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GM facing pre-bankruptcy-style pickup oversupply

General Motors is facing an oversupply of full-size pickups that, to some analysts, is bringing back bad of the company's old bad habits.

Facing an inventory glut reminiscent of 2008, some Chevrolet and GMC dealers say they have an excessive number of Silverado and Sierra pickups in stock.

Chevrolet admits that its cars are taking market share from its trucks, although positive numbers for nearly all of its remaining four brands' products make things look pretty cheery in Detroit.

Sales are up 22 percent for the Sierra (to 67,598) and 10 percent for the Silverado (182,785), but they're still off of what many dealers were expecting.

"We thought that this year would bring back the kind of economic activity that would translate into us selling more trucks," Mark Frost, the general manager of Jim Ellis Chevrolet in Atlanta, said in a phone interview with Bloomberg. "It's not happening."

Jim Ellis has more than six months' worth of supply, an inventory level that Frost says is a "little scary."

Overall, GM has about 280,000 Silverados and Sierras on dealer lots across the country - more than it sold in the first six months of 2011. As a result, GM says that inventory is at a 122 day supply level, about double what it is for most of its lineup. GM says it would prefer to keep trucks somewhere around 100 days, but even that figure is about two weeks higher than the competitive Ford F-Series' 79 days, not to mention the 78 days GM ran for its trucks on average from 2002 to 2010.

Trucks typically average more days in inventory because of the seemingly limitless number of body and powertrain configurations they offer. As a result, dealers will often keep many in inventory so customers aren't forced to take their money elsewhere. Still, GM's inventory is growing at a much more rapid rate than Ford's, even though the two brands are seeing similar growth rates.

Naturally, analysts who have been closely watching GM's stock, are a bit nervous.

"It's unbelievable that after this huge taxpayer bailout and the bankruptcy that we're right back to where we were," said Peter Nesvold of Jeffries & Co.

"Is GM falling into old, bad habits?" Nesvold asked in a research note shared with analysts.

The automaker says it isn't back to its 2008 ways of building way too many vehicles and selling them at hefty discounts. Sales might be up 10 percent for both the Silverado and the top-selling F-Series, but that doesn't mean that pickup truck sales are at the level they once were. As a result, GM has dialed back production in Indiana and Michigan and analysts suggest that the automaker might be forced to tack on big incentives to its trucks during the third quarter of the year.


References
1.'Widening GM truck...' view