GM and Ford Draw Battle Lineshttp://www.fool.com/investing/general/2013/01/23/gm-and-ford-draw-battle-lines.aspx Daniel Miller
January 23, 2013
Competition is coming from all angles as the U.S. auto market has become the bright spot in the global picture. Europe is a disaster, and Japanese automakers have eyed the U.S. since a territorial dispute had sunk sales in China the last quarter. Even with the extra competition, and Chrysler's Ram pickup's gaining ground, it comes down to two truck juggernauts, Ford (NYSE: F) and General Motors (NYSE: GM). Here's why they'll be battling to be top dog in truck sales. Adam Jonas, an analyst at Morgan Stanley, said that Ford's F-series, the best-selling model in America for over 30 years, accounts for an estimated 90% of Ford's profit globally. For GM, the story is similar, as the Silverado and Sierra equal roughly 60% of GM's profit globally.
GM and Ford will be battling for the most profitable segment of the U.S. auto market with the 2014 Silverado and the next generation F-150. For the first time, one is taking a huge risk with its next truck. Let's look at factors which will have a critical influence on which company comes out of this battle victorious, and reveal why one company is taking a big risk.
GM changes look and message
GM's last slogan and campaign, "Chevy Runs Deep," didn't run very far, or very long. The slogan, released in fall 2010, failed to create excitement or meaning with consumers. It also didn't translate well, limiting its effectiveness globally. Now with a portfolio refresh under way, GM has decided to press the reset button on that campaign, replacing it with "Find New Roads." It's supposed to represent a change in corporate culture by finding ingenuity and challenging oneself every day. GM hopes "Find New Roads" will have the lasting success that Ford's "Drive One" accomplished.
Battle line: F-150 vs. Silverado
As CAFE standards rise and consumers prefer better fuel efficiency, these two will be battling for market share with different strategies. The new Silverado merely takes the next step with cylinder deactivation, which essentially shuts off extra cylinders when full power isn't required, thereby saving fuel consumption. There is nothing revolutionary there, merely the next logical step. Ford's take on luring fuel-efficient-minded consumers will take a riskier approach with its next-generation F-150. By using aluminum in place of some steel, 700 pounds will be removed from the F-150, roughly 15% of its typical weight. That reduction alone is supposed to make the truck meet CAFE standards through 2020, a 25% improvement from today's model. Combine that factor with the EcoBoost engine that uses a turbocharged V6 engine, to keep all the power of a V8 but offer improved fuel efficiency, and you have a compelling story for the next generation of F-150s.
That doesn't mean this will be a walk it the park; this isn't a mere next step in fuel efficiency, it's a leap ahead. Aluminum has its advantages, obviously it weighs less and, unlike steel, it's more corrosion and rust resistant. One