(Updates with quotes from CFO)
By Jeff Bennett and Sharon Terlep
General Motors Co. introduced the latest version of its largest sport-utility vehicles Thursday, betting it can still
make some serious money from these hulking vehicles.
The refreshed Chevrolet Tahoe and Suburban along with the GMC Yukon, will begin arriving in showrooms early next year,
offering consumers some improved fuel efficiency, more anti-theft features and automatic fold-flat seats.
It's the first face-lift for the vehicles in almost seven years. Although price wasn't' disclosed, the vehicles will
likely sell between $45,000 and $50,000 based on current pricing. The updated versions were unveiled simultaneously in
California and New York.
GM is launching its new big SUVs in a U.S. market that is dramatically different than in 2007, when the auto maker
last redesigned these models. Today, many more Americans are buying smaller vehicles and put a greater premium on fuel-
economy. Big SUVs are now more than a decade removed from their heyday, and driving a big four-wheel drive vehicle no
longer carries the same cache as in the late 1990s, when cheap gas and easy credit made the vehicles a status symbol.
Still, GM says plenty of buyers remain who need to haul trailers or multiple kids and all their gear.
"We are back to the core buyers," said GM's marketing director of Chevrolet trucks Maria Rohrer. "These are people who
have two to three children and they need something either to cart around their family, their kids and their friend's
kids, soccer equipment, or they need to tow jet skis or a boat. These are people who want a little more style than what
a minivan has to offer."
And the margins on these SUVs are compelling.
"Behind pickup trucks, these large SUVs generate one of the biggest profit per vehicles sold, ranging between $3,000
and $4,000," said Kelley Blue Book senior analyst Alec Gutierrez. "They are affordable to produce, they are a high
profit center, so it makes sense."
The average transaction price for a full-size SUV - what the consumer paid - was close to $43,000 compared with a mid-
sized vehicle which runs around $25,100, according to Kelley Blue Book.
The updated vehicles also come at a time when auto makers are once again experimenting with SUVs as they try to take
the distinctive American idea to other markets around the world. They are making them smaller, more aerodynamic and
At the Frankfurt Auto Show this week, Nissan Motor Co.'s Infiniti brand showed a prototype for an aerodynamic, compact
vehicle called the Q30. Toyota Motor Corp.'s Lexus brand displayed a compact SUV and Daimler AG'sMercedes-Benz
officially unveiled the Mercedes GLA.
In Europe, where the overall market has been slumping, SUV sales have risen by about 6.7% a year between 2007 and
2013, and will likely reach about 2.8 million vehicles this year, according to consulting firm AlixPartners.
In North America, GM aims to use this refresh to squeeze a few more market points beyond its already dominant
position. More than half of the annual sales in the segment belong to the Tahoe and Suburban. Throw in the GMC Yukon and
GM owns about 74% of the market.
GM is also facing less competition than in the past. Their main competitors - Ford Motor Co.'s Expedition, Nissan's
Armada and Toyota's Sequoia are older vehicles and sales have dwindled for all three.
These days Toyota sells 1,000 Sequoias a month and Nissan about the same number of Armadas. Nissan said it had no
plans on dropping its SUV while Toyota confirmed it will make a 2014 Sequoia but offered no further comment on the
future of the vehicle.
In his first-ever public vehicle launch, GM's finance chief Daniel Ammann underscored the trucks' ability to drive
"You don't have to be a CFO to know how compelling this is from a bottom-line perspective," he said
He declined to say how much money the vehicles make: "they are quite profitable."
A potential problem facing GM is an unexpected spike in gas prices which would cool buyer enthusiasm. It must also
rein in how many vehicles to sell to fleet owners such as rental car companies and government agencies. Last year, 38%
of Suburbans sold went to fleet operators. That number climbed to 42% this year through June. Tahoe was 34% last year
and 49% through June this year, according to Kelley Blue Book.
Ms. Rohrer said the current plan calls for the auto maker to stop selling the SUVs to rental companies for an
undetermined amount of time.
For the update, GM borrowed heavily from lessons it already learned with the Silverado and Sierra pickup trucks, such
as offering its direct-injection EcoTec3 powertrain which is expected to boost fuel efficiency, although the company
declined to release specifics. Doors are flushed with the body to reduce wind noise.
Customers will, for the first time, have the option to hit a button to fold the second and third row seats flat. No
more having to pull the seats out and store them in the garage. Another option, which could start appearing in other GM
vehicles, is anti-theft technology such a glass-break sensor which automatically immobilizes the vehicle even if the
ignition is activated.
"I think those fold down seats and the larger interior will be a big home run," said Danny Hill, owner of Classic
Chevrolet Buick GMC in Granbury, Texas. "We have needed that for a long time. A lot of people would have to take the
seats out if they wanted the extra room and those seats are very cumbersome and heavy."
Mr. Hill, who sells a combined 100 new Tahoes and Suburbans a year, was among a select group of dealers that got a
sneak peek at the refreshes.
"Texas is a big market for these vehicles," he said. "I know there are people out there waiting for these."
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