General Motors, which has been scaling back production since last fall as inventories of unsold vehicles have grown, revised its sales forecast for 2017 downward, with senior executives now saying that U.S. sales will drop into the “low 17 million” range.
With the consensus of the auto industry now suggesting a downturn is taking hold, another key forecasting service also announced it was cutting its outlook for 2017. LMC trimmed its full-year 2017 forecast for new vehicle sales for the third consecutive month, pegging it at 17.1 million units from its previous forecast of 17.2 million.
“As the U.S. auto market enters the fourth month in a row of a sub-17 million unit selling rate, nerves are being tested,” Jeff Schuster, senior vice president of forecasting at LMC Automotive, said in a release. “It will be challenging in the second half of the year to keep pace with 2016 … but a year still expected above 17 million units should not be considered a poor performance.”
J.D. Power & Associates predicted June sales will drop by 2% to a seasonally adjusted annualized rate of 16.5 million vehicles from 16.8 million units in the same month in 2016.
(New car sales hitting the skids in June. Click Here for the story.)
Earlier, Kelley Blue Book had predicted a 4% decline in sales for June.
“The market is definitely slowing (and) it’s something we are going to monitor month to month,” GM Chief Financial Officer Chuck Stevens said during a conference call with analysts. “Pricing is more challenging.”
U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But the market has begun to saturate thanks partly to a glut of nearly-new used vehicles, forcing automakers to hike incentives to entice consumers to buy.
GM had previously announced it expected 2017 new vehicle sales in the “mid-17 million” unit range. Stevens told analysts that sales could fall by 200,000 to 300,000 units this year but that the automaker had “somewhat insulated” itself from a downturn by reducing fleet sales, which lower the residual values of vehicles.
(Click Here for more about automakers cutting production levels.)
“We are going to remain disciplined from a go-to market perspective,” Stevens said.
He reiterated the company’s target to bring U.S. inventories of its vehicles down to 70 days’ supply by December from 110 days in June. So far this year, GM has idled some 5,000 production workers as it has reduced production of slow-selling passenger cars.
Stevens also said GM also expects a higher-than-expected charge for its sale of its Opel-Vauxhall unit to the PSA. GM’s charges against earnings will reach $5.5 billion versus its previous estimate of $4.5 billion due to additional costs associated with the deal, Stevens said.
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The company plans to issue $3 billion in short-term debt to cover pension liabilities that PSA will assume in order to finalize the transaction quickly, he added.