue to expect that full year US total vehicle sales will be in the low end of our 13 million to 13.5 million unit range.

Now, despite the variance and the volatility that we’ve all seen in a number of the forecasts out there, our rationale for not revising our forecast is pretty straightforward. It comes down to a couple of things, first of all the timely end of production problems, for the most part, at our domestic and our Japanese competitors, which will bring people back into the market, people who have been on the sidelines.

The other factor is a modest, but steady continuing release of pent up demand as we continue to see the age of the fleet being 10.7, 10.8 years. So, a lot of those people continue to have to buy and come back into the market. So, when we consider these two major factors, we believe that, first of all the September SAAR will be principally above 13 million total vehicles probably in the 13.2 million to the 13.3 million range. So, that’s our view on 2011, but I also know a lot of you are looking ahead already to 2012. And while at this time, you are ready to announce our own 2012 forecast, I can’t tell you that continue to be cautious, but optimistic that the country will see slow growth in 2012, but not a recession.

In fact, we think it’s pretty encouraging that we saw an almost 7% increase in the University of Michigan’s consumer sentiment measurement in September, which also significant gain. Now that has been volatile, but that’s a pretty significant gain after what we saw a drop off into August.

In addition, industrial production, retail sales and employment data all point to a slow growth scenario not a double debt. And as we discussed over the last few months, household balance sheets in better shape and consumer credit continues to be widely available, so affordability for consumers for new vehicles, given low interest rates, given strengthening balance sheet and really very high historical vehicle trade-in values, it continues to be very affordable for consumers.

Now having put all of these together we continue to manage our business appropriately. We do still have a note of caution, but again we’re looking, as I said, cautiously optimistic at the future. So the bottom line for us is this. Even in the slow growth market we are very well positioned because we have momentum and we also have another wave of fuel-efficient passenger cars launching over the next several months at Chevrolet, at Buick and at Cadillac. These include the all-new Chevrolet Sonic, new Malibu, the all new Verano, as well as Cadillac XTS and Cadillac ATS.

So that wraps up my formal remarks for the month. Joining us for Q&A of our call; Chevrolet Vice President, Alan Batey; Brian Sweeney, Vice President of Buick GMC; Cadillac Vice President, Kurt McNeil as well as our Senior Economist, Yingzi Su.

Okay, let’s open it up now for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Himanshu Patel of JP Morgan. Please proceed.

Himanshu Patel – JP Morgan

Hi good morning.

Don Johnson

Good morning.

Himanshu Patel – JP Morgan

I just had a couple questions on pickup trucks. They were quite strong this month. Was that industry–wide rebound you saw in the segment or were there some GM Specific promotions there this month?

Don Johnson

No, the rebound was largely industry–wide. As I said, the segment as a percent of industry grew from 12% to 12.8%, but within that growth as I also said we continue to see throughout the year a growth in market share. So calendar year–to–date we have been outperforming the segment.

Himanshu Patel – JP Morgan

Was there a material pickup on GM incentives on trucks this month?

Don Johnson

No, there wasn’t. We actually maintain or slightly, according to our measurements, degraded a little bit our competitive position. So we were pretty pleased with the results.

Himanshu Patel – JP Morgan

Okay. And then can you talk about the cadence of sales throughout the month?

Don Johnson

Yeah. It’s interesting, because I have seen some varying reports of their as the month went on. If you just look at our sales we started off fairly strongly. I would call it a bit of a pass in the middle of the month and then finish up at the end of the month. So it was strong start bit of pass and then a good finish for us.

Himanshu Patel – JP Morgan

Okay. And then lastly just some of the high–volume launches for GM, the Sonic, and the Malibu, can you just refresh us on the timing of those?

Don Johnson

Yeah, the Sonic is at dealerships as we speak. We are just starting to fill up the pipeline but dealers particularly in the close have vehicles and have sold some fairly modest sales this month so far. We sold about 1,400 units. Verano is December this year, and Malibu will be first quarter of next year with eAssist.

Himanshu Patel – JP Morgan

Great, thank you.

Don Johnson

Okay, thank you.

Operator

Our next question comes from the line of John Murphy, Bank of America/Merrill Lynch. Please proceed.

John Murphy – Bank of America/Merrill Lynch

Good morning. Also a follow-up question on the large SUVs, I mean, in addition to the pickups been its strong the SUV the large SUVs were very strong in the month. And those tend to be a lot more discretionary purchases than the large pickups. I am just curious what was going on there, if there is more incentive activity of if there is more demand as gas price will come down.

