Silverados and Cadillacs Drive Gains for General Motors Company (GM)

An all-new version is due in just a few months, but GM’s current Chevy Silverado is still a very strong seller. Photo credit: General Motors Company (NYSE:GM).

GM’s sales were up just 3%, but that modest-sounding number belies what was actually quite a good month for General Motors Company (NYSE:GM).

GM’s total year-over-year sales increase was low because of the timing of some large fleet deliveries, but its retail sales increased 9% in May — and some of General Motors Company (NYSE:GM)’s most profitable products did especially well during the month.

Big sales gains where it matters most to the bottom line
What are the most profitable products in the auto business? It varies somewhat by automaker, but if you said “pickup trucks, SUVs, and luxury cars,” you’d be on the right track.

While GM showed pretty solid growth across the board, those areas were all especially good for the General in May — a scenario that bodes very well for General Motors Company (NYSE:GM)’s second-quarter profits.

As GM’s U.S. sales chief Kurt McNeil said in a conference call on Monday, “Quite simply, it’s a great time to be in the truck business.”

Following a trend seen at both Ford Motor Company (NYSE:F) and Chrysler Group LLC, sales of General Motors Company (NYSE:GM)’s full-sized pickups — the Chevy Silverado and GMC Sierra and their heavy-duty siblings — were together up 23% on the month. Pickup sales are being driven by a series of trends in the economy, and this factor: The average age of pickups in the U.S. is higher than the overall average age of American vehicles, and older than it has been in a while — 11 years or so.

So we start with the fact that there are a lot of tired pickups out there. Now, add in the fact that housing prices are rising — and new-home construction has begun taking off, after several quiet years. Also add in the fact that oil-services companies in pickup-loving places like Texas are seeing increased business because of the U.S. oil and gas boom.

The upshot? A lot of buyers — both individuals and small businesses, like contractors — are feeling it’s time to replace those old pickups. And GM, like its Detroit rivals, is the happy benefactor of that trend — a trend it’s been riding without a significant increase in incentives, even though it’s selling down supplies of two models that are set to be replaced shortly.