2013 Is a Crucial Year for GM
Dec 15th 2012 6:00PM
Updated Dec 15th 2012 6:04PM
This week, General Motors revealed its 2014 model year truck lineup. It's a big moment for the auto manufacturer, which is still largely owned by the United States Treasury. The company hasn't been the top seller of trucks in the U.S. for a long time -- competitor Ford has been the sales leader for the past 35 years. So this marks a big chapter for the company, and the first major test of the new and improved GM. Let's take a look and see what early reports are saying about the new cornerstone of General Motors' platform.
Is bigger still better?
For a long time in the truck business, the name of the game has been "bigger is better." But as the financial crisis struck, and with gas prices remaining far higher than they were 10 years ago, we saw what happens when the famous mantra proves to be false.
For GM's new pickups, though, it looks like it's back to business as usual. The burly trucks are bigger and faster than ever before, with more towing ability and, supposedly, more efficiency.
It is the first major redesign of the Silverados and Sierras since 2006, long eclipsed by updates to Ford's best selling F-150. In 2011, the two trucks made up for nearly a quarter of GM's sales, so this redesign is much more than a press release. The success of these trucks is also weighing heavily on the minds of the United States Treasury, which is looking for an exit, preferably a profitable one, to the remainder of its $50 billion bailout in the automaker during the depths of the financial crisis. This was an encouraging year for both GM and the government, as the company's shares rose 20%.
The thing is, for these trucks to really become class-leading vehicles, they need to be as efficient as possible. Fuel consumption is still one of the biggest things on the minds of buyers -- not horsepower. I was a bit confused to see the release of the trucks touting jumps in power, size, and ability. GM executives did say the trucks will have improved fuel efficiency over the previous models, but is that really enough?
Blind curves ahead
MPG estimates were not provided at the event, and it appears we won't know until early next year. But from the look of things, it doesn't seem that we should expect any jaw-dropping numbers on the sticker. Analysts are saying the new trucks are expected to equal the Ford V8 Ecoboost engine's 22 MPG.
In November, sales were down for the company, which management says was a result of aggressive promotions from competitors Ford, Chrysler, and Nissan. GM will probably finish the year with a few more vehicles in inventory than it wanted to. Looking forward, however, things look bright, as one Citi analyst projects that sales will rise with more and more consumers replacing their aging vehicles. People have held on to their vehicles for longer than usual since the financial crisis.
Can GM become No. 1?
As I mentioned, Ford has held the top spot for best selling pickup with the F-150 for an impressive 35 years straight. GM is hoping its remodeled trucks can finally change that trend. On an overall basis, some expect GM's combined pickup sales to surpass Ford in 2013 -- a sign of recovering strength for the company. Ford weathered the financial crisis in far better shape than GM.
While the jury will be out for some time to determine whether GM can reclaim the status of No. 1-selling full-size pickup, the company does have an advantage in that it is one of the few remaining auto manufacturers to offer a midsized pickup. Both Ford and Chrysler no longer offer a midsize option, which is a more efficient alternative for consumers who don't require the space.
As an investor in GM, expect continued performance in 2013. Depending on the success of the new trucks in the second quarter of next year, the U.S. may exit from its position, which will probably be a bonus for investors.
More on GM from The Motley Fool
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The article 2013 Is a Crucial Year for GM originally appeared on Fool.com.Fool contributor Michael B. Lewis has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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