How Chevy Silverado, Gmc Sierra Will Take On The Ford F-150 Profit Machine

When General Motors engineers were developing the 2019 Chevrolet Silverado and GMC Sierra pickup trucks, some of them joined public tours of Ford’s Dearborn, Mich., factory 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-pennies decisions will have major implications in the highest-stakes game going in Detroit: dominance in the world’s most profitable vehicle market, the gasoline-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 and 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 U.S. 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 likewise drag on GM results. GM also has a significant risk should the United States, Mexico and Canada fail to agree on a new NAFTA trade deal, given GM trucks built at its Silao, Mexico, factory could face a 25 percent tariff if NAFTA collapses.

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

Wall Street investors give Tesla and its electric vehicles a higher value than GM’s shares. But GM is betting that its core customers in the American heartland will keep paying premium prices — 27 percent of GM trucks sell for more than $55,000 — for these vehicles capable of hauling a trailer by day and serving as luxury car by night.

Large pickups generate at least $17,000 per vehicle in pre-tax 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.

Ford said it cuts costs by recycling about 20 millions pounds of aluminum scrap every month in its operations, enough to build about 37,000 F-Series bodies.