The Inside Scoop On Why GM Discontinued The Chevy Avalanche128
April 2012 will forever go down in history as a particularly sad month for Chevy Avalanche owners, fans and enthusiasts. That was the month that General Motors announced plans to discontinue the Avalanche, a truck loved by owners far and wide, many of whom praised it as the perfect truck. That made GM’s decision to abruptly discontinue the vehicle puzzling, if not completely bizarre. Since then, it was universally assumed that the discontinuation was caused by low sales volume, which is partially true. But it’s far from the whole story.
We recently had the good fortune of speaking to someone who was part of the decision to discontinue the Avalanche program, enabling us to get the complete picture.
As our source tells us, GM’s strategy for the Chevy Avalanche program involved generating increased utilization of GM’s GMT800 (for the first-generation) and GMT900 (second-generation) platforms that were used by the automaker’s full-size SUVs (Tahoe, Suburban, Yukon, Escalade) and pickup trucks (Silverado, Sierra), while also generating higher pricing power than the Silverado – which at the time was capped at the LTZ trim level and didn’t command the ATPs it does today. The business plan involved generating healthy sales volume and even healthier transaction prices from the Avalanche and its platform mate – the Cadillac Escalade EXT.
In fact, we were told that the Avalanche program was projected to carry about the same profit potential as the Silverado on a per-unit basis thanks to its price-positioning power.
So, let’s have a look at those sales figures that are often cited as the reason for the Ave’s demise.
Sales started off strong in 2001 with 52,955 deliveries. The truck posted its best sales year in 2003, selling 93,482 units. But by 2011, the year prior to GM’s decision to discontinue the vehicle, Chevy Avalanche sales dwindled to a measly 20,088 units.
|Calendar Year||Avalanche Sales||Silverado Sales||Avalanche To Silverado Ratio|
As such, rumors of GM discontinuing the Avalanche as a result of “poor” or “falling” sales do hold water… but it’s only the tip of the proverbial iceberg.
What (Really) Happened
Almost from its inception, the Avalanche was universally loved by owners for its flexibility, enabled by its distinct midgate and integrated bed. Moreover, the truck consistently delivered overwhelmingly positive ownership satisfaction ratings. Coupled with a solid profit strategy and healthy scale economies (the best available within GM, in fact), the team working on the Ave’s business case thought they had found another gold mine for the automaker that would complement the automaker’s lucrative full-size SUV and pickup truck business.
With excitement rampant, the word “bankruptcy” – which came about 13 years thereafter – was unimaginable. So what went wrong?
At the time that the Avalanche was conceived, GM’s business strategy was driven, first and foremost, by manufacturing efficiencies, rather than true market demand. Due to unfavorable agreements with its labor force, GM’s master plan involved producing more vehicles than were demanded by the market at large, and then selling the overproduced vehicles at steep discounts, rebates and/or other promotions. As our source tells us, the practice “rapidly removed the vast majority of profit from a vehicle line”, while also having other negative secondary consequences, such as eroding brand equity and reducing resale value. But for GM, it was cheaper to keep factories running and producing vehicles that were not selling than to idle a line at a plant for a week, or two, or three.
Notably, the Avalanche was produced at the GM Silao plant in Mexico, which somewhat shielded it from the high costs of temporarily idling a plant. Unfortunately, GM’s “over-produce and over-incentivize to sell” strategy was in full effect across the corporation, and applied to the Avalanche as much as it did to any other product. The approach made the Avalanche less profitable than it really was. We’ll come back to this in a minute.
Then came GM’s 2009 bankruptcy. As managers allocated funds for future vehicle programs in the aftermath, “money was tight, and budgets were even tighter,” says our source. During a meeting associated with the roadmap for GM’s full-size SUV and pickup truck products on the then-upcoming K2 platform, a new-to-GM manager questioned the strategy of fielding two Chevrolet full-size pickup truck offerings – the Silverado and Avalanche. The question seemed pertinent, as it came during a time when “efficiency” was all the rage within the “new GM”, especially following the shuttering of Pontiac and Saturn, and the sale (and eventual shuttering) of Hummer and Saab.
