GM: Losing Market Share and Gaining Profits

GM pickups 4 II

GM is on the cusp of introducing two new midsize pickup trucks in a segment that Ram, Ford, Mazda, Mitsubishi and many others have run away from (sometimes screaming and hemorrhaging cash). In fact, even GM took a few years off to prepare for its big introduction of the 2015 Chevrolet Colorado and GMC Canyon, which will be in dealerships in just a few months. Admittedly, this is a pretty big risk, but no one knows that better GM.

Not that long ago, when critics were calling for a newly restructured GM to kill GMC because that brand didn't make anything that Chevrolet didn't already have, it took a lot of guts and vision for Mark Reuss, executive VP of global product development, to fight for keeping both brands and strengthen the idea that they should continue their design divergence. And we might want to give the government a little credit for allowing the decision in the midst of restructuring, especially since it seems like GMC is enjoying meteoric success lately in both average transaction prices as well as total volume.

Keeping two brands that make full-size pickups and allowing each to come out with an all-new midsize pickup truck might seem like unabashed craziness, but it could also end up being another smart decision that will add big numbers to GM's bottom line.

Criticizing GM for having both Chevy and GMC full-size pickup trucks is practically a national pastime, but the numbers don't lie — both are making huge strides this year in profits and sales. True, the combined sales of the Silverado and Sierra pickups still don't come close to what Ford does with its segment-leading F-Series, but both GM brands are doing well year-over-year while Ford is flat — the gains are small but they are being chipped away. Even if the combined sales of Chevy and GMC pickups never beats the F-Series, there are strong profits to be had with much higher-than-normal average transaction prices and more high-dollar trim levels like High Country, Denali and All Terrain gaining momentum.

And now come the small pickups that Chevy and GMC marketing people have told us will likely take sales from buyers who left the pickup segment, choosing small and large SUVs, wagons or bulky sedans instead. Really? Common sense says that buyers who didn't want to buy Toyota or Nissan pickups most likely went to other base-model full-size pickups and could now very well move back to GM with a more economical, smaller, and more fuel-efficient choice. And from what we've seen so far at GM's build-your-own website, the Chevy Colorado offers some strong value.

Counter to what GM is saying, it wouldn't surprise us if all the full-size pickups each lost a little bit of marketshare when the new midsize trucks arrive (Combined, Chevy and GMC have been slipping when compared to last year's numbers), but we also expect the overall pie to grow as many crossover and SUV shoppers are lured back. It also wouldn't surprise us if, once the new trucks were in dealerships in sufficient volumes, that some of those new sales could take away from the Silverado 1500 and Sierra 1500 total. We'll have to wait and see for that, but that could make sense. But losing a small number of full-size truck sales for the benefit of making many more sales on a Colorado or Canyon — where Ford and Ram do not have an option — should help continue to put some big dollars in GM's pocket.

Where will the total number of sales for the new midsize trucks end up? Who knows? Whether the Colorado/Canyon full-year sales numbers are a good chunk above or below 100,000 units, you can bet GM will talk caution and optimism about doubling down on its three-truck strategy. Our guess is that total GM pickup sales (Chevy plus GMC, full-size and midsize) are likely to take over the total No. 1 sales spot sometime in 2016 (right about the time GM's baby Duramax comes online), which should make for some interesting conversations in the Ford and Ram product-planning conference rooms, if they're not happening already.

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Comments

Oops, NOT Sierra. Meant to say Sequoia SUV.

why do people continue to spend their hard earned money on that generic motors junk..especially after they cost us, the US taxpayers $11 billion to keep their sorry butts afloat.

@ Chuck Z- because believe it or not, lots of people (including myself) have had good GM vehicles over the years. Yes- some have not been great, but neither are the other manufacturers. GM would not be selling so many vehicles as they do if they were selling junk like you claim. And because some of us hate the thought of having to buy one of those boring powerless Honda and Toyota cars and trucks. I prefer to have the option of buying high-performance, sporty vehicles like the Camaros, Vettes, etc. I also like to have at least a couple of American auto companies around (Ford being the other one) in case this country needs to build a lot of war vehicles in the future (can you say Russia?). We won't be able to count on China or Japan to make our war vehicles since China may be on Russia's side and Japan won't want to get involved. Don't think it can't happen. Regarding the Govt bailout- GM didn't make the Govt give it the money it did. The Govt decided to because it made sense since so many more jobs would have been lost if it didn't. It is the Govt. fault the $11B wasn't paid back- they should have got that $ paid back by GM too. GM is laughing all the way to the bank on that one. And finally, don't worry about how I spend my hard-earned money. I can make informed decisions on my own.

