Here's something you don't hear often (if ever) from General Motors (GM): Small is cool. That will be GM's pitch on Apr. 4, when it takes the wraps off a trio of subcompact cars at the New York Auto Show. And by subcompact, they're talking Mini Cooper-size cars that would cost less than $10,000.
GM's bread-and-butter Chevrolet division will unveil the three Korean-designed minis—named the Trax, the Beat, and the Groove—in a play to prove that it can make stylish, fuel-efficient cars just like Honda (HMC) and Toyota (TM). The big picture for these small cars: Chevy wants to show that its brand stands for more than just trucks like the brawny Silverado pickup and gas-guzzling Suburban.
"We made conscious decisions in favor of trucks in the mid-'90s," says John Smith, GM's group vice-president for global strategy. "Now it's time to do something more with cars."
Wooing Asian Brand Defectors
The new models are concept cars; GM hasn't yet green-lighted a mini for the U.S. But Vice-Chairman Robert Lutz, who heads product development, is pushing hard to make it happen.
Smith says GM will decide whether to sell minis in the U.S. based in part on reaction to the cars at the New York show. He says they have a good shot. GM already plans to build the cars in Korea for emerging markets; Korean engineering costs are 60% of what they are here.
Chevy has become GM's global brand, selling 4.4 million cars around the world last year. GM targets global Chevy sales to hit 5.4 million by 2011.
Since GM will be building the subcompacts already, shipping some to the U.S. wouldn't be difficult, Smith says. But he admits he doesn't know whether the cars can be sold profitably. "That's a good question," Smith says. "I don't know the answer to it."
At home, Chevrolet is desperately trying to recoup passenger-car buyers who fled to Asian brands over the past 20 years. This fall a new and more boldly styled Malibu hits the market. Next year it's a rear-drive Impala that takes square aim at the Chrysler 300. A new Chevy Cobalt compact comes after that.
One of the Korean-designed mini cars will replace GM's Chevrolet Matiz, called the Spark in China, which is sold in emerging markets. That new model will start selling overseas around 2010. The new mini cars could show up in U.S. showrooms shortly after that.
New Image Taps Urban Style
While Chevy is waiting for the new cars to arrive, the company is ramping up an advertising campaign with the line, "People who love cars love Chevrolet." Instead of the usual country music ads promoting its trucks, Chevy has cut a marketing deal with young rap musician T.I. to reach the hip-hop crowd, says Chevrolet General Manager Edward Peper Jr.
The mini cars would be another effort to reach the urban milieu. Even though GM is targeting a low price, these aren't just econoboxes. Like Toyota's Scion, they make a fashion statement.
The Beat is sort of a Scion xA with a dose of Hot Wheels splashed in. The copper-orange Trax has sport-utility looks with urban flair, and the Groove is sort of a micro minivan, only with rounded edges that defy the label of utilitarianism.
The mini family is intended to offer style, along with the 40-50 mpg one can get from its three-cylinder engines. "Bringing a car that size to the U.S. as a commodity is suicide," says James Hall, vice-president of AutoPacific. "They have to be image cars like Mini and Scion."
The question is whether GM can find enough buyers to justify the venture. Detroit's record with small cars and subcompacts is embarrassing. Remember the AMC Pacer and Ford (F) Pinto?
Let the Voters Decide
More serious entries like the Chevy Cavalier and Pontiac Sunfire were losers, too. But with fuel prices fluctuating between $2.50 and $3 a gallon, sales of subcompacts like the Toyota Yaris, Honda Fit, and Chevy Aveo rose 50% last year, to 300,000 cars—and they have doubled through February.
Still, few have tried a mini in the U.S. DaimlerChrysler's (DCX) Smart division plans to launch one soon, and Ford will bring a new subcompact to the U.S. in two years, says AutoPacific's Hall. But there are doubters. Says Global Insight analyst John Wolkonowicz: "Americans don't want cars that small."
We'll see. After the show, in what could only be described as American Idol for cars, GM will set up a Web site at www.vote4chevrolet.com, where consumers can vote for their favorite mini car. If there is enough interest, the winning car will make it stateside.