GM's 90-Day Report Card: Mixed Results
October 07, 2009

The day in July when General Motors emerged from Chapter 11 bankruptcy, CEO Fritz Henderson  declared the new GM would focus on three things -- customers, cars and culture.

On Wednesday morning, Henderson is scheduled to give a 90-day progress report on how GM is doing.

So how is GM really doing in those three categories?

As for customers, GM, despite trying new ways to lure them, has found too few. As for cars, GM's new offerings are promising. As for culture, the jury's still out. And disappointments -- there have been a few.

Customers: Too Few

As for customers, GM has found too few of them. As with virtually all manufacturers, GM sales are down this year, but its decline is steeper than the overall industry's decline.

GM sales, including all right brands, totaled 589,385 in the third quarter this year, down 29 percent from the 824,281 it sold in the third quarter of 2008, according to an analysis by Edmunds.com, parent of AutoObserver.com. That compares with the industry decline of about 10 percent in the quarter. As a result, GM's market share fell to 19.7 percent in the third quarter of 2009, compared with 24.7 percent a year ago.

"GM has felt more pain than the industry at large, said Edmunds.com Senior Analyst Jessica Caldwell.

The picture was not rosy for GM's four core divisions, the only ones that go forward with the new GM.

- Buick's third-quarter sales totaled 25,166 vehicles, a 40-percent decline from 41,967 vehicles in the third quarter of 2008. Buick's market share dipped to 0.8 percent from 1.3 percent quarter-to-quarter.

- Cadillac sold 24,441 vehicles in the third quarter, down 40 percent from 40,859 vehicles sold in the year-ago quarter. Cadillac's share fell to 0.8 percent from 1.2 percent.

- Chevrolet sold 394,294 vehicles in the third quarter, down 20 percent from 493,670 vehicles sold a year ago. Chevrolet's market share dipped to 12.3 percent from 14.8 percent.

- GMC sold 61,476 vehicles, down 42 percent from 105,836 in the year-ago quarter. GMC's share slipped to 2.1 percent from 3.2 percent.

GM, eBay: Tried and Suspended

To address the problem of too-few customers, GM launched a couple of marketing experiments since emerging from bankruptcy, with mixed results.

In August, General Motors launched an experiment with eBay.com whereby its California dealers could lead their inventories of some Buick, Chevrolet, GMC and Pontiac vehicles on the online shopping site. GM was optimistic the experiment would be so successful it would be rolled out nationwide and to all brands.

However, the automaker suspended the program in September, saying it hadn't generated the hoped-for sales. GM's marketing chief Mark LaNeve said last week he expected GM and eBay would try again next year with some tweaks to the program. 

Edmunds.com noted the program's flaw in pricing, a flaw not lost on consumers. "Buy It Now" prices were, on average, 2 percent higher than Edmunds.com's True Market Value, a price that reflects what shoppers actually pay for vehicles.

GM Guarantee: Shifts the Focus

In September, GM launched a marketing campaign, "May the Best Car Win," that included a 60-day money-back guarantee to buyers of its Buick, Chevrolet, Cadillac and GMC models. The kick-off ads featured government-appointed GM Chairman Ed Whitacre.

The campaign appears to be mostly successful at least in shifting the discussion from GM's bankruptcy and financial situation to its vehicles.

Based on Edmunds.com data, the GM program: is drawing more shoppers to GM vehicles than before -- on some brands and models more than others; and is turning some shoppers into buyers in varying degrees depending on the brand and model.

"The Chevrolet Malibu benefitted most -- and significantly -- from the money-back guarantee," said Edmunds.com Senior Analyst David Tompkins, PhD. "Since the program's introduction, the Malibu has been cross-shopped far more often against import competitors like the Toyota Camry, Honda Accord, Nissan Altima and Hyundai Sonata than it had been before the program."

Consideration reflects casual interest in a vehicle as indicated by one or more Edmunds.com page views. Consideration is a good metric for advertising effectiveness. The correlation to sales is not strong, but companies value consideration because it reflects interest in a brand or model that could translate into intent when the consumer is ready to buy. 

Return to Traditional Ploys

Meantime, GM returned to leasing, which should help Cadillac in particular, though there are few signs of that yet.

And GM continued with traditional incentives consisting of cash rebates and low-interest financing. GM has been spending about $3,796 a vehicle on incentives for the year to date, according to Edmunds.com's proprietary Total Cost of Incentives (TCI) data. That's the highest level since 2004.

 

Year	Manufacturer	Market Share	True Cost of Incentives*
2002	GM	28.6%	$2,723
2003	GM	28.3%	$3,595
2004	GM	27.5%	$3,872
2005	GM	26.4%	$3,603
2006	GM	24.7%	$2,896
2007	GM	23.9%	$3,018
2008	GM	22.4%	$3,589
2009*	GM	19.7%	$3,796

*Year to date

Source: Edmunds.com

Cars: Promising New Models

On the cars side, GM has launched some promising new models since it emerged from bankruptcy in early July. Notably it has gone to market with a redesigned Buick LaCrosse sedan, a made-over Cadillac SRX crossover, a new Cadillac CTS wagon, a revamped Chevrolet Equinox and a new GMC Terrain crossover.

Buick is aiming the LaCrosse squarely at the Lexus ES 350. The reviews are favorable, and, indeed, the LaCrosse won a shoot-out with the Lexus in a comparison test by Edmunds' Inside Line.

"At first we questioned GM's strategy, not only with the LaCrosse itself but also with the notion of Buick as a genuine competitor for Lexus. But after this comparison, we have no doubt that the 2010 Buick LaCrosse is a game-changing, brand-defining automobile that will go far to both revitalize Buick and promote the new General Motors," wrote Chris Walton, chief road test editor for Edmunds' Inside Line.

Now Buick's challenge is to get Lexus buyers to seriously consider the LaCrosse, a challenge it is having in its early going as the LaCrosse is cross-shopped more often with GM models and the new 2010 Ford Taurus than the Lexus ES 350, according to Edmunds.com's analysis.

As for the Chevrolet Equinox, Walton wrote: "Despite its few dynamic idiosyncrasies, we feel the 2010 Chevrolet Equinox LT2 represents yet another clear example of what GM can accomplish."

Culture: Question Mark

Henderson's promise of culture change at GM remains the biggest question mark. GM is attemping the seemingly impossible: trying to change the culture with the same people, many of whom -- including Henderson himself -- have spent their entire careers at GM and know no other culture.

Disappointments: A Few

At the top of GM's list of disappointments of the last few months has to be the failed attempt to sell its Saturn division to the Penske Automotive Group. GM now has another division, along with Pontiac, to wind down quickly.

As its sale of Saab seems to be coming to a close, the sale of Hummer to a Chinese company remains up in the air even though GM insists it is on track.

The sale of GM's Opel division was long and drawn out -- and continues to be a messy business.

What only can be concluded is that GM has a long way to go in making A grades with customers, its cars and its culture. -- Michelle Krebs, Senior Analyst and Editor at Large

 

 

Posted by Michelle Krebs at 4:03 AM under Analysis , Companies , GM | Comments (4) | digg this | Seed Newsvine

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