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How Chevy Silverado, GMC Sierra will take on the Ford F-150 profit machine

FORT WAYNE, Ind. — When General Motors engineers were developing the 2019 Chevrolet Silverado and GMC Sierra pickup trucks, some of them joined public tours of Ford's Dearborn, Mich., factory to watch aluminum-bodied F-Series trucks go down the assembly line. The redesign of the Ford F-Series trucks, launched in 2014, set a new standard for fuel economy and lightweight vehicle construction. But armed with stopwatches and trained eyes, the GM engineers believed they saw problems. "They had a real hard time getting those doors to fit," Tim Herrick, the executive chief engineer for GM truck programs, told Reuters. His team did more intelligence gathering. They bought and tore apart Ford F-Series doors sold as repair parts. Their conclusion: GM could cut weight in its trucks for a lower cost using doors made of a combination of aluminum and high-strength steel that could be thinner than standard steel, shaving off kilograms in the process. These pounds-and-pennies decisions will have major implications in the highest-stakes game going in Detroit: dominance in the world's most profitable vehicle market, the gasoline-fueled large pickup segment. What's more, GM is banking on strong sales of overhauled 2019 Silverados and GMC Sierras to fund its push into automated and electric vehicles — a business many investors see as the auto industry's long-term future. The risks are high given the hits automakers have taken from U.S. President Donald Trump's trade policies. Rising aluminum prices spurred by Trump's tariffs are driving up costs on the Ford's F-Series, while rising steel and aluminum prices likewise drag on GM results. GM also has a significant risk should the United States, Mexico and Canada fail to agree on a new NAFTA trade deal, given GM trucks built at its Silao, Mexico, factory could face a 25 percent tariff if NAFTA collapses. Major profit per truck Interviews with GM executives and a tour at its factory here in northwest Indiana provide a detailed look inside GM's plan for the most important vehicles in its global lineup. These big pickups are everything Tesla's Model 3 or Chevy's Bolt electric car is not. The mostly steel body is bolted to the truck's steel frame, rather than the one-piece body and frame electric vehicles. The majority of trucks will have a V-8 gasoline engine powering the rear wheels — like the classic GM cars of the 1950s. Some Silverados will have new four-cylinder engines, but there is no electric or hybrid offering as of now.

GM profits threatened by glut of pickups

Automotive News reports that General Motors may slash production or ramp up discounts in order to deal with an oversupply of pickup trucks. GM currently has more than double the standard supply of pickups, and the vehicles are threatening to dampen the automaker's profits for 2013. Typically, automakers try to sustain a 60- to 75-day supply of vehicles, but GM is currently loaded with a 139-day supply, as of last month. At the end of November, the automaker was sitting on 245,853 units.
The manufacturer says that it will adjust production accordingly before laying any incentives on the profitable pickups. Even so, there's some concern that the inventory swell could hurt the roll-out of the next-generation Chevrolet Silverado and GMC Sierra. GM actually began slowly stepping back production in August, but it's clear the company will take further action as it heads toward the end of the year and into the next. Analysts predict the automaker could reduce pickup manufacturing by nearly half in the first quarter of 2013.
That still may not be enough to keep GM from laying extra cash on the Silverado and GMC Sierra. While the company's incentive spending was down in November compared to the same month in 2011, both the Ram 1500 and Ford F-150 saw double-digit percentage increases in sales last month while the Silverado and Sierra numbers slid compared to a year prior. Incentive spending could help move more trucks and add some balance to the GM inventory surge.

GM invests $24 million to build more crew cab trucks in Fort Wayne

The full-size pickup truck arms race continues unabated here in the United States as Ford, General Motors and Fiat Chrysler battle back and forth for sales supremacy. The Ford F-Series of trucks continues to lead the field in sales (214,611 units sold through the first quarter of 2019), but the race for second place has been a lot more interesting to watch. That's because Ram, long a distant third in truck sales, eked its way past Chevrolet late in 2018 and has managed to hold the position so far in 2019. Don't take this to mean that sales of GM's trucks have been poor across the board. In fact, the automaker reports that sales of its four-door crew cab pickups are up 20 percent in 2019 over the same period a year ago. And that's what makes GM's announcement today so interesting. The automaker is investing $24 million into its assembly plant in Fort Wayne, Indiana to build more Chevy Silverado and GMC Sierra pickup trucks, and the focus will continue to be on crew cab models. "We are building Chevrolet and GMC crew cab pickups at record volume and mix levels to meet customer demand and the $24 million investment will allow us to build even more," said GM chief Mary Barra in a statement. "Crew cab sales have been very strong, and we are expanding customer choice with new models, more cab choices and innovative new powertrains." It's worth noting that, if crew cab sales are up 20% this year, but overall sales are down (over 15% for Silverado and around 2% for GMC), that means it's the cheaper regular cab and double cab models that are lagging. At the same time, sales of the midsize Chevy Colorado have surged 16%. And finally, if you combine sales of the Silverado and Sierra into one bucket, GM still has a comfortable lead over Ram overall. If there's a takeaway here, it's that trucks of all shapes and sizes have been, currently are and will surely remain hot in America, and automakers will continue to invest money into making sure they are able to satiate consumer demand.