With Mid-Size Pickups, GM Takes Auto Battle to New Front

General Motors (NYSE:GM), emboldened by a stronger balance sheet and torrid sales, has been pushing out a slew of new and redesigned models this.

At the LA Auto Show on Wednesday, the nation’s largest automaker took its battle with international competitors to a new front when it unveiled the Chevrolet Colorado mid-size pickup truck.

GM put in place an aggressive launch schedule that called for 18 new or refreshed vehicles just this year, and the company has scored a number of big hits recently.

The 2014 Chevrolet Impala large sedan and Silverado full-size pickup were chosen by Consumer Reports as the top picks in their respective segments, while the Cadillac CTS received Motor Trend’s Car of the Year award.

With a rethought mid-size truck, the company is now looking to master another corner of the market.

Demand for smaller pickups has narrowed over the last five years, and sales are just a fraction of the 13 million total new vehicles sold so far in 2013. But GM is confident the Colorado’s capabilities as a truck and distinctive styling will woo Toyota (NYSE:TM) buyers, as well as drivers of sport-utility vehicles and other activity-friendly cars.

“These customers want the functionality and versatility expected of a pickup, but they don’t want or need a full-size truck,” Mark Reuss, President of GM North America, told the crowd at the LA Auto Show.

U.S. car manufacturers have been absent from the segment in recent years. Ford (NYSE:F) ceased production of the Ranger two years ago, and Chrysler Group’s 2011 Dodge Dakota was its last.

GM’s new 2015 Colorado and GMC Canyon, set for a reveal in January, mark the U.S. return of the nameplates after production stopped in the summer of 2012.

The mid-size trucks are a big bet by GM. When the Colorado goes on sale next fall, GM hopes it will not only topple the company’s Japanese counterparts but also expand the segment’s customer base.

Toyota’s Tacoma is by far ahead of the pack. According to Autodata, the Tacoma accounted for two-thirds of the 200,353 mid-size trucks sold in the first 10 months of the year. Nissan’s Frontier is second, followed by a small share of the market for the Honda (NYSE:HMC) Ridgeline.

Full Steam Ahead

GM’s current launch phase is the most expansive in company history. Across the board, the Detroit-based company has updated its portfolio and received positive reception

GM had one notable hiccup along the way. The Chevrolet Malibu, a mid-size sedan, was updated just a year after a major redesign. The 2014 version received more legroom and better fuel efficiency, responding to some complaints about the car.

Overall, analysts see GM’s makeover as a success and a major improvement over what the company was doing in the last decade.

“At bankruptcy, they didn’t just pull up. They stopped,” said Matt Stover, an analyst at Guggenheim Partners. “That’s sort of what happens when you go into a situation like that. It takes a long time for it to gain steam.”

The company is gaining momentum, due in part to successful Cadillac launches. While pricing may have damped sales a bit, Stover said the compact ATS is a great product, and the upcoming CTS should also get a warm reception in showrooms.

“GM has been on a massive tear, and it couldn’t have been timed better,” Kelley Blue Book senior analyst Karl Brauer said.

GM’s fellow Big Three automakers have also shifted into high gear by investing in the development of updated cars and trucks.

October sales were especially strong for the domestics, who outpaced nearly every rival from overseas. GM sales jumped 16% compared to the year-ago month, while Ford rose 14% and Chrysler was up 11%. Ford has shown the most improvement through the first 10 months of the year, logging 12% growth.

Brauer said Ford hasn’t taken on the same pace as GM, but the Dearborn, Mich., automaker has rolled out “very compelling vehicles.”

In Los Angeles, Ford took the wraps off a revamped Edge crossover, and a new version of the Mustang will be revealed next month. The No. 2 U.S. automaker is also reworking its Lincoln luxury brand with new models like the 2015 MKC on display in Los Angeles.

Chrysler recently began delivering the long-awaited Jeep Cherokee SUV to dealers. It resurrected the Dodge Dart nameplate earlier this year as a compact car, while Chrysler’s Ram pickups got a redesign for 2013.

The odds are high that Ford and Chrysler will eventually follow GM back into mid-size trucks, Brauer said.

“You know the other two domestics are watching closely,” he said of the Colorado launch. “I expect there will be a response in the next 12 months, if not an actual truck, at least in the form of a concept.”

Expanding the Market

For GM and its competitors, the Colorado will be a big test of the mid-size pickup market. It aims to bridge the gap between lifestyle vehicles and work trucks, combining options like a diesel engine with sportier styling.

The key for GM is bringing in buyers from segments other than its full-size Chevrolet Silverado and GMC Sierra. By launching mid-size trucks, the automaker runs the risk of cannibalizing sales of the larger, more profitable pickups.

“When Ford dropped the Ranger, customers went to a lot of different places,” Stover said. “Sure, there will be some modest cannibalization. But if they can grow the market, any cannibalization is less important.”

Tony Johnson, marketing manager for the Colorado, said consumer research made it clear that drivers of mid-size trucks choose the vehicles as a matter of preference, rather than just a cheaper alternative to a larger truck.

That research “debunked the myth” that people buy mid-size trucks because that’s what they can afford. In fact, Johnson noted that buyers in both segments have the same medium income. “It’s about giving them the right tool for the job,” he said.

Customers told Johnson they compromised and went into crossovers and other vehicles after finding limited options in the space. GM intends to address that problem with the Colorado, which takes some of the Silverado’s new features like corner steps in the rear bumper.

The Colorado, which will be built at a plant in St. Louis, can tow loads of more than 6,700 pounds, compared to the Toyota Tacoma’s rating of 6,500 pounds. Also part of the mid-size package are extras with weekend adventures in mind, such as 13 locations for tie-downs throughout the bed.

“We’re giving them the best functionality,” Johnson said, noting how the competition hasn’t refreshed its mid-size trucks in a while. “Focusing on customer needs will give us the advantage.”

Brauer noted how customers looking at pickup trucks tend to lean toward domestic brands, potentially giving GM an immediate boost.

Stover also expects the Colorado launch to be a positive for GM. “If the numbers are what they’re telling us, I’m not sure why you’d buy a Tacoma or Frontier,” he said.