GM urges patience as Silverado falls to No. 3

[Harley Lover]

1 hour ago, rperez817 said:

Which means Ford will continue to have a lower profit margin on its North American automotive business but higher revenue compared to GM.

If Ford has a lower margin, it's because GM continue to benefit from the gifting of the washing of its debt obligations in the BK. Ford will always be disadvantaged in that regard since it chose to repay its debts.

[fuzzymoomoo]

1 hour ago, fordmantpw said:

Seriously?  Have you never been to a campground, or even on a highway to see all the Super Duty and Ram HD trucks pulling big fifth wheels?

? shhh that doesn't fit his narrative 

[bzcat]

7 hours ago, rperez817 said:

I understand it just fine sir. GM and Ford have different strategies for revenue vs. profitability with their LD full size pickup trucks. With Silverado and Sierra, GM wants to maximize profitability even it means lower sales volume, and lower revenue. With F-150, Ford wants to ensure the highest volume of sales possible, meaning greater revenue. That means they are willing to accept lower profit margin and do more fleet sales than GM.

As I mentioned earlier, HD/Super Duty trucks are another matter. Those types of trucks are for business and government buyers, not individuals, and it makes sense that the majority are sold as fleet.

You haven't presented any evidence that Ford is accepting lower margin by selling to fleet. You haven't presented any evidence that GM is growing the truck margin by focusing on retail and ignoring the 40% of the market that Ford and Ram are not ignoring.

The only thing we know is GM is still spending more on incentives than Ford to achieve less sales in fullsize trucks. That implies exactly the opposite of the theory you keep floating.

When you are a volume player in the segment, you don't maximize profit by not selling to the biggest buyers. That's a classic mistake. A volume player in an oligopoly market should only deploy the strategy to maximize marginal unit profit when you are production constrained and/or when your competitors cannot respond to your higher prices. Absent those condition, you are just bleeding sales AND profits. Fullsize truck market is a classic oligopoly with 3 dominate players each holding roughly 30% of the market. GM is not production constrained on fullsize pickup truck and Ford and Ram are more than capable or taking away sales from customers that GM is not interested in selling. In this situation, you can't maximize profitability by restricting volume... you are just spreading your fixed costs over fewer units.

This is different from luxury cars or midsize cars where it is not an oligopoly and GM is not a major volume player. In those markets, GM can restrict output and try to maximize profit. In another word, GM can find a niche and try to stay out of the way of dominate players in those segments. In fullsize trucks, GM can't stay out of the way of the dominate players because it is one of the dominate players.

Edited June 24, 2019 by bzcat

[jcartwright99]

I was driving on 94 to the Detroit area over the weekend and I saw the new GM HD truck. It was partially in camo wrap but not sure why. Man, that thing looks like an extra in the Robo Cop remake. It may be a great truck but if that front doesn't look "TRY HARD" than I don't know what does.  For the futuristic extreme bro! It really was cartoonish.

[jniffen]

32 minutes ago, jcartwright99 said:

I was driving on 94 to the Detroit area over the weekend and I saw the new GM HD truck. It was partially in camo wrap but not sure why. Man, that thing looks like an extra in the Robo Cop remake. It may be a great truck but if that front doesn't look "TRY HARD" than I don't know what does.  For the futuristic extreme bro! It really was cartoonish.

 

[mackinaw]

Even Bob Lutz is disappointed with the new GM pickups.  He was interviewed in Automotive News this week.  He doesn't understand why GM went cheap with the interiors and considers the styling to be behind the F-series and the Ram.  

[jpd80]

What is concerning is that GM is adding a ton of vehicle and engine production capacity, all while Silverado sales seem to be slowing. In the past, Regular Cab 1500s made up about 30% of Silverado LD production but GM cut that out last year and is only now  supplying some RCs. The plan was to lower fleet sales and encourage  more profitable retail sales of super cabs and crew cabs but that looks to have backfired and cause a drop in sales that GM is struggling to replace.

[snooter]

I like regular cabs....what gm is doing makes no sense...they are cheap looking and just hideous....ram is beautiful truck as is siper duty

[probowler]

Am I the only one that likes the look of that single cab short bed on the front page? Compared to the bigger trucks, which I don't like.... something about the proptortions of the smaller one work for me.

