Companies
14/06/2023

Manufacturing Of Combustion Trucks And SUV Till 2035 Could Generate Billions For GM




According to experts and vendors, General Motors has hinted in a recent spate of statements on plant retoolings that it intends to keep producing its largest and most lucrative combustion trucks and SUVs for an additional 10 to 12 years than initially anticipated.
 
Before switching totally to electric vehicles in 2035, this should allow the manufacturer to gain tens of billions of dollars in additional profit, according to projections by experts.
 
In November 2021, GM declared that by 2035, its fleet would be all electrified. Although vendors and experts anticipated the end of production of gasoline-powered vehicles and SUVs well before 2035, the company never specified the precise date.
 
According to experts and vendors, General Motors has hinted in a recent spate of statements on plant retoolings that it intends to keep producing its largest and most lucrative combustion trucks and SUVs for an additional 10 to 12 years than initially anticipated.
 
Before switching totally to electric vehicles in 2035, this should allow the manufacturer to gain tens of billions of dollars in additional profit, according to projections by Reuters.
 
In November 2021, GM declared that by 2035, its fleet would be all electrified. Although vendors and experts anticipated the end of production of gasoline-powered vehicles and SUVs well before 2035, the company never specified the precise date.
 
Among the GM facilities are two in Flint, Michigan, one in Arlington, Texas, one in Fort Wayne, Indiana, and one in Oshawa, Ontario.
 
Investors and the United Auto Workers should welcome GM's clear indication that it plans to continue producing full-size ICE vehicles "for years to come," as one executive stated last week. This summer, GM and the union will start negotiating a new multi-year labour contract. One of the union's main concerns is the future of jobs associated with combustion engines.
 
According to GM management, ICE vehicles will continue to be a key component of the company's portfolio for the foreseeable future.
 
Paul Jacobson, chief financial officer, stated to investors in April that "we're strategically transitioning the business, while at the same time leveraging our important ICE portfolio with new and refreshed products, driving continued robust demand for our vehicles."
 
Additionally, GM executives recognised that it might take years before the brand's new electric vehicles start to draw enough buyers to match the revenue from gasoline-powered Chevrolet Silverado pickup trucks and Cadillac Escalade SUVs.
 
Ford Motor is in a comparable predicament. The company's electric vehicles might not be cost competitive with Ford's combustion vehicles until the second and third generations of EVs arrive between 2025 and 2030, according to CEO Jim Farley, who also suggested Ford's combustion trucks might continue to be produced much past that date.
 
Profit from ICE vehicles is still coming in while this is happening.
 
Michael Ward of Benchmark Automotive calculated GM's average per-vehicle earnings before interest and taxes for all of its trucks and SUVs last year as $10,678 based on GM's SEC filings.
 
Based on AutoForecast Solutions' projections for production at the Flint, Fort Wayne, Arlington, and Oshawa facilities through 2035, GM stands to make up to $7.5 billion a year in pretax profit on its full-size combustion trucks and SUVs.
 
According to Ward, the Arlington facility is "the most profitable auto plant in the world," producing GM's full-size combustion SUVs such the Tahoe, Suburban, and Yukon through the year 2034.
 
“Arlington produced 345,000 units in 2022, and by our estimate generated about $25 billion in revenue and $4 billion in EBIT – or about 30% of total company EBIT,” Ward told Reuters.
 
According to AutoForecast Solutions (AFS), Flint and Oshawa will together produce 360,000 heavy-duty pickups annually through 2035. Using GM's EBIT statistics, Ward and Benchmark estimated that those two facilities might produce $3.8 billion in pretax profit annually.
 
Dealers are not informed of GM's wholesale prices or gross margins. According to online advertisements from GM dealers, a 2024 GMC Sierra 3500 HD Denali Ultimate can sell for up to $107,000 and more, while a 2023 Cadillac Escalade ESV V-Series can go for $160,000 or more.
 
GM has informed its suppliers that it intends to start producing its upgraded Chevrolet Silverado HD and GMC Sierra HD trucks in Flint in the middle of 2027, with the Silverado HD moving to Oshawa at the same time.
 
GM intends to continue producing its heavy-duty combustion pickups at both factories through the year 2035, according to AFS, a company that offers data and research to suppliers and automakers.
 
According to AFS, GM abandoned an earlier ambition to produce electric variants of its heavy-duty pickups.
 
According to AFS, the firm is currently getting ready to introduce the new Tahoe, Suburban, Yukon, and Yukon XL at Arlington in early 2028.
 
Starting in the middle of the decade, the manufacturer will progressively stop producing its large SUVs in Arlington in favour of future electric vehicles. Arlington's production may fall to about 200,000 vehicles by 2030, according to AFS's prediction, although at least $2 billion in pretax profits may still be generated.
 
(Source:www.reuters.com)

Christopher J. Mitchell
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