Industry Comes To Grips With GM’s Decision

One week after General Motors announced it would abandon its medium-duty truck business, shock waves continue to reverberate throughout the industry.

“I’ve still got a ship-through and a pool to worry about, and there are going to be a whole lot less of both in the near future,” said Denny Jones, VP of sales and marketing for Auto Truck Group and founder of Fort Wayne Fleet Equipment Co in Fort Wayne, Indiana. “It’s just a shame we lost a product line. I told General Motors that. We lost a bona fide, solid product.

“It affects the availability of units we can put in the pool to our dealers and end users. We have less pooling capability because those are not something we’ll be able to pool. It does definitely hurt the marketplace. Sure, there’s Navistar and Freightliner, but for pooling, it takes away a whole element.”

GM will stop production of Chevrolet Kodiak and GMC TopKick medium-duty trucks by July 31. They include the following series: C4500 (16,000-17,500 lb), C5500 (18,000-26,000 lb), C6500 (22,000-25,950 lb), C7500 (25,950-37,600 lb), C8500 (33,000-42,000), and C8500-Tandem (46,000-61,000 lb).

All medium-duty series offered the 8.1 L V8 gasoline engine. The C4500/5500 series featured a “low” cab and chassis profile, and the diesel offering was the 6.6 L Duramax with appropriate transmissions. The C6500/7500/8500/8500-Tandem series featured a “high” cab and chassis profile, and the diesel offering was Isuzu’s 6H, 7.8L I6 and previously the Cat 7.2L I6 with appropriate transmissions.

It is believed that all the light-duty commercial model offerings will continue into the future: S/T mid-size pickups and chassis cabs (Chevrolet Colorado/GMC Canyon), G/H full body vans, passenger, cargo and van cutaway (Chevrolet Express/GMC Savana), and C/K full-size pickup 1500/2500HD/3500HD, and chassis cabs 3500HD CC (Chevrolet Silverado/GMC Sierra).

“What does General Motors have left for GVWs if you take away 4500 and 5500?” Jones said. “What are we down to as their maximum truck, 12,000 GVW? They’ve given up a whole GVW range that’s no longer available on a heavy-duty commercial truck. I’m sure that somewhere along the line, that will also hurt converters of chassis for trailer towing and things like that.”

National Truck Equipment Association (NTEA) executive director Jim Carney said the organization has conducted quarterly surveys this year to gauge the issues that are upper-most in the members’ minds, and the top concern each time was the potential for a massive chassis shortage when the recession weakens and business improves.

“This certainly is not going to alleviate their fears,” he said. “I think it’s just going to heighten those fears. I guess that’s our biggest concern. What does that do to chassis availability—not as much today, but in the future?”

He said that concern remains valid even though GM’s share of the medium-duty sector of the market is only about 6%—accounting for an estimated 3000 of the sector’s 51,000 vehicles sold in the first quarter of 2009, compared to 6000 for the same period in 2008.

“They’ve been trying to sell it for the past four years, and that’s been shrinking their market share,” he said. “There hasn’t been a real commitment to it.”

Navistar International Corp was one of the primary potential buyers for GM’s medium-duty truck business. They reached a tentative sale agreement, but the pact expired last August without a deal being reached.

“I thought something was going to happen to General Motors, but I would not have bet it would be totally shutting down the operation,” Jones said. “I thought for sure somebody would have bought their technology and their line. I’m really shocked they just totally gave it up. It shocks me that that Navistar-GM deal fell apart. I thought it would be resurrected, but I guess they just decided to close the doors.”

“This is a shock,” Eric Starks, president of research firm FTR Associates, told Fleet Owner. “We knew GM had to do some drastic things to save money, to improve cash flow, so curtailing its medium-duty production would not have been a surprise. But if they are truly shutting down their medium-duty production, that’s a surprise.”

Others feel, however, that GM missed the opportunity for a sale a long time ago—and buyers are nonexistent now, with poor truck sales and tight credit.

“At this point, it should really surprise no one,” Chris Brady, president of Commercial Motor Vehicle Consulting (CMVC), told Fleet Owner. “They should have sold that business 10, even 15 years ago. Now, with truck sales down and capital hard to raise, it should surprise no one they couldn’t sell it. GM missed the window.”

“If the market to sell trucks isn’t there for GM, it wouldn’t be there for another buyer either,” said Darry Stuart, president of consulting firm DWS Fleet Management.

He said that’s one reason Navistar may have dropped its earlier bid to buy that segment of GM’s business.

"Why go buy that business for market share if it’s going to dry up and you’re going to get that market share anyway?” he added.

FTR’s Starks said GM’s exit from the medium-duty truck market is going to have long-term rather than immediate ramifications.

“There’s a lot of excess (truck production) capacity in the market already, so stopping production won’t have much impact now,” he explained. “But it’s one to two years from now that this is really going to be felt. GM is such a big player in the medium-duty market that their exit is going to open up a lot of opportunity, especially for a lot of smaller, offshore (truck) OEMs.”

Carney said he expects that this decision will impact GM’s commitment to the work-truck industry and events such as The Work Truck Show.

“When medium duty goes away, they essentially have pickup trucks and some chassis cabs in the heavy light-duty and light medium-duty side of the business, and then they have the vans,” he said. “Beyond that, there isn’t much presence in the work-truck industry. But I’m sure they’re going to try to maintain that presence. We just had a meeting with them last week, and that’s what they told us.

“As for the Truck Product Conference, GM is still there with the Silverado, chassis cabs, vans, and cutaways. Their commitment is to be in the ambulance and bus business. I guess when you look at the numbers, it’s not a huge impact to the association or its individuals, but it’s just another concern.”

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