GM Bets Chevy Equinox Can Win Money Left on Table Amid SUV Boom

  • Top U.S. automaker will build model in four plants worldwide
  • Competitors gained foothold as SUV went years without redesign

General Motors Co. is trying to make up for lost time with its redesigned Chevrolet Equinox.

While the largest U.S. automakers’ competitors have pumped out new and refreshed sport utility vehicles to cash in on the booming segment, GM soldiered on with an Equinox that last underwent major changes seven years ago. Equinox deliveries slumped 13 percent in the U.S. last year as other crossovers surged, suggesting the Detroit-based company left money on the table by leaving its best-selling SUV virtually untouched.

GM will push to make up lost ground with an Equinox that’s roomier, more fuel efficient and more lucrative for the company thanks to reduced production costs. The automaker will build the model in four plants worldwide, including two factories in Mexico, where cheap labor costs should boost the economics of an already-profitable model.

“We have goals to grow market share both for this car and for Chevy,” said Steve Majoros, director of Chevrolet marketing in the U.S. “We know we could have sold more of these if we had more. There’s a real opportunity to grow here.”

Four Facilities

GM will be able to build about 550,000 of the Equinox and its sibling, the more upscale GMC Terrain, globally starting in 2018. The company built about 400,000 units last year from North American plants for the U.S., Canada, Mexico and a small number of exports to the Middle East.

The new Equinox, which will also be built in China for that market, will sell in 115 countries and serve as GM’s highest-volume SUV worldwide.

GM’s global sales ambitions for Equinox will play a role in determining if GM can pull off plans to meet or beat last year’s record $12.5 billion in adjusted earnings before interest and taxes. Rival Ford Motor Co. by contrast has forecast a lull in its profit this year.

Along with the new Equinox and Terrain, GM will be selling all-new versions of its larger Chevy Traverse, GMC Acadia and Buick Enclave SUVs this year. Those vehicles are all expected to help grow profits, GM President Dan Ammann told Bloomberg News in October.

Stale Sales

Equinox sales fell last year because the model went stale, said Stephanie Brinley, an auto analyst at IHS Markit. The fresher model is hitting the market as global demand for SUVs grows and should keep up with the company’s increased production, she said. The Nissan Rogue, Honda CR-V and Ford Escape all outsold the Equinox by at least 60,000 units in the U.S. last year.

“GM won’t suddenly go to top two in that market, but they should be able to gain market share with Equinox,” Brinley said.

Despite deliveries slowing down of late, the Equinox is still a major seller. GM moved about 242,000 of them last year in the U.S., behind only the Silverado pickup. It’s supplanted the Chevy Malibu sedan as GM’s family car, said Lisa Hutchinson, global marketing director for the Equinox.

That’s why the model is getting the star treatment with three North American plants. Only two other vehicles in GM’s line-up -- the Chevy Silverado and GMC Sierra pickups -- are each made at three North American facilities.

The Redesign

The redesigned Equinox going on sale this quarter in the U.S. and globally later this year is 400 pounds lighter than the outgoing version, helping improve fuel economy. The new model will get 26 miles per gallon in the city, 32 on the highway and 28 miles per gallon overall. The outgoing Equinox got 25 miles per gallon in combined city and highway driving.

GM focused on fuel efficiency because of tougher regulations, said Rick Spina, executive chief engineer for the Equinox. But the new model won’t be sluggish -- all three available engines use turbochargers to deliver some zip to drivers pulling onto the highway, he said.

Read more: Trump demands auto jobs after pledging fuel economy relief

In the U.S., GM will keep pricing steady for entry-level Equinox, which starts at less than $25,000. Higher-trim versions sell for about $35,000.

The new model was also engineered with exports in mind. Mexico has free trade agreements with more than 40 countries, giving GM tariff-free access to many of the markets where the company will sell the Equinox and Terrain, Spina said. To make room for Equinox south of the border, GM is shifting production of the Cadillac XT5 to Tennessee.

Continued Boom

Total auto sales may be peaking in the U.S., but GM is hopeful it’s introducing the new Equinox just in the nic of time. Vehicles like the Equinox make up 15 percent of the U.S. car market and may reach almost 20 percent by 2020, according to Jim Cain, a GM spokesman.

“This model is really important,” said David Whiston, a Morningstar Inc. analyst. “They’ve had aging SUVs on the market and they’re finally getting some fresh models out this year.”

Even if Americans’ love for SUV does wane, consumers in China and other Asian markets are still hungry for the roomier models.

“This will be the largest vehicle segment in the world,” GM’s Hutchinson said.

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