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GM moves to challenge Ford in U.S. commercial fleet sales

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Nick Carey, Reuters  /  December 4, 2018

FLINT, Mich. — General Motors is intensifying its attack on rival Ford's lead in sales to U.S. commercial fleets to prop up profit margins amid weakening consumer demand, according to executives at the No. 1 U.S. automaker.

GM is counting on new medium-duty Silverados — outfitted as tow trucks, utility bucket trucks and delivery trucks — to lift demand for its light-duty trucks and cars. Automakers estimate for every medium-duty truck a corporate customer buys, they purchase up to six pickups, SUV, crossovers or cars.

The need for automakers to bolster U.S. sales and keep plants humming was highlighted last week when GM slated five North American factories for potential closure, including two making the type of sedan that has fallen out of favor with American consumers. Ford announced it would shuffle workers from slower to busier plants.

Most major automakers on Monday also reported lower U.S. November sales.

But a 24 percent jump in commercial fleet sales in November vs. the same month in 2017 helped GM offset a 1 percent retail sales drop, according to a source briefed on figures GM does not make public on a monthly basis.

GM North America chief Alan Batey says the automaker has pursued a long-term strategy to cut lower-margin rental fleet sales and boost more lucrative commercial sales.

GM's rental sales are around 10 percent of total sales this year, down from 15.8 percent in 2013. In the same period, GM's commercial sales have risen to more than 11 percent from 7.8 percent of sales.

Batey said production of GM's medium-duty trucks, which begins this week under a partnership with truck maker Navistar International Corp. as an extension of the Chevrolet Silverado pickup line, is a milestone in the automaker's move to increase market share.

GM exited the segment during its bankruptcy in 2009. It originally announced the planned Navistar venture in September 2015.

GM and Ford compete for business from companies like engineering-services firm U.S. Infrastructure Co., which has around 9,000 vehicles, mostly light-duty Chevrolet Colorado pickup trucks. USIC's workers mark cable lines, water pipes and other underground infrastructure before contractors start digging holes in the ground.

USIC fleet manager Phil Samuelson said in a recent interview the company needs around 20 medium-duty trucks, fast. GM won his order by promising to accelerate production of his trucks.

Otherwise, Samuelson would have tried Ford or Fiat Chrysler Automobiles.

"We have a great relationship with GM and we saw no reason not to continue that," he said.

Satisfying customers like USIC could help GM next year when Ford launches its Ranger pickup, a direct competitor for the Colorado.

Rising commercial fleet sales have lifted GM's net profit by $1 billion over the last five years, according to sources familiar with GM's financials.

Tax overhaul boost

Commercial fleet sales are increasingly important as consumer vehicle sales are set to weaken over the next couple of years after an eight-year recovery.

Ford, GM and FCA control around 77 percent of commercial fleet sales for Classes 1 through 6 — from cars to the biggest medium-duty trucks — though Ford dominates at 40 percent, according to data compiled by Cox Automotive for Reuters from nonpublic sources. GM has around 25 percent market share.

Ford executives say they have no special plans to counter GM's expanded truck portfolio. "We're just going to do what we always do," said John Ruppert, Ford's general manager for commercial vehicle sales.

Through November, GM's commercial fleet sales rose 14 percent compared with a 5 percent increase at Ford.

U.S. auto retail sales are forecast to fall over the next two years. But commercial fleet sales should rise, partly because of tax write-offs in the 2017 U.S. federal tax overhaul.

Desperate need

GM's decision to re-enter the medium-duty truck segment was driven by commercial customers that seek several types of vehicle in package deals.

"If I want a medium-duty truck I end up going to Ford and the chances are I'll also buy my pickup truck from Ford instead of GM," said one market analyst.

"Dealers desperately need these trucks to go after industries we haven't been able to go to with existing product," said John Schwegman, GM's commercial product director.

Keith McCluskey, owner of McCluskey Chevrolet in Cincinnati, Ohio, said his commercial fleets now account for 10 percent of his sales, down from 40 percent when he last sold GM medium-duty trucks.

McCluskey has built a new $8 million service facility partly for commercial customers and aims to sell 1,000 medium-duty trucks annually.

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GM Fleet "gets it"- Fleet purchasing departments prefer to deal with one supplier. Being able to supply everything from a compact van or pickup up though Class 8 is a major advantage in the marketplace.

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Wasn't it GM that said a few years ago when Ford was beating them with high fleet sales that fleet sales "were not a good business strategy"?

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GM has been left in the dust in the commercial sector by still not having a modern competitor for the Transit/RAM/Sprinter vans. There is still a gap in the Astro van size segment they left years ago too. Now the Metris is trying to fill that gap.

