Autos

GM's profitable SUVs remain on-track for 2020; coronavirus delays other vehicles

Key Points
  • GM said production of its redesigned large SUVs such as the Chevrolet Tahoe and Cadillac Escalade remains on-track.
  • The importance of the highly profitable SUVs has grown as GM looks to the vehicles to assist in resurrecting its thinning balance sheet due to the coronavirus.
  • Other less-profitable models for GM that were supposed to receive updates this year as much as a year due to the pandemic.
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General Motors said production of its redesigned large SUVs remains on track for the coming months, while updates to other vehicles have been delayed as much as a year due to the coronavirus pandemic.

The launch of the SUVs was viewed as crucial to the automaker's profitability prior to the Covid-19 crisis. Its importance has grown even more as the pandemic has halted U.S. auto production and GM is searching for ways to resurrect its balance sheet this year.

GM has confirmed other less-profitable models that were supposed to receive updates this year — such as the Chevrolet Traverse, Chevrolet Equinox, Chevrolet Bolt EV, and GMC Terrain crossovers — have been delayed from the model year 2021 to 2022.  

It's an example of the challenge the auto industry now faces in prioritizing products and capital as the amount of cash on hand tightens due to the coronavirus devastating sales and shuttering factories. 

"Automakers are going to be prioritizing bigger launches and higher-profit programs," said Paul Waatti, an industry analyst for auto research firm AutoPacific.

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Gerald Johnson, GM executive vice president of global manufacturing, said the SUVs remain on track because the automaker was able to continue retooling, or updating, the Texas plant where the SUVs are built while it was shut down.

"The final conversation was to take place in this timeframe and it is," he told CNBC during an interview last week. "Mind you, if the whole country stays shutdown, then the whole country stays shutdown."

GM ceased production at its U.S. plants, including Arlington Assembly in Arlington, Texas, last month due to the virus.

$65 billion franchise

The full-size SUVs being built at the Arlington plant are the Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon, and Cadillac Escalade models. GM unveiled new 2021 models of the vehicles prior to Covid-19 significantly impacting the U.S. auto industry.

The Chevrolet SUVs are expected in dealer showrooms in the coming months, followed shortly by the GMC and then the Cadillac models in the summer, according to GM.

General Motors Executive Vice President Global Manufacturing and Labor Relations Gerald Johnson (middle) watches as engineers and technicians set-up and test the machines that will be used to manufacture Level 1 face masks at a plant in Warren, Michigan.
Photo by John F. Martin for General Motors

Assisting in the sales of the SUVs is expected to be record-low crude oil prices causing gas prices to plummet to the lowest levels in decades.

GM's truck franchise, which includes pickups and full-size SUVs like the Tahoe and Suburban, accounts for a $65 billion high-margin business, the company has said.

'Working hard' on EVs

The highly profitable SUVs are expected to assist in funding GM's transition, which the automaker outlined in February, to a large portfolio of all-electric vehicles, including a new GMC Hummer EV pickup.

Johnson said the company is "working very hard to stay true" to its plans around its "EV transformation," including 20 new models by 2023. He declined to discuss details, however.

"Things that are out in the future, some of them we've made some decisions around that I'm not prepared to make any announcements around," Johnson said.

Work at a Detroit plant slated to produce the Hummer EV models, he said, is "continuing under their reconstruction and transformation."

The company delayed the debut of the Hummer EV pickup, which was scheduled for May 20. GM said Wednesday the company's development work on the vehicle "continues on track and undeterred." 

Production of the Hummer pickup is expected to begin in the fall of 2021.

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