Contributing Writer, GM-Trucks.com
We've recently reported on two major investments by General Motors in its American manufacturing plants. We have also recently reported on GM's closing of five North American plants. Why is GM investing in some plants, while closing others? Obviously, GM considers this to be a good business decision, but what is becoming pretty clear is that GM will be building the high-volume trucks it sells in North America and primarily inside the borders of the U.S., while it shifts to imported crossovers for its high-volume family vehicle models. There are two reasons that underly this shift.
Before we get to those two reasons, let's list off the newest family model vehicle introductions by General Motors, and look at where GM has shifted work on other family vehicles. First up the newbies. The Encore and Envision are two new Buick models that GM introduced over the past half decade. The Encore is imported from South Korea and Mexico. The Envision is imported from China. Next up, GM introduced the Chevy Trax, which is a clone of the Encore. Also made outside of the U.S. GM then introduced the Chevy Blazer, which it builds in Mexico. Most recently, GM has introduced the new Encore GX and Chevy Trailblazer. There are derivations of the Encore with more space. They are also imported. GM also shifted the manufacturing of its Chevy Equinox and GMC Terrain from Canada to Mexico. These models make up the bulk of GM's non-truck sales volume.
There are two main reasons why GM has shifted its family vehicle business away from the U.S and Canada. Cost and import duties. On the cost side, GM's plants are among the most expensive to operate. This is partly due to the United Auto Worker's successful wage and benefit gains over the past half-century. These workers earn a bit more than the non-union workers who build Hondas, Toyotas, and Nissan inside of the U.S. However, they earn dramatically more than the workers in Mexico, China, and other overseas markets. Other reasons that plants inside the U.S. are more costly to operate than plants in China and Mexico are taxes, environmental costs, and safety costs.
The same unions represent workers who build GM's trucks in expanding American plants. However, trucks are protected by a 25% import duty, and that tariff had nothing to do with President Trump. It was promoted by President Kennedy as far back as 1962 and was implemented by President Johnson in 1964. The official name of the order signed by Pres. Johnson, and kept in place by every president since (both Democrat and Republican) is Proclamation 3564. Because of this 55-year-old tariff, hundreds of thousands of American workers have jobs building trucks and parts for trucks. The North American Free Trade Agreement allows GM and other truck makers to build trucks in Canada and Mexico if they so choose without paying the import duty, and most have truck manufacturing operations in those countries to some degree. However, a long-running but fading sentiment in America to buy American has helped influence where the plants are located.
There is no tariff that protects crossovers in this fashion. America does have small import duties on vehicles from some countries, but none are double-digit duties like the 25% on trucks. This is why GM is shifting its high-volume family vehicle production and jobs to cheaper markets. It is not alone. Ford builds its new EcoSport crossover that replaces the Focus in India. Jeep's Renegade and Fiat's 500X are imported from Italy. The new Jeep Compass crossover is made in Mexico. Interestingly, the Honda CR-V, Nissan Rogue, and many other "foreign brand" top-selling crossovers are built in America. In non-UAW plants.
Top of Page Image Note: GM CEO Mary Barra shakes hands with UAW President Dennis Williams.
Contributing Writer, GM-Trucks.com
Buick will import its Encore GX starting in 2020 and add it to its already impressive line of crossovers. The Encore GX will slot in between the smaller Encore and the larger Envision model. The Encore GX has about 5 cubic feet more than the Encore and is about 3 cubic feet smaller than the Envision. With this new model, Buick now will have four premium SUVs across three U.S.-market crossover segments; small, compact and midsize.
“As we look to the future of Buick, the Encore GX positions us strongly as a consideration for those who want to purchase small or compact SUVs,” said Duncan Aldred, vice president, Global Buick, and GMC.
Buick is almost entirely a crossover company now in the U.S. with 90% of sales coming from crossovers. That will only increase when the new Encore GX arrives in early 2020. GM-Trucks.com will bring you more details as they are released.
General Motors is concerned that the Buick model that makes up about one in five of all Buick sales will be unprofitable when the new tariff on imported Chinese goods is applied to it. To try to avoid paying the tariff on the low-volume crossover, GM has employed a two-pronged strategy.
First, GM pulled in six months inventory from its Chinese factory and sent those Envisions to the U.S. ahead of the import duty being imposed. GM sells about 20,000 Envisions every six months in the U.S., though sales have slowed a bit recently. In China, GM sells about 100,000 Envisions every six months.
The second way GM is trying to keep this non-union-built imported Chinese vehicle from being subject to the tariff is by lobbying. GM has reached out to the U.S. trade representative to plead its case for an exemption. This will be a long swim for GM, whose June quarterly sales recap headline was “GM Gains Half a Point of Market Share as Chevrolet and GMC Second Quarter Deliveries Soar.” included in its four main points outlined at the top of the report was, “Double-digit gains or better for 14 vehicle lines, including every single Chevrolet and GMC pickup and SUV nameplate.” Every single Chevrolet & GMC pickup and every full-sized SUV GM builds is presently built in North America and protected by a 25% import tariff. And has been for 55 years since President Johnson instituted it.
Some facts in this story were verified by this Reuters story.
Want a Great Deal On a Pre-owned Premium Crossover? Cadillac’s SRX or Buick’s Enclave May Be Just The TicketBy Gorehamj
Contributing Writer, GM-Trucks.com
A new study by our friends at iSeeCars looks at which vehicles had the largest decline in retained value after three years. In the crossover category, the SRX is the top vehicle in this regard with a 47% reduction in value from its new car MSRP. The second best deal on a three-year-old crossover the study found was the three-year-old Buick Enclave which sells for just under 46% of its price new.
iSeeCars.com analyzed more than 4.1 million car sales to identify which models had the greatest loss in value after three years. The BMW 5 Series was the top vehicle with an incredible 53% loss in valuation. Commenting on why the SRX and Enclave found their way to this list, iSeeCars CEO Phong Ly said, “The Cadillac SRX and the Buick Enclave, make the otherwise car-dominated list in the ninth and tenth spots making them attractive options for people interested in this booming vehicle segment. Trucks and truck-based SUVs are known for having the highest value retention, which explains why these vehicle types are absent from the top 10 list. Trucks as a vehicle category depreciate 23.3 percent in three years, which is two-thirds of the 35 percent average across all vehicle segments.”
The SRX was replaced by the XT5 in Cadillac’s lineup. The name change may be helping push down the vehicle’s value. “Discontinued cars typically have lower resale values than cars still in production,” explained Ly.
Executive Editor, GM-Trucks.com
The Buick Encore continues on with only small packaging changes for the 2019 model year. Buick is realigning the Encore's trim levels this year, so many of the previous year's trim packages are no longer available.
Check out our other "What's New For 2019" Articles
Here's what's new for the 2019 Buick Encore.
2018 Options That Have Been Retired
FWD Preferred II 1SD (4JU76) models AWD Preferred II 1SD (4JM76) models FWD Premium 1SN (4JV76) models AWD Premium 1SN (4JN76) models (GJ6) Black Cherry Metallic exterior color (GK2) Graphite Gray Metallic exterior color (GQM) Coastal Blue Metallic exterior color
New Features, Colors & Options for 2019
(GUM) Seeker Blue Metallic exterior color (GYM) Satin Steel Gray Metallic exterior color (PCL) Safety Package II, includes (KEM) Ionizing air cleaner, (CE1) Rainsense wipers, (UD5) Front and Rear Park Assist, (UEU) Forward Collision Alert and (UFL) Lane Departure Warning (1SL models)
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