When General Motors rolled out its new line of redesigned trucks last summer, a barrage of criticism surrounded the introduction: too expensive, too evolutionary, too blah. But now, almost a year later, GM is reporting higher than expected profits from higher transaction prices for both the Chevrolet Silverado and GMC Sierra, helping offset the hurt from ignition switch recalls.
Almost three months ago, Barclays Capital analyst Brian Johnson had called the truck rollout “arguably the least successful large pickup launch over the last 15 years,” but in a report last month, Johnson admitted “General Motors may have made the right call to go for price over share.” Automotive News reports that GM has experienced a $5,400 spike in transaction prices, which goes to show that GM’s plan may be working after all despite bumps along the way.
Much hype has been made about Ford’s use of aluminum for its soon-to-be-introduced series of trucks, but the trucks from General Motors already weighed a few hundred pounds less than Ford’s. Additionally, new gas mileage regulations aren’t in full effect until 2019, which meant GM wasn’t in a rush to meet it just yet. This meant GM could maintain lower costs while still commanding premium prices until it is time to introduce the next generation of truck, possibly in 2019. According to Automotive News, GM plans to maintain pricing by adding innovation, like an upcoming multi-gear transmission and possibly a light-duty diesel.
Of course, this has all been at the expense of market share. Henry Brown, owner Henry Brown Buick-GMC in Gilbert, AZ, originally was a big critic of General Motors’ strategy that didn’t focus on market share, but he says his mind has changed since sales staff has been making sales (and profit) by touting the premium features available on the Sierra. “You can’t sell a cheap one. Maybe [GM] knew the market better than we did,” says Brown.
J.D. Power and Associates shows that sales have spiked for trucks over $40,000, with General Motors commanding a 37.7 percent share, up 11 percent from a year ago. However, Silverado and Sierra sales the first quarter of 2014 totaled 33.7 percent of the full-sized pickup segment, which was a drop from 36 percent from the same period a year ago when GM was phasing out its old-gen pickups.
Even with the market share loss, General Motors shows strong profits because it has resisted heavy incentives to push sales. However, not everyone is convinced—Steve Hurley of Stingray Chevrolet in Plant City, FL believes that “Chevrolet dealers aren’t satisfied with what’s happened with Silverado market share. We’re all looking at what we can do to get that market share back.”
Comments
Like I’ve been stating all along in regards to these new trucks; the one at the top of the heap isn’t always the most profitable one. Quite often they get to be number one by buying market share (rebates/discounts, etc).
All too often #2 is more profitable than #1 in any commodity. That is once again showing true here. GM is about making money and being stable this time around. To do that you need good product, good technology and a good marketing team.
Well this deal has not gone all to plan but it is far from a failure. GM likes the added profits but would like to try to maintain the market share.
The key to market share will come with the cheaper smaller trucks. At that point we will see how that plan works out.
The money is the important part as most of the work being done on the other cars in their line up is paid for by the trucks.
This is not a plan you can judge at this point as they still have more to play out yet. I expect about this time next year we should have an indication of how this will work out.
Now if I were GM I would find away to lose about 300 pound in the present trucks to match or beat Ford in curb weight.
Note Ford to this point has not posted a curb weight for their new trucks which I find odd as if they are that light I would brag about curb weight and not just what they lost.
With the new engines and tranny I expect GM to be right with Ford on MPG even without the aluminum.
GM needs to get away from “evolutionary” design, a favorite theme for Reuss.
Evolutionary works well when you are either the sales leader or are selling an extraordinary well-regarded design.
The last generation of Chevy/GMC trucks were aged, runners up. Buyers weren’t craving a near identical product on a new platform (most people know little about platforms!)
Also, Chevy & GMC must starting skinning each product with a unique and different design now that RAM is on the move. In 2014, there is no reason for these two trucks to look so similiar. GMC has Jeep-like sales potential but with better margins.
Lastly, the bailout hurt GM trucks. Truck buyers trend conservative, love in rural areas that still hold TARP against the company. I notice Chevy is using “Born Free” in adverts which confidently was Mitt Romney’s campaign theme song.