GM slims down to attack Ford's pickup profit machine

When General Motors Co engineers were developing the 2019 Chevrolet Silverado and GMC Sierra pickup trucks, some of them joined public tours of Ford Motor Co's Dearborn, Michigan factory in the United States to watch aluminum-bodied F-series trucks go down the assembly line.

The redesign of the Ford F-series trucks, launched in 2014, set a new standard for fuel economy and lightweight vehicle construction. But armed with stopwatches and trained eyes, the GM engineers believed they saw problems.

"They had a real hard time getting those doors to fit," Tim Herrick, the executive chief engineer for GM truck programs told Reuters.

His team did more intelligence gathering. They bought and tore apart Ford F-series doors sold as repair parts. Their conclusion: GM could cut weight in its trucks for a lower cost using doors made of a combination of aluminum and high strength steel that could be thinner than standard steel, shaving off kilograms in the process.

These pounds and penny-based decisions will have major implications in the highest stakes game going in Detroit: dominance in the world's most profitable vehicle market, the petrol-fueled large pickup segment.

What's more, GM is banking on strong sales of overhauled 2019 Silverados and GMC Sierras to fund its push into automated, electric vehicles - a business many investors see as the auto industry's long term future.

The risks are high given the hits automakers have taken from US President Donald Trump's trade policies.

Rising aluminum prices spurred by Trump's tariffs are driving up costs on the Ford's F-series, while rising steel and aluminum prices drag on GM results. GM also has a significant risk should the US, Mexico and Canada fail to agree on a new North American Free Trade Agreement, given GM trucks built at its Silao factory in Mexico could face a 25 percent tariff if NAFTA collapses.

Interviews with GM executives and a tour at its factory in northwest Indiana provide a detailed look inside GM's plan for the most important vehicles in its global lineup.

These big pickups are everything Tesla Inc's Model 3 or a Chevy Bolt electric car is not.

The mostly steel body is bolted to the truck's steel frame, rather than the one-piece body and frame electric vehicles. The majority of trucks will have a V-8 gasoline engine in front powering the rear wheels - like the classic GM cars of the 1950s. Some Silverados will have new four-cylinder engines, but there is no electric or hybrid offering as of now. The new Silverado - GM's top-selling vehicle in the United States - is a technology achievement of a different kind.

It is taller and has a longer wheelbase than its beefy predecessor, which can help it more easily meet federal fuel efficiency rules. But it is 450 pounds lighter, and its V-8 engine achieves 23 mile per gallon on the highway that rivals smaller SUVs.

Large pickups generate at least $17,000 a vehicle in pretax profit for GM, the company has indicated in disclosures to investors. GM executives told Reuters that with the new trucks, GM will have a big cost advantage they can use to chop at Ford's leading market share.

"We think we have thousands of dollars advantage (over Ford) just in the aluminum costs. It's big," said Herrick.

Reuters