GM said to have limited supply of most popular V-8 truck version

Staff Writer
Columbus CEO

(c) 2013, Bloomberg News.

SOUTHFIELD, Mich. — General Motors, introducing its first redesigned pickups since 2006, can't make enough of the most popular versions of its new Chevrolet Silverado and GMC Sierra, according to three people familiar with the effort.

Demand for the trucks is exceeding a supplier's ability to produce certain drivetrain parts for the 5.3-liter V-8 engine, the most popular size, and GM is limiting how many dealers can order, said two of the people, who asked not to be identified because the matter is private. While one of the people said the issue could be resolved soon, another said it could take longer than a couple of months. They declined to identify the supplier.

The Silverado and Sierra are the high-volume, fat-margin centerpieces of GM's wave of 18 new or redesigned models for the U.S. market. Full-size pickups generate $8,000 to $10,000 in gross profit each, and Detroit-based GM needs to resolve the shortage quickly to get the most out of its redesigned trucks before Ford brings out a new F-150 next year.

"This is a window of opportunity for GM given the strong pickup market and the new Ford truck which launches in fall 2014," Alan Baum, an industry consultant at Baum & Associates in West Bloomfield, Mich., said in an email.

The constrained supply is most noticeable to dealers accustomed to ordering only V-8 trucks, one of the people said. The 5.3-liter V-8 is produced at GM plants New York, Canada and Mexico.

Dealers always want more of the "hot new truck," said Terry Rhadigan, a GM spokesman. "It's a temporary thing." A dealer ordering 10 of the 5.3-liter pickups is getting eight of them, he said. "It's almost an oxymoron to call it a constraint at 80 percent."

U.S. car and light truck sales sold at a seasonally adjusted annualized rate of 16.1 million in August, the fastest pace since October 2007, according to researcher Autodata. GM had said U.S. light-vehicle deliveries this year would total as much as 15.5 million, a figure its chief economist, Mustafa Mohatarem, said this month will be exceeded. The 16-million annual sales rate is "here to stay," he said.

GM's pickups generated an estimated 16 percent of the company's global earnings before interest and taxes last year and the redesigned versions could boost EBIT by more than $1 billion in 2013, according to a Citigroup estimate.

GM plans to offer the light-duty version of the new pickups with three engine options, a 4.3-liter V-6, 5.3-liter V-8 and 6.2-liter V-8. The smaller engine began production in August and the larger V-8 doesn't arrive in showrooms until later this year. The 5.3-liter engine made up about 80 percent of the previous truck's sales and was expected to be the same going forward, Baum said.

"Given that the 6.2 is late-availability and the 4.3 is obviously not as capable as the 5.3, it is a significant issue" to have limited availability of that engine, Baum said. "That said, their production volume to date has been strong. The volume they have been able to achieve as they were making the changeover" has been impressive.

GM has made the fuel efficiency of its V-8 a key peg of its marketing during this year's introduction of the new truck.

The 2014 Silverado with a 5.3-liter V-8 engine and two- wheel drive is rated by the U.S. Environmental Protection Agency as getting 23 miles per gallon in highway driving. Ford's 3.5-liter, six-cylinder turbo 2013 F-150 is rated at 22 mpg on the highway while a flex-fuel version of the vehicle gets a 23 mpg rating from the EPA. A flex-fuel 5-liter V-8 F-150 gets a 21 mpg rating for highway driving.


With assistance from Craig Trudell in Southfield, Mich.