Happy Birthday Mr Ackerson, I wish you GM price discipline!

GM’s Dan Ackerson turned 55 today.  For his birthday I wish him the gift of pricing silverado628optdiscipline.  He’s had a tough couple of years learning the ropes of the GM business.  Let’s hope GM has unlearned its volume for profit strategy.

Ackerson says he wants to boost the company’s North American margins bringing consolidated margins solidly into upper single digits.  He also said GM wants to raise US market share, building on the back of the new truck lineup.  So far, so good.  What’s worrisome is recent noise from GM field sales and dealers that they need more incentives on the brand new vehicles to meet those market share goals.   He needs to resist that temptation.

Yes, GM trucks are now priced higher than their Ford and Ram competitors.  Yes incentives will move volume and help them win some market share.  But the minute he puts that heroine needle back in to the vein of GM distribution, he’s well down the slippery slope of brand dilution and price sacrifice.  Chevy and GMC truck buyers need to learn now that they will have to pay up a little for the first year.  Otherwise, they will just learn that GM will pay up.  A little now and a lot more later.

Ford is playing hardball and after a strong 2012 for the F-150 with nearly 400 thousand sold, they are putting on price pressure.   But what the Ford number Ackerson should be emulating is it’s 11% North American operating margin for 2012.  Pumping truck volume in the short-term will feel good, but as the Silverado ages and the remainder of the K2XX lineup fills out the market it will lead margins up, not down.

WHO’S WHERE ON TRUCK INCENTIVES FROM OUR FRIENDS AT EDMUNDS

(…pretty good for GM considering they have up to $9,000 on some older Silverado models, but it’s still early)

 

 

Sep-13

Sep-12

%  ∆

F-150

 

 $         4,712

 $         3,701

27%

Silverado 1500

 $         3,777

 $         5,533

-32%

GMC Sierra 1500

 

 $         3,466

 $         5,403

-36%

RAM 1500

 $         3,945

 $         4,537

-13%

Toyota Tundra

 

 $         3,627

 $         4,058

-11%

Nissan Titan

 

 $         4,141

 $         4,495

-8%

images

So, happy birthday Mr. Ackerson.    Good luck have a sip of champagne and avoid that evil incentive needle.

Summary: 

  • The fast rising US market had helped GM, Ford and Chrysler management maintain pricing discipline with gaining the volume leverage.  Now that we are peaking out in the 16 million SAAR range, the operating leverage is going to waning. 
  • Pricing is at historic highs in the North American car business, so how do we maintain and grow margins.  Pricing, Mix and tight Cost Control  — the first the most important. 
  • If we push the volume and bubble the market beyond demand, margins may move up for a year will be more vulnerable to any speed bumps or the inevitable cyclical downturn.
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