Assessing the Automakers
When was the last time the auto business was this cutthroat? It's tough out there on the car lots, many of which are choked with acres of sheet metal. This Special Report is devoted to a group of experts' unvarnished appraisals of how six top carmakers are doing, along with a look at two up-and-comers.
But Todd Turner, president of Car Concepts, says he's not seeing GM's "renaissance" translated into sales.
GM scored an overall grade of B- for 2006, based on individual grades given by six automotive consultants.
The good news ...
The auto giant won kudos for a line of fresh products for Saturn, along with successful launches of bread-and-butter vehicles: the redone full-size Chevrolet and GMC pickup trucks and big sport utility vehicles.
Experts expect the new GMC Arcadia and Saturn Outlook crossovers to sell well this year, as should the redone Cadillac CTS and Chevy Malibu sedans.
Mr. Turner cites Saturn as "probably GM's biggest success story right now." He calls GM brilliant for rebadging one of its European Opels as the 2008 Saturn Astra small car for the U.S., due later this year. Mr. Turner also notes the sales jumps for the redone Chevy Silverado pickup and Cadillac Escalade SUV this year compared with 2006.
Lower sales, market share
That said, GM's unit sales fell 8.7% to 4.1 million in 2006; its U.S. market share slid to 24.5% from 26.2% in 2005. The North American arm finished the year with an adjusted net loss of $779 million, a huge improvement from 2005, when it lost $5.6 billion in the region.
"Our share is lower than we like," says Mike Jackson, VP-marketing and advertising for GM in North America. But he notes GM surprised industry pundits with its better-than-expected sales numbers last February. For first-quarter 2007, however, sales fell 5.6% vs. a year ago, to 909,094 vehicles.
Despite improvements, "there's no celebrating around here," Mr. Jackson says. "We still have a lot of work to do."
Auto-industry veteran Charlie Hughes, founder and president of consultancy Brand Rules, credits GM for sticking with its strategy, announced in January 2006: Reduce fleet sales, end giant ad campaigns for multibrand discount sales and reprice models.
But Mr. Hughes criticizes the auto marketer for continuing GM corporate ads because "it homogenizes brands. You can sell Buick or you can sell GM, but you can't do both."
Revamped product support
The carmaker introduced an extended vehicle warranty and roadside-assistance plan last fall and during this year's Super Bowl for all its 2007 models in GM-wide ads from Deutsch, Los Angeles.
Mr. Jackson defends the move, saying the ads had more power as GM-branded ads than they would have as individual auto ads. The goal is to "chip away at the gap that exists in some consumers' minds" about GM's vehicle quality, he says.
GM had a tough time selling down 2006 models because buyers wanted the warranty. The company's consumer research after the ads ran showed consumers valued the warranties at almost double the carmaker's pre-campaign estimate of $1,000.
Mr. Hughes says GM needs to do a better job differentiating its eight vehicle brands and communicating what each stands for. While he says Hummer's ads from Modernista, Boston, are in the best shape within GM, "Lord knows what a Saab is," he says. Mr. Jackson says Saab's "Born from jets" ad theme from Lowe, New York, is the sixth-most-recognized slogan in the auto industry. "Look at the effectiveness compared to our level of spend," he says. "We're happy with it."
GM was the second-largest advertiser in U.S. measured media last year, though at $2.29 billion it spent nearly 24% less than 2005, according to TNS Media Intelligence. GM has disputed the drop, saying it was only 10%.
The automaker still has too many products and too many brands, which results in a launch-and-leave ad approach for new models, says Doug Scott, senior VP at GfK Automotive.
Wes Brown, partner at consultant Iceology, calls Chevrolet advertising via Campbell-Ewald, Warren, Mich., solid; Hummer ads are "fantastic." But he says Cadillac's "Life. Liberty. And the Pursuit" theme from Modernista is confusing.
Chevrolet, Saturn and Pontiac are in the best positions product-wise; Cadillac is in the middle; and Buick, Saab, GMC and Hummer are dragging down GM, Mr. Brown says, adding that GMC's all-truck brand duplicates Chevrolet models.
Mr. Jackson says the automaker will be successful with all eight of its brands. He admits Buick needs the most work but says the brand is launching its "most significant product in recent history," including the upcoming Enclave crossover.
GMC's Sierra pickup and Yukon models are "huge successes" because they "speak to different kind of buyers" than their Chevy siblings, he says. The new Cadillac theme aims to launch the next phase of the brand's rebirth.
While GM lowered its incentives in the past year, they're still too high, Mr. Scott says. GM spent $2,423 per vehicle in incentives in December 2006 vs. $3,640 in the first month of 2005, when the industry average was $2,408, according to Edmunds.com. GM's spending in February 2007 was $2,691 per unit, only $399 more than the industry average.
Still, GM's average transaction prices rose, Mr. Jackson says. "We had some real key learnings that will propel us to greater heights."
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Car mavens sharpen their pencils
The automakers' grades are based on individual assessments offered by automotive analysts Jeremy Anwyl, president of Edmunds.com; Wes Brown, partner at consultant Iceology; Charlie Hughes, president of Brand Rules; Doug Scott, senior VP at GfK Automotive; Art Spinella, president of CNW Marketing Research; and Todd Turner, president of Car Concepts.
The grades refer to the automotive marketers' 2006 performance. The advertising/communications category includes the effectiveness of traditional, measured-media advertising as well as nontraditional marketing, with particular emphasis on the use of new media. Actual-sales grades are based on percentage change in 2006 vs. 2005, but they also take into account the particular challenges each carmaker faces.