DETROIT — DETROIT -- Gary Kovacic was putting the finishing touches on plans for the 2008 Chevrolet Malibu two years ago when his boss raised the bar.
What would it take to make the car better than the competing Camry that Japan's Toyota Motor Corp. had just put on sale, General Motors Corp. Chief Executive Officer G. Richard Wagoner Jr. wanted to know.
The question forced Kovacic and his engineering team to put two months into a part-by-part comparison of their car with the Camry and to propose hundreds of design upgrades. The result was a vehicle that Car and Driver magazine rated better than the Camry and close to Honda Motor Co.'s new Accord. The GM sedan was named North American Car of the Year by 45 auto reporters in an announcement at the Detroit auto show last week.
The Malibu "is probably the best sedan GM has ever produced in the midsize segment," the industry's most competitive, said Jesse Toprak, an analyst at Edmunds.com in Santa Monica, Calif. The company tracks vehicle pricing and shoppers' impressions.
One early measure of success is that the Malibu is selling for almost full sticker price in Southern California, a market dominated by Toyota, Toprak said. GM Vice Chairman Robert A. Lutz has predicted that Malibu sales will top 200,000 this year, almost double the volume of the previous version.
"This was the car that we knew the company could build, but due to a lot of internal constraints, they hadn't built yet," said Michael Robinet, an auto forecaster at CSM Worldwide Inc. in Northville, Mich.
Toyota executives aren't conceding defeat, and nobody predicts Americans will buy more Malibus than Camrys. In 2007, the Camry was the best-selling car in the United States for a sixth straight year, at 473,108 models.
"Our guys have driven it," said Jim Lentz, president of Toyota's U.S. sales unit. "It's a good car. There are a lot of really good players in that segment."
GM's U.S. sales fell 6 percent in 2007 and its market share dropped to 23.7 percent, the lowest since 1925. The company hasn't had a sales increase in its home market since 1999.
Until January 2006, Kovacic's mission with the new Malibu was to improve exterior styling and upgrade the interior. Kovacic, 52, was lead engineer on three earlier car-development projects in his 29 years at GM.
"This is the first time someone has come in and said, 'What are you going to do to beat them?' " Kovacic said.
For the past two decades, GM and its Detroit rivals counted on earnings from pickups and sport utility vehicles, where Toyota and other foreign automakers weren't strong, said Jack R. Nerad, an analyst for Kelley Blue Book in Irvine, Calif. Rising fuel prices and new competition wrecked big trucks profits.
"Suddenly the imports were breathing down their necks on trucks, and they had the definite desire to fight back in cars."
The review of the Malibu plans culminated in a 90-minute meeting in July 2006 at GM's Warren, Mich., technology center with Wagoner, Lutz and North American marketing chief Mark R. LaNeve. Kovacic and his engineers gave an "honest assessment."
The changes included shoehorning in a new, unplanned six-speed transmission with the four-cylinder engine, without delaying the start of production in October 2007. The team needed to make the car quieter and smoother to drive, and plan to sell more high-mileage versions, Kovacic said.
"Rick said, 'OK, that sounds good, go do it,' " Kovacic said. "There was no debate about whether it was worth doing it, or a question about resources."
In about August 2006, Lutz and Jon Lauckner, Lutz's top deputy, drove an early model at GM's test track in Milford, Mich. The four-cylinder engine was too noisy, and Lutz concluded the car wasn't yet "good enough," Kovacic said. "His criticism sort of rang through the company here," Kovacic said.
Kovacic's team added an engine cover equipped with five chambers, called attenuators, that change the air flow around the motor and cancel out the frequencies of unwanted noise, Lauckner said. The upgrades probably added $100 to $200 to the cost of the car, he said.
GM's Malibu advertising budget of more than $100 million is bigger than any car campaign at the company in the past two decades and comparable to Toyota and Honda spending on new sedans, LaNeve said.