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  • Chevy's New Cruze Needs a Hard Sell

    • Some big questions are being asked of the Chevrolet Cruze compact, which is just about hit the market. First, will its conservative styling draw showroom traffic? Will GM's new marketing minds--namely new marketing Vice President Joel Ewanick and his hand-picked Chevrolet marketing chief Chris Perry, both Hyundai veterans--come up with a way to get consumers interested in this car and the Chevy brand. And will consumers, who are accustomed to shopping Chevy for a low-priced compact, pay up for the $17,000 Cruze? The outgoing Cobalt sold for $1,300 less, though Chevy says the new car has more content and therefore is still a good value.

    Every one of those questions will pose a challenge for a car that GM absolutely needs to be successful as the automaker tries to rebuild the Chevy brand. Make no mistake, this will be a big marketing challenge. Chevy has never really had a good compact. The Cobalt was an also-ran, and that's very generous. The Cavalier before that was also a cut-priced loser. When people think of Chevy, they think of trucks, SUVs, Camaros, maybe the Impala, maybe the Corvette. Small cars have never been the brand's raison d'etre. So now they are trying to get fatter pricing on a pretty conservative car sold by a brand with no reputation for selling small cars.

    The good news is that if GM can get people to give the car a look, the Cruze has some great selling points. I sat in the car at a Chevy event yesterday. The cabin is first rate with attractive design, solid materials in the dash and comfortable seating. Chevy brags that if you load up competing models like the Toyota Corolla, Honda Civic and Ford Focus with comparable options, the base model Cruze LS is anywhere from $635 to $1,770 better value.

    The best news Chevy has may be the Eco version of the Cruze. A regular Cruze gets 36 miles per gallon on the highway, 2 mpg more than the Focus. The Eco model gets 40 mpg. There's no hybrid system or high-tech solution. GM's engineers just wrung out weight, made a few aerodynamic tweaks, added a gear to the manual transmission and gave it some low-rolling resistance tires. It was an old-tech solution to a long-standing problem. At highway speeds, for example, a shutter closes and blocks part of the grille. That cuts wind flow under the can and makes the Cruze slicker in the wind. Simplicity.

    Will enough buyers take notice? That's going to be the real challenge. Sometimes in the car business it takes a few generations of good models before consumers realize that the brand selling them is worth a look. Ewanick and Perry experienced that with Hyundai. They may have to do the same with Chevy.

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  • With Little Fanfare Comes the Transit Connect EV from Ford

    • With all the hype surrounding the pending launch of the Chevrolet Volt and Nissan Leaf electric cars, Ford's Transit Connect EV has gone almost unnoticed. It's easy to see why. When the van goes on sale later this year, it will sell primarily to commercial fleets. In the car business, there are few things less sexy than commercial vans.

    Still, Ford and Azure Dynamics, the company that engineered the electric drive system for the car, may be onto something. Companies like AT&T;, which has agreed to buy a few Transit Connect EVs, have drivers motoring around all day in stop-and-go traffic. They burn a lot of fuel even though they travel fewer than 50 miles in a day, says Curt Huston, Chief Operating Officer of Azure. Since the Transit Connect EV can go about 80 miles on a charge, their needs are mostly met. The van has a 28 kilowatt-hour battery that takes six to eight hours to charge and has a top speed of 75 mph. The Leaf can go 100 miles on a charge, but it's a compact car. This is a small deliver van. For range, the Volt beats both since it can go 40 miles on electric drive and another 300 miles once the gasoline engine kicks in and starts charging the battery. Again, it's a small car. The Transit Connect will appeal to business owners.

    Commercial fleet owners can install a charging station in the garage and get the vans juiced up overnight before heading out the next day. It's actually a great application. Huston says the fuel savings should return the added cost of an EV in four or five years. Unlike some of the startup EV companies, Azure partnered with Ford. That means vehicle owners can take them to a Ford dealer for service. The company will have 75 dealers to start and may add more later on.

    If it takes off, building sales volume through fleet sales can help drive down the cost of the technology and make electric cars more affordable in the future. There is one catch to the whole plan. The price has to be right. Ford and Azure have not set a price yet. Commercial buyers will look at the car purely on a fuel cost savings basis. It's dollars and cents. If the car costs too much, they won't see the savings at the pump that they want as quickly as they want it, says Jim Hall, principal of consulting firm 2953 Analytics in Birmingham, Mich. The car also won't appeal to environmentalists and technology buffs the way a Volt or Leaf will. But for what its target buyer wants, Azure's Transit Connect may be the right idea.

