Introduction

This report explains the findings of the feasibility study conducted on the addition of

a new turbo-charged engine to the existing Chevrolet Silverado and GMC Sierra. Its purpose

is to evaluate the benefits of the new engine to see if adding it will be beneficial for General

Motors. This report should be used as a guide in the decision making process for investing in

a new engine technology. It is important for General Motors since millions of dollars can be

made or lost.

Chapter 1: The Need of a New Engine, discusses the already existing engines made

by GM, and the need for a new updated engine type. It explains the importance for the new

engine and the primary concerns of consumers.

Chapter 2: Research into the Turbocharged Engine goes into the details of existing

turbocharged engine in order to understand the good and bad components. It discusses how

the engine will work as well as benefits and disadvantages of it. The majority of the chapter

speaks of Ford’s already existing turbocharged V6 and the components of that engine.

Chapter 2 also explains some of the legal aspects of the building of a new engine.

Chapter 3: The Financials of the New Engine discusses the financial aspects of

adding the new engine. It goes into detail of the estimated costs and revenue the new engine

will produce as well as the financial availability of GM.

Chapter 4: Conclusions and Recommendations, summarizes the information given in

the prior chapters and explains my recommended plan of action.

1

CHAPTER 1: THE NEED OF A NEW ENGINE

The annual number of Chevrolet Silverado’s and GMC Sierra’s sold has not

competed with that of Ford since 2009. According to pickuptrucks.com, Fords truck sales in

2009 were approximately 413,000 vs the 428,000 sold by General Motors. In 2013 Ford sales

increased by an 85% margin to 760,000. However, General Motors sales have only increased

by 55% to 664,000. Although an increase of 55% would normally be great, with a difference

of nearly 30% to that of Ford, GM needs to make some kind of change to their new line of

trucks.

The Current Engine

The current engine options and specifications for the Chevrolet Silverado were

gathered from the Chevrolet website and are outlined in Table 1.

Table 1: GM Engines

Powertrain 4.3L V6 Engine 5.3L V8 Engine

Fuel Type Gas/E85 Gas/E85

Displacement (liters/cu. in.) 4.3L/262 5.3L/325

Horsepower @ RPM 285 @ 5300 355 @ 5600

Torque @ RPM 305 @ 3900 383 @ 4100

Fuel Injection Direct Injection Direct Injection

Axle Ratio 3.23 3.08

Fuel Economy

City (MPG) 18 MPG 16 MPG

Highway (MPG) 24 MPG 23 MPG

While these current engines excel in producing horsepower, they lack in fuel

economy which limits the market.

2

Concerns of the Consumer

 According to consumerreports.org, “two thirds of car buyers expect their next model

to provide much or somewhat better fuel economy.” This means that the majority of people

searching to buy a truck will want the truck with the best fuel economy. Table 2, shown

below, was also retrieved from consumerreports.org, and outlines the most common reasons

people choose more fuel-efficient vehicles.

Table 2: Motivations for choosing a more fuel-efficient vehicle

Reasons Percentage

Lower fuel costs 79

Latest fuel-saving technology 53

Environmentally friendly or green 52

Concern about dependence on foreign oil 43

Change in lifestyle or family 28

The U.S. Department of Energy backs up this data and states that fuel economy is

important to people for the following reasons:

It reduces oil dependency cost

It increases sustainable energy

It saves you money

It reduces the effects of CO2 on the environment

According to ENP Newswire, although for the past ten years most people have

expected trucks to come equipped with a V8 engine, in modern society the main

requirements when shopping for a new truck are, “the combination of city and highway

mileage, horsepower, torque, towing capacity, payload and value.”

3

With the one of the primary concern of new car buyers being good fuel economy and

GM made trucks lacking this quality, the most logical solution to the problem at hand is to

create a new, more fuel efficient engine.

Ford’s Market Takeover

With Ford producing more and more EcoBoost engines, the market for the

conventional engines is depleting. According to ENP Newswire, in the past three years, half-

ton trucks equipped with a V6 engine has increased by over 600%. The Ford EcoBoost has

alone contributed to over 90% of that growth.

The truck market is changing rapidly, without some type of change in the engine of

the Chevrolet Silverado, and GMC Sierra, these trucks will soon become obsolete.

4

CHAPTER 2: RESEACH INTO THE TURBOCHARGED ENGINE

As spoken about in my proposal, I believe that adding a turbocharged V6 engine to

the Chevrolet Silverado and GMC Sierra will help to gain more customers and earn bigger

profits. However, the data that I accumulated from my research has shown that there are

many pros and cons of turbocharged engines.

