Fewer Truck Rivals Mean More Opportunities for GM, Chrysler
A recent report from the world of finance indicates that General Motors has succeeded in cutting about $10.7 billion out of its annual costs compared to last year. That's a big load of cash, and GM has some big plans for it: Up to $1 billion is being earmarked for development of the General's next-generation body-on-frame trucks, according to a report on Bloomberg.com.
Of course, the word "truck" can mean a couple different things in the auto world, and up until recently it was thought that GM would only be redesigning its full-size pickups. But separate stories now confirm that the automakers' big SUVs will get updated, too, which makes a fair amount of sense in this context. Yes, it will cost money to make over the SUVs, but a significant chunk of these costs will be shared out among the pickups, too, since all the vehicles share so many mechanical bits and pieces. And one can only hope that GM accountants worked things so the savings from spreading the costs around makes up for the extra money needed to morph the pickups into SUVs.
We're talking about seven to nine vehicles here, the Chevrolet Silverado and GMC Sierra full-size pickups along with the General's stable of full-size SUVs: the Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon, GMC Yukon XL and Cadillac Escalade. It's also possible the Chevrolet Avalanche and Cadillac Escalade EXT could live on for another generation as well.
2011 Ford Explorer Crosses Over
Is supporting all these vehicles a good investment? Well, one thing's for sure, GM's body-on-frame vehicles will be facing a lot less competition for the near-term future. It's well known that the next Ford Explorer will move to uniframe construction when the 2011 model debuts later this year (2010 model pictured), but this also will have a cascade effect throughout the Ford lineup '” and the industry.
The Ford Explorer Sport Trac and Mercury Mountaineer will disappear when the current Explorer goes out of production, and it's quite likely the Lincoln Navigator and bigger Ford Expedition will join them after 2011.
Now, those Ford products combined for just a tad over 97,000 sales last year, which means that there will be about that many customers up for grabs when the Fords go out of production. Sure, some will move to other Blue Oval products, like the new Explorer, Ford Flex or Lincoln MKT, and it's a safe bet that Lincoln will get a product built off the new Explorer, so we can throw that in the mix, too.
And some of these buyers also will migrate to other crossovers from other companies. But a hard core of former Ford customers, those that "need" the functionality of a body-on-frame SUV, will be faced with a shrinking pool of alternatives.
Recall Woes Slow Down Toyota Tundra
Sure, buyers could move over to Toyota, but to say things are unsettled in Tokyo right now is the understatement of the year. The recalls and recriminations continue, and it's important to remember that many view the Toyota Tundra full-size pickup as an early warning sign that things were slipping at the company.
By spending so much of its time and resources chasing big truck sales, so the plot line goes, the company stopped focusing on the high-quality, high-efficiency vehicles on which it built its reputation. And the fact that the Tundra quickly gained more attention for cracked camshafts and corroded frames than for its towing and payload capabilities didn't help.
Today, the future of the truck is very much up in the air, with Toyota now planning to stop production for two weeks or so due to slow demand. The Tundra notched 8,870 sales in December, on its way to an annual total of 79,385 '” a 42.2 percent drop. In January, reflecting the post-recall panic, sales fell to 3,904. The Toyota 4Runner did relatively well in January, actually posting a small increase on a daily-selling-rate basis, but sales of the company's other body-on-frame vehicles were about as weak as expected, with the Toyota FJ Cruiser losing 47.3 percent and the Toyota Sequoia off 56.2 percent. The Toyota Land Cruiser only lost 10 customers compared to January of 2009, but total sales last month came to just 145 units.
And it's worth pointing out that neither the FJ Cruiser nor the 4Runner has a direct competitor outside the ranks of the Jeep lineup.
Good Timing for Chrysler
Speaking of which, beyond the upcoming all-new Jeep Grand Cherokee, this is one division that I don't think will gain much from Ford's dropping its body-on-frame SUVs. The other Jeep products are probably too hardcore for former Explorer owners.
On the other hand, this major disruption in the full-size truck segment is coming at an excellent time for Chrysler's other divisions, especially Dodge and/or Ram. Currently, the only body-on-frame vehicle these two brands offer '” outside of the Ram 1500 and Ram Dakota pickups '” is the Dodge Nitro. This vehicle is about the same size as the 4Runner, but it's got a whole different positioning based on its over-the-top design.
Once the Chrysler product pipeline starts running again, however, you can rest assured that either Dodge or Ram, or both, will get a "real" SUV that will share mechanicals with a Jeep, and this product will be in a great position to succeed in the marketplace: It will be a fresh new product that builds on one of its parent company's key strengths and be entered in a segment that's losing some of its top entries.
Overall, with Ford and Toyota shrinking their presence in the body-on-frame segments, the pond may be getting smaller, but the returns for the remaining fish '” like GM and Chrysler '” will be that much bigger.