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GM to cut sedan production, continue shift toward trucks and SUVs

  • GM will continue to cut production on sedans.
  • The No. 1 U.S. automaker is trimming some businesses.
Chevrolet Tahoe sports utility vehicles (SUV) wait for final inspection before being driven off the production line at the General Motors Co. (GM) assembly plant in Arlington, Texas
Matthew Busch | Bloomberg | Getty Images
Chevrolet Tahoe sports utility vehicles (SUV) wait for final inspection before being driven off the production line at the General Motors Co. (GM) assembly plant in Arlington, Texas

General Motors will continue to reduce production of passenger cars in order to retool its product mix in favor of the trucks, SUV's and crossovers customers are buying, Chief Financial Officer Chuck Stevens told investors Tuesday.

The move is part of GM's larger strategy to trim off unprofitable businesses and focus only on its most profitable markets. That increasingly means shifting its product mix more toward crossovers, SUVs and trucks.

"We continue to take actions to adjust production in response to lower customer demand for passenger cars in North America," Stevens told investors on a conference call.

He added that truck production should be up in the fourth quarter.

The company is planning to introduce a wider range of trucks next year with a broader selection of features, including off-road capability, said GM CEO Mary Barra on the conference call.

Recent downtime helped lower U.S. dealer inventory by 160,000 units to 821,000 by the end of September, compared with June. Overall, GM is expecting inventory to hit 800,000 vehicles by the end of this year, Stevens said. That would be below the 850,000 it had at the end of 2016.

"Importantly within that, it will be better balanced," Stevens said, adding that the company plans to have about 80 days worth of trucks and SUVs in stock — which is normal for them — 60-70 days worth of crossovers, and about 50 days worth of passenger cars.

The No.1 U.S. automaker posted third-quarter results that beat Wall Street estimates despite slowing down production at several of its factories during the quarter.

GM finished September with 76 days' supply of unsold vehicles, down from more than 100 days' supply over the summer. Wholesale volume was down 26 percent below the third quarter of 2016.

GM is still aiming for about 70 days of inventory by the end of the year.

GM reduced production at several plants during the quarter and relied on discounting to sell cars in stock. Discounts as a percentage of the average transaction price totaled 13.7 percent, slightly above the industry average, according to Reuters.

Shares of General Motors are up more than 30 percent so far this year. Ford stock has barely budged. And upstart automaker Tesla's shares have risen almost 60 percent.