Analysts’ Take: Is GM’s Promotional Activity Detrimental or a Sign of Strength?

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Chevrolet Silverado Pick up

We reported earlier this week that General Motors (NYSE:GM) has pulled out most of the stops for its promotional efforts through March, an approach that although it clears inventory, can do some longer-term damage to profits and resale value down the road.

Now that its plans are laid out, analysts and investors are weighing what it means for the company, and for its stock. ”[General Motors] appears to be planning a highly visible new incentive program in March,” said analyst Rod Lache of Deutche Bank. ”We do not believe that this represents price deterioration from [February] to March. Nonetheless, the fact that GM appears to be increasingly relying on promotional activity on their newest products reinforces a key concern of ours — i.e. that several of the company’s recently launched products, including their trucks, have not been as successful as expected, as evidenced by [General Motors'] pickup truck market share declining 280bp’s vs. prior to the launch.”

Lache’s concerns come after the uptake of its 2014 offerings, particularly the Silverado pickup trucks, was noted to be slower-than-anticipated. ”GM has faced an intense full-court press by its competitors Ford and Ram,” Barclays analyst Brian Johnson wrote in a note to investors. “The result: the [pickup] launch has been arguably the least successful large pickup launch over the last 15 years.”

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