GM’s Pickup Prices Are Trucking Things Up for Dealers

Chevy Silverado Red Pickup

This summer, General Motors (NYSE:GM) was all about the launch of its highly anticipated next-generation pickups, the 2014 Chevrolet Silverado and GMC Sierra. Recognizing that a recovering economy coupled with a recovering U.S. auto industry translated to more interested American buyers ready to drive the redesigned trucks, GM rolled out an expensive marketing campaign and encouraged dealers to tout the new vehicles’ many alluring features. The problem the automaker now faces, however, is that no one is willing to buy them.

According to Automotive News, dealers are complaining about flattened demand for the new Chevy Silverado and GMC Sierra, and they blame the vehicles’ high price tags for consumers’ lack of interest. Though the dealers recognizes the trucks’ merits, they insist that GM needs to offer more alluring offers that counteract competition from heavily discounted Ford (NYSE:F) and Chrysler Ram trucks, but GM has so far refused.

That’s because the U.S. automaker recognizes that it is selling new redesigned pickups while its competitors are in sell-down mode, meaning they’re willing to highly discount their vehicles just to get them off the lots. The price of a popular Silverado model, for example, is $43, 005 after factoring in incentives, while the 2013 F-150 model is $40, 385, but GM execs maintain the position that this is a temporary period that will soon end, and GM spokesman Jim Cain explains, “You don’t ever want to let the oldest trucks in the market dictate strategy for the newest and best truck in the market.”

GM has a point, but the Detroit-based company also faces the reality highlighted by Auto News that U.S. sales of GM’s full-size pickups in September fell 8 percent, while Ford’s F-series rose 10 percent and Ram’s climbed 8 percent.

Dealers are getting frustrated as the trucks fail to leave the lots and have asked the U.S. automaker to offer more incentives so the sales trends don’t continue through October and November, but GM is standing rigid in its position, and the company also has the support of analysts who believe the price advantage on the redesigned GM trucks is temporary and will ease once Ford and Ram’s stocks of ’13s are depleted.

GM’s ambitious pricing of its redesigned trucks is the result of CEO Dan Akerson’s company goals of boosting U.S. market share while also lifting North American profit margins from 7.6 percent to 10 percent. Auto News explains that Akerson wants his company’s margins to get closer to Ford’s and is thus unwilling to drop its trucks’ high price tags, but the situation still remains challenging as both automakers serve cost-conscious buyers who still aren’t necessarily willing to pay the highest prices for the newest vehicles. As Ford and Ram prepare to roll out their new trucks, and their ’13 inventory is exhausted, it is likely that the Silverado and Sierra trucks will finally find their time to shine, but until then, dealers will need to prove their patience.

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