Can Chevy's Impala Outrun the Camry?

GM's new version of this venerable nameplate has plenty going for it, including quality and price. Getting Americans to notice is the trick

By David Welch

Everyone knows how Japan stole the passenger-car business from America's Big Three a few decades ago. It started when Japanese cars offered better fuel economy during the oil shocks in the '70s and early '80s. After that, it was Detroit's quality gaffes and relentlessly rote styling that turned off baby boomers.

Before the Big Three could regain their mojo, Honda's (HMC ) Accord and Toyota's (TM ) Camry were duking it out for the title of America's best-selling family car. Detroit has lost more than just bragging rights in a sales race. Consumers view Japanese cars as superior in nearly every dimension, and American cars are seen as a choice for people who can't afford anything nicer or just don't know better.


  That truism is astonishing when you think about all the storied American nameplates that once adorned the cars Everyman was proud to drive. In the 1950s, Chevrolet Bel Airs and Ford Fairlanes ruled. In the 1960s, the Chevy Impala was king. In fact, General Motors (GM ) Chevy sold 1.2 million Impalas in 1965 -- accounting for 11% of U.S. car sales. GM's Oldsmobile division sold millions of Cutlasses in the 1980s.

And Ford (F ) seized leadership in the family-car business with the new Taurus in 1986 but lost it with the Taurus' second redesign, in 1996. With that ridiculous ovoid car, Ford handed the family-car crown back to the Japanese, who haven't surrendered it since.

GM is trying to recapture some of its former glory with the all-new Chevrolet Impala, which arrived in dealer showrooms in late July. Chevy invited the auto press to test-drive the car among the tobacco patches outside Nashville late last month. "We can get it back with this model," new Chevy boss Edward Peper Jr. told those of us who went to Tennessee. "No doubt about it."


  Peper hopes he can rebuild the Impala's image so it can garner the kind of respect that Japanese models do. The Impala is certainly a respectable car, but its styling doesn't go far enough to grab attention. Since the Impala doesn't leapfrog the Japanese cars, Chevy will have a tough time convincing happy import owners that they need to trade up, so don't expect Chevy to steal the sales crown with this car.

Toyota sold 426,000 Camrys last year, and Honda, in a down year, sold 386,000 Accords. Chevy sold 290,000 Impalas in 2004, and half of them went to corporate fleets and rental-car agencies.

The Impala's problem boils down to money. Chevy brags that the latest version has an all-new body with fresher styling than the outgoing model, which is true. But GM didn't spend the money to change the car's internal frame, which means that its profile is similar to the old one. And it's pretty bland.


  Even the marketing budgets are tight. One Impala marketer lamented during my test drive that Toyota and Honda sometimes spend double the money every year marketing the Camry and Accord that Chevy gets for the Impala. "There are just too many mouths to feed," he said.

So even when GM has something to crow about, it's tougher to cut through the noise made by the imports, which can focus more ad dollars on one car. And that's too bad, because Chevy has a pretty good story to tell with the Impala. The car's quality, for example, routinely beats the Camry when judged by problems found in the first three months of ownership, says J.D. Power & Associates. And for three-year reliability, the Impala had 175 problems per 100 cars, vs. 173 per 100 vehicles for the Camry -- and far better than the industry average of 237 problems per 100.

Driving on the Tennessee back roads, I found that the Impala handles better than a Camry, which I drove the same day. The Impala's steering is more precise, and the car corners much more sharply. It's faster than the Ford 500 sedan. Inside, the Impala's buttons, knobs, and gauges are a vast upgrade over past GM models. The interior is competitive with most models on the road.


  Chevy will have another problem. Though the improvements make it competitive, new Camrys and Accords will hit the market in the next couple of years. Toyota may even offer all-wheel drive in the Camry. The new Impala just doesn't go far enough with styling or performance. And its quality, though on par with the Japanese, still isn't the best. So Chevy could soon find itself competing against better Japanese cars in just two years.

To Chevy's credit, though, is it's pricing. The Impala hits dealerships under GM's new "Value Pricing" strategy, which is the car business equivalent of Wal-Mart's everyday low prices. The base LS model's $21,990 sticker is 43% of an American family's annual household income. GM models for many years have been priced higher than that, and consumers didn't see a real bargain.

Back in '65, the base price of a four-door Impala, adding in many typical options, was $2,539 -- about 42% of household income. So the car is cheaper than Camry and Accord and within reach for many consumers.

The Impala proves that Detroit can build a good car. Now it needs to prove to Americans that blowing an additional $2,300 for a Toyota isn't such a wise move. If they can't, then the glory days of past Impalas will just be fond memories.

Welch is BusinessWeek's Detroit bureau chief

Edited by Patricia O'Connell

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