General Motors Chairman and CEO Dan Akerson says the auto maker expects to improve the margins on its pickups and provide the profitable Cadillac brand with a flurry of new vehicles, which will combine to drive a product offensive that will leave competitors in the dust.
“Going forward, our competitors are going to be on the south end of a northbound mule,” Akerson tells Wall Street analysts at the auto maker’s Milford, MI, proving ground for a business update and product showcase.
Akerson points specifically to GM’s extensively redesigned for ’14 Chevrolet Silverado and GMC Sierra pickups, which he says will command higher average transaction prices, pushed up by a greater mix of more profitable crew-cab and upper-trim-level models with fewer incentives.
The higher ATPs will close a $1,700 per-truck profitability gap against the rest of the industry.
“We’ve seen these tactics work for Ford,” Akerson says. “And we feel we have a better truck, a better powertrain, and we’ll be able to take their playbook and run it as well.”
GM also learns this week the 36-month residual values on its new pickups are higher than any vehicle currently on the market. Although leasing comprises just 10% of the industry’s large pickup sales, he notes important fleet and commercial buyers closely eye total cost of ownership.
“This in large measure validates the strategy we tried to pursue since we came out of bankruptcy in value-building,” Akerson says, adding the auto maker also has cut by half the resale gap on its vehicles compared with the industry. However, GM resale values still remain below the industry average.
The auto maker plans to flood Cadillac with new products to take advantage of a profitable global luxury market expected to grow from 7.1 million units annually to 10 million by 2020. Worldwide luxury-market share will rise to 9.2% of light-vehicle sales in 2020 from 8.5% in 2013, according to GM forecasts.
Near-term, Cadillac will receive a redesigned CTS sedan in the fall, the exclusive ELR extended-range electric vehicle in January and a redesigned Escalade large SUV in spring 2014.
The brand also plans a range-topping sedan to compete with the Mercedes-Benz S-Class and BMW 7-Series, and reports suggest a small cross/utility vehicle and a 7-passenger large CUV are in the works.
“There will be more (products), and it will be rapid-fire over the next few years,” Akerson says.
GM’s chairman travels to China next week to break ground on a new assembly plant to fuel Cadillac’s growth there. The factory is expected to build the ATS compact sports sedan. Cadillac also is asserting its presence in other emerging markets, as well as in Europe and the Middle East.
In the U.S., Cadillac sales in the first five months surged 37.6% to 69,750 units, making it the fastest-growing luxury brand and putting it on a pace not seen since the 1970s.
Akerson says the new large-truck and Cadillac products give GM “disproportionately large margins” to fuel a broader product offensive. “What used to be strategic intent for GM has now become reality.”
