Error processing SSI file
Struggles at GM
GM seeks comeback in big-city markets
Nagged by lack of sales on both coasts, ailing carmaker refines strategy to build customer base.
Error processing SSI file
"I feel badly for GM, and that's part of the reason why we ended up with one of their cars," says Los Angeles teacher Paul Strand, who owns a Chevy Malibu Maxx.
Comment on this story
WASHINGTON -- If General Motors Corp. hopes to emerge from its financial morass, it is going to have to break through with consumers like Robin Kleven Dishon.
The San Diego author grew up in a family that drove Chevrolets and Oldsmobiles, but she has never owned a GM model. She and her husband drive an Infiniti G35 sedan and a Toyota RAV4 SUV.
"You could ask me to name five GM vehicles," Kleven Dishon said. "I bet I couldn't do it."
She is not alone. GM remains a formidable competitor across the country's midsection, but the world's No. 1 automaker has for decades been steadily losing sales and market share in America's largest cities, especially on the coasts.
From San Diego to Washington, D.C., from Miami to San Francisco, more and more customers are bypassing Chevrolet, Pontiac and Buick showrooms in favor of Toyota, Hyundai and Mercedes-Benz.
A combination of factors feeds the divide, analysts say. GM's conservative reputation holds little appeal for image-conscious buyers. It also battles long-held perceptions that GM products can't match Asian quality and reliability.
Under the weight of deep losses in its North American car and truck business, GM is out to win back some of that lost ground.
CEO Rick Wagoner told company shareholders last week that bolstering sales in the country's biggest markets is a key element of his four-pronged turnaround plan.
"We need to perform as well in the top 25 markets in the U.S. as we do in other parts of the country," he said.
The statistics show GM has a long way to go.
While GM accounts for 25.4 percent of U.S. car and truck sales, its market share drops to less than 20 percent in its 10 worst markets, which include Miami, New York, San Diego, San Francisco and Washington.
By contrast, Japan's Toyota Motor Corp., with 13.3 percent of the U.S. market, is gaining share in major cities, claiming 20 percent of vehicle sales in San Francisco and more than 17 percent in a host of other major metro areas.
The trends are especially troubling considering that America's population is rapidly migrating to urban areas.
Based on interviews with car shoppers, dealers and industry analysts in Washington, Los Angeles, San Francisco and San Diego, GM faces significant obstacles with big-city buyers:
• GM models don't stand out in a crowded market.
• Some dealerships are poorly located.
• Consumers doubt the quality and reliability of GM vehicles
• GM brands lack panache.
"That's a tough ship to turn around," said Jack Nerad, editorial director for Kelley Blue Book, a consumer auto guide in Irvine, Calif.
He said the latest GM models, such as the Chevy Cobalt small car, are much improved over previous GM products in nearly every way, including quality, but it will take time before customers believe it.
"You have two or three decades of negativity you have to live down," he said.
As GM plots out an approach for attracting new buyers, Wagoner has been meeting with groups of dealers on both coasts to help refine the company's marketing strategy.
Spokesman Jeff Kuhlman said GM's plan to streamline the Pontiac, Buick and GMC brands by offering fewer but better cars and trucks will pay off in the long run.
At the same time, many GM vehicles have performed well in evaluations by organizations such as J.D. Power and Associates, which tracks vehicle quality, and the Insurance Institute for Highway Safety, which measures crash safety.
And promotional initiatives such as offering the GM employee price to all buyers are expected to generate dealership traffic.
"We recognize throughout GM that one of the best ways to break through with the vehicles is to get people to experience them," Kuhlman said.
To succeed in attracting new buyers in top markets, however, GM will have to overcome biases against the automaker that have been long in the making.
In California, where one of nine U.S. vehicles is purchased, Detroit-made vehicles are often thought of as plodding gas guzzlers. Toyota, known for its bulletproof quality and environmentally friendly hybrids, is now the Golden State's top-selling brand.
Chevrolet dealer Richard Hibbard of Claremont, Calif., said GM executives have failed to recognize the unique challenges of the California market for at least 20 years.
"They are starting to come out of the fog bank," he said.
Hibbard hopes it isn't too late.
He wants GM executives to spend more time at dealerships to get a better idea of what customers want.
