GM Has Good News/Bad News March

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First the good news: General Motors' March sales rose 6.4 percent, ahead of the industry's 3.4 percent gain. GM had its best March in five years. Its first-quarter market share rose to 18 percent from 17.5 percent in the first quarter a year earlier. Cadillac sales rose 50 percent. Buick sales rose 37 percent. And GM China sales hit a first-quarter record of 816,373.

The future looks good because GM will begin selling its new K2XX Silverado and Sierra pickup trucks toward the end of the current quarter, just as the pickup truck market seems to be gaining steam as both an indicator and beneficiary of the resurgence in housing construction.

The bad news? Start with the share price. GM rose 3 percent in March, but it is down 5 percent this year, while the S&P 500 index is up 9 percent and Ford Motor shares are down 4 percent. Ironically, automakers' shares are down even though industry experts say the stock market's rise is among the factors contributing to strong U.S. auto sales. Also, in terms of March pickup truck sales, GM trailed every other manufacturer.

Additionally, while GM's U.S. March sales grew 6.4 percent, Bloomberg's consensus estimate was 12 percent. GM's first-quarter market share was up, but as Jefferies analyst Peter Nesvold wrote in a note, March market share was trending down to 17 percent, below its 18.2 percent market share on a trailing three-month basis.

Perhaps the share trends are a sign of weakness, or perhaps they are a sign that Wall Street follows automotive sales a little bit too closely. What is clear is that potential GM and Ford investors are so far focused more on Europe's bleak auto economy than on the U.S. auto economy's promise.

"The biggest factor weighing on these companies is Europe," said S&P Capital Markets analyst Efraim Levy, in a recent interview.

"As you get more clarity on a turnaround in Europe, on if that will happen and when, it will relieve pressure on the stocks," Levy said. "In the U.S., both companies are doing well and are gaining market share."

Still, GM faces questions about its March performance in the U.S. pickup truck market, which, after all is said and done, remains at the heart of the Detroit Three's business model.

Ram sales rose 25 percent to 33,831 units. Ford F-150 sales rose 16 percent to 67,513 units. Toyota Motor pickup sales rose 16 percent to 24,471, including Tundra's 8 percent increase to 9,270. At the tail end of this list, Silverado sales rose 8.4 percent to 39,561 and GMC Sierra sales were flat at 13,817, so combined sales rose 6 percent to 53,378.

Another sour note in the pickup truck market was that full-size pickup sales accounted for about 11.6 percent of the total automotive market in March, down from 12 percent in February but up from 10.5 percent in March 2012, according to Nesvold. GM was the principal contributor to the decline, according to Credit Suisse analyst Chris Ceraso. "GM lagged the pack," in March pickup trucks, Ceraso wrote in a note issued Wednesday.

"The performance of GM's full-size pickups relative to the industry in March could be an important warning for investors playing the housing derivative theme," Ceraso said. "Not all trucks or truck makers (or suppliers) may respond equally or at the same time. While the improvement in housing is supporting higher pickup truck sales at the industry level (and should do so through 2013), sales and/or production volumes for GM may lag the market as it makes the transition to the new trucks—a process that will drag on throughout 2013."

Another troubling indicator in GM's sales report was that sales of the Chevrolet Malibu, the GM entry in the auto industry's biggest segment, fell 22 percent to 18,539. On the GM sales call, Don Johnson, vice president of Chevrolet sales and service, said the number is not altogether representative, since sales are up 25 percent since February and, also, a year ago GM was clearing out the 2012 Malibu. Still, overall Chevrolet sales rose just 0.5 percent to 173,859.

If the picture in March was decidedly mixed, it is certainly brightened by the hope associated with the K2XX. Hope means Ceraso could write that the market "will be willing to stick with the stock through this transition, with an eye toward larger earnings in 2014."

—By's Ted Reed

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