GM Says New Trucks Coming in ‘06

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Older models and a wait for new full-sizers have soured GM’s 2005 outlook.


The new generation of pickup trucks and sport-utility vehicles now in the product pipeline must be haunting the dreams of General Motors Corp. executives by now.

GM officials acknowledged that with the introduction of the new pickups still months away, the overall market flat or perhaps down a bit, and healthcare and material costs continuing to climb, both the company’s earnings and market share are under enormous pressure this year.

The automaker has already indicated, through its earning guidance for the coming year, that net income will drop by 50 percent in 2005 and its executives have decline to offer and predictions about market share.

Paul Ballew, GM executive director of market analysis, also told analysts GM was certain the new trucks and SUVs from the GMT 900 architecture will be a big hit once they reach the market. He also dismissed suggestions that the demand for full-size sport-utility vehicles is shrinking. Sales of full-size SUVs dropped 19 percent in December and were down by more than five percent for the full year, according to J.D. Power & Associates.

Ballew, however, blamed the decline on the problems of other manufacturers, he suggested. Ford’s Expedition simply hasn’t been a very successful vehicle, he added.

Consequently, while the growth of the full-size SUV segment has probably peaked, GM is confident that it will continue to hold a significant share of what will remain a significant market, Ballew said. GM still sees no evidence that rising gasoline prices have driven buyers out of the segment, he added.

Meanwhile, John Devine, GM’s chief financial officer, also told analysts that the company is cutting production through the first quarter. In fact, the company announced in this latest production report it was shutting temporarily both sides of its assembly complex inSpring Hill, Tennessee, as well as it assembly plant in Shreveport, Louisiana, to trim inventories. Both plants build newer products � the Colorado/Canyon pickups in Shreveport, and Saturn Vues and Ions in Spring Hill � that GM had been counting on to beef up its sales.
GM also plans to reduce production of its full-size sport-utility vehicles through the first quarter when the company said it will only break even or post a relatively small profit. With GMAC expected to continue to produce a handsome profit and positive contributions for Asia-Pacific and Latin America rolling in, the new guidance from the company clearly indicates that GM’s North American and European operations will continue to lose money, observer said.

Numbers adding up

GM’s global automotive operations earned $235 million in the fourth quarter, compared with $396 million a year earlier. GM’s North American automotive operations earned $416 million in the fourth quarter, up slightly from $397 million, due to cost cuts and tax settlements, partly offset by lower production.

“GM remains on Negative Outlook, with concerns focused on continuing margin compression in North American operations, losses in Europe, a dated truck portfolio that will not be refreshed through 2005, a weak car portfolio, rising capital costs, and very significant post-employment benefits. Although GM has made significant contributions to its pension funds and moved to greater prefunding of its healthcare liabilities, this has been accomplished to a large degree through asset sales and significantly higher debt levels,� Mark Oline, managing director of Fitch Corporate rating group, noted in a new report last week.

“It will be a long, hard year for GM North America, with only some new relatively low-margin products (Chevy Cobalt for example) to carry it through most of the year until the big cars (Cadillac DTS, Buick Lucerne) arrive in (the fourth quarter) and the GMT900 large SUVs launch in (the second quarter of 2006),� added John Casesa, Merrill Lynch’s automotive analyst in a separate report.

Devine insisted will look quite different once GM’s new truck program is finally put in motion.

GM, however, has not said with any precision when it plans to launch the new trucks and Devine declined to provide any guidance. Union representatives at the plants involved in the sweeping program said the planning for the launch has begun but GM has not said when the vehicles actually will begin rolling off the assembly lines. Devine, however, did indicate that the full-size SUVs will come first and the pickup trucks will follow.

Gary Cowger, president of GM North America, said in a recent interview it was impractical to try and pull ahead production of the new the trucks and SUVs because the program is so large.

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SUVs to lead GM's next generation of big trucks

Afterward, pickups are to be replaced

June 18, 2004







<li type="square"> An article in Friday's Business section about the next generation of General Motors Corp. full-size SUVs incorrectly said the GMC Envoy would be among the first vehicles replaced with a new version. It should have said the GMC Yukon would be replaced.
When General Motors Corp. begins replacing its line of full-size trucks in early 2006, it will start with sport-utility vehicles, including all-new versions of the Chevrolet Tahoe and GMC Envoy, the Free Press has learned.

Those new SUVs, along with an all-new version of the popular Cadillac Escalade and others, will be assembled at GM's assembly plants in Arlington, Texas, and Janesville, Wis.

