General Motors (NYSE:GM) will boost output of its midsize Chevrolet Colorado and GMC Canyon pickups in an effort to meet high demand for the two, according to a report in trade publication Wards Auto.
What's happening: GM's Sandor Piszar, who is the marketing chief for the Colorado, told Ward's that GM has added extra tooling and equipment to the production line for the two pickups at its Wentzville, Missouri plant in order to generate an "incremental" boost in production of the popular trucks.
GM sold a combined total of 114,507 Colorados and Canyons in the United States last year. Demand for the two midsize pickups, which compete with Toyota's (NYSE:TM) popular Tacoma pickup, has been exceptionally brisk.
But boosting production of the pair hasn't been simple. The trucks are made in a busy factory that also produces GM's full-size vans, almost 85,000 of them last year. The factory is already working around the clock to try to keep up, so increasing production of the pickups wasn't as simple as adding an extra shift of workers. That's why GM had to expand the production line and its painting facility at the plant in order to build more.
Supplies of the pickups are tight right now. At the end of January, GM had just 58 days' supply of the Colorado, Ward's said. (For pickups, an inventory closer to 80 to 90 days' supply is more typical.)
What this means for GM: Piszar didn't say how much of an increase the factory changes would generate, saying only that GM will make as many of the trucks as it can without sacrificing quality. But any increase in supply is likely to be warmly received by GM's dealers.
As strong as they've been, sales of the Colorado and Canyon are dwarfed by those of GM's full-size Chevy Silverado and GMC Sierra, which together often sell over 60,000 a month. But they're important competitors in a fast-growing space: Despite the entry of the GM twins into the midsize pickup space just over a year ago, the segment leader, Toyota's Tacoma, managed a 16% sales increase 2015.
What this means for investors: This move is unlikely to generate huge increases in GM's U.S. sales totals. But it should generate incremental sales and profit gains with only a modest increase in GM's fixed costs.
While the midsize GM pickups sell for less than similarly equipped versions of the Silverado and Sierra, and sell in much smaller numbers, these are good profitable sales. Like the Tacoma, and unlike Detroit's midsize pickups of the past, the GM twins aren't really marketed as work trucks. Instead, they're positioned as "lifestyle" vehicles, alternatives to SUVs for outdoorsy types, with appealing high-profit options packages geared to those kinds of buyers.
At least one of GM's rivals has taken note of its success: Ford is believed to be gearing up to re-introduce its midsize Ranger pickup to the U.S., likely in 2018.
That gives the General every incentive to make the most of its trucks' popularity now. And it appears to be moving to do exactly that.
John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. 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.