How the Turbo Will Work

In the interviews I conducted with both Mr. Vierus, and Mr. Weiner, I asked how

exactly a turbocharged engine is different than a conventional engine. The turbo in an engine

allows for more air to be forced into the cylinders at one time, which in turn allows for more

fuel to combust and force the piston down with more force. In turn all these factors allow for

a dramatic increase in horsepower. Unlike the conventional way of adding more horsepower

through larger engines, the turbo does not add a significant amount of weight to the vehicle.

In theory the additional horsepower along with the lighter weight engine should allow for a

significant increase in fuel economy.

Benefits of a Turbocharged Engine

According to Mr. Vierus, “Turbocharged engines are the future of the truck industry.”

He explained that in his opinion, turbo-charged engines were going to take over the truck

market because they add an enormous amount of horsepower, torque, and towing capacity to

trucks, while still keeping a smaller engine. They are more efficient that the standard V8

engines. With smaller engines producing equal or more performance trucks of the future will

be able to become more compact, and adapt to the changes in the automotive market.

5

Ford’s EcoBoost

I have looked into Ford’s already existing turbo-charged V6 engine which they have

available for their half-ton pickup trucks. The purpose of my research into their trucks was to

see if indeed the idea is profitable. According to Fords website, starting in 2011, Ford began

putting a 3.5L turbocharged V6 engine into their F-series pickup trucks. They called this new

engine the “EcoBoost” and with 365 horsepower it far exceeded the other V6 engines of its

time. According to Raj Nair, Ford group’s vice president, “The F-150's proven 3.5-liter

EcoBoost has become the industry benchmark for advanced and efficient truck engines.”

With the Ford EcoBoost out selling all General Motors trucks, I decided to compare

the two engines and observe what the true difference is. Table 3, created using data from

GM and Ford websites, compares the Ford EcoBoost and the current GM engines.

Table 3: GM vs Ford

Ford 3.5L EcoBoost V6

Chevrolet 4.3L V6

Chevrolet 5.3L V8

PerformanceHorsepower 365 285 355Torque (lb-ft) 420 305 383Fuel MileageCity (MPG) 16 18 16Highway (MPG) 22 24 23

*Source: Chevrolet and Ford websites

As shown in Table 3, the EcoBoost’s turbo allows it to output more horsepower and

torque than the Chevrolet engines while still maintaining similar fuel mileage.

According to Ford’s website, the new 2015 F-150 will not only have the option of the

3.5L Ecoboost, but also a new 2.7L turbocharged engine. Although this new engine is not on

the market yet, this engine will get even better fuel mileage than the existing EcoBoost.

6

Disadvantages of a Turbocharged Engine

Although turbocharged engines do produce more power and better fuel economy,

they do have a few draw backs. While researching turbo-charged engines, I found that overall

they are more expensive to produce and therefor more expensive to buy for consumers.

According to usatoday.com, the turbo-charged Ford engine can add up to $2,395 when

compared to the other V6 they offer. While researching on Ford’s website, I found that the

EcoBoost adds an additional $1395 when compared to the conventional V8.

Fuel Mileage Fluctuation

Turbocharged engines do not always deliver the better fuel economy that they

advertise. This is caused by inconsistency in driving patterns for average drivers. According

to Phil LeBeau, CNBC Auto and Airline Industry Reporter, consumers who bought turbo-

charged vehicles reported fuel mileage lower than what was promised by the automakers.

Automakers record the estimated fuel mileage by the Environmental Protection Agency’s

standards. These standards use cycle based testing, and have optimal conditions for the

vehicle.

Engines equipped with turbochargers do have the ability to get the fuel mileage that

the automakers promise, but with unprofessional drivers and variance in environments,

vehicles with turbos will have a larger fluctuation in their fuel economy.

Legality of New Engine

When designing new technology, one of the main concerns is whether or not the new

product is already patented. If the new product is already being made by a different company

there will be legal boundaries.

7

I researched the Ford EcoBoost’s patents in depth to be positive General Motors can

legally produce a V6 turbocharged engine for their half-ton pick-up trucks. According to PR

Newswire, Ford has 150 patents on the current EcoBoost engine. The majority of the patents

are for the internal components of the powertrain that allow for their engine to run smoothly

with little to no turbo lag. There however is no specific patent concerning the usage of a

turbocharged engine in a half-ton truck.

8

CHAPTER 3: THE FINANCIALS OF THE NEW ENGINE

When designing and build a new engine for the Chevy Silverado and GMC Sierra,

there are several things to consider. The main concerns of a business man, like you, will be

the overall cost of the new engine, the financial availability of the company, and the

projected profits associated with the new product. In this chapter, I will discuss the things

listed above in more detail, and explain how I researched into the financials of the new

engine.

