GM's trucks boost profits ahead of EV push
San Diego — Even as General Motors Co. prepares to pivot to electric vehicles, the Detroit automaker still is going all-in on the big, fossil-fuel powered trucks that have long buoyed its bottom line.
Highly profitable pickups and SUVs — like the redesigned 2020 GMC Sierra Heavy Duty pickups that debuted Tuesday here — will play a crucial role as GM undergoes a restructuring this year amid a growing number of economic obstacles. GMC in particular, with its high transaction prices and popular high-end trims, will be a key piece in ushering in GM's latest transformation.
The Detroit automaker was upbeat earlier this month about 2019, projecting a slight increase in earnings as it forecast strong SUV and truck sales. That’s due in part to the early investments the automaker made in the trucks, SUVs and crossovers for sale today, GM President Mark Reuss told The Detroit News last week at the Detroit auto show.
GM’s newest pickups — the light-duty GMC Sierra 1500 and Chevrolet Silverado 1500 that went on sale last year, and its heavy-duty siblings that will come later this year — are likely among the last to be launched on GM’s current gas- and diesel-powered architectures.
“Our regulatory investment for the future on internal-combustion engines and architectures is largely done,” Reuss told The News.
That’s not to say there aren’t more gas or diesel engines coming — GM is preparing to launch a new global product portfolio in China, South America and Mexico this year — but investments in internal-combustion engine technology are winding down as battery and fuel-cell investment ramp up.
”The transformation of the company is going to be product-based,” Reuss said. “In my space, the purchasing and product-development future is probably the biggest transformation that GM’s ever undergone.”
The company will wade deeper into a restructuring effort this year that will cut about 8,000 white-collar jobs and reassess the viability of five plants in North America. The effort is expected to save up to $2.5 billion this year as the automaker prepares to fund development of expensive electric and autonomous vehicles.
GM's highly profitable GMC truck brand is upping the ante on its profitable full-size Sierra pickup trucks with the Sierra 2500 and 3500 Heavy Duty models designed in the light-duty’s likeness.
GMC's Denali-badged pickups command some of the highest transaction prices in the segment — even outpacing luxury brands like Mercedes-Benz, Jaguar and BMW. The average GMC Sierra Denali pickup sells for nearly $55,600.
The pricey Denali option and new AT4 off-road trim are particularly profitable. For the redesigned Sierra 1500, 54 percent of sales are Denalis and 20 percent are the AT4. That has made the Sierra 1500 and its heavy-duty siblings the "crown jewel of GMC," said Duncan Aldred, vice president of GMC.
How the success of GM's premium truck brand will translate into the automaker's electrified future is still up in the air, said Phil Brooks, vice president of sales and marketing for GMC. But for now, the brand's goals are clear.
"GMC's role right now is to continue to grow our business, sell lots of SUVs and trucks, and be a key profit-driver for the company — which helps build the future," Brooks said in an interview. "Without a strong present, there’s not a strong future."
But the redesigned trucks will compete with the likes of Ford Motor Co.’s formidable F-Series as well as Fiat Chrysler Automobiles' all-new Ram trucks. The new Ram Heavy Duty, which builds on the success of the tech-laden, more luxurious light-duty truck, made its debut last week at the Detroit auto show.
Ram in particular has GM in its sights. Its new heavy-duty models are designed to build on the success of the redesigned 1500, which won North American Truck of the Year at the auto show after it gobbled up retail market share from Chevrolet and GMC last year.
"We’re still seeing the potential grow with our new Ram 1500," Jim Morrison, head of the Ram brand for North America, told The News last week at the show. "One of the benefits of the Ram truck brand is we’re a truck-only brand. So we spend all of our time just focusing in on the truck customers and listening to what their needs are and what their wants are."
Brooks says he respects GMC's competition because it drives the innovation that GMC needs to develop the high-end trucks for which customers are willing to pay the big bucks.
"We understand we have some very, very strong competitors," Brooks said. "They keep upping their game, so our job is to keep upping our game."