GM Plans New or Redesigned Very Cool Midsized Cars

Detroit, November 13, 2002 Dow Jones is reporting that General Motors Corp. plans to bring out nearly a dozen new or redesigned car models over the next three years in a push to rebuild its shrunken share of the key midsized car market.

"It's exactly where we plan to make our stand, beginning now," Vice Chairman Robert Lutz told a media event outlining the strategy. "If this multi-billion dollar assault does not provide market share, I'd be seriously surprised and truly disappointed." He and other GM executives declined to give any targets or goals for sales or market share, however.

GM once dominated the midsized car market, with more than 45% of the segment in the 1980s, but a string of quality problems and lookalike cars that weren't competitive with new models from Asian and European rivals led GM to lose ground, with share this year of 30%.

GM had been holding its own in the segment in the late 1990s, but has seen its share decline in the last year or so as import rivals have brought out new models that often had more features than GM's older offerings and the gradual closure of the Oldsmobile division drained GM sales.

Ford Motor Co. and DaimlerChrysler AG's Chrysler group also have fallen back in the midsized car market, which still accounts for about one in every five vehicles sold in the U.S. All of the Big Three auto makers are vowing to reinvigorate their dated car lineups with new models over the next few years, hoping to reverse their declining market share.

But as the largest player in the midsized market, the segment is particularly important to GM. Officials also said the segment is a key profit contributor, noting that profits on some premium midsized cars are close to those on midsized sport-utility vehicles.

GM said that while 38% of midsized car buyers either consider or buy a GM vehicle, only 11% of those who buy Toyota Motor Corp.'s Camry, Honda Motor Co.'s Accord or Nissan Motor Co.'s Altima considered GM vehicles. GM is hoping its new lineup will help attract some of those buyers to its dealerships.

GM officials said they expect midsized cars to continue to account for about 20% of the U.S. market, despite the growing popularity of SUVs and other trucks. Several times over the past decade or so, GM has vowed to turn around the slide in its midsized market share, only to fail to deliver. GM officials said the new lineup will perform better, however.

GM will offer new car models in its Chevrolet, Pontiac, Buick and Saturn divisions over the next three years, ranging from sedans to coupes and a convertible. All of the new models will showcase GM's new focus on making its vehicles look high-quality, with rich-looking materials, tight fits between panels and parts and elegant designs. Company officials noted that while the company's actual quality and reliability performance has improved dramatically, consumers' perceptions of GM's quality still lag, partly because of the look of the vehicles.

First out is the Pontiac Grand Prix in the first quarter of next year, a sporty sedan that has been upgraded and redesigned, although it still relies on the same underpinnings as the outgoing model.

Late next year brings the Chevrolet Malibu sedan and a new hatchback version with rear seats that slide back and forth to make more room for passengers or cargo. Both are based on a brand-new set of underpinnings that GM's European unit is using for the Opel Vectra and Saab 9-3 cars. GM hopes improved interiors and better safety and driving performance will help the Malibu compete against cars from Toyota and Honda.

In late 2004, GM will bring out a redesigned Pontiac Grand Am sedan and coupe based on the same underpinnings, but offering more powerful engines, sleeker, sportier styling and better performance than the Chevys. A hardtop convertible will follow.

The Kansas plant that will build the Malibu will have capacity of about 250, 000 to 260,000 vehicles a year, while the Michigan Grand Am factory will be about 240,000, officials said. They added GM will continue to build the current Malibu for several years to satisfy demand from rental fleets.

The Saturn brand will get a hatchback broadly similar to the Malibu around 2005, replacing its L-series sedan and station wagon. At roughly that time, GM will bring out a new version of its Buick Regal sedan, which officials said will offer a new level of "premium American style."

Later, GM will bring out redesigns of its Chevrolet Impala sedan and Monte Carlo coupe. All of those vehicles share their underpinnings with the Pontiac Grand Prix and will be built at a GM plant in Oshawa, Ont.

Many of the models will also be available in high-performance versions, which GM hopes will burnish its brands and boost revenue with their higher prices.

Meanwhile, GM chief market analyst Paul Ballew said U.S. auto sales thus far this month are running at an annual rate in the low 16-million-vehicle range, " in line with our expectations."

He added, "Sales are still a bit sluggish. They're not out of line with October."

U.S. auto sales have decelerated in recent months amid sagging consumer confidence, but GM and other auto makers say they expect sales to remain reasonably strong in the coming months. In October, U.S. auto sales ran at a 15.5 million vehicle annual rate.

Mr. Ballew said sales so far in November are tracking closer to October's levels, which would be in the high 15-million-vehicle range on an annualized basis, including heavy trucks, the way GM calculates it. On that basis, October sales ran at a 15.8 million annualized rate.

But Mr. Ballew said GM remains comfortable with its expectation that for the entire month of November, the annualized sales rate will end up in the low 16- million range, although he emphasized it is difficult to make specific forecasts this early in the month.

Sales often pick up late in any month as dealers push to meet quotas. The Thanksgiving holiday weekend also can affect sales.