GM's Silverado Looks to Disappoint
Later this year General Motors will be releasing its newly designed 2014 Chevy Silverado. It comes at a perfect time -- we're seeing a slight rebound in the housing market which is helping drive pickup sales this year. Not only that, but it has a year head start on major rival Ford's next generation F-150. GM's profits have disappointed recently and the Silverado gives it a chance to boost the bottom line because each truck can bring in up to $10,000 in profit from each sale. How the Silverado sells once it's released will be one of the biggest factors for investors looking to buy or sell GM stock. Will the new model meet expectations and sell, or will it flop? Let's take a look at some details and see if the Silverado will disappoint or dramatically increase GM's sales.
Photo courtesy of GM
The F-Series has been America's best-selling truck for about 36 years now. However, when you combine Silverado and Sierra sales, it becomes a much closer battle for GM. Recently, Ford has been winning the battle for truck sales and it hopes that trend continues until it can release its 2015 F-150. In March the F-Series sold 14 thousand more trucks than the Silverado and the Sierra combined. For Ford and GM that was good for 16% and 6% increases, respectively. GM is looking to take advantage of the surging pickup segment and reverse those numbers before Ford's new F-150 hits the market next year.
Functionality or appearance?
If you take a look at the 2014 Silverado in the photo above, do you think the redesign looks improved from the 2013 model that it's going to replace? I sure don't, and the critics were pretty harsh on GM's decision not to make many design changes. GM stood by its strategy to produce a design that was inoffensive and could sell across the nation. That said, how will consumers respond? Do they care about the appearance or is functionality the most important factor? We'll have our answer - judging by sales figures - by the end of the summer.
Appearances aside, the new Silverado has changed some very important features. Seeing the success of Ford's EcoBoost engines, the GM has three "EcoTec" engines that are available for the new Silverado. Those consist of a 4.3-liter V-6, a 5.3-liter V-8, and a 6.2-liter V-8. All will have active fuel management that shuts off half of the engine's cylinders when driving under specific conditions. It's a decent step forward and GM claims its V-8 engine now gets one mile per gallon more than Ford's turbocharged V-6. GM has also been shouting to anyone who will listen that its trucks offer the lowest cost to own over the vehicle's lifetime. Both will be big selling points to convince consumers on the fence to buy a Silverado instead of waiting for the next generation F-150, which -- according to the Atlas concept -- will offer a much different design. Ford has also punched back by saying its next F-150 could increase its efficiency by one-fifth, a significant increase with the looming CAFE standards on the horizon.
Another of GM's strategies is to keep the 2014 base price identical to the 2013 model. That's an aggressive pricing decision and shows GM is going to try and take market share back as quickly as possible. That also means GM needs to have a smooth transition selling down the 2013 models. Investors need to keep an eye on the inventory levels because it would require large incentives and hurt margins to push the older models off the lot.
If consumers are looking for a fresh look from GM, the new Silverado will disappoint. If consumers are looking for functionality, innovation, and improved fuel efficiency, then GM might have done just enough. I expect Silverado sales to increase but not to the extent GM wants to see. I think the Atlas concept has generated enough buzz for some consumers to wait and see the next-generation F-150 before making a decision. What do you think: Which will dominate sales over the next few years -- Silverado or F-150? I want to hear some consumer opinions, so let me know what you think in the comments below. One thing is for sure, the most profitable vehicle segment is up for grabs, and it will have a direct impact on Ford and GM's profits over the next few years.
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Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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