It's very likely due to an issue of the Ignition Switch failing to read the VATS/Security Key/"PassKey" Resistor.
Here is a site that outlines the different Model Years effected.
Here is a regurgitation of that site:
The anti-theft system may fail causing a no start condition, the security light may illuminate. Our technicians tell us that the ignition switch may need to be replaced to correct this fault.
GMC Yukon Denali Vehicles With This Problem
Average mileage: 167,175 Miles
Here is an article explaining different issues with PassLock/VATS and different options
Here's a regurgitation of some key points of that article:
Operating states of the warning light on Passlock systems should be:
- On for bulb check
- Off when engine is running
- On steady if a fault occurs
- Flashing in the learn mode
Under normal operation, you should see the warning light on during bulb check and off when the engine is running—no message displayed on the DIC.
When the system detects a fault, the warning light will illuminate or a message will be displayed on the DIC, depending on the model. If a fault occurs while driving, the engine may or may not start after turning the ignition off. If a fault occurs when trying to start the vehicle, it probably won't start.
The warning light on the VATS system is similar except it does not have the learn mode.
By far, the most common problem with the VATS system is broken wires in the steering column. These wires connect the ignition lock cylinder to the under-dash wire harness. The proper repair is to replace the ignition lock cylinder, which comes with wires already attached that snake down the steering column. The new lock cylinder will come with a key blank that will only rotate the new lock cylinder—it does not have a resistor in it that will allow the engine to start and run. A new key must be made from the blank because it has the proper resistor value. Normally, the resistor is read from the old key using a tool called an "interrogator." The interrogator is available in the parts department of most GM dealers.
The paragraph quoted above, in the yellow box, affirms the suspicion of a common issue across GM vehicles of the era. Depending on the model and year, there will be plastic covering under the steering column, to hide wires etc. You should remove these panels and attempt to gently wiggle the main wire-harness bundle that should just about touch the drivers right knee when seated. The exact location will vary based on the Model and Year, but if you get your head down at the floor and look up under the dash, it will likely be hard to miss the large bundle of wires.
Symptoms and Solutions
- Passlock system fault code B2960
- Security light flashing
- Engine starts and dies
If you find yourself stranded, your engine won't start, and the security light is flashing, wait ten minutes. The flashing light should go off or illuminate without flashing. When it does, turn the ignition off, wait twenty seconds, and then try to start the engine. If it starts and runs, you should be able to make it home. Please remember that this is only a temporary fix; the fault will happen again.
The most common repair is to replace the ignition lock cylinder or Passlock sensor and perform a relearn procedure.
VATS (Vehicle Anti-Theft System)
- Security light on steady
- Engine won't crank—all other systems functioning normally
If you find yourself stranded and the engine won't crank over, turn the ignition off and wait four minutes. Then, try again. If the engine starts, you should be able to make it home. Please remember that this is only a temporary fix; the fault will happen again.
The most common repair is to replace the ignition lock cylinder due to broken wires inside the steering column.
This issue with the PassLock/VATS system is common on most Early-to-Late Oughties GM vehicles. An easy test would be a New/Lightly-Used spare-key with a known good resistor which has little to no wear. If this key works flawlessly it's likely just the normally-used key needs replacing, rather than the Ignition "Module". I advise testing a spare key, first, if possible.
Obligatory removal, cleaning, and re-tightening of your battery terminals and grounds is also advised as a start to diagnosing this issue.
I hope this helps.