General Motors has recently announced that it is cutting scheduled overtime hours in six of its plants to avoid the bloating inventories of full size pickups and SUVs due to the ever increasing fuel prices aggravated by a weak housing market that has affected the demand.
With the present situation it is less likely for consumers to take out home equity loans just to fund a car purchase. Aside from that, in a country like the US where its market is traditionally inclined to trucks and SUVs it is really taking all the damage from the increasing fuel prices.
Housing contractors who represent a big chunk of the market for pickups are putting off new truck purchases due to the decline in the housing market. According to GM spokesman Tom Wickham, "Gas prices are still driving people out of the full-size segment and into crossovers." He also noted that such trend was worsened by high fuel prices which started after hurricanes Katrina and Rita last year.
Wickham further explained that although GM is experiencing an increase in the pickup and SUV segment the fact remains that they are presently selling fewer vehicles this year than last year.
The changes implemented on GM's manufacturing operation are expected to last until the end of the year. Scheduled overtime hours are still to be eliminated but not the unexpected overtime that might be required due to an interruption in manufacturing.
However, since revenue is based on vehicles that leave the plant then it is to be expected that the cut in scheduled overtime will have direct impact on GM's revenue.
General Motors has increase the scheduled overtime to meet with the launching of its 2007 Chevy Silverado and GMC sierra Trucks. Wickham explained, "If inventory levels get too high, you're compelled to increase incentives, which hurts the resale value of product. We're working hard to improve resale value."
Last month just to increase sales, GM, producer of , has raised incentives to $3,500 and offered zero financing on some of its full-sized pickups to compete with Toyota's $4,000 cash back offering for its large truck---the Tundra.
It is expected that for this month of August the US auto sales could be off by 10 percent from a year ago basing on the preliminary data from industry sales tracker Edmunds.com.
The sales last July were down by 19 percent year-over-year and despite sales of Toyota and Honda have surpassed those of Detroit's Three still their sales fell last July also.
