GM Inventory Levels at 8-Year High; More Jobs Threatened?

At the end of November, General Motors Co. (NYSE: GM) reported a total of 834,200 cars and light trucks in its inventory. According to the company, that’s an 84-day supply, based on an adjusted selling day basis. GM’s inventory has risen 28% over the past four months.

What that gross number doesn’t reveal is which models are taking up all the space on the lot. According to a Monday report in Automotive News, GM had a 177-day supply of Chevy Camaro on December 1, up from a 74-day supply last year. That’s nearly six-months worth (34,600 units), compared with an ideal inventory level of 60.

Last year the Buick Enclave luxury sport utility vehicle (SUV) had a 60-day supply on December 1, compared with a 114-day supply this year (16,000 units). The Chevy Cruze had a 121-day supply and the GMC Terrain also had a 114-day inventory supply. The industry average was 73 days of supply on December 1.

GM has already said it would eliminate jobs in two plants — one in Ohio and one in Michigan — that manufacture the Cruze and the Camaro, as well as two Cadillac models. Cutting production again almost inevitably means even more workforce reductions, although GM has not announced any plans to do so.

GM Chief Financial Officer Chuck Stevens said in October that swelling inventories are part of the company’s plan:

What’s really driven the increase is filling out inventory on newly launched products and new entries that we didn’t have before, like the [Cadillac] CT6 or the [Buick] Envision as an example. Our inventory levels will be dictated by matching supply with demand. We will continue to watch inventories closely, especially cars, and will take actions if and when required.

The concern for investors is incentive payments that were much higher this past November than they were a year ago. According to official PIN data, GM’s incentive spending was up 35% year over year in November, by almost $1,300 to average nearly $4,900 per vehicle. The increase is double the $650 industry average of 19% year over year.

Oddly neither the Cruze nor the Camaro is being heavily promoted now. A buyer seeking a good deal should look at the Chevy Sierra 1500 Crew Cab LT All Star, currently a Red Tag special with an average total incentive package of $9,680.

Politically, cutting more jobs is not the best move GM could make for the next few months. President-elect Donald Trump, who made a lot of noise about manufacturing jobs during his campaign for the presidency, has not yet waggled his finger at GM as he has at Ford. And the auto industry wants the Trump administration to review (and soften) the mileage and fuel standards they agreed to with the Obama administration in 2012.

One thing GM can’t do is go back to building cars that nobody wants to buy. Doing that was a big part of the company’s bankruptcy filing in 2009. The company got union buy-in on removing the Job Bank that guaranteed workers nearly full pay if production was cut and a two-tier pay scale. GM has a lot of room to maneuver, but relations with Trump may set a limit on how far the company can go.

GM stock traded down about 0.1% Tuesday morning, at $37.07 in a 52-week range of $26.69 to $37.74. The consensus 12-month price target is $36.10.