Don Johnson

Yeah, our full size utility were up about 56% and I think we characterized that in the latter comment more accurately, which is with gas prices stabilizing with at least some stability in consumer confidence we were totally surprised to see those vehicles increased in sales. I think there is also as I noted earlier at this time of the year collectively the industry tends to advertise trucks more. We and our competitors are in football. We are majorly baseball, so we will move in the level of awareness with consumers and I think that started to drive some customers for the full size pickups as well as full size utilities.

John Murphy – Bank of America/Merrill Lynch

Okay. And then second follow-up question just on the Malibu launch, I mean I thought the only Malibu is going to launch in the second half of next year. Is this Malibu just launched in the first quarter, the current model with the new eAssist powertrain and I just try to understand with this first quarter launch is the new Malibu as you are quoting.

Don Johnson

Yeah, we are going to provide more details to come in that.

John Murphy – Bank of America/Merrill Lynch

Okay. Is it the existing model with the eAssist that you mentioned?

Don Johnson

No, it is the new model.

John Murphy – Bank of America/Merrill Lynch

Okay. And then just lastly on consumer sentiment, obviously you sort of highlighted that as a big drag on the recovery in sales here. I mean just think about this, what are the major issues out there. I mean obviously there is unemployment or employment and problems that what are sort of the major issue that you think really need to change turn consumer sentiment around as you look at your models and get sales going?

Don Johnson

Yeah, actually what I one of the things I highlighted is that in September consumer sentiment turned around, which was positive, the follow-up point I made is that consumer sentiment has been volatile probably for the six to eight months. But clearly growth in employment is going to be one of the biggest drivers of the industry getting to we will call normal post recession growth rates. The good news right now is that we are at least seeing it stabilized, which I think is really important of really vehicle buying attitudes remain strong out there.

One of the things people have to remember is that, we are still at historically very low levels of industry. So, even as long as things remain relatively stable, and even in the face of persistently high unemployment, we're going to continue, we believe to see slow growth. I think once employment starts to improve that’s when we are going to start really see the knee in the curve, so to speak. But right now the pent-up demand due to age of vehicles is what is keeping this nice steady, slow growth going.

John Murphy – Bank of America/Merrill Lynch

Great. Thank you very much.

Operator

Our next question comes from the line of Chris Ceraso, Credit Suisse. Please proceed.

Chris Ceraso – Credit Suisse

Thanks. Good morning. A couple of items, one is a follow-up to the cadence of sales through the month. Do you have any feel for how much benefit you received from let say a catch up post to hurricane people that wanted to buy a vehicle late in the month, but postponed because of a bad weather or maybe even more to the point any vehicles that were replaced that had been destroyed in the storm.

Don Johnson

It’s not a significant number I guess the way of it characterizes right now.

Chris Ceraso – Credit Suisse

Okay. Did that it all influenced what you characterize is the stronger start to the month and then a pause and then a better finish?

Don Johnson

Not that we can tell materially.

Chris Ceraso – Credit Suisse

Okay. And then just one on the fleet sales you mentioned overall fleet sales were up 22%. Do you have the breakdown of the year-over-year comp for the three categories daily rent, commercial and government?

Don Johnson

In terms of the increase?

Chris Ceraso – Credit Suisse

Yeah, at year-over-year percent change.

Don Johnson

Rent was up 28.6%, commercial was up 4% and government was really strong up 26% this month.

Chris Ceraso – Credit Suisse

Okay.

Don Johnson

As I said year-to-date our fleets as a percent of total is down about 3 percentage point.

Chris Ceraso – Credit Suisse

Okay just to clarify those numbers you gave me are the year-over-year percent change for September, right?

Don Johnson

Correct.

Chris Ceraso – Credit Suisse

Okay. Thanks Dan.

Don Johnson

Okay. Thank you.

Operator

Our next question comes from the line of Peter Nesvold of Jefferies. Please proceed.

Peter Nesvold – Jefferies

Hey Don. Any follow-up color on the daily rent number up 28.6%, was the year ago comp just unusually easy or is there anything else that was happening in the month?

Don Johnson

Yeah, I mean, month-over-month we were down, but one of the things, we have tried to do this year is try, so you will see daily rent falloff for the remainder of the year. We try to get them early in the model year, because it does help residuals as we go forward. So, it’s really more of a timing issue than anything.

Peter Nesvold – Jefferies

Okay. And then the follow-up question is can you just speak to model year mix in terms of sales for the month and how is that trended versus August?

Don Johnson

We had 47% of 12s, so 53% of 11s, and what was it in August? Actually, I don’t have the August numbers in front of me. Clearly, again I would describe it as pretty normal trend into 12s with about 50:50 sales right now.

