GM truck discounts whip up an overdone fuss

General Motors put big discounts on a few V-6 trucks and stirred the industry and Wall Street investors into a froth.

GM put a $7,092 total discount on crew-cab and extended-cab models with so-called All-Star equipment to boost sales of the new-design V-6, which currently is only 10% of total Chevrolet Silverado and GMC Sierra sales.

But incorrect reports Monday said GM had bumped up the discount that much across all its trucks. Investors bailed, leaving the stock price down 3.4% on a day the S&P, which includes GM, was up 1.2%.

And analysts wondered if new CEO Mary Barra already had broken her Feb. 6 promise to them in a conference call that "we will still maintain our pricing discipline."

Overall, GM "is raising incentives less than seasonally expected," according to Ryan Brinkman, industry analyst at JP Morgan. "The market got it wrong again," he declared in a note to clients early Tuesday, suggesting the previous day's decline created buying opportunities Tuesday.

GM's discounting "isn't troubling right now but is something to watch in the coming months," cautions Jessica Caldwell, senior analyst at Edmunds.com.

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But the dust-up has spotlighted some issues that could signal bigger discounts for buyers, which translate to lower profits for automakers.

• The GM "Presidents Day" discounts were announced Feb. 4 and run through Feb. 28.

"Historically we've seen Presidents Day sales run for two or three weeks, not the entire month," says Alec Gutierrez, senior analyst at Kelley Blue Book's kbb.com.

• Inventories of unsold new vehicles — not just at GM — are at their highest level since August 2009, says ALG, a unit of TrueCar.com.

Though that's largely because bad weather in January kept shoppers home, it's also a cautionary sign that another spate of bad weather, or car-buyer ennui, could flood dealer ! lots.

"There are signs that February could be slow, too," Gutierrez says.

ALG translates that into "a short-term spike in incentives," said Eric Lyman, a vice president at ALG.

But there's a chance it "could be the beginning of an escalating arms race for market share," he said, rather than a simple spike.

• An Edmunds.com study shows that falling used-car prices could drop another 2% this year, as more are traded in on new-car deals, or turned in when leases expire.

Lower trade-in values mean higher monthly payments to buy or lease new cars. That, in turn, steers shoppers toward used cars.

Automakers then need growing discounts to keep selling new cars.

Aside from pricing, the latest numbers snafu, third in less than a week, makes GM seemed jinxed.

When the car company reported it made $913 million the fourth quarter, or 67 cents a share excluding one-time items, shareholders fled. Analysts had primed them to expect 88 cents. A combination of explanations and mea culpas the next day restored some order, and value to the stock.

Then this week, GM, in an extraordinary move, had to disclose well in advance how the automaker plans to compensate Barra. Shareholders must vote on a significant portion of the package in June, so GM didn't want to outline that part until closer to the stockholders meeting.

But to deflect criticism that it was underpaying Barra because of her gender, GM outlined her full compensation package, showing she's getting about 58% more than her male predecessor, Dan Anderson, who retired in January, assuming shareholders approve of the formula for her long-term compensation.