An all-out study was commissioned to determine whether a business case existed to bring to market a third-generation Chevy Avalanche on the upcoming GM K2 platform. The results of that study determined that “all in costs” – those including development, tooling, production, marketing, aftersales support, and more – were higher than the return threshold to make a new Ave. In addition, some GMers felt that a large enough subset of Avalanche owners could be transitioned to the Silverado.
Our source tells us that the study wasn’t entirely accurate, since it relied on Old GM’s data that overproduced and over-incentivized vehicles – factors that made the first- and second-gen Avalanche seem far less lucrative “on paper” than it actually was. So, the new management – gun shy to take any unnecessary risk or create any conflict following a highly-publicized bankruptcy – decided to do away with the Avalanche, referring to the model as a product that “duplicated efforts” (when taking into account the Silverado).
The GM we know today is one that has learned to manage profit-sapping incentives extremely well, while exhibiting very respectable levels of discipline. The automaker also doesn’t seem to care much for outright sales volume if it’s not profitable, significantly reducing its reliance on the unprofitable daily rental fleet business while also reaping the benefits of a friendlier cost structure for its manufacturing labor.
Taken as a whole, that means that the Avalanche could have very much been into its third (or fourth) generations had the GM of 2010 had the same freedoms, principles, priorities and general ways of thinking as the one we know today.
Alas, the Chevy Avalanche is not coming back. As far as we know, future GM product plans do not include a revival of a pickup truck with the Ave’s innovative midgate. But we can always dream, right?
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Sales tanked when they got rid of the cladding.
If you asked the dealers most struggled to get them off the lot without highly discounting them. The article skips over the fact they sat on the lot twice as long as its truck counter part and in the end didn’t bring the same profit. Its all opinion but i couldn’t stand all the cheap plastic cladding, reminded me of the Pontiac Aztec. I also never understood how anyone wanted a truck-ish vehicle with a such a tiny unibody payload capacity combo’d with piss poor fuel economy. Sure you could pull 5K pounds but it sagged horribly from even moderate tongue weight and if you wanted more then 2 average sized adults to ride along you pretty much had no cargo weight left.
Some automaker will hit that Cruck crossover sweet spot one day but i don’t think the Avalanche, Baja, or Ridgeline came even close to hitting what the market wants.
The body cladding was definitely something people either loved or hated, but I imagine the Avalanche sat on the lot twice as long partly because we went into a recession and GM tried to make the Avalanche it’s own high-price segment vehicle. Customers will go with cheaper options in times like that when the Avalanche was slowly morphed into a copycat of the Silverado with a midgate for more money.
They never should’ve targeted the higher price by loading it with bells and whistles, but rather keep the body cladding (which I loved – it kept my car free of scratches and dents even on two occasions when someone hit me when I was parked… I got out of my Avalanche and just shrugged my shoulders). If GM tried to keep costs down and market it the way Toyota FJ Cruisers are, which also have a loyal brand following, then GM wouldn’t have shot themselves in the foot in a recession without enough to make it different from the Silverado to justify the higher price.
Also, my ’02 Z71 Avalanche pulled my 4,000 lb dry weight boat + trailer just fine (even when I forgot to drain the 1,250 lbs of ballast before towing) and the Avalanche never sagged. Sounds like the Avalanches you’re referring to didn’t have the offroad suspension.
Fake news huh? Not sure where you are getting your info from, but pretty sure your entire comment is not based on any actual data, but things you “observed” rather than gathered through fact finding. Here are some true numbers for ya.
The days to turn on the Avalanche was almost identical to that for the Silverado LTZ during the time period that it was available. Given that it was not a work truck and wasn’t priced like one, this is actually good news.
Never seen one sag either. You sure you weren’t loading it up with 15k worth of ballast and five hefty heffers?
Clearly you never owned one. I had to wait 3 months to get my second one because there were none to be had, so it was found 2 states away and brought in to Long Island NY. I’ve owned two Silverado’s and two Avalanche’s. The ride difference was astounding. My 03 Ave has 300,000 miles on it and I tow a 26 ft boat What sag are you talking about? I had a load of cement blocks in each of my trucks and the Ave wasn’t down any lower than the Silverado. The Best tow vehicle of the 2 because of the comfort and quiet. There is a reason they use Coils in a suburban. I have to buy a new Silverado soon as this thing can’t go on forever and I have put about 300,000 miles on all of them before getting a new one. I would buy a new Ave in a heartbeat and will keep the Silverado until it reaches 250k. Or Maybe a new Suburban ?