Peter Nesvold – Jefferies

Okay, great. Thank you.

Operator

Our next question comes from the line of Adam Jonas, Morgan Stanley. Please proceed.

Adam Jonas – Morgan Stanley

Hey Don.

Don Johnson

Hey, Adam.

Adam Jonas – Morgan Stanley

Question about October truck months, can you give us some of the highlights of why is it a great month to buy a truck and because I mean I think some of us would have anticipated, because there has been a lot of advertising about that. There might have been some, a bit of a delay air pocket waiting for that doesn’t appear to have happened. So, kind of, what else can you do? It seems like your dealers are complaining too much about, but they have to work with 0 for 60 and what not, so we are going to start seeing 0 for 72 or more money on the hood?

And then question on the Volt type of buyer, who is buying these things? Now, you’re getting more broader dissemination of customer profile kind of any data you can share with us in terms of demographic, how many Rolls-Royces these people own, household income, things like that? Thanks.

Don Johnson

Okay. Let’s start with the full size pickup. No, I mean, there is no plan to as you say go rent it out and putting more money in the hood, we think that our incentives are very competitive. Our net price position is very competitive. I think what are the things that I mentioned earlier is this time of the year people are starting to think about winter commercial customers are starting to think about with placing their trucks before things get too cold at least in the north and they start to breakdown like at the end of the year budget issues that you deal with, but also for us this is a good time of the year to advertise trucks and pickups overall. The properties out there for us to buy advertising are correlated very well to our target, so that’s why you are seeing a lot of promotional activity. I think you are just going to see more of the same and keep the momentum going.

Adam Jonas – Morgan Stanley

So, 0 for 72 is not one of those weapons here?

Don Johnson

We don’t talk about what our future incentive plans are. Our plan is to stay competitive in the market. I think we’ve demonstrated that. We will continue down that path.

Adam Jonas – Morgan Stanley

Okay.

Don Johnson

So Volt?

Alan Batey

Yeah, this is Alan Batey at Chevrolet. I don’t have all the statistics in front of me, but with regards to Volt, obviously it’s early times we are just starting to ramp up now nationwide. So, we’ve only been operating in six states. The people that have both the vehicles so far are basically 83% of the people are new to General Motors, so they are new to the GM family which is great. The average household income was about $175,000 and the most traded in vehicle was actually the Prius, so very early stages, but excellent early results. And as I said on our previous call, but the Volt is just a magnet around grass-root and open-door activity. So, we are very, very happy with the performance so far, but excited about now getting it sold nationally.

Adam Jonas – Morgan Stanley

Thanks very much.

Operator

Our next question comes from the line of Patrick Archambault, Goldman Sachs. Please proceed.

Patrick Archambault – Goldman Sachs

Great, thank you. Good morning. My question was just on the incentive landscape, you said interestingly that there really hasn’t been much sign yet of the spike in incentives. Obviously, inventories are still quite low going into October. So, one might think that people might hold back until that changes, but how are you thinking about that going forward, when you look at some of the competitive plans that are out there. Do you expect that come some kind of normalization of inventory? There is going to be a step up or do you actually think it should stay pretty stable from hereon in? And then I have one follow-up question.

Don Johnson

Okay. Let’s just address that, one reason, I mean as I started clearly we can’t read the minds of our competitors, but I think when we look at the behavior as inventories have built, what we’re seeing is the dealers are able to turn them faster and I don’t think there is a holding on inventory. The incentive levels have largely come back to the levels where they were in the first quarter of this year. So I would argue that if we’re not at, we’re very close to that sort of steady state position that we described. So again notwithstanding incentive analysis, I don’t see a big change. Having said all of that, we also continue to monitor the market and we’ll stay competitive and do what we need to do.

Patrick Archambault – Goldman Sachs

Okay, but given what you know about what your competitors are doing, you think there's a pretty good chance we will be in the same zip code for a while?

Don Johnson

Yeah.

Patrick Archambault – Goldman Sachs

Okay. The other follow-up I had was just on, can you guys gives us your estimate of the retail share for this month and how it compares to last month?

Don Johnson

Yeah, the retail share looks like it will come in around 10.7%, 10.8% and last month it was at mid 9, 9.5%, 9.6%.

Patrick Archambault – Goldman Sachs

Great thank you very much.

Don Johnson

Okay.

Operator

Our next question comes from the line of Rod Lache, Deutsche Bank. Please proceed.

