General Motors' June Sales Defy Logic As Its Recall Count Piles Higher

Source: General Motors.

General Motors just stunned the world, yet again, with another massive recall. General Motors' most recent recall was to the tune of 7.6 million vehicles in the United States alone. If you add that into the automaker's massive running total through the first half of 2014 alone, all 54 individual recalls cover more than 25.6 million vehicles in the U.S. and nearly 29 million globally.

With that massive recall total in mind, the consumers have spoken: They don't mind. The endless recall saga appears to have had little, if any, impact on General Motors' sales, and that was further proven this morning when GM released its June sales report.

By the numbers
General Motors' sales in June increased 1% to 267,461 vehicles, compared to last year. That was far better than Edmunds.com's prediction that GM's sales would decline 8.5% in June, compared to last year.

That doesn't even tell the full story, as GM's sales last month were actually better than they appear. Investors should take into account the number of selling days between comparable months: Last year's June had 26 selling days compared to last month's 24 selling days.

When you adjust for the two fewer selling days, General Motors' sales gain in June, compared to last year, jumps from a 1% gain to a 9% increase.

Back to unadjusted figures, Chevrolet continued to carry the entire General Motors sales figure. Chevrolet posted a 2.5% sales decline in June, compared to last year, yet its 188,567 units sold accounted for more than 70% of General Motors overall sales total.

GMC and Buick improved over last year's June total with a 10.6% and 18.4% gain to 43,550 and 21,403 units sold last month, respectively. That sales performance was GMC and Buick's best June since 2006. Cadillac's struggles continued in June with sales up only a tenth of a percent, and through June, the brand's sales have declined 4.5%, compared to last year.

"June was the third very strong month in a row for GM, with every brand up on a selling-day adjusted basis," said Kurt McNeil, U.S. vice president of Sales Operations, in a press release. "In fact, the first half of the year was our best retail sales performance since 2008, driven by an outstanding second quarter."

Sales of Chevrolet's Silverado remain unimpressive. Source: General Motors.

Disappointing results
While June was overall a success for General Motors, especially since Detroit's largest automaker has faced months of negative press regarding recalls, one consistent disappointment has been sales of GM's most profitable products: full-size pickups. 

This was supposed to be General Motors' window of opportunity before America's best-selling truck, Ford's F-Series, launched its all-new 2015 F-150. Unfortunately, sales of the Chevrolet Silverado were only up 0.6% last month and remain 0.8% lower through the first half of 2014. The story is similar for GM's other full-size pickup, the GMC Sierra. Sales of the Sierra were down 7% last month, but are up 6.3% through the first half of 2014.

Originally, General Motors' strategy was to take advantage of the all-new Silverado and Sierra designs and maximize profits by not offering many discounts. That strategy led to months of double-digit sales declines earlier this year and forced the automaker to increase incentives and deals as the historically strong summer months approached.

Investors would be wise to keep an eye on incentives and market share of competing trucks when Ford's next-generation F-150 hits the dealerships later this year. The F-150's arrival could have a direct impact on GM's profits if the latter is forced to substantially increase incentives to compete, or if it refuses to increase incentives, it could lead to another dramatic sales decline.

Bottom line
Ultimately, General Motors' sales increase of 1%, or 9% on a selling-day adjusted basis was a pleasant surprise compared to analyst estimates. Thus far, General Motors' sales have seemingly been unaffected by the negative attention surrounding the automaker's recall debacle, but investors will have to deal with another massive charge of $1.2 billion in GM's second-quarter results because of rising costs associated with recall repairs.