Did GM Just Crush Ford's Pickup Advantage?

General Motors (NYSE: GM  ) said on Monday that its all-new Chevy Silverado and GMC Sierra full-sized pickups will have the most fuel-efficient V-8 engines in their market segment – so efficient that they would even beat Ford's (NYSE: F  ) much-touted "EcoBoost" V6 truck engines.

The difference is a tiny one, just one mile per gallon in the EPA's highway ratings. It's unlikely to mean a whole lot in real-world driving. But while the difference may be tiny, consider this: GM didn't just send out a press release, they held a full-blown press conference to tout the new trucks' advantage.

Is this just mere Detroit trash talk? No. The truth is, the pickup wars are very serious business for both GM and Ford, and little distinctions like this one can mean a lot.

Why pickups are a huge deal for both GM and Ford
Why are pickups such a big deal? Because they're a huge source of profits. Ford's F-Series and GM's Chevy Silverado aren't just the best-selling pickups, they're the No. 1 and No. 2 best-selling vehicles in America, period, handily outselling cars like Toyota's (NYSE: TM  ) super-popular Camry month after month.

Consider this for context: Tesla Motors (NASDAQ: TSLA  ) has made a big impact with its goal of selling 20,000 of its all-electric Model S sedans in 2013. But Ford sold over 54,000 F-Series pickups just in February -- and while that was a decent month for the Blue Oval, it wasn't a remarkable one. GM's total sales of its two pickups, the Silverado and the Sierra, were in the same ballpark.

Long story short, full-sized pickups sell in huge numbers here in the U.S. And they're high-margin products, especially when they're "optioned up" with luxury-car-type features or heavy-duty add-ons, as many are nowadays. That adds up to an enormous impact on the bottom line: One top analyst recently estimated that as much as 90% of Ford's global profit comes from the F-Series.

The impact at GM is likely somewhat less, but it's still huge.

Why small differences in cost can be a big deal
So why did GM make such a big deal out of its one-MPG victory? Because it might mean a lot of sales. Unlike cars, the vast majority of which are bought by individual consumers, many pickups are purchased by business buyers. Those buyers range from giant utility companies down to tiny three-man contracting firms, but as a general rule, they're very sensitive to new truck pricing and to cost of ownership differences.

That sensitivity is why Ford has advertised its EcoBoost drivetrain so heavily over the last year, and it's why GM made a big deal out of a tiny MPG advantage on Monday. It's an advantage that probably seems trivial to most individual consumers, but to a commercial fleet manager, it might swing an order to Chevrolet that might otherwise go to Ford.

Might, that is, unless Ford responds, which it surely will. Stay tuned.

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  • Report this Comment On April 01, 2013, at 2:46 PM, sondo1313 wrote:

    GM's tainted corporate reputation (Obama bailout, management turmoil, inefficiency) will continue to haunt Silverado. A mere 1mpg yields nothing over the better-designed, iconic F-150. Ford's advertising and marketing continually leave Chevy in the dust. Moreover, the F-150 is being redesigned for 2015! The auto show concept Ford Atlas proved revolutionary vs. the minimally-tweaked new GM product. So where do you get "crush"?!

  • Report this Comment On April 01, 2013, at 4:34 PM, bluegrasspicker wrote:

    GM? Crush Ford's pickup advantage? Not in a thousand years. Isn't Gub'Mint Motors the company that failed so miserably that it had to come to the taxpayer on bended knee for an $85 billion bailout? Yep, that GM! And, my investigative research has proven that Gub'Mint Motors has failed to repay even one cent. Face it: Gub'Mint Motors couldn't crush an ant, let alone Ford Motor Company. Take a look at the lack of imagination in Gub'Mint Motor's products. The Silverado is the epitome of lack of ingenuity, with a totally boxy, squared off appearance. There is NOT one single category where Silverado can compare to the vastly superior Ford F-150. Furthermore, Gub'Mint Motors continues to lose market share, almost ensuring that the socialist "car company" is destined to fail again. Poor products, poor advertising, poor management decisions, and non-competive pricing are the hallmarks of Gub'Mint Motors. "The problem with socialism is you eventually run out of other people's money to spend." Words that Gub'Mint Motors should heed.

  • Report this Comment On April 01, 2013, at 4:34 PM, TMFMarlowe wrote:

    @sondo1313: The headline was a question. Did you read the article?

