Commercial Vehicles Profits Offset EV Losses in Detroit

Despite healthy profits and steady if not spectacular sales during the first half of 2023, Detroit’s automakers are continuing to hunt for ways to trim costs as the transition to EVs moves forward in fits and starts, new labor contracts loom over their operations and they continue to adjust future product plans.

By the numbers, each company did well in the first half of the year. General Motors’ second-quarter revenue grew 25% to $44.7 billion and net income increased 51% percent to $2.6 billion despite a $792 million charge linked to a recall of batteries made by LG Energy for the Chevrolet Bolt. Ford reported a 12% percent increase in revenues to $45 billion, while net income doubled to $1.9 billion despite a $1 billion loss by its new EV segment.

Stellantis made €14.5 billion or $16.1 billion on revenues of €98.3 billion or $108 billion in the first half of the year thanks to the strength of the Ram and Jeep brands, which continue to expand their portfolios to include products appealing to customers in Europe and other parts of the world beyond the U.S.

All three automakers’ results for second-quarter and first-half 2023 reflect success with commercial customers as Detroit’s business model slowly shifts to be less dependent on the retail end of the business, the companies acknowledge during conference calls with analysts and investors.

Farley Pro-Ford Pro

Ford Pro – the company’s commercially oriented subsidiary – is growing into a $50 billion business, CEO Jim Farley observes. “Our combination of services, software, dominant product and dominant market share, (plus Ford’s) upfitting and large dealer physical repair network will not be easy to match."

“We already have over or about 550,000 subscribers – paid subscribers and service subscribers – and Ford Pro is 80% of those,” Farley says. “Accordingly, we will continue to shift more investment to fuel Ford Pro’s growth and press our advantage with full flexibility between EV and ICE,” he says.

But Ford is scaling back on its electric-vehicle projections after its new EV subsidiary, Ford Model e, posted big losses during the second quarter and Farley admits for the first time the company is putting more emphasis on hybrids. Ford currently offers hybrid versions of the Escape, Maverick and F-150 and the Escape plug-in hybrid. The adoption rate for EVs is below expectations and EV makers are cutting prices amidst excess inventories.

“We are adding hybrid options across our ICE lineup, and we expect to quadruple our hybrid sales in the next five years,” Farley says. “We were already No.2 in the market last year.”

GM’s Barra Eyes Cost Cuts

At GM, Chairman and CEO Mary Barra says the automaker is looking for ways to simplify its business and reduce its capital spending while it pushes ahead with its electrification plans and continues to fund Cruise, its autonomous vehicle service, which is gradually expanding operations despite losing roughly $500 million each quarter.

Cruise (pictured, below) holds great potential for the future, Barra says.

Cruise_in_SF_0.jpg

The success of the cost-reduction plan GM launched earlier this year is continuing, the CEO says. “We have identified another billion in fixed costs that we will deliver over the same 2023 to 2024 timeframe,” says Barra, who predicts GM’s net automotive fixed costs will be down $2 billion even with new contracts with the UAW.

Barra adds Norm de Greve, GM’s new chief marketing officer, has been tasked with taking a fresh review of spending and putting GM on a course to deliver greater marketing efficiency.

“For our EV and ICE vehicles, we are targeting a 50% reduction in trim levels through a smart bundling of customer features and options,” Barra says. “This results in fewer part numbers to simplify marketing, engineering and manufacturing while maintaining the best features customers want.”

As it pursues a strategy of simplification, GM is expanding its efforts in the commercial market.

GM leads the U.S. industry in both commercial and total fleet deliveries calendar year to date, notes Barra. “We intend to have industry-leading margins, and we’re not going to stop until we get there, and we still have a lot of levers to pull.”

Stellantis’ Tavares Touts Competitiveness

Stellantis CEO Carlos Tavares emphasizes the company, which was created by the merger of Fiat Chrysler and PSA, is growing its commercial-vehicle and EV businesses while working to hold down costs.

“We are still, by far, the leader of the light-commercial-vehicle business,” says Tavares. “It is good that we remind ourselves that our LCV business represents 33% of our net revenue. So, it's a big, big business.

“Our share is 30.9% in Europe and 26.8% in North America. We are leading those two markets…It is also a fact that we are number one in the U.S. PHEV (plug-in hybrid-electric-vehicle) sales (see Jeep Wagoneer 4xe, pictured below), which is a tribute to the way the 4xe technology is being received by the market. So, great stuff is coming from North America,” he says.

Jeep Grand Wagoneer 4xe

At the same time, Tavares says he is emphasizing the continuing need for improvement even with the integration of FCA and PSA operations producing solid results.

“We have a list of things that we should do, and that we would like to do, to improve the competitiveness of our U.S. operations,” he says. “So, from one side, we want to protect the ability to pay strong performance bonuses as we did in the past. From the other side, on the midterm, we want to make sure that we build the conditions for that performance to be sustainable.”