GM hangs hopes on latest Silverado
Automaker aims to exceed sales of Ford F-series
General Motors Co.’ s best bet for 2013 may also provide the Obama administration an exit ramp for its $50-billion investment in the largest U.S. automaker.
With Thursday’s unveiling of its first redesigned Chevrolet Silverado full-sized pickup since 2006, GM aims to take Ford Motor Co. head-on with new trucks that could help boost its share price, encouraging the U.S. government to sell its stake.
GM’s Silverado and GMC Sierra pickups are mechanically similar models that combined to make up 23 per cent of the Detroit-based automaker’s U.S. sales last year. The trucks generated an estimated 16 per cent of the company’s global earnings before interest and taxes this year and the redesigned versions could boost Ebit by more than $1 billion in 2013, according to a Citigroup Inc. estimate.
Even with the recent cloud of high existing truck inventories, the new models hold the promise of giving GM’s investors, the U.S. government included, a long awaited boost.
Introducing a new pickup “tends to correlate very well with positive stock returns” for GM, said Itay Michaeli, an analyst with Citigroup. Since GM’s initial public offering in November 2010, “there was high anticipation already then for the 2013-2014 truck launch.”
Of 13 new Chevrolet vehicles introduced next year, the Silverado will do more than any other model to help boost sales and profits, which analysts project will increase next year. Nineteen of 25 analysts surveyed by Bloomberg recommend buying GM stock.
“It’s really hard to find a product for GM that’s more important,” Rebecca Lindland, an industry analyst with IHS Automotive, said this week in a telephone interview. “From a volume and financial standpoint, this is GM’s Super Bowl.”
GM has the “oldest portfolio” of vehicles, Mark Reuss, president of GM North America, told reporters in Pontiac, Michigan, after introducing the new Silverado and Sierra, which will begin arriving in showrooms in the second quarter. “We’ve got to turn it and we’re going to turn it as fast as we can, starting with this.”
“We think we are timing this very, very well in terms of construction and growth in the economy,” Reuss said.
The U.S. may sell its remaining 32 per cent stake in GM, a holdover from the 2009 rescue of the automaker, if the shares rise. The Treasury wants to sell for at least the $33 a share price it got in the IPO, people familiar with the matter have said. It needs to sell for more than $50 for the U.S. to break even.
GM has long battled Ford for pickup buyers. Sales of Ford’s F-Series, which was redesigned in 2008 and has been the bestselling vehicle in the U.S. for 30 consecutive years, have outpaced Silverado and Sierra as customers have shifted to the Dearborn, Mich.based automaker’s more efficient smaller engines.
Reuss said at the press briefing that GM’s goal is for Silverado and Sierra sales to exceed F-Series deliveries. He didn’t provide a timetable.
About 54 per cent of F-150s sold through September came with sixcylinder engines whereas only 7.6 per cent of Silverado 1500s had the smaller power plant, according to Edmunds. com, a website that tracks auto sales. Before Ford’s 2010 introduction of the EcoBoost version of its V-6 engine, which uses direct fuel injection and turbocharging to increase fuel economy and power, about 14 per cent of F-150 sales came with six-cylinder engines in 2008, Edmunds said.
“They need to move fuel efficiency that sticks beyond what Ford is doing without sacrificing power,” Matthew Stover, an industry analyst with Guggenheim Securities LLC based in Boston, said in an interview. GM will probably “shift it from a horsepower war to a fuel-efficiency war.”
GM’s current Silverado has fallen behind in technology as the automaker wasn’t able to keep investing enough during its 2009 bankruptcy reorganization, said Larry Dominique, executive vice-president of researcher TrueCar.com.
“They had a really good riding truck, good fuel economy,” he said in an interview in Bloomberg’s Southfield, Michigan, bureau. “They’ve got to take that leap again. They’ve got to leapfrog Dodge and Ford.”