Dan Galves – Deutsche Bank

Hi good morning. This is Dan Galves in for Rod this morning. Just wanted to ask, it looks like based on your estimates, the light vehicles SAAR will come in around $13 million give or take versus $12.1 million last month. Can you talk a little bit about what portion of that gain is from the Japanese, from having better inventory positions, and what type of increase we got from the other auto makers? I just wanted to get a sense of that.

And then, in terms of your market share, I mean it’s been very consistent this year between 20% and 20.5%, looks like it’s going to be similar to that again this month. It’s quite a bit higher that, I think what the projections were back at the time of the IPO. Like what are you thinking in terms of, how much, did you get a benefit over the summer months from the Japanese having constrained inventory. It looks like you are able to maintain that this month. What do you think about market share going forward, would you be able to sustain something in the 20% range?

Don Johnson

Okay, so a couple of things. First of all the SAAR, we would attribute that and these are rough numbers, because we haven’t seen all the numbers come. And but probably half of that is due to improving inventories and the other half I think is due to that pent-up demand as we continue to see in the market. So that’s the general assessment of the two factors driving the star.

In terms of our market share, as you said, we’ve been very consistent so far this year, even before the tsunami and earthquake in Japan, and even now that the competitors are building inventory. So did we benefit somewhat from the inventory shortages, maybe a bit, but I think by far the greater factor has been the consistency with which we have gone to market, the focus on our new product introductions, focus on store brands, even that work is getting progressively more healthy every single month. So, I think it’s all of those factors as we all know we have to take into account.

And therefore, we anticipate that we will be able to sustain this, I will call this general level of market share, you certainly are not going to see, or you will expect a huge fall off, but you’re also not going to see us take step functions up either. As a message from us is, has it has been for the last number of months, consistent efforts to the market and I think that’s what delivers consistent results.

Dan Galves – Deutsche Bank

Okay, great. And on incentives, it’s pretty impressive that you guys are down sequentially, it seems like you’ve got zero percent for 60 months on most of your truck products. How big of a factor is the current low cost of funding, for auto ABS, low benchmark rates, low spreads, how much of a tail wind are you getting. I mean I guess, what I am saying is, how cheap is these low cost financing deals for you compared to maybe a year ago, and how does that change your thinking on incentives going forward?

Don Johnson

First of all there is no doubt, there is cost of funds to all the manufacturers and all the financing institutions makes it less expensive to offer those kinds of promotion. So, I think that almost goes about saying in terms of how does that affect our thinking of incentives going forward, I would say, that’s a bit of a TBD. It depends on what your outlook is for rates and then more importantly it depends on what the competitors are looking for. We don’t see a significant uptick in rates and therefore serving in the short to medium term we wouldn’t see much change in that cost impact.

Dan Galves – Deutsche Bank

Okay. And not sure if I missed it, but have you given the industry incentives kind of on a month-over-month basis?

Don Johnson

No. The industry though on an August to September basis looks like it’s down between $80 and $90.

Dan Galves – Deutsche Bank

Okay, thanks very much. Appreciate it.

Don Johnson

Okay.

Operator

Our next question comes from the line of Seth Weber of RBC Capital Markets. Please proceed.

Joe Spak – RBC Capital Markets

Good morning gentlemen. This is Joe Spak in for Seth. Just two quick questions, one considering on with incentives, how much of a factor was presumably higher model year 2012 mix? I guess the implication being that I guess I am trying to figure out is if incentives are greater than normal on the old 2012 models?

And then secondly if we just look at cars, in general, I know it was up year-over-year, but on a daily selling rate, it looked down sequentially. So, if you could just disaggregate that between mix I know you said trucks are seasonally strongest on here and also competition from some of the Japanese supply coming back?

Don Johnson

Okay. So starting on the incentive piece, there is no doubt in the industry today as it has been historically as you get to the end of the model year, the incentives have tendency to rise and typically therefore at the beginning of the model year, your incentives aren’t as high. So, model year mix does have an impact on the overall industry incentive levels, tough to quantify it right now, but that directionally that is definitely there. I think the second question you had was on the car versus crossover versus truck month-over-month performance?

Joe Spak – RBC Capital Markets

Yeah. Just it looks like cars on a daily selling it was down versus August for GM, so I was wondering how much of that is from, excuse me, some of the competition coming back or is it really just a GM mix factor?

Don Johnson

Yeah. I mean I think it’s more of a news for our sales. It’s more of a mix factor, because as trucks are relatively stronger in the month due to seasonal demand.

Joe Spak – RBC Capital Markets

Thanks.

Don Johnson

Okay, thank you.

Operator

The following question will conclude the analyst portion. Following this question, we will proceed with the media portion of the question-and-answer session. (Operator Instructions) Our next question comes from the line of Colin Langan of UBS. Please proceed.

