Pared-Down GM Likes Niches, Including Natural Gas Vans
In the wake of its bankruptcy, General Motors has radically pared down to just four brands, but that hasn't stopped it from exploring some potentially lucrative niche markets. Commercial compressed natural gas (CNG) vehicles are one such niche, and GM has just announced it's close to reentering a field it left in 2006. CNG is good business for GM, because there is a ready-made market in utility and corporate fleets.
CNG vehicles are not likely to go mainstream anytime soon, but the business can be low overhead and steady, the kind of revenue stream that GM shouldn't -- and won't -- ignore as it might have done when car sales and truck were through the roof.
In some ways, conversions like this are less of a risk than much more high-profile programs like the "range extender" Chevrolet Volt (now with an eight-year battery warranty). The Volt's volume will be larger than for the company's CNG converted vans, but (at least initially) not hugely so. And because they represent a very small R&D investment, the CNG vans could without much fanfare be more of a profit center.
Conversion is also relatively simple and can be farmed out with little effect on existing production lines. The vehicles are full-sized Chevrolet Express and GMC Savana cargo vans with six-liter Vortec V-8s, and after being readied for CNG with hardened valve seats at GM's Wentzville plant, they'll be shipped to Indiana's Productive Concepts International (PCI) for installation of fuel delivery and storage hardware.
There's a reason GM is converting commercial vans, not cars. The scarcity of public stations has long been a barrier to expanding natural gas into the car market. Natural gas cars are big business in Europe, but only Honda offers a natural gas car in the U.S., though private companies (including an operation owned by natural gas owner (and tireless advocate) T. Boone Pickens) do conversions. But large U.S. fleets have their own natural gas pumping stations, as well as centralized garages where the vehicles can be serviced and refueled.
According to Mike McGarry, a marketing manager for alternative fuels at GM fleet operations, "We had some fleet operators come to us, so this is answering their requests." He identified potential customers as gas utilities, gas producers and other operators that simply want to operate more environmentally friendly fleets. The strongest regions, he said, are in the northeast, southwest, south central, Texas, California and, oddly enough, Salt Lake City, which happens to have very cheap CNG.
The first converted vans will be available in the fall, but you won't see them in Chevy showrooms. These are special order products, available through dealers but contracted through fleet executives. McGarry declined to estimate the annual size of the market, or put a price on the converted vans.
Why farm out the conversion rather than do it at a GM facility? "PCI can get the vans to market quicker, because they have the expertise," McGarry said.
Brian Small, general manager of GM fleet and commercial operations, said the company went ahead with the vans because both CNG and liquefied petroleum gas (LPG) are becoming more widely available. "The industry commitment to expand the CNG and LPG infrastructure in key fleet markets was an enabler to allowing us to introduce these options now," he said.
The natural gas industry has long sought more natural gas vehicles with OEM backing, rather than simply conversions of varying quality. Richard Kolodziej, president of trade group NGVAmerica, says it's "exceptional" that the U.S. fleet market has been demanding natural gas vehicles, "and GM is responding."
GM has 17 E85 ethanol capable and five hybrid models in its fleet and commercial lineup, but that work is done in-house. PCI says it's motivated to work with GM by the need to "do our part to reduce our nation's dependency on foreign oil." I imagine a lucrative contract from GM counts as a motivator, too.
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Photo: General Motors