GM Makes Big Investment for Big SUVs like the GMC Yukon
2011 Chevrolet Suburban
2011 Chevrolet Tahoe
2011 Cadillac Escalade
2011 GMC Yukon
There was some important news for fans of the GMC Yukon recently: General Motors is investing some $331 million in its plant in Arlington, Texas'”and adding 110 jobs'”to support future production of the Yukon family (including the GMC Yukon XL), the Cadillac Escalade roster (including the Cadillac Escalade ESV and EXT), and the Chevrolet Tahoe and Chevrolet Suburban.
That represents a nice chunk of the $2 billion overall investment in U.S. manufacturing recently announced by the General, and at first glance, it may seem a little out of touch with reality. Last time I checked, gasoline was still hovering around the $4-per-gallon mark and the marketplace was making a strong shift to more fuel-efficient products.
But here's the real reality: Last year, the Yukon duo combined for a 13.7 percent increase in sales over 2009, and we're talking about a not-insignificant volume, too. GMC's body-on-frame SUVs found 52,688 new customers in 2010, far more than did products ranging from the Toyota Yaris (40,076 sales) to the Ford Flex (34,227).
Even more surprising is that the Yukons have improved on that performance in the first four months of 2011, as their combined sales so far this year are up 24.3 percent. Oh, there has been one notable change: Last year, the Yukon XL was up 41.5 percent and its little brother actually saw sales slip 2.1 percent. In 2011, no doubt reflecting the pressure of fuel prices, etc., it's the Yukon proper that's up 40.4 percent, although the Yukon XL is still ahead of last year's pace by 5.8 percent.
And we're seeing a similar change on the Chevy side of the business, where the Suburban posted a higher growth rate than the (relatively) smaller Tahoe last year, while their positions are reversed so far through April. Only at Cadillac is the story different. There, the largest version of the Escalade, the ESV, continues to outgrow the standard model.
GMC Yukon with V-8 vs. Ford F-150 with EcoBoost
Now, there are a lot of ways of analyzing this situation, and I imagine a common thought would be that a certain chunk of customers still doesn't care that much about fuel efficiency. But here's another one of those interesting factoids I so enjoy discussing: The two-wheel-drive Yukon packing GM's 5.3-liter V-8 is only 1 mpg less efficient across the board than a Ford F-150 with its much-ballyhooed EcoBoost V6. The Yukon posts an EPA line of 15 mpg city/21 mpg highway/17 mpg combined, and the F-150 goes 16/22/18.
Further, if you compare four-wheel-drive models, the Yukon is able to somehow maintain the same EPA rating as its 2WD sibling, while the EcoBoosted F-150 drops down to 15/21/17 itself. So just to be clear here, the four-wheel-drive Yukon is just as efficient as the four-wheel-drive F-150 with its high-tech V6.
I fully realize that GMC may be gaming the system with the Yukon by tuning its powertrain specifically to score points with the EPA, even if it means the SUV's real-world efficiency suffers. But most consumers aren't going to look past the government's ratings when they're shopping for a new truck.
Accounting for Discounting
Then, if you do rely solely on those ratings, the picture looks a lot brighter for GM's big boys'”well, except for the Escalade, which starts with a bigger, 6.2-liter V-8 and ekes out 14/18/16 with the EPA.
Regardless, it's a mark of how low ye olde bar is set in the full-size pickup segment that achieving 20 mpg highway is still considered a key selling point'”as it is in the HEMI-powered Ram Express pickup'”but that's another part of today's reality. As is the fact that the full-size pickup segment remains one of the most closely watched vehicle segments in the U.S. And when you combine those two factors, you get a lot of exposure for the idea that attaining 21 or 22 mpg makes a vehicle "fuel efficient."
The metaphorical elephant in the room, on the other hand, is GM's use of "targeted incentives" to keep its SUV sales high. GMC dealers are currently offering $2,000 in discounts on a 2011 Yukon, and while that's not exactly a sustainable way to grow business, it still leaves plenty of room for profit. With all of GM's big SUVs and pickups riding on the same platform, the cost of developing said platform and manufacturing those vehicles can be shared among the whole group.
Even when you're talking about GM's new $331 million investment in the next generation of its full-size trucks.