Colin Langan – UBS

Incentives year-over-year, you said they are flat month-over-month, are there some more year-over-year?

Don Johnson

Year-over-year looks like we are up about 20 bucks. So, it’s tough for the gun to shoot that straight, to be honest with you.

Colin Langan – UBS

And you commented rental was up, I guess, 28% or so, what was rental mix in the month?

Don Johnson

Rental was, pardon me, 17.6% in September.

Colin Langan – UBS

And year-to-date?

Don Johnson

Year-to-date, it’s 18.3%, so September as a percent of total was down.

Colin Langan – UBS

Okay. And then any comment you kind of touched on the Ford cars a bit weak, but the Cruze seems to have fallen off, and I think it was selling above 20,000 and now it is at 18,000. Is that a normal seasonal pattern for that vehicle or is it what sort of the weakness there?

Don Johnson

Yeah, it is a seasonal pattern. I would not at all characterize Cruze sales as unique. I would characterize them as being continually strong. If you look at it, if you seasonally adjust Cruze retail sales in September, they were basically bang on with what we did in both August and July. So not surprising, certainly no weakness there at all.

Colin Langan – UBS

Okay, all right. Great, thank you very much.

Don Johnson

Okay, thank you.

Operator

Also there is question from the media portion comes from the line of Tom Krisher, Associated Press. Please proceed.

Tom Krisher – Associated Press

Hi Don.

Don Johnson

Hi Tom.

Tom Krisher – Associated Press

Hey, I had a couple of things. You’d have the same seasonal demand increase for pickup trucks last year yet you still had a big year-over-year increase. Would you say that it’s a sign that there might be some more especially business buyers back in the market now or the pent-up demand is kind of taking hold? And then the other question would be on the Cruze as well, you’ve been above 20,000 in sales, last time you are below it was March. And would you attribute any of that decline to the Civic and Corolla kind of being back in the market with greater numbers?

Don Johnson

Yeah, maybe I’ll go with the Cruze one first and we don’t attribute any but to those guys coming back in the market at this point. Again, when you look at the seasonal factor for the month were bang on to what we did in both August and July. So, Cruze continues to go on. The one thing that we also have to remember about Cruze is again our dealers are getting really good at turning those vehicles. We are down to about 52-day supply on retail. So, the dealers are really flipping them quickly. So don’t see any negative factors there in Cruze.

On full-size pickups, I do think as you noted that there continues to be more pent-up demand in the small commercial business and there probably is in other parts of the market. So, a lot of the full-size pickup strength we’ve seen pretty well a year, but particularly now as we get into the second half of the year, I do think it’s been driven by that pent-up demand. I mean, a commercial owner cannot afford to have the vehicle at a service, so as they look at the age of their vehicle as they look at the upcoming winter season coming up and the affordability a lot of them are making the business decision that it’s better to buy a new vehicle.

Tom Krisher – Associated Press

Very good, thank you.

Don Johnson

Okay, thanks Tom.

Operator

Our next question comes from the line of Todd Lassa of Motor Trend. Please proceed.

Todd Lassa – Motor Trend

Hi, good morning. I wonder could you clarify you are still looking at a low $13 million year this year. Could you tell us I didn’t quietly SAAR number from you are, the total SAAR number for this month. Can you give us an idea what the SAAR would be for the first nine months, first three quarters? How much more you’d need to sell to into the $13 million by the end of the year?

Don Johnson

Yeah, I mean that the total SAAR to-date and again this is lightly even though the total SAAR to-date that we are tracking is around 12.8 million. This month it looks like it’s going to coming around 13.2 million and 13.3 million in order to get in excess of the $13 million industry. This year, we have to run at 13.6, 13.7 around that range. So given we’ve seen in September again we don’t think that’s unreasonable with all the further in the year.

Todd Lassa – Motor Trend

Do you think given that your kind of your big introduction for the coming model year is actually a 13 model with a Malibu and you don’t ever have a wax new coming at this fall that perhaps some of yours competitors will be picking up that number more so than GM going forward?

Don Johnson

Well, I think in the – as we’ve said in the fourth quarter of this year certainly competitors having more inventory will help drive the SAAR maybe more than the domestics. But in terms of the large momentum, one of the things I always come back to is when you look at the vehicles that we have that are having substantial increases year-over-year. These are not vehicles that have been introduced in the last six months necessarily, certainly some of them are, but you we look at the strength of the SRX of the Chevrolet Equinox, the GMC Terrain, the Buick LaCrosse, the Enclave, the Acadia, those are all vehicles that have been launched within the last three years, but have really proven to have excellent gain power and our freshness in the market that’s driving us forward. So, as we go into – in the last quarter this year and as we get into 2012, I see no reason why that momentum will not continue. So, I conclude in a very good position.