I agree with Steely123 I currently have a 99 S-10 since new and although it is not perfect overall it has been very good and reliable far from what Chuck Z's assessment of all GM products. All have had a few other GM products over the years some great and others ok but none I would call junk. If GM goes away I can manage but I don't think that would be good for the market. I could get by with any of the Japanese or Korean vehicles as an alternative so if you are thinking that all GM owners will just buy Ford or Chrysler products if there were no GM then you need to think again. My wife has a 2013 CRV--she went from Fords to Hondas. I just would like to see GM get their act together.

News Alert!!!

GM is huge and very well positioned for the next generation. Buick is one of the top brands in China.

GM made decisions regarding union contracts and benefits in the 1980s that made the 2008 collapse inevitable.

Re War materiel. The US has been winding down the cold war military ever since 1991. The tech warrior replaced GI Joe.

Today it's drones and remote guidance systems. A ground war like Stalin's Russians sweeping into Berlin in 1945 ain't gonna happen soon. Vehicles?

If you had said we have a huge problem with having so few shipyards and naval production I would be more inclined to agree.

Where are the machine shops that would support a fleet upgrade. China and Russia have them, but we don't

Papa jim

You are so right about the machine shops because they are very few left is the US and a lot of those that are left have old out of date equipment. The old tool & die makers are mostly past away or retired and none are being trained. This is one of China’s big problems building automobiles. They can design it, they can build the tools using programmable machines to make the parts but they don’t have the tool & die makers to fine tune the tools to run good parts. Ford is right now going through a learning curve on going from steel to aluminum and will still be learn years from now. Metals & plastics at times don’t do what the books say they are supposed to do. Schools ,colleges & apprenticeships are great as a starting point but it takes experience also. You never learn it all.

@Jake D--Good points, my question would be what do we do in the US if this is happening? Shouldn't companies invest in new equipment to make these dies or are we just going to set up these tool and die shops in China since they do not have them? It seems that if American companies do not have anyone to replace the older tool and die makers that have retired and died then they would have to either set up these shops somewhere else or pay to have someone else to do this work. I am not as familiar with this but I do see a problem. Are we losing all are skilled tradesmen and craftsmen in the US? If so we need to do something.

@papajim - my figures were global ones not USA based but they do shine a harsh light on GM. GM needs to be more efficient and pick vehicles to focus on that are already viewed as strong products domestically and globally. Trying make a product for every possible segment lends to inefficiency.

Toyota is running on borrowed time since they do not change quickly. They are riding on their reputation but that reputation is slipping.

VW wants to be #1 in sales globally but cannot crack the USA market and as an overall corporation tend to build mostly econoboxes or luxoboxes.

Jeff S

Your questions are a little hard to a person that don’t know much about dies, molds and machining. If you don’t understand please tell me and I’ll try to do better.
First you ask if this is happening ? No it already has. I live in the country but within a 10 mile radius of my house there are several small towns with several factories that had all combined 50 -60 tool & die makers. Within a 50 mile radius in the larger towns/cities (40,000 - 500,000 population ) there was numerous factories with 400 - 500 tool &die makers. Today with most of the factories having moved to other countries there probably is 50 - 75 tool & die makers in that 50 mile radius. The small job shops that couldn’t afford to buy the new equipment closed and only the bigger shops are left. The 3 community colleges in that taught tool & die in that 50 mile radius dropped that course.
Companies started having tools built overseas many years ago but the quality was poor (the first tool I saw built overseas came from Taiwan, a $16,000 mold they built for $4,000 ) they tried to get their in house tool makers to fix all the bad parts but many labor hours and several try’s to make parts per print it went in the steel scrap bend. Several years later they placed another order and the tool was much better but the price was much higher. The tool was still of a lower quality than US but with some in house help it did run acceptable (I didn’t say per print) parts but maintenance was high. The companies have chased cheap tooling all over the world and as the quality goes up so do the prices so they move to the next cheap country they can find.
Yes Jeff China does have the machines to make tools but they don’t have the skilled labor to run these machines to make good quality tools. In 10 years they will be much better and 20 years be doing a great job.
Old saying that is true, a good tool maker can take a wore out machine and make a good part but a poor tool maker can take a new machine and only make a poor part. Also, The agony of poor quality lingers far longer than the sweetness of low prices. I got a friend in Dallas Texas that has to turn down work every week because he can’t find tool & die makers. He has been advertising all over the US trying to get someone for 2 years and has only found 1 so he is training 6 but says he would hire 5 today if he could find them.
I apologize for taking so long to reply but I had to change states last night

