Models That Matter

October 13, 2006
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NORTHVILLE — Industry analysts have characterized two vehicles, one new and one re-tooled, as being crucial to the future of two struggling domestic automakers, their employees and their parts suppliers.

But each is crucial in a different way. One would give Ford Motor Co. an entry into what analysts see as a growing market that will become more lucrative in the coming years. The other has been “like a rock” of sales stability for General Motors Corp., and a market share slip could cripple the company.

GM has just launched its new 900-based Chevy Silverado in the hotly contested, full-size pickup category, which also has a long-running veteran, the Ford F-150, and a newcomer, the Toyota Tundra, as key competitors. The 900-platform version truck replaces the older, but proven, 800 model that has sold so well for GM over the past few years.

Dave Terebessy, a market analyst with CSM Worldwide, said continued sales success of the Silverado is critical to GM because the model has been a large and profitable segment for the company.

“The GMC-based 800 series pickup from 2001 to 2005 accounted for about 25 to 26 percent of General Motors’ Chevy sales. Now, that’s Chevy — not GM — sales, but that still is a very large portion of GM’s sales,” said Terebessy from his office in the Detroit suburb of Northville.

“Now the 900-based pickup, we have that forecasted to account for 27.1 percent (of Chevy sales) from 2007 through 2012. It’s big,” he added.

CSM Worldwide has pegged Silverado sales at 671,813 units for the 2007 calendar year, and Terebessy called that a strong number. He added, though, that GM wouldn’t balk at a higher sales figure.

“Well, I think as an OEM you’re never happy with what you sell. You always want more, even if it’s just one more unit. But it’s definitely a competitive number, especially when you factor in their sister vehicle, which is the GMC Sierra. Then it becomes quite competitive,” he said.

The analysts, like Terebessy, don’t appear to be exaggerating Silverado’s importance to GM, because the automaker has poured $400 million this fall into an advertising blitz to promote the pickup, mostly to male viewers of the World Series and NFL games.

“We think the Silverado — the entire 900 lineup — is a strong lineup. They’ve done a really good job at improving the interior. The fit, finish and quality of the materials have improved over the previous generation. It’s got a strong powertrain and cab configuration. So we think GM is going to really do well and meet the customer demand for the segment,” said Terebessy.

In the meantime, Ford is banking on a new crossover sports utility vehicle called the Edge. A crossover is a smaller SUV that is built on a car or van chassis instead of a truck platform like the larger Explorer. Crossovers are easier to handle and offer better gas mileage than standard SUVs.

Terebessy said the Edge is crucial to Ford’s future, but sales of the crossover are not as critical to Ford as Silverado’s sales are to GM. While sales of the Silverado are expected to account for 27 percent of Chevy’s totals, CSM Worldwide projected the Edge to represent about 4 percent of Ford’s total sales from 2007 to 2012.

“You’re dealing with a much smaller volume of product, but where the Edge is crucial for Ford is, it is a new product. So it gives them good incremental volume and it gives them a mid-size crossover utility vehicle, which allows Ford to enter some white space,” he said.

“It’s a new vehicle and a new segment for the company, and that’s key, especially with the Explorer dropping off.”

CSM Worldwide projected Ford as selling 124,000 models of the Edge for 2007. Is that a good sales figure for a debut vehicle? It depends, in part, on how many total crossovers are sold.

“It’s hard to say whether that’s a good or bad number. The true measure would be the internal planning volume within the company, and how does that number account for a percentage of that mid-sized crossover SUV segment. But we expect the Edge to be moderately successful,” said Terebessy.

Ford has installed a 3.5 liter V-6 engine in the Edge, which Terebessy said gives it a strong power train — and it gives the automaker a player in what CSM Worldwide thinks will become a lucrative segment.

“Oh, absolutely,” said Terebessy. “In fact, crossover vehicles will account for about 25 percent of the market by 2012.”    

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