GM's Hot Models
Catch the watercooler chat or bar-room bustle in Detroit these days and the betting odds are that General Motors (GM) will make it back from the brink, but Ford (F) is doomed. The logic behind it says that GM at least has a good product strategy.
And you know what? That seems to be the case. I chatted with some GM executives and designers in recent weeks, talked to industry intelligence folk, and prodded around to see what's coming. At long last it looks like we'll soon see the fruits of labor from GM car czar Robert A. "Bob" Lutz.
The spate of new models that will hit showrooms starting this fall and through 2009 are vital. Sure, Chairman and CEO G. Richard Wagoner Jr.'s cost-cutting campaign has slowed the bleeding. But GM has been steering itself in and out of profitability while shrinking itself since 1980. What the company really needs are some hot models that will boost sales, jack up revenue, and bring some respect back to GM's brands. Lutz vowed in a recent e-mail that we will see "no more ugly or middle-of-the-road cars or trucks from GM. I won't have it."
Will he come through? This is the guy who crowed a few years ago that the slow-selling Chevrolet Malibu and Pontiac Grand Prix amounted to an assault on the passenger car market. That assault never made it to the beachhead.
But let's be fair. Those weren't Lutz's cars. Having taken a hard look at what GM has coming, there are some good models coming that could help turn the company around. "I think GM has the right product plan," says Global Insight analyst John Wolkonowicz. "They'll run right over Ford and maybe Chrysler (DCX), too."
This doesn't mean GM has fixed all of its problems. It still brings home just $19,852 per vehicle—about $3,000 per vehicle less than Toyota (TM). While some of the best-looking future models don't hit the market until 2008 or 2009, market share is sinking. CSM Worldwide Vice-President Michael Robinet says GM's cut of the U.S. market could fall from 24.8% through July to as low as 22% before it bottoms out later in the decade. And even the ever-confident Lutz said in an interview that another big spike in fuel prices could hit GM's turnaround attempt hard.
But most analysts see signs of hope in the future models. Here are some of the Lutz cars that have a shot at reversing GM's fortunes.
Acadia, Buick Enclave, and Saturn Outlook:
Acadia, Buick Enclave, and Saturn Outlook:These trucks are vital. Car buyers are ditching midsized SUVs like the Chevy Trailblazer as if they had exploding gas tanks. Actually, they have ballooning gasoline bills. Even GM's new large SUVs, which have held up surprisingly well despite $3-a-gallon gasoline, are seeing slower sales.
When its new large crossover SUVs arrive, starting early next year, GM will finally have an eight-passenger crossover sport-ute that seats as many as a Honda Pilot (HMC) or Toyota Highlander, only more comfortably, says J.P. Morgan analyst Himanshu Patel, who drove the Outlook at a recent event held for analysts. The new utes will get much better fuel economy than the company's own Chevrolet Tahoe and GMC Yukon truck-based SUVs. The trio of crossovers should get 26 miles per gallon on the highway—about five mpg better than a Tahoe or Yukon. Chevrolet is also rumored to have one of these in the works. The combination of roominess, fuel economy, and price could be best in class, Patel said in a research note.
Malibu:Let's face it. The current Malibu is a slab-sided bore. The cabin feels cheap, and it hasn't managed to evade the stigma that all American midsized cars are fare for the rental fleets. But the next one, coming out in 2007, could do a lot for the brand. It's front-wheel drive—making it tough to style a long hood and the prominent stance of a luxury car—but GM's designers pushed the cabin back to give the car a nice, long hood. It's a family car with a more athletic stance. An extended version will also be offered.
Impala:This one could be a hit. GM designers currently have three different versions of this big, brawny rear-wheel-drive sedan in its design studio. The car will be built in 2008 off a version of the rear-wheel-drive platform that will host the Camaro muscle car. Using the Camaro's underpinnings will allow GM to make the next Impala a more dramatic-looking, rear-drive car that competes head-on with models like the successful Chrysler 300. It could be a winner. The Impala will give GM a different sales proposition between the Impala and Malibu, which right now are both front-drive, midsized cars with four doors and a V-6.
"This is a smart strategy," says Wolkonowicz. "They will be able to satisfy buyers who want midsized or large cars with either front- or rear-wheel drive."
CTS:Caddy made a fine comeback over the past couple of years, but with its sales down 12% this year the luxury marquee needs a reboot. The CTS is getting old and the larger STS sedan is sales-proof. GM needs a winner in the luxury business fast.
Enter the next CTS. GM stylists say they will keep Cadillac's edgy look, but the car's body will become more dramatic. Insiders say they are really pushing the wheels to the corner of the car to give the ride an athletic stance. And the interior appointments are befitting of some of the best top-shelf brands in the world.
There are a few more surprises coming. In addition to the Camaro—which Wagoner announced would go into production a week ago—GM will build a rear-drive sports car for Pontiac off the same underpinnings. A new Cadillac crossover SUV will come in a few years. It should be engineered and sized to go head-to-head with the likes of a Lexus RX 330.
GM still has plenty of problems. Health-care costs, pension expenses, and weak brands will be pitfalls for years to come. But there are clear signals that the company's cars are getting better.