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WILL GM'S NEW CARS SELL?

THE BALTIMORE SUN

WASHINGTON -- Linda Johnson handed her cone of ] Haagen-Dazs to a friend and slipped behind the steering wheel of a snow white 1995 Chevrolet Monte Carlo.

She tested the comfort of the seat, then the head and legroom, and carefully inspected the instrument panel and the car's rounded lines. Only then did a warm smile of approval slowly emerge.

"Jack Smith is doing a good job," said Ms. Johnson, a government worker from Rockville, who was among several hundred people invited to a recent private showing of General Motors Corp.'s newest line of cars.

At the door was Mr. Smith -- John F. Smith Jr., the 56-year-old president of GM -- who was all smiles as his confidence was being bolstered by the stream of compliments from his guests.

"The Aurora looks like a real winner," said one visitor, patting Mr. Smith on the back.

Although the setting this night was the chandeliered ballroom of the Hyatt Regency, a few blocks from the Capitol, and included members of Congress and government workers, it was the next best thing to the marketplace.

After closing plants, eliminating hundreds of thousands of jobs, cutting costs and going through management shake-ups, the biggest test still awaits the auto giant in the showrooms and on the asphalt lots where consumers decide whose product they will buy.

GM executives acknowledge their cars have been outdated and of poor quality for years, resulting in stunning losses of market share.

A critical part of the company's plans for a turnaround is the revamping of its entire fleet of cars and trucks. It is in the midst of one of the most extensive new model introduction programs in its history. Nine new models will come out this year, and two more are scheduled to appear in showrooms in early January.

It actually started last year with the revamped Camaro and Firebird. The all-new Cadillac DeVille and S-10 trucks quickly followed.

The new Chevrolet Monte Carlo and Lumina, Oldsmobile Aurora and Buick Riviera are now in showrooms, and by this fall they will be joined by the redesigned Geo Metro, Chevrolet Cavalier, Pontiac Sunfire and the Chevrolet Blazer and GMC Jimmy sport utility vehicles.

Early next year, GM will unveil its all new four-door full-size utility vehicles, the Tahoe and Yukon.

Chevrolet, in fact, is scheduled to introduced a redesigned model every six months through the end of the decade.

"GM has made significant gains in reducing its costs [of producing cars] and is in the process of revamping its entire vehicle lineup," said David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation. "With fresh products and lower cost, they could do extremely well in the marketplace. They can make things tough for their competitors."

While it is too soon to accurately gauge consumer acceptance of these newest offerings, they have received favorable reviews in the automotive press. USA Today, for instance, called the Lumina "the best Chevy in years." Road & Track called the Aurora "the finest new Oldsmobile to come down the assembly line in many a decade."

Michael P. Ward, who follows GM for Kidder, Peabody & Co. in New York, agrees that the jury is still out on its latest models. "The cars they introduced last year are doing extremely well."

But as for the newest models, the Lumina, Monte Carlo, Aurora and Riviera, "We probably won't get a clear indication on how well these cars are going to do until January," he said. He said the Aurora could help the Oldsmobile division, but it won't rescue GM. "The volume is too small."

The analyst said the Lumina and its two-door version, the Monte Carlo, offer "a fresh new design," but he is not certain they represent enough of a leap in design and technology to make a big impact in the extremely competitive midsize car market.

But, Mr. Ward added, they will benefit greatly from the most powerful distribution systems in the auto industry.

"Yeah, I think they can make it in the marketplace," he said, "but it is not going to happen overnight."

While GM's future looks better than it has for several years, Mr. Smith dismisses any suggestion that the company can ever return to the days when it controlled 50 percent of the U.S. car market.

"Our plan is to gradually increase our market share . . . If you get great cars into the market, you're going to get market share. So our focus is on getting great cars into the market," Mr. Smith said.

There are signs that this strategy is beginning to pay off: The new models are being favorably received, according to J. Michael Losh, the newly appointed executive vice president. Mr. Losh said that retail sales, which do not include the less profitable or, in some cases, money-losing fleet sales, are up 11 percent for the first six months of 1994. "This compares with an industry growth of 7 percent during the same period."

And for the first time since 1989, Pontiac is outselling Toyota in the United States.

The numbers are even more im pressive when limited to GM's recently redesigned vehicles. Sales of the Camaro, for instance, are up more than 100 percent, and sales of its sister car, the Pontiac Firebird, are up 120 percent.

Geo Prizm sales have shot up 60 percent since its make-over, but the company says that number is misleading. "In reality, the car is doing much better," said John F. Maciarz, a GM spokesman in Detroit.

About two-thirds of the Prizms sold in 1992 were unprofitable sales to rental fleets. Such sales were not uncommon during the difficult years of the recession as GM looked for a way to keeps its factories open and workers employed.

According to Mr. Maciarz, GM is not only selling more of its revamped models, but making more money on each car delivered. On the new models, he said, the company is not offering the profit-cutting incentives that car buyers had become accustomed to in recent years.

GM, as well as the other domestic car companies, has been helped by the strong yen that has added several thousand dollars to the cost of some Japanese imports.

"There is no doubt about it, the strong yen is helping all the domestic manufacturers," said Joseph Phillippi, an auto analyst with Lehman Brothers in New York. That advantage can't last, however, he said.

Sales of vehicles made in the United States are also being helped by the "consumer perception that their quality gains are better than they really are," said John H. Hammond, a senior partner at J. D. Power and Associates, a market research firm based in Agoura Hills, Calif.

He said that while GM has made improvements in quality, it still lags behind some of its Japanese competitors.

But GM is anxious to close the gap. The redesigned Chevy Blazer is a good example of those efforts. Before settling on the final design for the sport utility vehicle, the company took it to Denver and invited 1,500 sport-utility owners and users "to go over it with a fine-tooth comb" and recommend changes. GM also sought advice from its 18 largest and best dealers.

The process resulted in dozens of changes to the Blazer, including adding air bags and removing the spare from the passenger compartment. GM also added cup holders. That may not seem an important detail, but they are very popular with consumers and their absence on so many GM models was viewed as a symbol of just how out of touch the company was with the public.

"They have talked to their customers for decades," Mr. Cole said, "but for the first time in a long, long time, they are listening to them."

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