That cladding sucked! Glad that was one of the first things Lutz got rid of!
Best, most versatile truck I ever had was my 2002 2500 Avy. The 8.1 would pull anything. Please bring it back.
8.1 you say… Now that’s a motor.
We have the 8.1 in our 2500 suburban and that thing is a beast!
The worst mistake of my life was selling my 2005 Avalanche 2500 with the 8.1L in 2010. I bought it new and built it the way I wanted it. It was my perfect truck. I sold it because I wasn’t using it much as I had sold my boat, but started regretting that decision within a few months. I still search craigslist in hopes of finding it up for sale one day and buying it back. In the mean time, I recently purchased a low mileage (73,000 miles) 2004 Avalanche 1500 Z71 with cladding to quench my Avalanche desires, and I love it. I think I like it more than my Raptor, although certainly not as modern.
I had an ‘02 2500 Sierra Crew Cab with the 8.1 too. It would pull a house but the mileage was horrible even with no load. It burned at least a quart of oil between oil changes right off the bat so I took it to the dealer for an oil consumption test and they told me it was within factory specs. I told them the guy who engineered that into the engine should be strung up. Utter stupidity.
I now drive a ‘19 Silverado LTZ 1/2 ton crew cab 4wd with the 6.2l gas engine. The absolute finest truck I’ve ever owned in every way.
I have extremely fond memories of the 2002 Avy the old GF and I purchased in 2002. Unique and fun. Loved that truck. Cloth and leather interior, sun roof…
My sister has a 2013…she feels the same about it.
Have a friend who had 2; an 05 and a 2010. She loved em both, and was devastated in 2015 when she needed a new truck.
She ended up with a Ridgeline and absolutely HATES it.
I own the first year 2002 and the last year 2013 Black Diamond . Both are going strong and still ride as good as a Suburban.
I’ve always been kinda fond of these. I’d rather drive a 2001 Ave than a new Ridgeline. So much more truck, and better.
I have the first Gen and love it. 148 k and going strong. Original parts, never use after market. A Chevy truck will out last anything.
My uncle has a couple of these. He has a silver diamond edition and also one with the 8.1 engine in it. I hope one day they bring them back.
I own a 2013 Silver Avy Black Diamond edition and I love it!!! 106k miles on the clock and running strong!!! PLEASE BRING THE AVY BACK!!!!
I have a 2002 with 350,000 miles! It’s the coolest, most versatile truck. You can’t beat the Chevy Vortec.
My 2005 has 318K and still is the best riding vehicle I ever had
I have two 2013 Chevy Avalanche’s, one with 105,000 and 45,000 miles. Named them Ava and Ava II. My wife and I love them both. Both Black Diamonds LTZ. Most comfortable vehicle I ever owned, great on mileage, and never has any problems pulling my 30 ft trailer full and truck bed full with rear window up filled above the cab with mulch. I Own 5 vehicles including full size Blazer, Ava out preforms them all. Plan to keep forever washed, waxed, and beautiful. These are my girls. Chevy should bring them back. Fantastic vehicles
I’m not sure that I believe that cost of R&D was a biggest reason to cancel the avelanche. It’s practically a suburban with a bed and share about 90% of parts. GM should bring it back and build it in Arlington, TX along with suburban.
The way we were told about this, it wasn’t just the cost of the R&D, but the all-in costs that also included tooling at the Silao plant (an entirely separate assembly site from the Arlington plant where the Suburban is/has been made).
So faced with a choice between investing in a third-gen Avalanche versus making more Silverados or more Tahoes/Suburbans, the Avalanche lost out because it didn’t meet profitability targets (a certain figure that must meet GM’s internal return on invested capital goal).
But Alex, Is it possible that the Avalanche didn’t meet profitability targets because the leadership tried to steer the culture surrounding the Avalanche into being the same as the Silverado and Suburban? It clearly had a different product image when it was first launched compared to 2013. It went from being a rugged do-all vehicle to a luxury (“don’t scratch my expensive truck”) vehicle.