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2 hours ago, Jamaican Bulldog said:

GM has been left in the dust in the commercial sector by still not having a modern competitor for the Transit/RAM/Sprinter vans. There is still a gap in the Astro van size segment they left years ago too. Now the Metris is trying to fill that gap.

The Vauxhall Movano and Vivaro could have been brought over before Transit and Promaster.

https://www.bigmacktrucks.com/topic/47523-vw-considers-crafter-commercial-van-for-us/?tab=comments#comment-350895

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Navistar building a truck for GM, what could go wrong? A lot. Ford builds what they sell. Ford and Ford dealers know light commercial better than GM.

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2 minutes ago, TS7 said:

Navistar building a truck for GM, what could go wrong? A lot. Ford builds what they sell. Ford and Ford dealers know light commercial better than GM.

I hear you. But surprisingly GM has some legitimate truck people. Navistar head Troy Clarke is GM alumni.....I know him personally.....he’s sharp as a tack. The GM-Navistar cooperation will proceed blossom, and expand. It’s a great win-win that eliminates duplication of effort, resulting in great savings.

Does Ford really do it all in-house? The PowerStroke was not designed by Ford. Ford outsourced it to AVL in Austria. 

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1 hour ago, TS7 said:

Navistar building a truck for GM, what could go wrong? A lot. Ford builds what they sell. Ford and Ford dealers know light commercial better than GM.

I think the bigger threat is Navistar selling these trucks.  We have a former Ford heavy truck dealership in the Boston area that is now an International/Ford medium dealer.   In their ads, they NEVER show any new Fords other than 550.  Once these class 4 and 5 and 6 trucks hit their lot, guess which trucks they will push?

Plus, if I have a fleet of mediums and heavies -down to class 4- am I likely to go to my Ford dealer for a class 4/5  and my International dealer for the others?  I don't think so

I'm afraid Ford is going to do nothing but lose market share unless they wake up and do something with class 6 and 7 to expand their offering-to include going into baby 8 with a tandem and some power train other than their in house Power Stroke/Torque shift.

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The one negative about the Class 6 Silverado/CV is it looks like a “baby Class 6” when parked next to a DuraStar or Freightliner M2 106. 

It really only competes with the F-650.

Like the F-650, lacking a Cummins ISB option, many fleets will pass and continue to buy DuraStars (MV) or M2s.

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Red Horse, good point about the multi-brand dealerships. Here in Minnesota and surrounding states Boyer Trucks is the "big dog" in work trucks, carrying Daimler, International, Isuzu, and Ford. They started with Ford, but when Ford sold off the heavy trucks Boyer was forced to diversify to survive. If Ford isn't competitive, they can offer the customers the International version of the Chevy conventional, the Isuzu version of the Chevy cabover, as well as Daimler's offerings.

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18 minutes ago, Maxidyne said:

Red Horse, good point about the multi-brand dealerships. Here in Minnesota and surrounding states Boyer Trucks is the "big dog" in work trucks, carrying Daimler, International, Isuzu, and Ford. They started with Ford, but when Ford sold off the heavy trucks Boyer was forced to diversify to survive. If Ford isn't competitive, they can offer the customers the International version of the Chevy conventional, the Isuzu version of the Chevy cabover, as well as Daimler's offerings.

Wow- I just went to Boyer's web site-impressive-you are right on-they have all the bases covered.

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Great service, I and most of the companies I've worked for have been customers since they were in downtown Minneapolis in the 60s.

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23 hours ago, kscarbel2 said:

The Vauxhall Movano and Vivaro could have been brought over before Transit and Promaster.

https://www.bigmacktrucks.com/topic/47523-vw-considers-crafter-commercial-van-for-us/?tab=comments#comment-350895

They really missed a huge opportunity then. I am surprised too that Nissan didn't offer it here instead of the NV vans

Edited by Jamaican Bulldog

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On 12/4/2018 at 2:21 PM, grayhair said:

Duh, obviously GM needs to hire a furniture man to head the company and move their HQ to an old railroad station.  Jeez.

You forgot the scooters.

I am really curious to see where this GM/Navistar thing leads.  I think there's potentially enough business for them to make both sides happy.  But, it's going to come at the expense of some other players in the field...........

I went to the L.A. Auto Show today, and Chevy had a 6500HD crew cab 2 yd. dump on display.  Yes, it does appear to be aimed squarely at the low profile F-650.  Looking at the frame and suspension components, it's clearly more truck than an F-550 or Ram 5500.  

Ram also had a nice 5500 4X4 crew cab flatbed there.  Ford didn't bring any commercial vehicles, but in their defense it really isn't the venue for work trucks.   

 

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Dodge Truck (Ram) dealers are begging for a 6500. And it would be such as easy step up (one recalls all the second generation "BR" 6500s sold in Mexico).

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