New General Motors Sales czar Susan Docherty would rather fight than have you switch to another brand.
While the recovery is just taken hold, there are positive signs in the economy, and that’s translating into some measurable gains for the post-bankruptcy General Motors, company officials declared during a Wednesday meeting with the news media.
The struggling automaker expects to gain share, when the final sales numbers are counted for October, and those cars, trucks and crossovers are rolling out of dealer lots at a higher transaction price than a year ago, said Susan Docherty, GM’s new director of sales. Residuals – industry speak for projected trade-in values – are rising and the automaker is hoping to “dial back” on incentives, which remain the highest in the industry.
But Docherty, who assumed her new post just nine days ago, also acknowledged that GM has some significant challenges ahead of it. For one thing, it has to improve its standing in the annual and highly influential Consumer Reports magazine survey of vehicle dependability. In a news conference just yesterday, CR editors said that GM’s performance is “inconsistent,” at best.
The carmaker’s mediocre performance is “one of the things that keeps me up at night,” said Docherty, who was previously in charge of the Buick-Pontiac-GMC brand group.
“Clearly, there are signs of an economic recovery from the worst recession in 70 years,” noted Mike Di Giovanni, GM’s chief market analyst, who joined Docherty for today’s briefing. But he warned that while the worst may be over, the economy has a long way to go, and so does the auto industry.
October sales should hit an annualized rate of 10.7 million - still the worst numbers since the 1980s, cautioned GM's chief analyst, Mike Di Giovanni.
On the positive side, said Di Giovanni, sales for October are likely to come in at an annualized rate of 10.7 million, well above the low 9 million figures repeated for much of the first half of 2009. That’s a sharp turnaround from September, which suffered a significant “payback” in the wake of the government-funded Cash-for-Clunkers program.
“That said, this isn’t great,” the analyst cautioned, pointing out that even the larger figure “is a level we haven’t seen since the 1980s.”
While the final figures could vary a bit, GM expects October to bring it its first year-over-year sales gain in 21 months. Overall, the automaker is forecasting it will achieve a market share somewhere between 20 and 21%, with its retail share only slightly lower, at 18 to 19%. That would position GM as the number one automaker in the U.S., about three share points ahead of Toyota, and four in front of Ford.
Perhaps more importantly, 95% of GM’s October sales are being rung up by the Chevrolet, Cadillac, Buick and GMC brands, the company’s four surviving divisions. As part of its bankruptcy reorganization, the company is phasing out four other brands, and trimming back its retail network by about 1,200 dealers.
According to Docherty, the numbers are being driven, in large part by some of GM’s newest models – many of which won praise by Consumer Reports. Demand is strong enough for the new Chevy Equinox and GMC Terrain crossovers that GM will shortly launch a third production shift.
With four GM brands going away – Saab and Hummer sold, Pontiac and Saturn closing down – and with so many dealers closing, the automaker is reaching out to millions of “free agent” customers who might feel no compunction about switching to the competition when they next trade in. To try to lure them back, a new program, dubbed Project Outreach, will offer a free oil change – at one of the remaining dealers, of course – to 1.6 million GM owners.
Then there’s the reborn Camaro “pony car.” The Chevy offering, which was relaunched after a nearly eight-year absence, has been outselling its arch-rival, the Ford Mustang, for the first time since 1985 and, if demand holds, Camaro could snag the title as the segment’s best-seller for 2009, even though it didn’t debut until the beginning of the second quarter.
Another positive sign, noted Docherty, is the upturn in residual values for new offerings like the 2010 Cadillac SRX which, at 52% after three years, is a 21.5 point increase over the old model.
Residuals matter in a number of ways, but from a consumer point of view they can help make or break a sale since it translates into how much money a buyer might expect to get back on a trade-in.
GM heavily damaged its residuals in a number of ways: by letting quality slide, by dumping cars into money-losing daily rental fleets, by running up incentives to record levels and by over-emphasizing subsidized leasing.
With last year’s financial meltdown, GM was forced to abandon leasing entirely, and has only, cautiously, resumed the sales practice. Leases will account for just a bit more than 2% of its October volume, Docherty projected, and eventually that might get back up to somewhere between 7 and 10%. But by offering leases only on select products – notably including luxury models like the SRX, that will be far less than the 20% lease rates GM used to run.
As for incentives, they’re currently averaging about $3,900 a vehicle, Docherty confided. The goal is to trim that back, though she admitted it is unlikely rebates and other cash givebacks will ever go away entirely, explaining that, “I want to be competitive on incentives, not the leader. I want to be the leader on residuals.”
Docherty noted that there are actually some advantages to incentives, which can help a struggling buyer make it into a new car. “Not all incentives are evil,” she suggested.