 

I might just be crazy though.

[J-150]

16 hours ago, mackinaw said:

Even Bob Lutz is disappointed with the new GM pickups.  He was interviewed in Automotive News this week.  He doesn't understand why GM went cheap with the interiors and considers the styling to be behind the F-series and the Ram.  

Lutz is disappointed they didn't use more fiberglass ground effects.

Edited June 25, 2019 by J-150

[Gurgeh]

The headline of this thread reminds me of the joke that was going around in 1980: "Yeah, if President Carter was the one being held hostage in Iran, I'd urge restraint as well."

[DequindreToo]

On 6/24/2019 at 5:41 PM, mackinaw said:

Even Bob Lutz is disappointed with the new GM pickups.  He was interviewed in Automotive News this week.  He doesn't understand why GM went cheap with the interiors and considers the styling to be behind the F-series and the Ram.  

Bob Lutz must not get invited to too many GM company picnics anymore. 

Edited June 27, 2019 by DequindreToo

[rperez817]

8 hours ago, DequindreToo said:

Bob Lutz must not get invited to too many GM company picnics anymore. 

If GM paid Lutz' lecture and book signing fee, I'm sure he would come to a GM company picnic or other event. If not, Lutz won't mind. He has plenty of other engagements. http://www.boblutzsez.com/

Also, Lutz is busy managing the startup company he founded with Gilbert Villarreal and Henrik Fisker.

 

[jpd80]

On 6/24/2019 at 9:07 PM, rperez817 said:

Which means Ford will continue to have a lower profit margin on its North American automotive business but higher revenue compared to GM.

Not quite, GM's sales portfolio is markedly different to Ford.

GM sell a heck of a lot more full sized SUVs compared to Ford, it also sells more mid sized trucks but no competitor to Transit, sells plenty of 1500s but comparatively fewer HDs than Ford. Bottom line is that GM has more sales numbers where it counts and higher profits, Ford works the commercial fleets that GM passes on and still manages to make good profit. It's the eternal Push=Pull between the two that allows each to make good profits in chosen markets.

Edited June 27, 2019 by jpd80

[J-150]

I'm curious as to why everyone cheered Ford for downsizing volume to increase profit per vehicle but GM is bad for doing the same?

[rperez817]

16 minutes ago, J-150 said:

I'm curious as to why everyone cheered Ford for downsizing volume to increase profit per vehicle but GM is bad for doing the same?

I'm cheering both companies for emphasizing profitability over increased sales alone. And their willingness to accept lower sales if it means better EBIT.

Ford and GM have different approaches to achieve that goal, and both have some ways to go. But it's good that both companies no longer do the "#1 in sales no matter what the cost" thing they used to.

Edited June 27, 2019 by rperez817

[akirby]

1 hour ago, J-150 said:

I'm curious as to why everyone cheered Ford for downsizing volume to increase profit per vehicle but GM is bad for doing the same?

Because in the full sized truck world those fleet sales aren't low profit AND GM has plenty of extra capacity.   That's a little different than cancelling Focus which had little to no profit.

[rperez817]

1 hour ago, akirby said:

Because in the full sized truck world those fleet sales aren't low profit AND GM has plenty of extra capacity.   That's a little different than cancelling Focus which had little to no profit.

The difference there is in degree, not concept. For full-size LD trucks, fleet sales are lower profit than sales to real retail consumers. For U.S. market Ford Focus, any sale of a new Focus car, whether to fleet or real consumers, is low or even negative profit.

So the example of reducing fleet sales of full size LD trucks and cancelling U.S. Ford Focus both help profitability of the respective automakers. The second does so to a greater degree than the first.

[atomcat68]

Even a full sized pick up sold to a fleet sale, is worth more profit than a mid sized car sold at retail. GM is throwing away truck sales which are more profitable than those of CUVs and cars. To add insult to injury they are now being beaten by Ram, who used to be the JV team.  So as much I grind my teeth at Ford cancelling cars, I can see their point to a degree.