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  • Doing the Math on Obama's Detroit Bailout

    • President Obama served up red meat for his hard-core supporters in Detroit yesterday, proclaiming that the government's bailout of General Motors and Chrysler to be a success. Had he not intervened and invested in the two companies, Obama said, they would have fallen into liquidation and 1.1 million jobs would have evaporated. In the past year, the auto industry has regained 55,000 of the 334,000 jobs lost, he went on. "The fact that we're standing in this magnificent factory today is a testament to the decisions we made," Obama said while visiting Chrysler's Jeep Grand Cherokee plant in Detroit. His comments were aimed clearly at the critics on the other side of the political aisle who opposed the bailout 18 months ago and who still criticize government ownership of GM and Chrysler to this day.

    So far, it is tough to argue that the bailout hasn't worked. GM is in the black, having reported an $865 million profit in the first quarter with black ink looking likely for the rest of the year. GM's results are strong enough that the company is preparing for an initial public offering that should start selling stock in November. Chrysler is at least making an operating profit, which puts the company in much better shape than most analysts thought it would be a year ago. With much lower costs, both companies should be able to make money going forward. Let's not forget that GM, Chrysler and cross-town rival Ford cut out 2.9 million cars worth of production capacity during the crisis, according to the Center for Automotive Research. That was a quarter of capacity in the U.S., Canada, and Mexico. Cutting out the fat has allowed them to post profits even though sales are slow.

    The real test will be if the government breaks even on its investment, or at least comes close. Obama Administration officials say they are hopeful that the taxpayers will be paid back in full. GM got $49.5 billion from the feds and Chrysler took $10.8 billion. For the government to break even on GM, the company must be worth at least $66 billion, and even more if the bondholders and United Auto Workers union exercise warrants and dilute the government's investment. But nearly breaking even would still be an accomplishment. Here's what I mean: Based on where GM's bonds trade, the company is worth about $53 billion right now. That would be an 80% pay back on the government's investment if GM's stock were so valued. Stock in GM will be more liquid than its current bonds, so it should be worth even more, analysts say. But for the sake of argument, assume an 80% recovery on the $60.3 billion direct investment in GM and Chrysler. That would leave $12 billion unpaid. Would that be a reasonable price to save two industrial icons and hundreds of thousands of jobs? I would have taken that deal in the depths of the financial crisis, and I wager that most critics would have, too.

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  • Chevrolet Volt Fatigue Setting In

    • The Chevrolet Volt may be wearing out its welcome. General Motors has been hyping the gasoline-electric car ever since the company showed it off to the public 1,300 days ago. The company has let countless reporters into its battery labs and given interviews with its engineers, all in a very credible attempt to show that GM has smart people with good ideas. And it has worked. GM has picked up some technological credibility and fostered goodwill with the environmental crowd.

    Now that GM is finally, after three and a half years, getting close to selling one, the commentariat is taking shots at the Volt. In an editorial in the New York Times today, Truth About Cars Editor Edward Niedermeyer panned the car as "GM's Electric Lemon." He criticized the car for, among other things, having bland styling and because it will likely lose GM money. Before that, "Tonight Show" host Jay Leno, a well-known car buff, also took a shot at the Volt's styling, telling the Detroit news that, "if you didn't know, you might think it's a Cobalt or a Camry."

    What gives? It could be a case of Volt fatigue. Sure, documenting the tale of the car's development gave GM a great story to tell. But in the past few months the company has amped up the noise on a car that has been hyped for years. I count 14 press releases on the Volt since June, including an announcement today that GM will boost 2012 production from 30,000 to 45,000. Some of those releases were absolutely necessary, like vital information on pricing, warranty and ordering options. Others were less weighty, such as a release saying that the car can get water under the hood without the electronics going haywire. Another details a test that proves dust won't get in the car or affect its vitals while driving. The Volt goes on sale in November. At this point, it's probably time to just market the car to consumers.

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  • What Toyota Sees in Tesla

    • Here's a matchup I thought I'd never see: Toyota and Tesla Motors. Toyota is a conservative money maker that likes to develop technology in-house. It has quite a nice hybrid program that the company developed while making billions selling cars and trucks. The Japanese giant shuns controversy. Yet the company is teaming up with tiny Tesla, a company that has lost $246 million on $148 million in revenue since 2007. Tesla Chairman and CEO Elon Musk is very un-Toyota, finding controversy like a moth to a light bulb. In the past, he has been in litigation with a former Tesla CEO, a past design firm he hired and has a rather public divorce going on. So what does Toyota see in Tesla?

    Toyota's brain trust thinks that maybe, just maybe, Tesla might be onto something. Tesla's lithium ion battery pack strings together 6,831 cylindrical cells that are typically used for laptops. Major carmakers like General Motors and Nissan use prismatic cells, which are usually flat, resembling a thick notebook. They are larger than Tesla's cells, therefore the battery pack doesn't need as many of them. There are fewer connectors and less chance of a breakdown, says Jim Hall, principal of consulting firm 2953 Analytics. Tesla's advantage is that there is an entire computer industry out there using those small cells, so the capital costs are lower. If Tesla's battery is durable in the long run, it could be an option for carmakers.

