GMC Terrain and the Rough Road to GM's IPO
The big news today is obviously the General Motors IPO. Me, I'm thinking there's no better time than the present for the move, and not the least of the reasons is that it will allow the company to sharpen its focus on the business of moving the metal. The sooner this happens, the better, because a past problem for the General looks like it could again rear its ugly head: Total GMC sales numbers so far in 2010 look quite strong, and a lot of that is due to the apparent success of the GMC Terrain. But when you take a close look at what's going on, it's obvious the Professional Grade division needs some attention, and wrapping up the IPO might be the only way it gets some.
As readers may recall, GM's decision to keep its all-truck division among its core brands was a contentious one. A lot of people doubted whether a division that relied so heavily on trucks and SUVs could make it in today's marketplace, since the thought was that people would abandon bigger vehicles for smaller, more fuel-efficient products. Then there was the Chevrolet factor: All GMC products have a Chevrolet sibling, so the two divisions' lineups were/are somewhat redundant. Even when two products are highly differentiated from a design standpoint, as with the Terrain and Chevrolet Equinox, they are still both medium crossovers that are aimed at roughly the same customers in shrinking segments.
Of course, none of that has been a problem so far. Fuel prices remain relatively low and any reduction of interest in trucks overall has been made up for by increased customer enthusiasm for domestic products in particular. GMC's sales volume was up 27.2 percent in July, helping keep the division's year-to-date results at a level that's 28.4 percent above the same period in 2009.
That performance significantly outpaces the industry as a whole, which was up 5.2 percent last month and 14.8 percent so far this year.
But now let's consider the Terrain factor. GMC's medium crossover offers a distinctly different approach to design from the Equinox, as well as most other rivals, thanks to touches like its huge, squared-off wheel arches and massive front fascia. It may not appeal to everyone, but it's no Pontiac Aztek, and it's no bland transportation appliance, either.
It's also hard to argue with the Terrain's Equinox-matching EPA line of 22 mpg city/32 mpg highway/26 mpg combined. True, that's for the I4, front-wheel-drive model, but it's still a noteworthy, customer-attracting achievement.
The bottom line: GMC saw 3,788 customers buy a Terrain in July and 30,903 in the first seven months of the year. But when you compare that performance to last year's numbers, you can see that ... there are no "last year's numbers" on the Terrain since it didn't go on sale until this year. (GMC technically claims to have sold three of them in 2009.)
On the other hand, all that volume does get lumped into the division's total 2010 numbers, which makes direct comparisons between GMC's overall numbers a tricky bit of business. It's like this: If you eliminate the Terrain's numbers from the picture, the division's sales were up only 9.8 percent in July and just 6.3 percent on the year through July'”the latter number now reflecting a GMC sales rate that is underperforming the industry by a significant 8.5 percent.
Now, there's certainly plenty of ways to analyze the GMC numbers to put a more positive spin on things, especially when you remember that GM's decision to get out of the medium-duty truck business has taken a few thousand units of volume out of the GMC year-to-date results. And there's a decent chance that if the Terrain had been on sale in 2009, it would be seeing Equinox-like sales increases'”despite a sudden 8.9 percent drop in July, the Chevy is still up 113.6 percent on the year.
But relying on marketing spin is no kind of long-term solution to the GMC problem; that's going to take new models. Yet while all three of GM's other divisions are seeing a nice stream of new products, the company is still hemming and hawing over whether to greenlight the GMC Granite.
I don't know for sure if GM will finally turn its attention to GMC once all this IPO stuff is over and done with, but I can tell you this: It should.
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