Todd Lassa – Motor Trend

With the low inventory on Cruze were mostly September sales ‘12 models or ‘11 model year cars?

Don Johnson

I’ve got to look. I don’t have the mix in front on me. I – my recollections was it was certainly evenly split, but I honestly can’t tell you that right now.

Todd Lassa – Motor Trend

Okay, thank you.

Don Johnson

But we’ll not be actually with that number.

Todd Lassa – Motor Trend

Thanks

Operator

Our next question comes from the line of David Welch of Bloomberg News. Please proceed.

David Welch – Bloomberg News

Good morning guys.

Don Johnson

Good morning, Dave.

David Welch – Bloomberg News

Hey large SUVs, were there some really good deals, I don’t know how much you spent, I know there were some lease deals out there for Tahoe and Suburban, did you get a pretty good take on those?

Don Johnson

Typically, we don’t do a huge release percentage on our full-size utilities or our full-size pickups.

David Welch – Bloomberg News

You do this month?

Don Johnson

No, I mean it’s probably and again I am looking all the data by vehicle line, but it’s likely more financing.

David Welch – Bloomberg News

Okay. I mean is there what some of this and some of those are some very big gains for the months kind of unusual for the product line?

Don Johnson

Again, I honestly believe it’s some of the pent-up demand that has been out there and this year when everybody started to get a little bit more stable confidence picked up a bit and gas prices stabilized or dropped, people had more confidence about the future price of gas and came out of the woodwork, came off the sidelines and starting to buy them. I mean, our least penetration kind of just passing the number on our utility is about 5%. So?

David Welch – Bloomberg News

Okay.

Don Johnson

And slight year-over-year so.

David Welch – Bloomberg News

Okay, very good. Thanks guys.

Don Johnson

Okay.

Operator

Our next question comes from the line of Mike Colias, Automotive News. Please go ahead.

Mike Colias – Automotive News

Yeah, thank you. Don, I just was hoping you might be able to confirm this report out of Canada that the KME plan might increase production of Equinox and Terrain, I think squeezing out another 50 units a day. Can you confirm that?

Don Johnson

Actually, I can’t. (indiscernible) I know our manufacturing folks are always trying to squeeze every dealer or every plant, but specifically not able to confirm then I’ll warn.

Mike Colias – Automotive News

Okay. Any other time indeed would you start characterize as being in relatively type supply?

Don Johnson

Yeah, yeah definitely, but again I’m also continually impressed by our leaders ability to turn those vehicles extremely quickly. So, we continue to see month-over-month sales increases despite the fact as bounce like 35, 40-day supply.

Mike Colias – Automotive News

Okay. And just quickly as pretty significant drop in Malibu sales last month, I think down 31%, any reason you point to for that?

Don Johnson

No, nothing specifically right now, to be honest with you.

Mike Colias – Automotive News

Okay, all right. Thank you.

Don Johnson

Okay, thanks.

Operator

Our next question comes from the line of Chrissie Thompson of Detroit Free Press. Please proceed.

Chrissie Thompson – Detroit Free Press

Hi, Don.

Don Johnson

Hi, Chrissie.

Chrissie Thompson – Detroit Free Press

I am just hoping you can go into a little bit more detail on uninvolved. You said earlier that by you’ve got 2000 demos on the ground and then 884 units for sale. Are those dealers’ lots waiting for buyers to come by them or they pre-sold? All right, can you give some insight sort of thing?

Don Johnson

Some of them will be sold units, I don’t know exactly how many, but the point is that they are well when we call them available-for-sale I am trying to distinguish between something that is in the pipeline or in transit or something that is designated as a demonstrator and therefore not available for sale. The net conclusion from that should be that we have 2200 dealers that we are trying to get to in these ultimately 34 additional states that’s not very many salable per dealer yet.

Chrissie Thompson – Detroit Free Press

Sure. And so the demo some of them might be and half of them?

Don Johnson

Yeah, some of them would be, although we send the demos out first, so they are pretty closely be or pretty soon be on ground.

Chrissie Thompson – Detroit Free Press

But you are saying that those that are (indiscernible) in the 2000, okay. And then does that maybe on you can give some context on that, does that mean, I get the low ratio of dealer to vehicle here, but how you are looking for, are you guys going to be sold out or?

