Will GM buyers come back?

Dealers are banking on model popularity, bargain-hunter prices

Jaclyn Trop and Brian O'Connor / The Detroit News

Government intervention and a radical restructuring plan that will shave billions off General Motors Corp.'s debt won't help save the automaker unless it gets shoppers into its showrooms.

Expectations of fire sale prices are likely to draw consumers to GM dealerships soon, now that the largest U.S. automaker has filed for bankruptcy protection, according to Jack Nerad, executive market analyst for Kelly Blue Book in Irvine, Calif.

Potential customers "might think this signals bargain-shopping time" at GM, Nerad said.

GM's four jettisoned brands -- Pontiac, Saturn, Hummer and Saab -- are also likely to get a sales boost as dealers try to clear their inventory, he said. "Pontiac has a lot of fans, for example. This is basically your last chance ever to buy a new Pontiac."

But prices have been slashed steadily since last summer, and it's unclear whether the bankruptcy filing will bring still better deals for the four brands.

"To a certain degree, consumers are unrealistic with the prices they're hoping to find," said Jeff Bartlett of ConsumerReports.com. "The reality is that at today's prices dealers aren't making any money."

The historic restructuring is supposed to strengthen the company's focus on consumers and make it more competitive. GM's U.S. sales for April were down 45 percent from a year ago, lagging about 10 points behind the overall automotive industry, according to J.D. Power and Associates.

A Consumer Reports survey found that about three-quarters of potential car-buyers would avoid buying a vehicle from a company in bankruptcy, but that didn't happen after Chrysler filed for bankruptcy protection on April 30.

The smallest of the Big Three reported an April sales decline comparable to GM's but is likely to come out ahead of the market when May figures are announced today.

"The threat of bankruptcy has proven to be a bigger sale-killer than bankruptcy itself," Bartlett said. "I think GM is positioned now to benefit from Chrysler having gone through the process to come out of bankruptcy today, and everyone realized that everything's OK."

There are two big differences between Chrysler's reorganization and GM's, he noted. First, GM's vehicles are considered more popular, with a dozen models recommended by Consumer Reports; no Chrysler or Dodge is on the recommended list.

Second, GM won't shutter dealers during its bankruptcy process. Most of the 2,000 dealers GM plans to close have until the end of 2010 to wind down their GM sales, while the 798 Chrysler dealers who have lost their franchises have only until next week to change their businesses.

GM CEO Fritz Henderson Monday tried to reassure potential customers that a GM vehicle is a good and safe purchase. "Our product launches remain on track," Henderson said. "GM remains open for business."

The latest bankruptcy announcement is likely to brighten shoppers' outlook after several months of low consumer confidence.

GM has "been in the penalty box for the past six months," said Gary Dilts, senior vice president for global automotive at J.D. Power and Associates in Troy.

News that GM will continue to operate -- as a smaller company -- and government-backed vehicle warranties "will put a lot of comfort into people's minds," he said.

jtrop@detnews.com (313) 222-2300