@Jake D--No I do not know much about tool and die makers and that's why I ask. Thank you for your reply I have learned something. Being a novice I will ask another question and forgive me for my lack of knowledge. GE is using 3D imaging and copying to produce parts for a new jet engine. Is it possible that this technology will be used in place of tool and die making or is this not realistic? Again I am coming from the position of a novice.

Jeff S

That is a great question for a guy of novice as you say. Computers, computer soft wear, and computer controlled machines have made a advancement in engineering & tool making that is almost unreal. 3D came out many years ago and it’s uses have jumped from one thing to another. All of today’s modern technology has made engineering & tool making easier, better, and faster but it still has not taken their place. Most of the tine when new technology & machines first come out the price is so high only the larger companies & tool shops can justify the purchase. Some dies & molds run one part at a time by placing a sheet of steel in the die or placing a certain amount of molding in and cycling the machine. Dies & molds that run automatic the material is feed to it as needed., a die less say is running 450 strokes a minute making 2 parts per stroke and the mold has 24 cavities cycling every 15 seconds. The operator is checking parts every so often and now the parts don’t check per print. Something (most common things but not all ) wore, broke, bent, moved, cracked or the material is not to speck. Sometimes it’s simple others not at all.
So is this new technology going to replace anyone ? No but it has improved quality &cut time on projects to the point you buy it today but tomorrow it out of date.

Jeff you work in the state that makes one of the best molding machines and punch presses made in America. Cincinnati molding machines and Minster punch presses both made right there in Ohio. Ohio was years ago big in machining and tooling. Years ago there was a lot of private owned tool & die shops in that state that supported the auto industry I think? You might look into this? They may have a very different opinion of tooling and tool & die making than mine

Idiot Ford lovers like to quote sales numbers, like it's not fleet sales driving them up. So lets talk about sales like it makes a difference...lol.

Even if the GM small pickups are a total failure and they only sell half of what they are projecting. GMC and Chevy combined will overtake Ford. It's just math...so what.

They are still both American auto makers that are selling over priced, unreliable trucks to drive profits. But if the math is important to you morons, then GM will overtake Ford.

The real question is....SO WHAT!

@Jake D

Most of the guys my age did not have the grit that their dad's generation had.

I cannot tell you how many family businesses have been liquidated during the last 30 years so that the boomer kids could live large in places like Maui or Santa Barbara.

Affected industries?

Family farms and dairies; machine shops (and tool/die), packaging, restaurants and family owned retail stores.

Sure it's hard work to run a business like any of the above, but the work involved in building a business AND running it is much more demanding.

The impact on the tool business is just as you describe it. Companies are begging for qualified applicants--not journeymen, just guys willing to work hard and learn a trade. The best of the bunch can go on to get a real education in engineering and tool design, if willing to do the work.

@Jake D--Thank you for your response, I have learned something that I did not know. I like to read comments where I can actually learn about something that I am not familiar with. Jay Leno has use 3D copying to have replacement parts made for some of his cars where replacement parts cannot be found. Nightly Business Report had a segment on the GE Jet engine plant and the 3D technology that it will be using to make parts. The GE plant is in Evandale which is in Cincinnati.

@CT--That is true but Ford is not the most profitable too. Ford maybe is more profitable than GM but I would put Toyota ahead of most in profitability. My investment firm recommends Daimler and Toyota in the automotive sectors and does not recommend Ford or GM. Long run I would put my money on Toyota and Hyundai/Kia.



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