    So Toyota wants to get Tesla's battery and electric drive technology, hook it up in to a couple of Rav4 SUVs and put it through some rigorous testing. The sports car buffs who drive Tesla roadsters may give the car a thrashing on the highway, but not many people drive a $109,000 two-seater in bad weather or every day. Toyota wants to test the battery pack out and see how durable it is and how simple it would be to produce, Chairman Akio Toyoda told reporters in a round table session last week. "Tesla's battery should fail, but it doesn't," Hall says. "Toyota wants to understand why it hasn't failed." Despite its troubles, Toyota has $43.3 billion in cash. Consider its $50 million investment in Tesla as a venture capital investment. Many of those don't pan out.

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  • GM Mulls a New York Showroom to Woo Wall Street

    • General Motors realizes it has a nagging little marketing problem as it prepares for an initial public stock offering. The analysts, portfolio managers and potential investors that they are hoping will like their stock aren't big customers of the company's cars. So GM is mulling over a plan to open up a GM salon in Manhattan, say three people who know about the discussions. The company would rent or buy a building, outfit it with imagery for its four brands and showcase the latest cars. The idea is to get GM's best models in a place where high-fashion New Yorkers, tourists and high-rolling investors might walk by. GM does poorly in the New York metro area. GM's market share in the New York area was just 9.6% in the first quarter, compared with 18.7% in the U.S. GM's share in the New York area was 10% last year, down from 13% in 2008, according to Experian Automotive, which tracks vehicle registrations.

    GM thinks that the salon would show investors and car buyers that the company's newest models are competitive. Audi has a similar display called the Audi Forum at the corner of 47th Street and Park Avenue. Audi keeps five cars on hand, including a vintage Le Mans series race car. Audi has events at the Forum. They even kept it open so Audiphiles could watch the entire 24 Hours at Le Mans race last year.

    For GM, this does create a bit of a dilemma. GM wants to get in front of the hip and the well-heeled. But is this the right way to do it? The Forum works for Audi because it's a house for just one brand. There is nary a Volkswagen in sight. GM would have four brands together at a time when the company is trying to give Buick, Cadillac, Chevrolet and GMC some individuality.

    That isn't what's stopping GM. Executives say they like the idea of a company showroom in the Big Apple. But Manhattan real estate is really pricey. For a company perceived by some to be on the dole--and that took some heat for giving a Corvette to near-perfect Detroit Tigers pitcher Armando Galarraga--a Manhattan marketing scheme could draw heat. GM should pay no mind. The bigger question is whether GM could differentiate its brands with this, and any other companywide marketing strategy.

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  • Cadillac brooms out its ad agency

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    Not even two months into the job, General Motors Co. marketing Vice President Joel Ewanick is already shaking things up. Adweek reported that he has replaced Bartle, Bogle and Hegarty as Cadillac's advertising agency after six months with the account, handing the estimated $250 million in business to Fallon.
    It's not a big surprise. Ewanick is known for moving quickly and any new marketing chief will want to bring in his own people and favored agencies. Last month, he brought in San Francisco-based Goodby, Silverstein and Partners for the Chevrolet account, replacing Paris-based Publicis after just a few weeks. Publicis had been hired by GM before Ewanick arrived to replace Campbell Ewald, which did Chevy's advertising for decades.
    Even before Ewanick arrived, GM wasn't blown away by some of the Cadillac work done by BBH. The company asked for changes several times, says one person with direct knowledge of Cadillac's advertising. Cadillac wants ads that focus more on the cars and have less emphasis on sizzle and sophisticated graphics, the source said.
    Expect more changes to come. Two people close to GM's marketing operations say Ewanick wants to bring in some outside marketing talent to add some brain power to GM's ranks. Given the company's woeful marketing efforts in recent years and its brand-image challenges, it could be just what the company needs. The company's brands have lurched from one marketing message to another for a decade, with a revolving door of marketing bosses to keep the churn going. Cadillac, for example, has had three marketing heads in a year.
    And make no mistake, Cadillac is a big marketing challenge. Last year's sales were the worst since 1953, albeit in a woeful car market. The brand ranked eighth among 12 luxury car brands in the Luxury Institute's 2009 survey of people making more than $150,000 a year. Only one-third of respondents said the brand is worth paying a premium to buy, compared with 57% for BMW and 62% for Mercedes. At 62 years old, the average buyer is 13 years older than a BMW buyer. That's a long way of saying that the brand isn't hip. Cadillac has some strong models with the CTS sedan and new SRX SUV. But GM needs to get the core of the luxury consumers to check out the new, aggressively-styled and sporty models that are the antithesis of the brand's old geezer image. Now it's up to Ewanick and Fallon to get luxury buyers to give those cars a look.