As part of this next generation of GM's full-size truck line, a major $175-million investment already has been announced for Janesville and an announcement could be coming soon for Arlington, say GM officials, supplier officials and other people familiar with GM's plan.



GM's big trucks are North America's largest and the automaker's most important, vehicle line.



Unlike the rollout of the current line of heavy-duty GM trucks that were unveiled in 1998 and 1999, GM will introduce its new SUVs first, probably around March 2006. This next generation of full-size trucks, code-named GMT 900 within the automaker, will eventually produce at least 1.6 million vehicles a year at seven assembly plants, say insiders

A lot will be riding on this new line, because its job will be to slowly replace the current generation of full-size GM trucks, which is code-named GMT 800 and has been wildly successful for GM, allowing it to earn multibillion-dollar profits in 2000-03 while its crosstown rivals at Ford Motor Co. and the Chrysler Group struggled with red ink and restructuring.



Last year, about 1.85 million vehicles were built off the GMT 800 platform, making it the largest vehicle platform in North America and perhaps the world.



"We don't want to take any chances with this. The numbers are so large and the financial impact is so great that we research every step of what we do," said a GM insider who asked not to be named.



After the new SUVs roll out in 2006, GM will then wait about a year to replace its full-size pickup trucks, the popular Chevy Silverado and GMC Sierra. The launch of the new pickup trucks will start at GM's Oshawa, Ontario, assembly plant in early to mid-2007, followed later by rollouts at Ft. Wayne, Ind., Pontiac and Flint.



"The SUVs will go into production first. SUVs are much a more fashion-conscious and profitable part of the market than pickups, so it makes sense to get them on the road first," said Jim Hall, vice president of auto analysis in the Southfield office of consultant AutoPacific.



When the current full-size truck lineup debuted in 1998, GM put the pickups in production first, kicking off with the Oshawa plant. According to GM insiders and others, then-GM chairman Jack Smith asked why SUVs weren't being done first.



GM officials declined to comment on the next lineup of full-size pickups and SUVs, saying they prefer to focus on the current lineup. The current platform was the basis for 11 vehicles, ranging from pickups like the Silverado and Sierra to SUVs like the Hummer H2 and Suburban.



"We have not said anything about future products or any future trucks. We continue to have sales momentum on our current trucks, and we just revamped them last year," GM spokesman Joe Jacuzzi said.



One GM production forecast shown to the Free Press projects about 510,000 SUVs off the GMT 900 line in 2006, slowly rising to about 580,000 by 2008. Pickup production would start around 760,000 in 2007 and move to 940,000 in 2008.



The rollout of the new lineup will make for an interesting clash, as Toyota Motor Corp. plans to unveil its next generation of full-size pickup trucks in 2006, with an all-new Tundra built at a new plant in San Antonio. The next year, Toyota will come out with a larger heavy-duty version of the Tundra, say auto insiders.



At the same time, insiders say they expect Nissan Motor Co. Ltd. will continue to ramp up production on its full-size Titan pickup, built at a new plant in Canton, Miss., and the always-popular Ford F-series pickup truck line will be in its third and fourth year on the market since a major redesign. The battle in the pick-up truck and SUV market is crucial in the auto industry because profits are far bigger there than in cars.



Trucks now make up about 54 percent of the U.S. vehicle market, and analysts expect that to grow to about 58 percent by the time GM's next line is unveiled. Last year, 9.06 million trucks were sold versus 7.62 million cars, auto-sales analysis firm Autodata Corp. reports.



"When GM comes out with that next generation, that will be a time of a real truck war," said Rebecca Lindland, senior auto market analyst with Global Insight, a Massachusetts-based research firm. "There will be tons of truck options out then. I know Detroit likes to bad-mouth the Titan, but it is part of a whole group that is attacking GM's truck dominance."



Much of the emphasis in this new GM lineup will be on the engines, say insiders, with GM focused on increasing horsepower but improving fuel efficiency.



Coming GM engine technology, specifically something called displacement on demand, will also be a big part of the lineup. This technology shuts off half the cylinders in a V8 or V6 engine when they're not needed for acceleration or towing. This can improve fuel economy 8 to 10 percent. The system debuts on some of GM's midsize SUVs this fall.



Insiders say styling of the new full-size SUVs will undergo more radical changes than on the pickup trucks, which GM sees as attracting a more conservative, business-minded, buyer.