Had they kept a cladding option, without loading all the bells and whistles, surely GM could’ve competed for the customer segment that buys vehicles like the Toyota FJ Cruiser and the Nissan Xterra right? Instead they seemed to keep redesigning it to look so similar to the Silverado that customers were no longer willing to pay more for such a similar vehicle, especially in a recession.
Just to add to/clarify my previous comment, these bed bars in the link below don’t typically get added to someone who has a sleek clean luxury truck. People who want this look (which mimics the Avalanche) are going with the rugged off-road look, rather than luxury look.
With the newer Avalanche models marketed as high-priced luxury crossovers, it was sort of going through a gender identity crisis. Still awesome and I would drive a 2013 Avalanche in a heartbeat, but the Avalanche image was lost to customers who had to decide whether or not to pay so much more when they could just buy a Silverado.
The irony is that the Ram is eating their lunch with the same rear suspension design the Avalanche has had for years.
I can see GM bringing that rear suspension into higher trims perhaps Denali and High Country only.
Ram is eating its own lunch by giving away its products.
Buying market share does not work. Just ask GM circa 2008.
Yes the path FCA is following is the one GM and they followed to bankruptcy accept they are doing it on higher profit truck only and not just cars.
Owners are taking a bath on trade or resale value.
The Avalanche was the first to have storage bins on the bed right? Now Ram have his Ram Box, why GM don’t continue to use that on the Silverado/Sierra.
Ram box was built and invented by Magna, offered to GM first but they did not see the value or potential. Another missed opportunity.
I read a year or so back that GM is averaging $17,000 per truck in profits. Clearly that isn’t the case with a Cruze or Malibu. They have plenty of room to incentivize purchases when and where they need to without going into the red. I suspect Ram has similar margins, but without an extensive car line to subsidize (like the one GM is in the process of killing off), I believe they can discount like crazy and still make respectable money.
Generally speaking, all of the big three’s trucks are grossly overpriced – when a well-equipped (LTZ, SLT, Denali) truck approaches $70k, or, if a diesel, $80k, you’re north of a Mercedes 3 row SUV, and approaching S-class or 7-series pricing. That’s too damn much for a truck.
My 16 SLT sticker’d for $56,500, and I paid $41,900, thanks to incentives and a dealer who couldn’t sell a 6.2 – and GM still made money. They ALL need to stop ripping off those of us who need trucks by overcharging us to subsidize crappy econoboxes that they practically give away to keep their CAFE numbers in the right range.
I wouldn’t trade my 05 Avalanche for any truck. It has been the most useful, and reliable truck I have ever used.
I too have a 2005, bought in 2015 with 91K on it, now at 118K. It was kept basically showroom by an older gentleman 1st owner, and I plan to keep it that way, since it sounds like there’s no replacement coming… 🙁
I tow a couple 2500-4000 lb boats with it, and even with the 5.3, it does just great. I love the utility and the general layout of the thing, and almost sporty feel of the way it drives. And, it’s easy to work on. The PCM module did go out, apparently a GM achilles heel of that era, but it wasn’t terrible to fix. Other than that, trouble-free.
As so often happens when models get discontinued and there are fewer and fewer good ones left, now it seems like everybody wants one. Two of my buddies have looked for one in the past year, and cannot find a decent one that the seller doesn’t want an arm and a leg for.
I’ve seen stories on the rumor sites about GM being in development on a new one; one even went so far as to describe a Silverado-size, a Colorado-size and a small 4-cyl turbo version. But it was just somebody’s fantasy, I guess. Wish it were true.
I have a 2007 Z71 Platimun Edition brand new with 06 miles when I purchased it.
A Great truck, but they need to put a bit more HP & torque in them, without going to the6.2 Ltr extreme.
Silverados and most other GM built trucks have mush better performance, especially in HP and Torque ratios.
I plan on saving it as a classic especially after pay $60K for it when I got it in “07.Thinking of an upgrade with Turbo or SC. Either will cost me about 6 to 7K, but I will get an additional 36K on the motor warranty by the manufacture and installer of the Turbo or SC.