    Maybe you should read what I said about the Atlas when it was first shown: http://www.fool.com/investing/general/2013/01/16/why-ford-ju...

    John Rosevear

    ps: Don't count on GM staying down in the dumps forever. Another 2-3 years or so and the General might look like a very different company. But I agree that their new pickups seem too conservative.

  • Report this Comment On April 01, 2013, at 5:18 PM, NineD930thTA wrote:

    Bluegrasspicker you may want to do some research before you spout off about things you dont understand. #1 Ford was bankrupt first. They got lucky the credit markets werent frozen when they ran out of cash and MORTGAGED THEIR ASSETS to stay afloat which if you understood account would realize is a huge debt burden on Fords books. #2 GM didnt receive $85 Billion it wasnt even half of that. #3 GM repaid every single penny they were LOANED! The money you think they owe was the treasury buying shares of the company and giving them cash. When you buy a share of stock in Microsoft you give cash you get a share they owe you NOTHING! The treasury received shares of stock they gave GM cash. They are owed nothing.

    Now if you want to talk about which truck is better the Silverado is the longest lasting truck on the planet. Talk all you want about Ford selling more the fact they sell more and have less on the roads after 10 years speaks volumes. The 22 mpg for the Ecopoop motor is in standard cab 2 wheel drive trim. If you get a ext or crew with 4 x 4 its 19 or 20 mpg highway. The Silverado will get 23 mpg highway in ext cab and crew cab 4 x 4 which will BLOW AWAY the Ford Ecopoop garbage motor.

    The GM diesel is assembled in Ohio. The Ford is built in Mexico! The Allizon transmission is used in MILITARY VEHICLES! Ford has nothing trans wise used by the military they can tout as being proven.

    Ford is a cheap company that cuts costs left and right just to make more money. Daytime running lights....what are those? Standard remote start? NOT IN THIS LIFETIME! Comfortable seats? HAHAHAHAHA!

  • Report this Comment On April 01, 2013, at 6:29 PM, eastsidedude2 wrote:

    NineD930thTA, you are wrong, in too many ways to list, and it is because you are simply ignorant. Let me help. Read the following, and be sure to reference the sources at the end. Glad to help.

    Home • Ask FactCheck • General Motors’ Debt

    General Motors’ Debt

    Posted on May 3, 2010

    Share on linkedinShare on facebookShare on twitterShare on emailMore Sharing Services

    Q: Did General Motors repay its TARP loan from the Treasury with other TARP money?

    A: Yes. GM repaid the loan portion of the automaker bailout ahead of schedule, with interest. It used TARP money it had already received but hadn’t spent. And taxpayers are still stuck with GM stock that isn’t worth what was paid for it.

    FULL QUESTION

    There are GM commercials and mass mailings that say they’ve paid back their "government loans" ahead of schedule with interest. Didn’t the government take a 71% ownership in the company? Was that a loan or is the loan a smoke screen for the actual government ownership?

    ________________________________________

    Has GM repaid its bailout loan in full with interest, 5 years ahead of schedule?

    GM is running advertisements claiming the above statement is true, and the President seemed to reaffirm that claim in his most recent radio address. However, Sen. Grassely (R) claims that GM is using other bailout funds in order to pay off the aforementioned bailout funds and their claim is simply an accounting trick.

    FULL ANSWER

    Many readers have asked us about the White House-touted news that General Motors, and Chrysler, repaid loan money from the Treasury Department, with interest, ahead of schedule. GM launched an ad boasting of the news, and President Obama talked about it in his weekly address on April 24.

    We wrote about this, too, on April 26 in a review of the Sunday political talk shows. Here’s the deal for those who missed that post:

     Yes, it’s true that GM paid back its loan from the Treasury Department, in full, ahead of schedule.

     But the debt was only part of the automaker bailout package. Through the Troubled Asset Relief Program, the Treasury gave GM $49.5 billion, most of which was converted into an ownership stake in the form of stock. Through this equity stake, the government still owns 61 percent of GM.

     Some Republicans, including Sen. Chuck Grassley of Iowa have pointed out that GM used TARP money to pay back its TARP debt. That’s true, but GM simply handed back TARP money it had been lent and hadn’t used. Those funds had been sitting in an escrow account, should the automaker need them. (The company didn’t borrow new money to pay back an older loan.)