Don Peck, a Chevrolet dealer in Arlington, Va., praises GM's newest offerings, including the Cobalt and redesigned Chevy Malibu, as good, quality cars that he could sell -- if he could get customers to come to his store.
"We suffer from a mistaken perception by many consumers that our vehicles aren't as high in quality as our competitors'," Peck said. "It will be tough to break through that. We're in a position now where a lot of people won't even shop us."
GM has tried several initiatives in recent years to break through with customers, including zero-percent financing and a Hot Button giveaway promotion. GM spokesman Kuhlman said other programs are in the works to get more customers behind the wheel, where the cars can begin to sell themselves.
An old Air Force base in El Toro, Calif., has been converted into a test drive center for Cadillac. GM mails invitations to consumers who have been recommended by dealers or subscribe to luxury magazines. Once a month, potential buyers arrive for a full day of driving and the chance to pit Cadillacs against equivalent models from Mercedes, BMW, and Lexus.
GM also has a traveling test drive featuring all eight of its brands that moves from city to city -- an "auto show in motion," Kuhlman said.
Nonetheless, conversations with recent car shoppers on both coasts show GM still has work to do.
Cliff Roberts, a civil engineer who lives in Washington, didn't even consider a GM when he shopped for a small car a few months ago.
"I don't think GM has a good reputation for small car construction," said Roberts, who looked at the Toyota Corolla and the Ford Focus before settling on a Honda Civic. "GM was really out of the running. ... I can't even name a small GM car."
Roberts also said GM suffers from reputation problems in both quality and service.
"I don't have any facts to back it up, but those perceptions are so widespread, there's probably a reason for them," he said.
The same story emerges on the West Coast.
David Chase, 54, a Los Altos, Calif., hair stylist, still has bad feelings about GM after owning a 1992 Camaro convertible, the only convertible he could afford at the time.
"In a year's time, I had an over 1-inch thick dossier of things that went wrong with the car," he said.
Chase replaced the Camaro with a Toyota truck, and never had a problem with it.
"I don't think about American cars anymore," Chase said. "GM cars are not appealing. They're mediocre, generic cars."
GM's best showing continues to be in America's industrial heartland, claiming more than 45 percent of new car and truck sales in markets such as Youngstown, Ohio; Wausau, Wis.; Fort Wayne, Ind.; Lansing; and Flint.
From its Midwest stronghold, it can be tough for an American manufacturer like GM to see what needs to be done in big coastal cities, said Robin Heintzelman, business manager at Covington Buick Pontiac in Silver Spring, Md.
The former Detroit resident said the peer pressure to buy American is strong in Michigan and extends beyond auto company employees and their families to include anybody whose business -- be it auto parts or legal services -- depends on the auto industry. That's not true on the East Coast, she said.
"In Detroit," Heintzelman said, "there's internal political pressure to buy American."
John Ourisman, a major Washington-area dealer, is managing director of a family-owned conglomerate of 14 dealerships that sells 19 brands, including GM marques. He thinks GM is very close to turning its business around.
"The Chevrolets we sell are equal to or better than the foreign nameplates we sell. The perception is not with quality, but with image, a difference in styling and design. We're closer to solving the puzzle than the market gives us credit for."
Ourisman said GM and Honda sales have been rising and falling about equally in the market, but Toyota has experienced significant increases in the last couple years. He attributed that mainly to years of locally targeted advertising.
If Paul Strand is any indication, though, there's still hope for GM on the coasts.
The 47-year-old Los Angeles teacher is very happy with his new Chevy Malibu Maxx. Strand and his wife wanted a GM car to take advantage of $3,000 worth of points accumulated on a GM credit card.
He cites such features as heated seats, remote-control start, antilock brakes, side air bags, power and fuel economy as key selling points.
"I feel badly for GM, and that's part of the reason why we ended up with one of their cars," Strand said. "I knew that their quality was moving up. I think they're making good quality cars."
Detroit News Staff Writer Lisa Zagaroli contributed to this report. You can reach Jeff Plungis at (202) 906-8204 or jplungis@ detnews.com.
"You could ask me to name five GM vehicles. I bet I couldn't do it," says San Diego author Robin Kleven Dishon, with her Infiniti G35.
Copyright © 2005
The Detroit News.
Use of this site indicates your agreement to the Terms of Service (updated 12/19/2002).