GM now better start praying to whatever auto industry god is out there that Toyota doesn't figure out a winning formula for trucks as they are not afraid to take market share from others.

[akirby]

34 minutes ago, atomcat68 said:

Even a full sized pick up sold to a fleet sale, is worth more profit than a mid sized car sold at retail.

This.

Eschewing lower end fleet sales of full sized pickups when you're not capacity constrained is just throwing away money.   I bet the margin on those fleet trucks are still >10%.  And they're not saving any money by not making them.

Contrast that to Focus - Ford wasn't making much on stripped down Focii to begin with and by killing production they've saved a ton of money and replaced those sales with Ranger sales.

Huge difference.

[bzcat]

On 6/27/2019 at 8:47 AM, rperez817 said:

The difference there is in degree, not concept. For full-size LD trucks, fleet sales are lower profit than sales to real retail consumers. For U.S. market Ford Focus, any sale of a new Focus car, whether to fleet or real consumers, is low or even negative profit.

So the example of reducing fleet sales of full size LD trucks and cancelling U.S. Ford Focus both help profitability of the respective automakers. The second does so to a greater degree than the first.

I don't know how to make this any more simple that it is already...

GM has the same fixed costs to build 100 trucks or 110 trucks. The first 100 truck has profit of 12% and that last 10 truck has profit of 10%.  If they decided not to build that extra 10 truck to sell to fleet, it reduces both the revenue and profit. It doesn't improve your profit by not selling that last 10 trucks.

This is fundamentally different than in midsize cars (just picking a random example) - GM is losing money on each unit, doesn't matter if it is fleet or retail. So the smart thing to do is to cheery pick the sale with lower loss and accept that you have a fixed cost but there are intangible benefits of being a full line car company that offers something for everyone (that Malibu owner may eventually buy a Silverado that is very profitable).

We know that example above on profit margin is not even totally true... Ford sells F-150 to fleet and YET it somehow manages to do all of it with lower average incentive than GM. So eschewing fleet sales on fullsize truck is nonsensical. Period.

The decision Ford made on Focus is that they don't think there is a significant intangible benefit to being a full line car company. I think that is debatable but it's not really the point here. Ford is smarter than GM to realize that marginal revenue and profit matters until you max out your capacity where you have to increase your fixed cost (of adding another plant).

Edited June 28, 2019 by bzcat

[bzcat]

On 6/27/2019 at 5:50 AM, J-150 said:

I'm curious as to why everyone cheered Ford for downsizing volume to increase profit per vehicle but GM is bad for doing the same?

That's two different things.

Downsizing (closing plant or not adding a new one) reduces your fixed costs. This is what Ford did to Ranger (closing Twin City Assembly 10 years ago) or Focus (cancelling the 3rd Mexico plant last year).

GM is not downsizing the fixed costs of fullsize trucks by closing a plant. They are just choosing to not build as many, which means they are spreading their fixed costs over fewer trucks.

Reducing fixed costs (capacity) does have a long term impact of increasing profit per vehicle because you don't need to keep churning out cars that no one wants to buy.

Voluntarily not building as many cars that you can still sell at a significant profit doesn't increase your profit per vehicle. In fact, it does the opposite.

Edited June 28, 2019 by bzcat

[kindafun]

Previous Silverado owner here, recently purchased a lightly use 2016 F150 Lariat... that I love!

[kindafun]

A friend of mine recently purchased a new Silverado, then told me of his buyers remorse. Doesn't like the lag when going from 4-8 cylinders.

[CKNSLS]

On 7/8/2019 at 12:54 PM, kindafun said:

A friend of mine recently purchased a new Silverado, then told me of his buyers remorse. Doesn't like the lag when going from 4-8 cylinders.

 

 

Well...I bought a new 2018 Silverado LTZ about a year ago-almost 11,000 miles on it and the 4 to 8 is so smooth it's hardly noticeably.  Lag is not existent. That's not to say there isn't room for improvement-but the 4 to 8 transition isn't one of them. Tried to buy a Ford-but multiple Ford Dealers (at the time) decided their truck was $5,000.00 better than the Silverado. I disagreed.

Edited July 12, 2019 by CKNSLS