Make no mistake, the Silverado is the most important vehicle for General Motors (GM 0.48%), and whiffing on this model would be a huge speed bump on its road to recovery. Analysts estimate the Silverado could bring in over half of GM's profits. While some critics quickly snubbed the 2014 Silverado as a design failure, I have to disagree – to some extent. Yeah, if you compare the 2014 with its predecessor, the initial appearance might not be life-altering. However, how many consumers that own a 2013 are actually going to be buying a 2014 anyway? I'd bet it's not enough to matter.
Those with an older Silverado model are likely going to come away with a much better impression, and that's what matters to General Motors. Here's a quick look at the difference between past and present Silverado's and how GM plans to take advantage of a surging luxury market.
If you own a 2008 Chevrolet Silverado, it likely looks similar to this:
2008 Chevy Silverado. Courtesy of GM Media Photos.
Now check out the 2014 Chevy Silverado below:
Chevy's 2014 Silverado at Detroit's 2013 Auto Show. Courtesy of GM Media Photos.
That's a vast design improvement for the consumer that is more inclined to purchase a new truck. Trucks have a higher price tag and when the recession hit and the housing market collapsed, truck sales took a nose dive.
The average age of pickup trucks has hit 13 years. Now, as we're beginning to see a slow economic recovery, with an uptick in housing construction, truck sales are beginning to surge – and so are automakers' profits. That graph compares Ford's (F -1.92%) F-Series to combined sales of the Silverado and Sierra – which are built on the same GM platform. Ford enjoyed a nice sales surge and that led its bottom line profits to stand above those of General Motors in this year's first-quarter earnings reports. If GM wants to reverse this recent trend, and boost profits to the level desired by investors, it must impress critics and consumers alike starting with this summer's Silverado launch.
10-second takeaway
The front of the Silverado is a blockier and solid-looking design. It rides smoother and has less noise in the cab. It offers much-needed tech innovations and options which will be key if GM wants to raise its transaction price. That's important for GM and investors because the new Silverado won't even cost consumers an extra penny in price compared to the outgoing model. If selling consumers on expensive features and options fails, margins could see pressure as GM increases the cash spent on marketing and advertisements.
It's no secret that Ford and Chrysler have been touting fuel efficiency with their new models, but I think it's a moot point. While those statements make for great marketing campaigns and press releases, truck owners have already admitted defeat when they pull up to the gas station – they know they're in for a hefty charge. The tide of MPG improvements has raised all boats, and that's all that matters. For most people, trucks are a tool; this Silverado will no doubt get the job done.
GM is also taking the Silverado "High Country" into the luxury market to increase its revenue and margin potential – helping to offset the nonexistent price increase for its base model. It features more chrome than most will care to have, but it does look really sharp and sleek. It also boasts an exclusive interior options that will make it the top model in the Silverado lineup.
Skimming through reviews and opinions, it seems the Silverado has shrugged off its early design snubbing and slowly impressed enough folks to take its spot as the best Silverado ever. Ford's next generation F-150 will have a lot to say next year – we'll have to wait to see if it's enough to make the Silverado the second-best truck available, though.
Bottom line
GM's stock price has been held down for multiple reasons. One reason is that the U.S. Treasury still holds some of its stock from the bailout. Another is that due to the cost of restructuring the company, it hasn't been able to focus on refreshing its vehicle portfolio until recently. Lastly, it's not yet as profitable as its rival Ford. A successful launch this summer of its most profitable product, the Silverado, could jump-start its attempt to fix the latter two of those three problems. Investors need to keep a close eye on its sales development; we could see a surging stock price if sales turn out better than expected. One thing is for sure: GM didn't swing and miss on the new Silverado – we just don't know if it's a home run yet.
