General Motors is at a crossroads, as the automaker is preparing for an onslaught of green cars after discontinuing the Chevrolet Volt. Because it’s getting reading to develop a slew of electric vehicles, supposedly 20 by 2023, but after laying off over 1,200 at its Warren Tech Center. We’re told that these painful decisions are being made to help GM retool its business model in order to finance its future. General Motors is navigating a massive restructuring, replacing low-profit models such as passenger cars with higher profit models. These encompass crossovers, sport utility vehicles, and lucrative full-size pickup trucks, the last of which GM needs to fuel its electric vehicle development in the coming years.
A report from Bloomberg’s David Welch last month shows just how important pickup trucks—the Chevrolet Silverado and GMC Sierra—are to General Motors. According to his math, aided by Morningstar Inc. analyst David Whiston, GM makes at least $12,000 per heavy-duty pickup. With GM selling 210,000 truck last year, that equates to about $2 billion in pretax income. With that, GM’s combined truck sales bring in an estimated $65 billion in annual revenue – just under half of the $147 billion in revenue GM posted for 2018.
That’s a significant amount of cash to reinvest in things like Cruise Automation, its self-driving subsidiary, and it’s new scalable EV architecture that’ll underpin future electric cars, the first of which will be an electric Cadillac. A slew of electric crossovers of various sizes will follow.
Should electric and autonomous become the norm, eventually, pickup trucks will continue to sell well. Trucks will be vital to GM’s bottom line in the coming years, which is probably why the automaker has been coy about the idea of an electric Silverado. The last thing General Motors wants to do is disrupt its moneymaker, which sells to an audience not looking for much of a change. That’s why investing in a company like Rivian could help the automaker see how the market reacts to an electric truck without the risk, even though the automaker has yet to confirm it’s even considering such an investment.
Should the all-new Chevrolet Silverado and GMC Sierra family not catch on, the all-electric future hyped by GM could be in trouble. The sales results will tell the story.