"We will now discuss in a little more detail the struggle for existence." --Charles Darwin
Had dinner a while back with Brian McVeigh, general manager of General Motor's fleet and commercial division -- the second largest division within GM, I might add, just behind Chevrolet. Brian's a great interview, because he never shys away from speaking his mind on almost any topic and tends to be very blunt in his critiques, even where GM is concerned.
"Listen, there is no question we lost the car market to the Japanese -- they build a great product and we got caught sleeping," he told me. "But we've been working very hard to catch up and we're going to continue to do so. Now, when you look at light trucks, we've always dominated that segment of the market. And though the Japanese are starting to introduce product there, we have no intention of giving up our leadership in that segment. That means we have to keep bringing new stuff to the table."
That's one reason why GM's OnStar communication system is now an embedded feature within both its car and truck lines -- something that's getting harder and harder to remove from the spec sheet -- because GM believes vehicle telematics is going to become a key battleground in the future.
"Telematics gives you greater dialog with the vehicle and how you operate it -- offering fleet managers, especially, the opportunity to save money," McVeigh explained. "You can achieve significant savings -- more so, in my opinion, than buying a hybrid vehicle -- simply by routing it better, managing idle time more closely, and staying on top of maintenance issues. [OnStar] is a tool to make the vehicle operate more efficiently across the board, not just in terms of fuel economy alone."
While GM plans to keep offering more hybrid vehicles, McVeigh still isn't convinced they generate enough fuel savings yet to repay their hefty sticker price premium. "If you are tacking on $3,000 to $4,000 extra to the base sticker cost of a vehicle, that's a big deal to fleets," he said. "That's one of the issues we're seeing in the move to become more 'green.' Fleets -- especially in the public sector -- get mandated to become more green, yet they don't get any increases to their budgets to really help them do so."
McVeigh also feels the future of alternative fuels isn't going to be limited to one or two fuels either -- it's going to encompass a wide range of options, from hybrids and ethanol to natural gas and biodiesel, well into the future. "By 2040, we'll have eight different fuels powering our vehicles because there's just no single 'silver bullet' out there than can replace petroleum completely. We'll need a mix of them to fit various operations."
On the light truck side, heavy competition mixed with the need to pare down costs is creating a lot of dynamic change for GM and the other domestics, McVeigh said. "We're all moving away from the minivan, except for Chrysler -- and that light van with the two sliding doors served as a great commerical platform for many segments of our market," he explained. So now, customers must either move up to big 15-person vans or drop down into smaller crossovers, like the HHR panel van, instead.
"Diesel is the next big battleground, because it offers both the great fuel economy and power commerical customers want," said McVeigh. "Yet the emissions rules are getting tighter, and that adds a lot of cost to diesel. But that diesel engine is key for us -- we need to find ways to make it work despite the extra cost emission controls add to it."
Finally, there are partnerships with upfitters -- the companies that add ladder racks, work bodies, and other equipment to GM's truck chassis. McVeigh feels far more closer integration with these final stage players is going to be extremely important in the years ahead. "We already have partnerships with 30 to 35 upfitters -- they help you get down into niche markets where we, by ourselves, would find expensive to serve," he said. "We've got a team of eight engineers that do nothing but work with all our upfitter partners to nail integration issues so we don't impact safety or vehicle capability as we add things on. We also need a more smoothly inegrated vehicle delivered faster to the customer -- all of that is going to just keep growing in importance to commercial customers."