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General Motors Company (GM)

December 03, 2012 11:00 am ET


Jim Cain

Kurt McNeil - U S Sales & Service Vice President - Cadillac

Alan Batey - Global Chief Marketing Officer

Don Johnson - Vice President of Chevrolet Sales and Service

Chase Hawkins - Vice President of Cadillac Sales and Service

Mark L. Reuss - Vice President and President of North America


John Murphy - BofA Merrill Lynch, Research Division

Adam Jonas - Morgan Stanley, Research Division

Rod Lache - Deutsche Bank AG, Research Division

Brian Arthur Johnson - Barclays Capital, Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Colin Langan - UBS Investment Bank, Research Division



Ladies and gentlemen, thank you for standing by. Welcome to the General Motors November 2012 U.S. Sales Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Monday, December 3, 2012. I would now like to turn the conference over to Jim Cain, GM Communications. Please go ahead, sir.

Jim Cain

Good morning, everybody, and welcome to the GM November sales call. Joining us today to lead the discussion is Kurt McNeil, our U.S. Vice President of Sales Operations. We'll have the discussion followed by Q&A as we always do, and as always, the conversation's governed by our disclosures on forward-looking statements.

With that, Kurt, the floor is yours.

Kurt McNeil

Thank you, Jim. Good morning, everyone, and thank you for joining us. As you've seen from our press release today, GM reported its highest November sales in 5 years with deliveries reaching 185,505 units. That's up 3% versus a year ago.

Now among the highlights, we saw strong car and crossover sales with car sales up 19%, and crossovers up 9%. Importantly, GM continues to make inroads with younger customers, import buyers and fuel economy-focused drivers, thanks to strong sales of our mini, small and compact cars, which were up a combined 51%.

At the high end of the market, the Buick and Cadillac brands are doing very well with sales up 22% and 30%, respectively. Finally, our average transaction prices or ATPs were up $750 per unit versus a year ago even though our car and crossover mix increased from 56% of our total sales to 62% of total sales. ATPs also increased about $190 per unit from October, when our car and crossover mix was about 60%.

Lower incentive spending is one of the factors helping to drive these higher ATPs. As a percentage of ATP, our spending for the month was less than 9% or more than 0.5 percentage point below the industry average based on J.D. Power PIN estimates. Spending is also down more than 0.5 point versus October and almost 2 points below last November.

Based on PIN, GM was the only OEM to reduce incentives from October. When you compare that against last November, half of our key competitors raised incentives and half lowered them, but we had the largest year-over-year decline of anyone in the industry.

In dollar terms, spending was down about $200 per unit from October and $500 per unit from last November. At the vehicle line level, you can see that our positive momentum is being driven by our combination of new products and the sustained performance of the vehicles we launched starting in 2009 and 2010.

At Chevrolet, sales of the Cruze were up 27% versus a year ago, the Sonic was up 12%, and the Equinox was up 13%. All of these vehicles continue to sell strongly with incentives quite a bit lower than the industry average. We're also gaining momentum with the Malibu, which saw a month-to-month increase of 6%.

At GMC, the Terrain was up 44% year-over-year, and at Buick, we reported another strong month of Verano sales and a 23% increase for the Enclave crossover. The Verano is really proving to be an eye-opener for a lot of customers and car critics. We were especially pleased to see the Verano Turbo win the recent Motor Trend comparison test against the Acura ILX. The Enclave, meanwhile, had its best November ever, which helped Buick achieve its highest November sales since 2006.

Over at Cadillac, sales of the SRX increased 13%, and we continued to gain momentum with the ATS and XTS. They helped Cadillac achieve its highest November sales since 2007.

The buzz around these great products is really starting to build, thanks in part to the third-party awards and the recognition we're receiving. These include CUE being selected as Technology of the Year in the telematics category by AOL Autos, and the Cadillac ATS being named Vehicle of the Year by the L.A.-based Motor Press Guild, which is the largest auto press group in the world.

Now on the truck side of our business. We did not achieve our objective for the month. Total truck sales were down about 11%, and our full-size pickup sales were down about 8%.

One of the headwinds we face was related to the model year mix in the full-size pickup segment. As we shared with you on the September sales call, we started our 2013 model year with the GMC Sierra and Chevrolet Silverado about 45 days earlier than last year. That also ended up being several weeks earlier than our domestic competitors when they launched their 2013 trucks. Unfortunately, this left us vulnerable to unexpectedly high incentive activity as competitors ramped up spending to sell down their 2012 model year stock.

A couple of data points will provide valuable context. First, GM had among the lowest incentives in the segment for the third month in a row. Our incentives were $500 per unit lower than the segment average, and the biggest spenders have $1,500 to $1,700 more on their trucks than we do. This makes sense when you consider that roughly 60% of GM retail large pickup sales in November were 2013 models compared to about 35% for Ford and less than 10% for Dodge.

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