BTW I just bought my 2nd extended warranty, after the factory one ran out. Just want to make sure it’s taken care of and I keep FULL Insurance Coverage, Collision, Theft, Liability etc, on it
I or why it was discontinued,ITS A PIECE OF SHIT!!! My transmission went out at 76,000 and then bout a year later the motor went out because the oil pump quit!!! I have been all over your website since that happened asking for reimbursement with no response. I always ran synthetic oil in it since I got it Brand new and I am completely unsatisfied with it. Friends have Rice Burners and they get 200,000 miles w/o having to replace motor and transmission. This is completely unacceptable!! I have been a Chevy man all the way back when I had a 52 Chevy coupe!! I will Never buy another Chevy and neither will anyone I know. Thanks for building the Worst pos I ever owned. YOUR RIGHT IN DISCONTINUING THIS FRANKENSTEIN OF A PIECE OF SHIT!!!!!!!!!
My 2003 ran 221,pop miles with no problem. My 2009 had 160,000 when I traded for a 2013 so that I could drive an AV as long as possible. It now has 218,000 miles and going strong. Either you got a lemon or something strange happened. Don’t blame the platform.
Hey retard, this is a separate blog site reporting GM news, not GM corporate. If the motor blew because the oil pump quit, then you’re a moron for running it when you had no oil pressure. Those things on the dash are called gauges. You’ll figure that out when you grow up.
Come on………anyone with mechanical background will tell you by the time those gauges go off the damage is done.
The oil pumps and transfer pumps in a couple of the early 2000 half ton models where known to be crap. Its one thing to be a fan boy and another to know a vehicle for what it is.
With all due respect, Richie (which is VERY little). Nobody cares. Nobody cares that your tranny failed. Nobody cares that your motor blew. Nobody cares. Nobody on this site. Nobody at GM corporate. Nobody. Nobody cares that you’ll never buy another GM product again. Nobody cares that you were a “Chevy man,” back to your 52 coupe. Nobody cares. You lack any relevance at all in the Chevrolet world specifically and the GM universe as a whole. Run along.
Mine has been nothing but reliable. At 76,000 miles it was trouble free. Then, about a year later, it was still trouble free. Though, to be fair, my dealer and I used to laugh at another guy who had one and had the transmission go bad and then blew his motor a year later. We’d laugh and laugh and laugh. What a hoot!
I have always felt the opening cab technology would have been prime for the Trailblazer or Colorado crew cab.
Both are smaller and it would make the larger and most practical in class.
I’ve mentioned in the past also that the Avalanche should be a midsize Scott. Chevy needs a pure offroader with a removable top and midgate aimed directly at the Wrangler.
I think they should call it the “Apache ZR2” or “Apache HX”, remember the Hummer “HX” concept?
Do both and one could be a crew the other a standard or extra cab and put half doors in the accessory catalog, It would be awesome!
The real victim here is the Escalade EXT. Cadillac would be killing it right now if they still had a truck to offer. The luxury truck market is red hot. Just look at Denali.
I’ve often thought about that myself.
I know it seems kinda of “old GM-ish”, but I think that Caddy could do well with a Canyon based truck. Think; Denali with a sunroof, a “better” bed, tri-zone climate, more engine choices, an Escalade-ish front end and MUCH nicer materials. The Denali is already basically a money tree, not to mention Caddy would then have a competitor to the MB X-class.
I have a 2005 with 244,000 miles and shes my baby. Avalanches are a hot item still for the fans. People will buy used ones with over 100,000 miles on them because they are so reliable. I had a scare recently where I thought I would have to give mine up and started shopping around and I was depressed. Nothing ‘sings’ to me for originality. All the SUVs look alike and the Sierra and Silverados are expensive and boring looking. Avalanches are unique and fun. Need to being them back!
Very sad for me. I owe a 2006 Avalanche and absolutely love it. Was hoping to trade in for an upgrade soon. Best truck I have ever owned ❤❤❤
My 2007 avy is a great truck and would buy it all over again. 170,000 miles and still going strong. 541 miles range to a tank of gas!!!
Had a 2006 with 165k. Gas line rusted and developed a hole where it comes out if the tank. Long story short, caught on fire and burned along with my barn and everything in it. That is a common issue with that year. Love the Avalanche so much I bought another one. Replaced the fuel pump and gas lines as soon as I got it though.
Ricard Foote, My 2003 ran 221,pop miles with no problem. My 2009 had 160,000 when I traded for a 2013 so that I could drive an AV as long as possible. It now has 218,000 miles and going strong. Either you got a lemon or something strange happened. Don’t blame the platform.