General Motors has decided the booming sport utility segment is here to last and will keep on rolling the good times in terms of profit as key global markets, including China, are posting negative trends.
The largest US automaker and the third biggest in the world recently announced it would use $1.4 billion to upgrade and modernize its assembly facility in Arlington, Texas, currently in charge of manufacturing the Cadillac Escalade, Chevrolet Suburban and GMC Yukon sport utility vehicles. This is the biggest single investment part of the $5.4 billion, three-year plant upgrade strategy showcased earlier this year and could be used as a positive bargaining chip during the ongoing contract talks with the United Auto Workers union. GM chief executive officer Mary Barra has pledged to shareholders the company would be able to deliver an average 20 percent return on its capital investments in the future, though the investment in Arlington is pushing the mark a lot higher, according to sources.
GM has in operation around 400 plants worldwide and has well in excess of 120 markets selling vehicles under eleven different brands, but the models produced in Arlington alone generate about $3 billion or more in profits each year – which would be around 50 percent of the automaker’s $6.5 billion operating profit of 2014. GM owes this particular setting to the financial crisis of 2008-2009, when most of its rivals decided to turn away from big SUVs as gasoline prices soared, but now the fruition is here: GM owns around 64 percent of the large SUV market in the US.