Don Johnson

Yeah, it will be pretty much. As you got like you say we have obviously got some dealers that have got 10 demos on the ground and obviously that we are moving into 11s, but we are ready this month and often getting vehicles out there. In fact, we had only just conducted all of that training for the dealers. So, you need to give us probably another eight weeks before I can give you a better lead of what we are seeing across the nation.

Chrissie Thompson – Detroit Free Press

Okay. That sounds good. So, everybody has to replace their 2010 demos with 2011?

Don Johnson

Yeah.

Chrissie Thompson – Detroit Free Press

Okay, very good. And then just on…

Don Johnson

2011, sorry?

Chrissie Thompson – Detroit Free Press

Go ahead.

Don Johnson

You go to calendar year of 2011?

Chrissie Thompson – Detroit Free Press

Yeah. Okay, that’s fine. And then Don also if you clarify you have mentioned gas prices impacting SUVs. With that impact just for your pickup truck sales as well?

Don Johnson

Typically that’s what we see, well, what was the reason for the uptick.

Chrissie Thompson – Detroit Free Press

Okay, very good. Thank you.

Operator

Our next question comes from the line of Robert Schoenberger, the Plain Dealer. Please proceed.

Robert Schoenberger – The Plain Dealer

Thank you. I know there probably been a lot of questions about the Cruze so far both from the Analysts and Reporters here. But looking at the day supply it sort of 52-day supply going into this month?

Don Johnson

Yeah.

Robert Schoenberger – The Plain Dealer

Which is up from I mean it’s right around 30 to 35 going into last month, we were able to rebuilds some of that inventory because I was under the impression of some of the over time just had to be delayed because of supplier issues?

Don Johnson

We were able to rebuild a little bit, but let me just identify last month absolute is that I think. The absolute numbers probably pretty flat (indiscernible) here. Now actually I’m on, we offer about 4000 so 2500 so we were able to build a few.

Robert Schoenberger – The Plain Dealer

And as you’re still to get up to that 60 days level or are you going to try to keep it below that and concerning that strength of car shown at resale.

Don Johnson

Yeah, I mean ideally that’s why we’d like to be in the industry with build up some more. But again as we shown on Cruze and Equinox and Terrain even at those day supply down around 40, 45 even 35 there other spending for the growth.

Robert Schoenberger – The Plain Dealer

All right, great. Thank you.

Operator

Our next question comes from the line of James Amend, Ward’s Auto. Please proceed.

James Amend – Ward’s Auto

Hi folks just kind of curious about, can you give me some background on catalog sales up 1% it’s sort of half year half base so far this year and just kind of (indiscernible) DTS-STS.

Don Johnson

Actually and probably the bigger factor in there and I’ll let Kurt jump in, but the biggest factor again is in a very deliberate reduction for Cadillac in fleet sales. So, retail sales continue to be pretty strong in fact retail sales for Cadillac this month were up a 11%.

Kurt McNeil

Yeah James, this is Kurt McNeil, Don hit it our retail was up 11%, which we obviously feel very good about that primarily fueled by CTS and SRX. But we have methodically month-over-month taken our fleet business down 54% this particular months and then down 30% calendar year-to-date. So, we’ve made a commitment to the competitive with the other premium luxury makes and we’re going to do so.

James Amend – Ward’s Auto

Okay thanks.

Don Johnson

Thanks.

Operator

Our next question comes from the line of Ted Reed of The Street. Please proceed.

Ted Reed – The Street

Thank you. I wanted to ask if I look at all your numbers, where do I see the impact of Japanese production coming down if it’s in there anywhere and could just be impacting Malibu sales?

Jim Cain

I’m sorry can you repeat that?

Ted Reed – The Street

Yes, I wanted ask about, where all of your numbers do I see the impact of Japanese production returning, where does it show up in GM sales and as a corollary could this be impacting Malibu sales?

Don Johnson

I think it’s difficult even we reduce our sales report today to go in and similarly identify where the impact of the Japanese inventory coming back is I think again if you look at our overall sales performance for the month our consistent share performance.

Regarding to the Japanese deal given our growth portfolio I think we would be in a pretty good position and maintain our sales rate as well as our share. I think the next few months is what’s going to really tell what impact it might have I think it’s almost too early to tell right now.

One of the things we just talked about was Cruze that’s been impacting in fact I would say quarter the 52-day supply it’s actually that included (the trend) and on ground is 38 right now that is lower day supply than we like, but we are selling against Civic as well as we’re maintaining our superior ATP. So, difficult particularly the numbers would say Malibu has been hurt by the competitor, I just, I can’t include that right now.

Ted Reed – The Street

All right. Thank you.

