General Motors is boosting production of its highly profitable large SUVs and trucks to a pace that could result in 48,000 to 60,000 additional vehicles for the 2016 model year, in a bid to capitalize on rising demand, sources told Reuters.
GM’s Arlington, Texas, plant that makes full-size SUVs such as the Cadillac Escalade and Chevrolet Suburban added Saturday overtime shifts beginning on Aug. 1, a GM spokesman confirmed.
GM is also expected to boost output of pickups, other people familiar with the company’s plans said, but it was not clear how that would be done.
The Arlington plant is capable of making 400 big SUVs per shift, or about 1,200 in a full day’s production, barring any planned or unplanned maintenance, said the sources, who wished to remain anonymous because GM has not announced its plans.
Adding one day a week to production for a full year could result in as many as 60,000 additional vehicles a year, although production is likely to be less because of maintenance downtime or parts shortages, said the sources familiar with GM’s plans.
GM does not disclose profit margins on individual vehicles, but analysts and company executives say the large SUVs and pickups generate profit well above the average for GM’s North American operations, which was a robust 11 percent in the second quarter.
“Industry sales are running ahead of expectations,” said GM spokesman James Cain. “Sales of our full-size SUVs are very strong and we have been working to find creative ways to increase production to meet demand and rebuild our inventories.”
He did not confirm the number of increased full-size SUVs and pickups GM plans on an annual basis. Other individuals briefed on GM’s plans said the target was as many as 60,000 additional vehicles.
GM dominates the lucrative large SUV market, which has enjoyed a resurgence as gasoline prices have fallen below $3 a gallon in most of the U.S. GM models such as the Chevrolet Suburban and Tahoe and GMC Yukon reap pretax profit in excess of $10,000 a vehicle, analysts estimate.
The Cadillac Escalade built in Arlington is the top seller among luxury large SUVs, taking 30 percent of that segment in the U.S.
Last month, GM said it will spend $1.4 billion to modernize the factory in Arlington, the single largest investment in a $5.4 billion, three-year plant upgrade program announced earlier this year.
The vehicles built in Arlington alone generate about $3 billion or more in profit annually, or almost half of GM’s $6.5 billion operating profit last year, analysts said.
Last year, the Arlington plant built 281,439 large SUVs, according to data compiled by Automotive News. Through the first half of 2015, Arlington’s production was up 32 percent from the prior year to 162,431vehicles.