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GM's Big Gamble Revealed: No New Trucks in the Works

Small cars, hybrids and EVs get all the love, but Americans still can't live without their trucks -- especially pickups -- and neither can U.S. car companies. In good economic times, pickups account for more than a tenth of the total vehicle market. Domestic automakers still rely heavily on trucks' healthy margins. For Ford, half its profits can come from the F-150 lineup alone.

That's why jaws dropped last week when General Motors CEO Daniel Akerson admitted that the company's 2009 bankruptcy more or less eviscerated its vehicle development program. That was expected. But here's the kicker: no new full-size pickup trucks are in the immediate pipeline.

But wait till you see what we have for 2013!
To get out of bankruptcy, as GM did in 2009, it had to whack a cool $2 billion in R&D spending. So, you may say, what's the big deal? They've launched the game-changing Volt, which captured a wagon load of awards, and they've shed their underperforming brands. No harm done if they don't get back on track with cool new Cadillacs and sweet new Chevrolets until 2012 or 2013.
Except it is a big deal. GM has put off revamping both the Chevy Silverado and the GMC Sierra, which combined add up to more sales for full-size pickups per year than segment leader Ford with the aforementioned mighty F-150. This is enviable market position, and now it's seriously threatened.
Can GM drive and chew gum at the same time?
As a business, the newly IPO'd GM needs to walk and chew gum at the same time. True, the days are over when it could cede the small-car market to the imports because of its fat truck profits. GM has to pull consumers to every one of its post-bankruptcy brands. The Volt has to beat the Nissan Leaf and woo green buyers away from the latest Prius reiteration (and soon, its plug-in hybrid). The Chevy Cruze, a small sedan, needs to beat the somewhat boring but popular Honda Civic and Toyota Corolla.

But the pickups! The pickups! Over in Dearborn at Ford HQ, they're celebrating, and not just because they've just dropped new engines in their stalwart pickup, including a juicy V6 sporting a turbocharger. That equals V8 power with V6 fuel economy. You might call it the Thinking Man's F-150. The icing on Ford's cake is the GM scenario: It will have to stall through this year with no pickups--pickups that can be equipped with an extended bed or an extended cab or numerous other features. That sidelines the moneymaking extras that appeal to contractors and those who want to be like them.
Pickup sales pick up

I've been anticipating a big recovery in the truck market for a while now. The ongoing housing crisis is holding it back, but there are signs of life, even a modest upward trend. I can't imagine what kind of sorry shape some contractor's pickups are in these days. And the laid-off multitudes who gave up their trucks have to be doing some hopeful window shopping, expecting that even strapped homeowners can't hold off re-roofing much longer.

So kudos to the New General for genuinely committing to a small-car strategy and in redeeming the evil things it did back in the day with the EV1: getting behind the Volt and bringing Buick back from the dead and--oh, come on!
Say it ain't so, Dan!
Did Akerson seriously just admit that GM doesn't have any new full-size pickups? Maybe GM really is in a state of total transformation. I just don't think anyone at GM wants to transform the pickup right out of the picture. In most years one would expect the executive team to see it as a way to fund the company through its perilous post-IPO period. And, oh, ensure that the $7 billion R&D budget never has to be slashed to $5 billion again.

Chris Liddell, the GM CFO who has argued that the company needs to move forward with no debt, is the exec who needs to reckon with this scenario. The key to retiring debt is profits. And a big key to profits is pickups.


Photo: GM Media
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