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GM’s Long-Term Commitment to Pickups, SUVs Suggests Powertrain Revolution

Executive Summary

Pickup production based on the successor to GM’s GMT900 platform is scheduled to begin in 2012.

Special Report

UAW logo2007 UAW
Labor Talks

That General Motors Corp. is bullish on its bread-and-butter products – fullsize pickups and large SUVs – could not be clearer.

The auto maker’s tentative contract with the United Auto Workers union details plans for the next-generation of these vehicles, with no reduction in the number of U.S. plants building them. Despite recent upswings in gasoline prices, industry observers suggest GM is counting on a proliferation of alternative powertrains, advanced powertrain technology and relief at the pump.

The plants that build GM’s fullsize pickups and large SUVs – Arlington, TX; Flint, MI; Pontiac, MI; Fort Wayne IN; and Janesville, WI – will see their products transition from the GMT900 platform, introduced for ’07, to one currently dubbed C3XX.

Fort Wayne and Pontiac, home to the Chevrolet Silverado and GMC Sierra light-duty pickups, launch production with the new platform in 2012, according to the UAW document that was posted last week on a dissident union website. Pontiac will also see heavy-duty pickup production based on C3XX.

Flint, which builds the Silverado, Sierra and a range of medium-duty trucks, also launches in 2012 with a C3XX-based pickup and a heavy-duty commercial cab.

Arlington and Janesville start up in 2013 with a mix of trucks and SUVs.

Unclear is the future of GM’s medium-duty trucks such as the GMC Topkick and Chevrolet Kodiak, which are assembled at Flint and Janesville. The tentative deal says production at the two sites continues until 2008 and 2009, respectively.

If GM has a plan, “they haven’t told us,” says Don Cooper, vice president of UAW 598, which represents Flint workers.

Unconfirmed reports suggest GM is looking to get out of the medium-duty market.

GM declines comment on the contract, which has yet to be ratified by the auto maker’s 73,000 workers represented by the UAW.

Meanwhile, Ward’s is told not to expect any impact on GM’s other GMT900 plants – one in Canada, two in Mexico.

Jim Stanford, economist with the Canadian Auto Workers union, echoes this assessment, saying he sees “nothing” in the UAW’s tentative deal that portends lost work for members of his union.

The market projection for stable sales in the fullsize pickup and large SUV segments runs counter to concerns over volatile gasoline prices.

“What (GM’s plan) says to me is clearly they expect the alternative powertrain step we know about for the fullsize SUV to be very successful in their acceptance, and (they are) probably looking at some form of similar strategy happening with the pickups as well,” says Wes Brown, principal of Iceology, a California-based consultancy.

Next year, GM will introduce hybrid versions of its Chevrolet Tahoe and GMC Yukon fullsize SUVs. Also planned are hybrid iterations of the Cadillac Escalade SUV and Chevrolet Silverado and GMC Sierra fullsize pickups.

All share the GMT900 platform and feature a two-mode hybrid system developed in partnership with DaimlerChrysler AG and BMW AG.

“Society, globally and especially (in the U.S.), continues to build on this green initiative and being worried about the environment and what I do and what I drive and what it says about me,” Brown observes. “If GM sees great acceptance and good buzz about the fact that their fullsize SUVs (are) not as bad as The Sierra Club makes these things out to be, we will probably see everyone else follow suit and try to get those types of powertrains into those vehicles.”

The Sierra Club environmental lobby has condemned SUVs as significant contributors to global warming and slammed the growing trend toward pickup use for personal transportation. Pickups are “far more likely to haul lattés home from Starbucks than lumber from the yard,” the organization says on its website.

However, should GM make hybrid systems available across a wider range of its plus-size products, those segments could see “a similar level of stability” to the one they enjoy today.

The combined share of the light-vehicle market occupied by fullsize pickups and large SUVs has been declining from 2004’s 20% peak, according to Ward’s data. That’s when industry-wide U.S. sales totaled more than 3.3 million units – 870,000 SUVs and just under 2.5 million pickups.

For the first nine months of 2007, a period that saw the average national per-gallon price of gasoline hit a record $3.23 in May, large pickups and fullsize SUVs accounted for 16.9% of the total light-vehicle market. Through September, sales were on pace to reach 2.7 million units.

Meanwhile, there is room for optimism on the gas price front. Supply could get a boost from the more than 200 refineries under construction worldwide, according to Refinery Tracker, an industry newsletter.

But refinery activity is not always an indicator of what happens at the pumps, warns David Givens, publisher of Refinery Tracker.

“A lot has to happen in between,” he says, noting most of the refineries under construction are in Asia.

Adds Rayola Dougher, senior economic analyst with the American Petroleum Institute: “Some are saying the market is overpriced right now. (Pump prices) all depend, as it always does, on politics and the weather – things you can’t predict.”

Despite the volatility, consumer behavior has remained constant, the Washington-based oil lobby has observes.

“What we have seen is continued strong demand for gasoline and even greater demand for diesel fuel,” Dougher says.

GM has plans for a light-duty diesel pickup as early as 2009. A 6.2L OHC V-8 and another OHV V-8 also are in the works, both featuring direct injection.

This is confirmed by another UAW document that says Delphi Corp., GM’s former captive supplier, is building components for them.

Regardless, consumers seem resigned to rising gasoline prices, which bodes well for GM’s larger vehicles.

“Consumers continue to use their cars,” Dougher says. “When we had prices this high 25 years ago or so, consumers thought it would go much higher. This time around, consumers really think it’s going to moderate around $3.00 and we’ve all, kind of, become accustomed to that.”

Even better, from GM’s perspective, is a recent Energy Information Admin. report that suggests gas prices could moderate, long term. The report, released in the spring, says crude oil prices could fall to $49 per barrel by 2014.

Currently, the cost is hovering near $80.


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