    Grassley has argued that this wasn’t a "meaningful" repayment of a loan, since it didn’t come from earnings. That’s an opinion, and we’ll leave it to readers to agree or disagree with the senator. The TARP special inspector general, Neil Barofsky, has said the repayment was "good news," since it meant the automaker didn’t need to use those funds held in escrow. In testimony before the Senate Finance Committee on April 20, Barofksy made it clear GM still was operating with government help:

    Barofsky, April 20: G.M. has paid $1 billion, and I think they’ve announced that they’re going to be paying back the debt portion, which is about — I think there’s about $6 billion left in its entirety very shortly. But we should be a little — we need to be a little bit cautious about that because the way that that payment’s going to be made is drawing down an equity facility of other TARP money.

    So it’s good news in that they’re reducing their debt, but they’re using it by taking other available TARP money to repay the TARP. It’s good news because it means that money, which was going to be available for future problems with G.M., that there’s a determination that they don’t need it, but we should caution that it’s not necessarily being generated out of earnings, but out of other TARP funds.

    In an April 21 interview with Fox News’ Neil Cavuto, Barofsky repeated his assessment that the repayment was "good news" but should be taken with a grain of salt. "I mean, the good news is, that money — they already have that money that’s in that escrow account, so it does lower the total amount of money that they owe to the government, so that’s somewhat good news," Barofsky said. "But I don’t think we should exaggerate it too much, when we remember where — the source of this money is just other TARP money."

    The president’s and GM’s statements may have given some the false impression that taxpayers have gotten back all the bailout money loaned to or invested in GM. Strictly speaking, Obama was accurate when he said: "GM announced that it paid back its loans to taxpayers with interest, fully five years ahead of schedule." But he alluded only vaguely to other bailout money, which taxpayers may never get back, adding: "It won’t be too long before the stock the Treasury is holding in GM can be sold, helping to reimburse the American people for their investment." Those statements might have confused anyone who wasn’t familiar with the details of GM’s stock-and-loan debt to the Treasury.

    As for Treasury’s equity stake, worth $40 billion-plus, the nonpartisan Congressional Budget Office has said the Treasury won’t fully recoup that money. The total automaker bailout, including TARP money given to Chrysler, CBO estimates, will cost taxpayers about $34 billion.

    – Lori Robertson

    Update, May 3: The CBO doesn’t give a breakdown of how much of its $34 billion cost estimate for the bailout would have gone to General Motors. But most of the automaker bailout funds went to GM. While the Treasury has a 61 percent equity stake in GM, its stake in Chrysler is 9.9 percent.

    Sources

    Obama, Barack. Weekly address, transcript. WhiteHouse.gov. 24 Apr 2010.

    Office of the Special Inspector General for TARP. "Additional Insight on Use of Troubled Asset Relief Program Funds." 10 Dec 2009.

    Cavuto, Neil. Interview with Troubled Asset Relief Program Special Inspector, transcript. Associated Press. 21 Apr 2010.

    CQ Transcriptions. Sen. Max Baucus Holds a Hearing on the Financial Institution TARP Fee. 20 Apr 2010.

    Grassley, Charles. "Did General Motors Really Repay Its Taxpayer Bailout?" FOXNews.com. 23 Apr 2010.

    Congressional Budget Office. Report on the Troubled Asset Relief Program — March 2010. Mar 2010.

    POSTED BY LORI ROBERTSON ON MONDAY, MAY 3, 2010 AT 12:54 PM FILED UNDER ASK FACTCHECK. TAGGED WITHBAILOUT, CHUCK GRASSLEY, GENERAL MOTORS, TARP.

  • Report this Comment On April 01, 2013, at 6:39 PM, AmericanFirst wrote:

    Nine,

    Your ignorance regarding the GM Bailout is breath taking. GM actually received over $100B in bailout money / tax benefits. That's not counting the $30B in debt that GM was relieved of from fleecing bondholders/creditors per Obamaruptcy. GM actually has paid back approx. $13B "out of pocket" for approx. $100B in bailout/tax benefits as described above................not a bad deal for GM..huh? a terrible deal for the taxpayers. Regarging GM's toughness, I live in Texas, where Ford dominates GM in the Oil/Farm industry, GM's will not hold up!

  • Report this Comment On April 02, 2013, at 6:50 AM, sondo1313 wrote:

    Does a mere question mark negate any inference? Is the author defensive?

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