There's no doubt about it, when it comes down to loyalty truck owners are the toughest to convert. You're born and raised either a Ford (NYSE:F) or Chevy guy. General Motors (NYSE:GM) and Chrysler took the government bailout funded by taxpayers, causing names such as Government Motors to be tossed around the past few years. I can remember, from being young and in elementary school, about 10 different phrases for the acronym FORD that never spelled anything pleasant.
GM has decided to take a different strategy to battle rival Ford by expanding its market segment reach. Its goal is to own the most important and profitable segment in the U.S. auto industry – trucks. Will it work? Let's break it down and see.
Ford's F-Series has been the No. 1 selling truck for 36 years straight now. When you combine sales of GM's Silverado and Sierra – that are built on the same platform – the race is nearly even, but Ford still has managed to sneak out a victory each of the last three years.
GM is going all out this year to take anything and everything from Ford. It's redesigning its No. 1 model, the Silverado, as well as the Sierra, which are both due out in late spring.
While the design appearance is mostly unchanged, both improve on the previous models in performance and fuel efficiency. Consumers also won't be paying any extra hard-earned cash for the new model. GM is being aggressive and will not raise the price tag to take advantage of the full-year head start it has on Ford's next generation F-150. This makes the full-size truck pretty affordable, especially with truck demand surging and the housing industry rebounding. The regular cab Silverado starts at $24,584, double cab at $28,610, and crew cab at $32,710.
Those two models are only half of the attack GM has planned. While those two models have a head start, GM plans to bring back all new versions of its two midsize pickups late next year. Its new Chevy Colorado – which might be renamed – is aimed at a younger "lifestyle" consumer and is a bigger truck than the Tacoma. Its second midsize truck, the GMC Canyon, will be aimed more toward fleet buyers. This ensures that GM has fully covered the truck market from full-size to midsize, even to fleet buyers.
It's a good move in my opinion, one that Ford and Chrysler have avoided since the Ranger and Dakota were each canceled. What makes it interesting is that the launch of these two products will be timed to coincide with Ford's launch of its next generation F-150 next year.
"We are going to have a midsize truck that we launch right down the alley," Mark Reuss, President of GM North America, said. "When they bring out their F-150, we are going to have something no-one else has."
GM has its work cut out for it trying to overtake Ford and its F-Series. Ford commands the highest brand loyalty with consumers in the U.S. according to Experian, loyalty which will play a role as GM tries to lure consumers away. Another thing that will play a role is that estimates show Ford's F-150 has a pricing advantage of $500-$1,000 "on an apples to apples basis," according to Barclays analyst Brian Johnson in a recent research note. We'll have to see how Ford uses that advantage, but it could be the reason GM opted not to raise prices.
This next year is going to bring a flurry of new models and the most profitable segment in the U.S. auto industry will largely be shaken up. It's estimated that full-size trucks bring in as much as 60% of Detroit automakers' profits. This will be big – really big. As an investor, those profits are my profits and I'll be watching who comes out on top.
Motley Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.