New Trucks Won't Save GM
 
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New Trucks Won't Save GM

 By Jerry Flint

WardsAuto.com, Jan 30 2006

GM’s new GMT900 trucks should help stabilize GM's falling market share, but its new cars and CUVs have to come on strong behind these big boys.

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CommentaryJust about now, we should be reading the first stories on the sales of the new GMT900 trucks. 

That is the designation for the General Motors truck platform replacing the GMT800, starting now. The vehicles built off this platform include the Chevy Silverado and GMC Sierra fullsize pickups; Chevy Avalanche, Suburban, Tahoe; GMC Denali, Yukon and Cadillac Escalade SUVs – even the Hummer H2. They are being phased into production now, SUVs first. 

Watch for words like “disappointing.” You will read the new GMT900 may not be able to save GM. But don't worry.

The new SUVs and the pickups that follow in another year will do just fine. They are much improved, with better fuel economy, handling, fit and finish. But too much is being expected of them.

They won't single-handedly save GM. Sales won't match the volumes of a few years ago, when they soared to more than 1.5 million just in the U.S. I doubt 2006 sales will be able to equal last year’s 1.4 million units, and they could drop again in 2007.

The old GMT800 did save GM – absolutely. It’s possible the auto maker would be out of business now but for that platform.  Look at total North America production, according to Ward’s data:

  • 2005: 1,491,084
  • 2004: 1,704,239
  • 2003: 1,810,340
  • 2002: 1,672,804
  • 2001: 1,569,198

Those volumes are incredible. At 1.8 million, with a $5,000 pre-tax profit per vehicle (my estimate) that is a $9 billion profit! If GM had another platform that profitable, there wouldn’t be any speculation about bankruptcy.

If it had two more platforms like the GMT800, Democrats would be demanding we break up GM.

What happened to the money?  GM lost it everywhere else in North America, but that platform still saved the company.

Unfortunately the market growth isn't in big, body-on-frame vehicles anymore. Fuel prices are playing a role in the decline, but more likely they have just run their course.

The growth is in smaller models and cross/utility vehicles. There's much more competition, too.  Nissan is selling 85,000 big Titan pickups a year and not just to folks who never before owned a pickup. Some conquests are from GM. 

When Toyota cranks up its new Texas fullsize pickup plant, some of those sales will come out of GM’s hide, too. The new Mercedes R-Class and GL-Class CUVs swill grab some customers that might have bought Cadillac Escalades.

With the market shift and new competition, profits slide. Prices get chopped, or dollars are put on the hood. That's just the way it is.

GMT900 still will be the highest-volume platform at GM; it just won't come close to past years' volumes.

Over time, the new trucks should help stabilize GM's falling market share and transaction prices. But GM’s new cars and CUVs have to come on real strong behind these big boys.

If the present management can't show signs of a turnaround soon, expect a change by fall.

Jerry Flint is a columnist for, and a former senior of, Forbes magazine.



© 2006, Primedia Business Magazines and Media, a PRIMEDIA company. All rights reserved. This article is protected by United States copyright and other intellectual property laws and may not be reproduced, rewritten, distributed, redisseminated, transmitted, displayed, published or broadcast, directly or indirectly, in any medium without the prior written permission of PRIMEDIA Business Corp.

 
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