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Business

December 15, 2012

GM aims to regain dominance in truck market

For decades, Chevrolet’s Silverado pickup has carried the load for General Motors Co., most recently providing needed cash and loyal buyers through the automaker’s bailout and bankruptcy.

Truck sales remain central to GM’s North American strategy, even as it has uncharacteristic success with new car models including the small Cruze sedan and the Chevy Equinox crossover. That’s largely because GM makes $9,000 to $11,000 from each pickup sale, compared with about $5,000 for a passenger car, according to Brian Johnson, an analyst with Barclays Research.

But now, with a new generation of Silverado and GMC Sierra trucks introduced Thursday, the automaker is driving into rugged terrain. The models now in dealerships, the oldest of the major offerings in the full-size pickup market, have lost market share as rivals from Ford Motor Co. and Chrysler Group have surpassed GM trucks in fuel economy and other features.

GM’s truck inventory has ballooned to 110 days despite hefty sales incentives designed to move the vehicles off dealer lots. Analysts worry that slack sales could set off a profit-sucking price war in the industry if GM were to pile on incentives to fire-sale current models before the redesigned trucks hit dealerships in the second quarter of 2013.

Still, the Silverado notches nearly double the annual sales of the Cruze, GM’s next-best-selling vehicle.

“GM’s profits in North America still ride in the bed of pickup trucks,” Johnson said.

Financially, GM has surged since the dark days of bankruptcy. It has logged 10 consecutive profitable quarters for the first time in more than a decade, including a $1.5 billion gain in the second quarter. Fueled in large part by sales of pickups and large SUVs, GM’s North American operations earned $2 billion in the latest quarter. Although pickups account for about 24 percent of GM’s U.S. sales, they make up a third of the automaker’s profit in the region, Johnson estimated.

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