GM Says Full-Size SUVs, Its Most Profitable Products Ever, Aren't Going Away

GM Says Full-Size SUVs, Its Most Profitable Products Ever, Aren't Going Away

By Scott Doggett, Contributor

An article in Sunday's New York Times did a nice job of recapping the boom and bust of the sport-utility-vehicle market, particularly as it applies to General Motors.

The reporting high up in the article about GM putting the brakes on plans to overhaul the next generation of large SUVs and full-size trucks was particularly newsworthy; our regular readers will recall that we reported the development four months ago.

The decision came amid plummeting sales of full-size trucks and increasing demand for fuel-efficient cars. But as bad as things were for the auto industry in general and the Detroit Three in particular at the start of summer, they pale in comparison to the ugliness that followed.

Back in June, GM spokesman Tom Wilkinson said "we think the higher fuel prices are here to stay and they'll have a significant -- essentially permanent -- impact on the truck market."

Although gas prices have since fallen, financial markets the world over have crashed and talk about America's major automakers possibly going belly-up is on the rise.

With this backdrop, we decided to call Wilkinson again to see where things stand now with regard to the GM's plans for full-size SUVS, the most profitable products in the General's hundred-year history.

The decision to not develop the next-generation Chevy Tahoe and Suburban, and GMC Yukon and Cadillac Escalade, has not been reconsidered, he said. GM had earmarked $2 billion to completely redesign the big SUVs and retool its assembly plants to build them, but by late spring had decided against it.

GM will close the SUV plant in Janesville, Wisconsin -- birthplace of the full-size SUV -- and will consolidate SUV production in Arlington, Texas, as was decided four months ago, Wilkinson said.

And in an effort to unload its slow-selling large SUVs and trucks back then, GM  increased its incentives for GM owners to as much as $6,000 on its largest 2008 trucks and, for the first time, offered cash back on its large hybrid SUVs, the Chevrolet Tahoe Hybrid and the GMC Yukon Hybrid.

The incentives started less than a week after GM reported a 36.9 percent drop in truck sales for May. But the rebates for the hybrids, we were told then, were mostly to help spread the word of their existence and bring prospective customers into showrooms to check them out 

This afternoon, Wilkinson said GM remains committed to the dual-mode Tahoe, Yukon and just-launched Escalade hybrids (left ). "We do think there will be some full-size truck market and we intend to compete in it, but it certainly won't be like it was," he said.

Although GM typically stages photos of the three hybrid models in rugged outdoors settings, Wilkinson suggested their owners are more likely than not to use their boat-hauling-capable, wilderness-taming-capable rides in the concrete-and-asphalt jungle of financial districts. 

There's a "certain market, particularly for VIP transportation, and a lot of those vehicles spend most of their lives parked at curbs in big cities," he said. "A hybrid is perfect for something like that" -- city use, where the huge hybrids can get a very respectable 20 miles per gallon.

Wilkinson said GM is "very bullish on that technology and sales on those are starting to grow as people get to know the vehicles. Obviously, they're pretty expensive [$50,000-$75,000] and it's kind of a selective market, but they've been very well received."

As we reported recently, the hybrids helped lift GM's sales numbers during the past two horrible months. September sales for the Tahoe Hybrid rose to 636 sold from 530 in August, sales of the Yukon Hybrid jumped to 374 sold from 267, and the just-launched Escalade Hybrid soared to 91 sold in September from a single one sold in August.

After reading off the September sales figures for the three hybrids, Wilkinson said he expects them to continue to climb. "They've been really well received, and there's nothing like them in the market," he said.

"Nothing like them" isn't entirely true. Chrysler just launched the Aspen Hybrid and the Dodge Durango Hybrid -- and nearly as quickly announced they are being discontinued. They will likely be remembered as the first green vehicle casualties in the wake of the automotive industry's declining fortunes.

As for all of the Tahoes, Yukons and Escalades -- hybrids and non-hybrids alike -- as well as GM's other large SUV, the Suburban, which isn't available in a hybrid, Wilkinson wouldn't say whether or not they will stay in production until 2011 as originally planned. For competitive reasons, he said, GM doesn't like "to give numbers."

But "we don't think the full-size truck market is going to go away. We think it'll get smaller and probably more focused on people who really need the capability of a truck, but we don't expect it to go away. Certainly as long as there's a market for those vehicles, we don't see that market going away."

That said, Wilkinson was wont to discuss the Chevy Traverse and the GMC Acadia (right ), both crossover SUVS. They've got the interior space of large SUVS, he noted, but because they are built on car platforms, they drive like cars.

Sure, they can't tow or haul like truck-platformed SUVS, he said, but they are perfect for people who want all the space, like the better fuel efficiency and don't need the towing/hauling or four-wheel-drive capability of a big SUV.

"I'm driving an Acadia right now and it's a very nice vehicle," Wilkinson said. "I think both types of vehicles [big SUVs and crossovers] will coexist in the market for the foreseeable future."

Scott Doggett:  is an AutoObserver.com Associate Editor.