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Auto Execs Say Consumer Demand Remains Strong

GM and Ford top execs say U.S. consumer demand for cars and trucks remains strong, despite soaring interest rates and gas prices.

June 16, 2022
Auto Execs Say Consumer Demand Remains Strong

GM Chief Financial Officer Paul Jacobson

Credit:

GM

2 min to read


General Motors Co. and Ford Motor Co. top execs say U.S. consumer demand for cars and trucks remains strong, despite soaring interest rates and record high gas prices.

The Federal Reserve boosted U.S. rates on Wednesday to combat a surge in consumer prices. Rate hikes, costly gas and inflation have spelled disaster for Detroit's automakers in the past.

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"We have not seen signs of weakening demand," GM Chief Financial Officer Paul Jacobson told investors at a Deutsche Bank conference. New vehicle prices are high while inventories of unsold cars and trucks remain at historic lows, he said.

GM has offset $5 billion in higher supply chain costs by raising prices and cutting expenses, Jacobson said. He reaffirmed GM's earlier financial targets and its goa to increase vehicle production for 2022 by 25-30% over 2021.

Ford Chief Financial Officer John Lawler reported demand remains strong as prices stay steady.

But Ford’s credit arm, he says, has started to see loan delinquencies increase, a potential indicator of softer demand. He added that the higher delinquencies are not a concern yet because of extremely low delinquencies before.

Both Lawler and Jacobson reported low inventory will benefit their companies if U.S. economy head into a recession.

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Jacobson said GM executives are watching for signs of a slowdown while Lawler said Ford has done modeling on the potential impact of both moderate and severe recessions.

Low inventories are a benefit if a recession occurs. In the past, the Detroit automakers and their dealers carried two to three months' worth of vehicles on their lots. When the recession decreased demand, they were forced to offer deep discounts to sell old vehicle models.

"We are not going to go back to the high inventories that we had in the past. We've targeted 45 to 55 days and we're going to stick to that," Lawler said.

GM's also is taking a cautious approach to adding staff, and is reviewing capital spending plans, Jacobson said. He maintained the company would not cut long-term investments in electric vehicles, software and other new technology that may drive revenue growth.

Originally posted on Auto Dealer Today

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