GENERAL MOTORS Truck lineup shows its age

GM is upping incentives to compete against newer trucks.
KNIGHT RIDDER NEWSPAPERS
DETROIT -- The country's largest and most important vehicle line is starting to show its age, and the implications are a bit scary for General Motors Corp., its workers and largest suppliers.
GM has relied for years on its full-size trucks to generate billions in sales and profits, with hits ranging from the Hummer H2 to the popular Chevrolet Silverado pickup truck. The lineup was so dominant it forced every other automaker to improve its trucks or prop them up with profit-eating rebates.
However, the lineup is now 6 years old -- nearly ancient in today's ultra-competitive auto industry, where the first few years for a new vehicle are like the first few weeks at the box office of a Hollywood movie -- that's where the big money is.
Needing larger rebates
Tellingly, GM now needs vastly larger rebates to lure consumers to these trucks, which are taking longer to sell and piling up on dealer lots across the country. Auto experts note that GM will not replace this lineup until 2006 and 2007, so GM still has another two years or more with this suddenly aging line.
"This is a truck lineup that has peaked. It's now long in the tooth, and that is hurting it. It's viewed by the industry trade pubs as just a good lineup, not a great one anymore," said Robert Hinchliffe, who studies the auto industry for the Wall Street firm of UBS Inc.
To his point, a July Consumer Reports' study ranked the Chevy Silverado fifth out of six big pickup trucks. In another study, Edmunds.com ranked the Silverado last.
For nearly five years, this truck line was an industry star with seven GM factories working overtime to feed fevered consumer demand for big pickups and SUVs.
GM, its suppliers and hourly workers basked in profits and overtime checks as GM squeezed out one big-truck success after another, including the Cadillac Escalade that caught the fancy of the hip-hop crowd. This lineup -- all based on a platform, or basic architecture, known as the GMT-800 -- is so big it accounts for about one of every eight vehicles built in North America.
Best-selling platform
Auto analysts and insiders, who think the GMT-800 is the best-selling vehicle platform in the world, call it everything from the "mother of all platforms," to the "800-pound gorilla" of the industry. A platform is a single set of components from which a variety of different cars or trucks can be built. A platform usually includes the suspension, and large parts of the metal underbody that forms the vehicle's floor.
To be sure, GM's full-size truck and SUV lineup is still a strong seller, on pace in 2004 to beat or exceed 2003's record sales of 1.56 million vehicles. GM officials insist the GMT-800 is still the industry standard for trucks and SUVs and will keep making money for GM.
"It's not like we are surprised that everyone else has all these new products. We anticipated everyone coming in at us now that we've taken leadership in full-size trucks," said Gary White, GM's head of full-size trucks.
Thirteen different vehicles were created from the GMT-800, which was introduced in 1998 when the Silverado and Sierra rolled off the line at the Oshawa, Ontario, assembly plant.
Ford's new series
Ford unveiled its new F-series line of pickups last summer, shortly after Chrysler rolled out its Dodge Ram. Nissan introduced the full-size Titan in late 2003. All of them have sliced into GM's dominance in full-size pickup trucks.
Incentives such as cash rebates on the Silverado jumped from $1,893 per vehicle in April 2002 to $3,453 in April 2004, according to the vehicle-pricing site Edmunds.com. The Silverado is now sitting unsold on dealer lots for an average of 68 days, compared with 47 days two years ago.
It's no coincidence other automakers are rolling out big pickups and SUVs. That's where the money is made in the auto industry.
"Much of GM's success was based off the GMT-800. Their margins from the H2 and Escalade were just enormous, while the volumes of the Silverado made them lots of money," said Mike Chung, pricing and market analyst and Edmunds.com. "Now, the others have made a strategic decision to catch GM at the end of the Silverado's life cycle. They targeted GM and rolled out these products with them in mind."
White admitted GM probably will need greater incentives on the GMT-800 vehicles as the line ages, but he remains confident.
"For three or four years, we were the fat hog at the trough making money on the GMT-800. We're not going to sit on our hands going forward. Our incentives have certainly gone up, but our profit margins should hold steady because our warranty costs are going down, we are saving money on material parts and we've got these new derivatives that are selling for more," he said.
Because the GMT-800 is so immense, it influences the entire industry. So if GM decides to jack up incentives on that lineup -- and so far that seems to be GM's plan with current $5,000 rebates on many SUVs -- that forces the hand of every automaker selling a large pickup truck or SUV.