General Motors full-size pickups
It’s easy to be cynical when it comes to General Motors and their full-size pickups. The pickups are behemoths that are known for getting 14 miles to the gallon. General Motors is losing market share because people think their miles per gallon stink, even though they claim to have over 30 cars that get over 30 miles to the gallon. Yet, with the price of gas climbing to the heavens last year, General Motors sold 935,469 of these two pickups. Almost 1 million pickups between GMC Sierra and Chevy Silverado models when gas was almost $3 a gallon and the models were on their last leg of the 800-platform.
It is with great interest that we are all here today. Anytime one can see the next edition of a vehicle that makes up almost 1/17th of the entire sales for a full year, your interest has to be peaked. According to Tom Libby, Senior Director of Industry Analysis for J.D. Powers Power Information Network (PIN) “the full-size pickup market is 14.8 percent of the entire market, eclipsed only by the 15 percent midsize premium cars that include the Toyota Camry. The Silverado and Sierra represent 5.5 percent of full-size pickup sales. If you add in the Avalanche and the Cadillac Escalade EXT (both derivatives of the Sierra/Silverado line-up) the percentage goes up to 5.9. The same pickups represent 21 percent and 22.5 percent, respectively of General Motors sales. This new platform is key to General Motors’ turnaround and the timing couldn’t be better volume-wise and financially speaking.”
And we know it’s a big deal: CEO and Chairman, Rick Wagoner and Vice President of global production, Bob Lutz both show up and, on the same day, hours after the presentation before anyone could go to press, Ford announced that they have best in class towing on some of their pickups at 10,500 pounds. General Motors will have the same towing on their new model, but since it isn’t out yet, Ford will be first with 10,500 pounds towing on pickups. Coincidence, hm, I think not. Merchandising rights are a big deal and every pickup sale counts. Pickups are the bread and butter of Ford and General Motors. Pickups have the biggest per unit profit of any segment for those companies.
Wagoner is refocused on marketing, or at least that is what he said in the speech he gave to the 100 or so journalists sitting in the 100 or so heat. “We are raising the bar in cars and trucks. No turnaround has continued without new product.” Most impressive for General Motors was the ability to pull forward the production and launch of both of these vehicles by thirteen weeks. A while back Alex Taylor from Fortune magazine did a piece that showed the production cycle of Asians versus American car companies. The production and launch time was less, giving those companies new products more often. General Motors was long on the time it took, so to shave 13 entire weeks off that time is saying that General Motors is paying attention.
I positioned a question to Bob Lutz, “this technology to increase fuel economy costs the end consumer more money. If the price of gas goes back down to, say $1.50, will you take the technology that increases fuel economy out and bring the price back down?” Lutz rattled off the different technologies General Motors had access to, “We have 6-speed, variable valve timing, displacement on demand (DOD), active fuel management and we have made the machines more aerodynamic. We have to sell the vehicles this way to meet fuel economy as compelled by law.” Lutz answered another question about where GM is, “we are nowhere near where we want to be in this turnaround, but we have the best share, at 26.8 at the end of July, so far this year. The HHR outsold the Escape, the G6 is up 80 percent this month over 2005 this time. Passenger cars are getting good traction in the market.”
John Larson, General Manager of Buick, Pontiac, and GMC (BPG in the US, PBG in Canada) is ecstatic that his colleague, Gary White, was able to pull this off. “We’ve had 11 sales records in 13 years. We had our biggest gain last year with the old 800-platform, and now we are bringing the 900 platforms out a full quarter before it’s scheduled to release.” Larson said that the crew cab (that’s the one with four doors he told me, thank you, John, I said in sign language) would come out in October with the extended cab following later in the same month. The regular cab follows in November and the rest of the models just keep coming.
The decision was calculated to bring out the line over a succession of months. Pontiac brought the G6 in different quarters in different models and it seems to have worked for them. According to Larson G6, retail sales are up 40 percent year-to-date and 80 percent month-over-month from last year.
Larson confirmed that General Motors is combining Pontiac, Buick, and GMC franchises in dealerships, “dealers are buying the franchises and putting them together in one store. This way General Motors will have market promotions that complement each brand. We have one car dealer in Florida that just opened up a PBG dealership and he sold 76 cars in the first nine days.”
Some of the best quotes were from the folks General Motors brought on stage. They were GMC Sierra or Chevy Silverado owners that had mega-miles on their trucks. Of course, they loved their old trucks and wouldn’t trade them, but what would be the one thing they would upgrade their vehicle for if they were to trade it in? That would be the full 170 degrees rear access door, opening all the way out, the design that Nissan debuted on their Titan.
The conversation with four of the guys got around to alternative fuels. Joe Ellen, a Chevy Silverado owner from North Carolina with 500,000 miles, “used to use gasohol back in the 70s” wouldn’t mind using E-85 in one of the 5.3-liter vehicles that are flex-fuel capable, but “the first E-85 station just came into North Carolina about 4 days ago.”
Greg, whose “old blue” Silverado has 406,000 miles on it is a corn farmer. “We sell our corn to the ethanol people, but I would like to see bio-diesel come into play.” Greg has a 2005 heavy-duty Duramax diesel that he fills with bio-diesel and he just likes diesel better. Diesel gets 25 percent better mpg than gasoline and 67 percent better mpg than ethanol. There are 220 million vehicles on the road that can only take E-10 and only 5 million diesel on the road. This alone should be a hint to General Motors on their next move: diversify engines and fuels.
When asked why they were brought here, after all, Volvo has a P1800 with over 1 million miles, one of the guys said it, “We work with our trucks, we don’t drive them back and forth to the office. This is my office.”
These guys speak to the heart of what may be changing in America. It might not be just the price of gas that is changing the demand in vehicles. It may be the seller of family rural farms that are developed into “commute farms”, or suburbia. Suburbia won’t need as many work trucks as they will commute cars.
General Motors may be helping themselves more than they realize by promoting the use of ethanol and making their 5.3-liter vehicles flex-fuel capable. Ethanol is made from corn and the business is booming. Ethanol is bringing back the viability of the rural farmer and, perhaps, will keep old blue alive.