Operator

Our next question comes from the line of Jeff Flock, Fox Business Network. Please proceed.

Jeffrey Flock – Fox Business Network

Yeah, hi Don, how are you? Would you clarify what you had to say about double dip versus slow growth? Was that sure your own economic model and just put one into that and then it strikes me as we see all the numbers come out today, the auto industry is certainly one area that’s running counter to the economy.

Don Johnson

…and business for that.

Jeffrey Flock – Fox Business Network

Which is nice, all right, maybe start to all over spot, but that’s good. And secondly, just with regard to strategy and you talked a lot about Cruze and all of that, but this is my characterization, not yours about GM to enter a hybrid strategy, I know you do hybrids, but to us it has gone out from the standpoint of trying to provide hybrid mileage and value over that cost and that is what’s happening with the hybrids out there. Now as you look at those sales of competitors, sort of affirming that strategy or making you feel like, we did the right thing?

Don Johnson

I guess a couple of thing, first one, in terms of the double dip versus slow steady growth, that’s certainly are (indiscernible) yet, and based on our modeling and what we are seeing at the agent and assurance floor that’s our view going forward, double dip we’re encouraged by consumer sediments, over the year are going up 7 points in September, but again having said that, when you have slow, steady growth you also want to manage your business prudently which is what we’re doing.

In terms of the hybrid strategy, I think, I wouldn’t characterize this as sort of not wanting to do hybrids and geo, we will add now, as far as our selling is related. I would again look at our strategy as one of offering multiple options to the consumer, whether it’s a 22 miles per gallon Cruze, Eco, whether it’s EF fixed at (indiscernible) around at 36 miles per gallon in highway or whether it’s an (indiscernible). I think what we are doing is giving the consumer a variety of choices and in that regard we’re certainly pleased with the strategy we have undertaken. But I wouldn’t again say that we have an anti-hybrid strategy.

Jeffrey Flock – Fox Business Network

That was by characterization. And just a follow-up on the Malibu dip, certainly, obviously there’s said to be a thought as you came out with the model, is there any concern that the Cruze in some ways it cannibalized Malibu sales that you saw this month or is it just perhaps that everyone knows there is a new model coming up sooner than they thought.

Don Johnson

Yeah, again, already, nothing we’ve seen has shown significant diversions from the Cruze so far, up into the list, now that’s sort of Cruze and the Malibu have been running side by side very strongly. So I don’t think that’s happening right now.

Jeffrey Flock – Fox Business Network

Got you. Thanks Don.

Don Johnson

Okay.

Operator

Our last question comes from the line of Craig Trudell of Bloomberg News. Please proceed.

Craig Trudell – Bloomberg News

Hi Don. Just one sort of follow-up to inventory, you talked about there been sort of a different story going on with inventory of cars like Cruze versus trucks like Silverado and others. How is that shaking out in terms of them getting more inline, I know trucks are coming down, but how is Cruze doing and do you expect that trend to continue for a couple of months or is it on the way back to more normal?

Don Johnson

Well, I guess, a couple of things, first of all, we’re continuing to see the stock of pick-ups and utilities getting line to where we will have to make the comment that our goal by the end of the year is to have about 200,000 pick-ups in stock and about a 90-day supply. So we will I believe continue to see that as we match production with demand.

On the Cruze side, I know Alan is down at the (indiscernible) plant every week making sure they can squeeze out every extra unit they have. So, while 38-day supply is not as many as we’d like and we want to get everyone we can, if increasingly higher sales drives our day supply down a little bit is just going to mean was that much harder by getting more production and turning our inventory faster.

Craig Trudell – Bloomberg News

And I think that works. And in terms of the labor deal that you guys reached last month, how soon will you guys be able to see a boost from production is that more of a late 2012 timeframe for you guys to get some production of the cars that you committed to making in that contract?

Don Johnson

Yeah, Craig I’m actually not in a position to comment on that. We can get some more backgrounds somebody, who is a little bit closer that of me for you. I will get somebody to talk to you.

Craig Trudell – Bloomberg News

Thanks.

Operator

Mr. Cain, I will now turn the call back to you. Please continue with your presentation or closing remarks.

Jim Cain – Communications

Thank you everybody for joining us. It’s a good discussion. I hope we got everyone’s questions and feel free to follow-up with me directly if you have any additional information you need to track down. Thank you.

Don Johnson – Vice President, U.S. Sales

Thank you everybody.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines. Have a great day everybody.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: General Motors' Management Discusses Monthly U.S. Vehicle Sales - Conference Call Transcript
This Transcript
All Transcripts