As the world spins: The mystery of the missing sales

Inside the truck wars black ops...

Inside the truck wars black ops…

Spend enough time looking at anything, and patterns eventually emerge; stare hard enough at auto industry news, and you can discern the movings of the PR teams who craft the messages that drive 95% of all auto media content. Spend enough time reading and a sweeping drama emerges: one side probes a competitor at a point of perceived weakness, the defender digs in or counter-attacks, a problem appears from nowhere while another problem fades away, yesterday’s non sequitor becomes today’s news.

In the polite world of the auto media, the journalist’s role on this battlefield is to be the straight man: to merely repeat each feint and parry in this informational melee as if they were the weather, or stock prices. Even the combatants themselves will back away from any direct confrontation when pressed, caught between the pull to ruthlessly compete and the inherently conservative culture of all large corporate communications departments.

But the battle for reality is constantly being waged in the auto industry… and the action is always most exciting when the stakes are highest. Which is what makes GM’s new truck launch the perfect case study.

Hints of trouble were wafting out of GM’s critical new pickup launch even before the launch itself, as inventory issues and mysterious delays showed up before any trucks did. With the launch of the company’s most profitable product family on the line, there was only one course of action: a full-on informational campaign.

The first step: scorched earth. Just as analyst concerns over GM’s truck inventory hit their peak and production of the new 2014s was starting to spool up, GM suddenly and unexpectedly stopped releasing its production data. Suddenly analysts and bloggers were without the most reliable method for verifying the health of a vehicle: comparing production rates with deliveries.

With the primary source of evidence for critics and watchdogs taken out of the game, analysis of the truck launch was back in GM’s hands. And as strong summer sales lifted the entire industry’s mood, analysts seemed content to believe that GM’s truck inventory and cannibalism issues would be wiped out by frothy demand.

Things suddenly came crashing back to earth when GM’s September’s sales results received a pre-emptive expectation deflation. The surest sign that trouble is afoot is a “getting in front of the story” story released on the day before sales results. When it comes from a known “favored outlet,” as Bloomberg is known by industry insiders to be for GM, the suspicion inevitably deepens.

In addition to conforming perfectly to the PR cliche of “admit a small problem to cover a large problem”, Bloomberg’s story itself makes little sense. The story’s nut graf is telling:

“Demand for the trucks is exceeding a supplier’s ability to produce certain drivetrain parts for the 5.3-liter V-8 engine, the most popular size, and GM is limiting how many dealers can order, said two of the people, who asked not to be identified because the matter is private. While one of the people said the issue could be resolved soon, another said it could take longer than a couple of months. They declined to identify the supplier.”

As the volume engine of the line, the 5.3 is made at three separate plants and was the first engine GM started building new Silverados with. Its also the engine that GM is centering much of its ad spend around, tackling the Ford F-150 EcoBoost head-on. Meanwhile, blaming a supplier bottleneck for slowing sales of “hot new” product rings somewhat hollow when sales volume is 10% below September 2012’s level.

Sure enough, inventory data from Automotive News [sub] shows that far from having a supply constraint issue, Silverado inventory has been heading in the wrong direction: as of September 1, GM had over 153,000 Silverados sitting on lots with supply rising from 87 days to 98 days. But, without GM production data these are merely estimates… and until we get October 1 numbers the picture remains unclear. Still, the mathematical likelihood that GM’s Silverado inventory is even half V6 models is not good. The story simply doesn’t add up.

And with GM’s overall volume dropping in September, it was inevitable that at least one of the few industry reporters left would ask about pickup issues. But rather than getting a consistent retelling of the supplier story that had been pre-emptively leaked just a day earlier, WardsAuto was treated to a veritable smorgasbord of The Very Best Of The Auto Industry’s Weak Sales Excuses.

“The lack of key inventory, combined with aggressive incentive spending by rivals, helped send the auto maker’s U.S. deliveries down 3.2% in September.

Kurt McNeil, GM’s chief sales analyst, says fewer selling days in September compared with the same period year-ago, as well as an anticipated slide in fleet sales, also contributed to the lackluster results.”

Selling day reductions and fleet sales vagaries are classic refrains from GM’s pre-bailout liturgy of excuses. The inventory issue, which just 24 hours before was THE story on GM trucks, was actually downplayed by GM’s Don Johnson who said “a report of a shortage of the volume 5.3L V-8 engine has not affected sales.” Instead, the focus was shifted again: to “competitor incentives”.

But here too, GM’s thesis is hardly supported by the data. Ford’s truck incentives rose just 1.2% between August and September, and Ram’s dropped by over 13% according to data from Edmunds.com. Though F-Series did have the highest incentives, the new Silverado’s competition came closer from home: When the same Edmunds data is drilled down to 2013 models only, the Silverado and Sierra turn out to be the most-incentivized pickups on the market. TrueCar’s data concurs.

So, rather than the supplier issue or the all-you-can-eat excuse buffet, the real story surrounding GM’s new truck launch is the same issue foreseen by analysts months ago: with inventories remaining stubbornly high, discounts on outgoing 2013 Silverados are killing demand for new 2014s. Though competitors are turning up the heat, the 2014 Silverado’s worst enemy remains the 2013 model.

Eventually GM will sell off the deeply-discounted 2013s, at which point it should see inventories and incentives drop and transaction prices rise. But it’s also on a tight timeline, trying to establish its truck line on the market before competitors launch their new pickups.

Finally, there’s the issue of loyalty: in an intensely competitive and brand-loyal market with long product cycles, the launch of an all-new line of Chevy/GMC trucks should be creating real excitement. If outgoing Silverados are cannibalizing the new hotness, it could point to deeper problems than mere inventory management. If, for example, this is an earlier indicator of traditionally conservative pickup buyers leaving GM’s brands over its “Government Motors” image, the trouble is only just beginning… and clearly that’s a possibility GM has at least considered.

In any case, the automotive world will keep spinning… and DailyKanban will be there to help you keep your bearings.