The Cost of the New Engine

The cost of putting a turbo-charged engine in the pick-up trucks will depend on the

individual cost of the following:

1) Engine design

2) Manufacturing of the turbo

3) Additional labor cost in assembly

Table 4: Engineers’ Salaries

Percentile 10% 25%50%

(Median)

75% 90%

Hourly Wage $25.27 $31.43 $39.47 $49.41 $59.30

Annual Wage $52,550

$65,370

$82,100$102,77

0$123,34

0

Engine Design- In order to produce the best and most efficient turbo-charged engine,

you need to have the best mechanical engineers working on the project. Table 4 shown

below, was taken from the Bureau of Labor Statistics’ website and shows the average pay for

mechanical engineers in the US.

9

The engineers that will be assigned to design the new engine will most likely be in the

75th percentile to assure the engine be made to the best quality. I have estimated that three

engineers will work on the project for approximately 40 hours a week for 3 months. This

brings the estimated cost of engine design to $80,044.

Manufacturing- The new turbo will be made from cast aluminum to allow for it to be

both strong and light weight. According to continental-corporation, aluminum turbochargers

allow for 30% less weight than steel, and are more affordable for automotive manufacturers.

According to afsinc.org, the manufacturing cost of cast aluminum can vary depending on the

quality of aluminum chosen, and the precision needed for the product. After researching on

dhgate.com, I compared the average price for wholesale turbo chargers. Although without the

design from the engineers I cannot be completely accurate with the cost of the manufactured

turbo, I estimate the cost on the high end at $350 per unit. With 382,000 half-ton Chevrolet

trucks sold in 2013, and an estimated 40% of those trucks being sold with the new engine,

the estimated cost per year would be 53.4 million dollars.

Additional Labor- With a turbocharger added to the engine, the time it takes to build

one engine will increase. According to bloomberg.com, the average General Motors

automotive assembly line worker makes $28/hour. From the information gathered in the

interviews with Mr. Vierus and Mr. Weiner, I estimate the time it takes to mount the turbo

onto the engine block will be 15 minutes. If one worker’s task is to attach the turbo, the

additional cost of labor per unit will be $7. If the estimated 152,000 trucks are built with the

new engine, the additional labor cost per year will be 1.07 million dollars.

I estimate the total cost of adding a new engine to be approximately 54.6 million

dollars per year.

10

Financials of General Motors

To provide you with the most accurate feasibility study, I researched into General

Motors finances to see if now is a good time for the company to invest in a new engine.

Figure 1 is an excerpt from a financial table on GM’s website showing the financial

statements from 2012 and 2013. The full table will be available in appendix A.

Figure 1: 2013 GM Financial Statement

With total net revenue increased by over 3 billion dollars, the company has room to

expand and research new products.

Projected Profits of the New Engine

The primary research I did in projecting the profits the new turbocharged engine was

a combination of looking at the example of Ford’s EcoBoost and General Motors recent

sales.

Sales- According to Forbes.com, the turbocharged 3.5L EcoBoost engine became the

number one engine sold in Ford F-150’s in May of 2012. In the first two year of the

11

EcoBoost, the turbocharged engine was the chosen powertrain in around 43 percent of the

half-ton Ford pick-up trucks sold.

According to torquenews.com, by the beginning of this year Ford has sold more than

500,000 F-150’s equipped with the turbocharged EcoBoost. This account for an average of

45 percent of all F-150’s sold in the past 3 years. Figure 2, shown below, displays the past 3

years of F-150 sales of Ford. This data used to build this graph was collected from both

pickuptrucks.com and the social Ford page.

Figure 2: Ford Sales

As is seen from the data in the graph above, since Ford’s introduction of the 3.5L

EcoBoost, total F-150 sales and EcoBoost sales have increased. Total F-150 sales have

increased by approximately 34% since the EcoBoost.

I then took the increase in Ford’s sales from their new engine and projected the

numbers to the Chevy Silverado and GMC Sierra. With an increase of 34 percent in three

12

2010 2011 2012 20130

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

All F-150's

F-150's with Ecoboost

Year

Num

ber

of

Tru

cks S

old

(I

n T

housands)

years, the Chevrolet Silverado will go from 382,000 sold in 2013 to 511,880 by 2016. The

Sierra will go from 143,000 to 190,000.

Profits- The cost of the new engine estimated at $357 per unit plus $80,044 per year

for engineers. Going by Ford’s example, the average increase of price due to the

turbocharged engine will be $1395 per truck equipped with the new engine. The new engine

will produce $1038 per truck. I estimated 40% of the first years trucks will be equipped with

the new engine and at $1038 per truck, the revenue caused by the new engine will be $218

million. After factoring in the cost of the engineers, the overall profits from the new engine in

the first year will be $217.9 million. With the increase of total sales due to the new engine,

by 2016 this profit margin should increase to around $291.4 million for the year.

