Awards Won’t Drive Sales for Recalled Chevy Silverado

Silvardo awardGeneral Motors seems to be really good at winning awards for its vehicles. The Chevy Silverado just took home the North American Truck of the Year Award at the Detroit Auto Show. The truck also was just embarrassingly recalled due to a potential fire hazard. Unfortunately for GM, the bad news outweighs the good as awards do not always result in increased sales. Just look at the award-winning Chevy Volt as an example.

Like the Silverado, the 2011 Volt was a recipient of the North American Car of the Year Award. In fact, it seems that the Volt has won more awards than Wilbur, the Prize-Winning Pig from the children’s tale, Charlotte’s Web. But winning awards did not make the Volt appealing to mainstream consumers as sales have never lived up to the hype. And while the Silverado may literally be off to a blazing start, figuratively speaking sales have not caught fire.

The Silverado (GMC Sierra is also included) recall involves 303,000 vehicles sold in the US along with another 67,000 trucks sold in Mexico and Canada. The trucks are at risk of engine compartment fires from overheating exhaust components. Even prior to the recent recall, GM’s truck sales momentum has been underwhelming.

December sales for the Silverado came in at 42,593, down 16% from the prior year. The GMC Sierra didn’t exactly pick up the slack, selling 17,854 units, down 4.6% from December of 2012. Comparatively, the best selling Ford F-Series sold 74,592, up 8.4% from the prior year. While GM truck sales may arguably still qualify as “good,” Ford easily retains the best-selling truck title.

The North American Car and Truck Awards may be a feather in the cap of GM, but I have to wonder if there are more politics involved in the selection process than logic. Past recipients haven’t exactly been stellar sellers. Two of the past three truck award winners were not household names with the Land Rover Range Rover Evoque winning in 2012 and the Ford Transit Connect winning in 2010. The 2011 winner, the Ford Explorer, was a more mainstream choice, but I really don’t recall anything groundbreaking about that vehicle.

On the car end of the awards the Hyundai Elantra was worthy (if not cutting-edge) as the 2012 recipient, but the respective winners for 2010 and 2011 were the Ford Fusion Hybrid and the Chevy Volt. The cars seem to be a politically-correct choice as neither car was on the buying list of most drivers. But winning awards does not make for winning sales as GM seemed to try and utilize the awards more than Ford to hype its vehicles. The strategy certainly didn’t work for the Volt.

It again appears that GM needs to focus on building vehicles at the best value to succeed in a very competitive environment. Boasting about awards as your vehicles are catching on fire is not going to cut it. A comparison of the 2014 Chevy Silverado to the 2014 Ford F-150 on Edmunds.com shows that GM is still lagging in value.

The regular cab 2014 Silverado 1500 model comes in at a sticker price of $26,670 and an invoice sticker of $25,647. The similarly equipped Ford F-150’s MSRP is $25,640 with an invoice amount of $23,867. That is a disconcerting (at least to GM shareholders) difference in cost. The implication is that it is costing GM almost $2000 more to build the Silverado than it does Ford while GM offers its vehicle for $1000 more. GM will have to eat even more profits by raising incentives to compete with the better-selling Ford truck. Telling consumers that the Chevy truck won an award is not going to persuade consumers to spend over a thousand dollars more than for a similarly equipped Ford truck that offers equal or superior quality.

GM shareholders should question why the company seems to be having difficulty with efficiently building vehicles that they can offer at competitive prices without pumping up incentives. Given the fact that the company received $50 billion of taxpayer money to bolster its balance sheet and was relieved of its debt as a result of the 2009 auto bailouts, you would think that they would have the advantage.

GM has come a long way since the 2009 auto meltdown but so have Ford and other auto manufacturers, and they did it without handouts. The rebounding overall auto sales we are seeing along with loosened credit standards for car buyers can hide a multitude of sins. The time will come when GM will not have the taxpayer-provided hoard of cash as a cushion to absorb its seeming lack of efficiency. Making “good” cars and trucks will not be good enough, despite the number of awards they receive.

Mark Modica is an NLPC Associate Fellow.

 

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