13

CHAPTER 4: CONCLUSIONS AND RECOMMENDATIONS

General Motors has been one of the top manufacturers of trucks for the past 30 years.

Recently however, the sales have not competed with that Ford. The Chevrolet and GMC

trucks produce a relatively good amount of horsepower and torque, but one of the major

concerns of truck buyers is fuel economy.

Although General Motors has increased the number of trucks sold in the past few

years, with the addition of a truck equipped with a turbocharged V6 engine, I believe the

sales will increase more rapidly. Ford has already begun using a similar engine, but with the

top engineers, I believe GM can produce and engine with better fuel economy than that of

Ford.

After estimating both the cost and the revenue brought by the new engine, General

Motors should increase net profits by around $200 million. With this huge profit margin, as

well as the fact that the new engines will decrease carbon emissions and therefor benefit the

environment. I believe adding a new turbocharged V6 engine to the Chevrolet Silverado and

GMC Sierra is feasible and I strongly recommend General Motors begin to invest in the new

engine.

14

References

Ford. (2014). Retrieved July 12, 2014, from http://www.ford.com/trucks/f150/specifications/engine/

Chevrolet. (2014). Retrieved July 12, 2014, from http://www.chevrolet.com/silverado-1500-pickup-truck/specs/powertrain.html

U.S. Department of Energy. ( 2014). Retrieved July 20, 2014, from http://www.fueleconomy.gov/feg/why.shtml

Ford Social. (January 26, 2012). Retrieved July 19, 2014, from http://social.ford.com/our-articles/suvs/escape/guess-how-many-ecoboost-equipped-ford-vehicles-sold-in-2011/

PickupTrucks.com. (January 5, 2010). Retrieved July 20, 2014, from http://news.pickuptrucks.com/2010/01/2009-year-end-top-10-pickup-truck-sales.html

PickupTrucks.com. (January 3, 2014). Retrieved July 20, 2014, from http://news.pickuptrucks.com/2014/01/best-selling-pickup-trucks-december-2013.html

ConsumerReports.org. (February 4, 2013). Retrieved July 19, 2014, from http://www.consumerreports.org/cro/news/2013/02/survey-car-shoppers-want-better-fuel-economy-here-s-why/index.htm

Forbes. (June 3, 2012). Retrieved July 21, 2014, from http://www.forbes.com/sites/dalebuss/2012/06/03/ford-guns-ecoboost-engine-tech-brand-and-it-races-past-sync/3/

PR Newswire. (2014). Retrieved July 20, 2014, from http://www.prnewswire.com/news-releases/ecoboost-contributes-125-new-us-patents-continues-ford-tradition-of-patent-quality-63281852.html

USA Today. (May 16, 2013). Retrieved July 19, 2014, from http://www.usatoday.com/story/money/cars/2013/05/16/ford-ecoboost-engine-problems/2168865/

CNBC. (February 5, 2013). Retrieved July 21, 2014, from http://www.cnbc.com/id/100433542#.

Bureau of Labor Statistics. ( May 2013). Retrieved July20, 2014, from http://www.bls.gov/oes/current/oes172141.htm

Continental. (July 15, 2014). Retrieved July 20, 2014, from http://www.continental-corporation.com/www/pressportal_com_en/themes/press_releases/

15

3_automotive_group/powertrain/press_releases/pr_2014_07_15_turbocharger_en.html

GM. (2014). Retrieved July 19, 2014, from http://media.gm.com/content/dam/Media/gmcom/investor/2014/feb/q4-earnings/GM-2013-Q4-Chart-Set.pdf

Bloomberg. (October 18, 2012). Retrieved July 20, 2014, from http://www.bloomberg.com/news/2012-10-18/mbdlhh0yhq0x.html

Torque News. (May 13, 2014). Retrieved July 21, 2014, from http://www.torquenews.com/106/ford-f150-ecoboost-sales-top-half-million

AFS. (2006). Retrieved July 20, 2014, from http://www.afsinc.org/files/images/aluminum.pdf

Zobel, Derek. (June 18, 2013). Ford F-150 Chosen as Best Light-Duty Pickup Truck by Pickuptrucks.com and Popular Mechanics Magazine. ENP Newswire. Retrieved from http://www.lexisnexis.com.lib-ezproxy.tamu.edu:2048/hottopics/lnacademic?verb=sr&csi=344171

Vierus, G. (July 4, 2014). Personal interview.

Weiner, E. (July 20, 2014). Telephone interview.

16

Appendix A: General Motors 2013 Financial Statements

17