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  • J.D. Power's Quality Survey: Toyota Tumbles, GM Disappoints

    • You can't hide from quality problems. Witness the results of the Initial Quality Study released today by J.D. Power. Toyota's sudden-acceleration crisis--which forced the once-heralded carmaker to recall more than 8 million vehicles over the past year--resulted in its worst-ever performance in the survey. Toyota dropped from sixth place last year to 21st. Consumers complained in the survey about brake and floormat problems, which is what the recalls were mostly about. Last year, Toyota brand vehicles had 101 problems per 100 vehicles. This year, it rose to 117. No big surprise given the massive number of cars recalled.

    What was more surprising is how poorly General Motors did. Cadillac tumbled from third place with 91 problems to a tie for 12th place with 111 problems. Chevrolet went from ninth to 12th, falling below the industry average. GMC went from 18th to 25th. Of GM's four brands, only Buick improved. The survey tracks complaints during the first 90 days that a consumer owned the car. The problems can be anything from a mechanical breakdown to, say, too much wind noise to mundane things like the driver griping about the size of the cupholders.

    What's worrisome for GM is that the culprit happens to be the company's newest models. Dave Sargent, J.D. Power's vice president of global vehicle research, said new models are often weaker in quality than cars that have been on the market for a few years. Carmakers have time to find glitches and work them out. Sargent says GM can easily improve its quality performance by patching up new models like the Cadillac SRX and Chevrolet Camaro. But this is terrible news for a GM management team that is trying to convince buyers that the company is new, improved and doing things differently. Some of GM's new models are selling well; the Cadillac SRX, Chevy Equinox SUV and Camaro in particular are red hot. What better way to wow those new owners than sell them cars that they think are cool, and which end up being problem-free. The fact is that GM has been making quality strides. But until the company can follow rival Ford, which finished fifth and ahead of all other mass-market brands, GM will have something to prove instead of something to boast.

    J.D. Power pointed out that as a group, Detroit's Big Three carmakers did better than the foreign brands for the first time in the survey's 24-year history. That is largely due to the fact that Ford made big gains and Toyota tumbled so far. The disappointing results at GM and Chrysler, whose Chrysler, Dodge, Jeep and Ram brands all scored below the industry average--say that much more work needs to be done before consumers will view American cars as equal or better than the imported brands.

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  • Chevy or Chevrolet? Who Cares

    • There's corporate silliness. And then there's what happened at Chevy, er, Chevrolet this week. Chevrolet sales vice president Alan Batey and marketing vice president Jim Campbell sent a memo to employees asking that they talk about the brand as Chevrolet, not its shortened nickname Chevy, according to a New York Times report. They want the brand to be consistent, especially since General Motors is trying to push Chevrolet in global markets where some people may not know it as Chevy. The story took on a life of its own, with some observers thinking that Chevrolet way trying to ban the use of the nickname "Chevy."

    GM has since backed away from that internal memo saying that Chevy is the brand's beloved nickname. "We're proud of it," Batey said in a phone interview. "It's great." He said GM's global colleagues were looking for clarity on the brand. Here in the U.S., people can call it Chevy. But around the globe, Batey wants to see it consistently called Chevrolet over time.

    This all seems like much ado about nothing. Even if GM wanted to ditch the Chevy nickname, Americans won't care. They will call it Chevy just as they have for decades. The fact is, GM may legally own its brand names, but the company doesn't own the Chevrolet or Chevy names in the popular imagination. Not here, not overseas. The brand's customers and fans do. If Chevy or Chevrolet buyers in China or the U.S. or Russia want to call it Chevy, let them do it. So long as they are happy with their cars, GM shouldn't care. Given the fact that GM is trying to rejuvenate interest in its brands--especially Chevrolet, which is 72% of its U.S. sales this year--the company should be happy that consumers care enough to give the brand a nickname. The message ought to be, "call us whatever you want, just call us."

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  • Labor unrest in China could be Mexico's gain

    • It seems like Chinese workers want a bigger piece of the economic pie. The recent strike at a Honda transmission factory ended with workers getting 24 percent wage hikes. But don't expect U.S. auto workers to start winning back work from China. The more likely beneficiaries are in Mexico. The rising wages in Chinese auto plants just about match the $7 an hour all-in cost, including benefits, in Mexican plants, says Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich. If you add in the $1,200 to $2,000 per-car cost to ship vehicles across the Pacific, 'Ole Mexico looks better all the time. Shipping auto parts is cheaper than sending a whole cars across the ocean, but you get the idea.

    Same goes for auto parts factories. Mexico has tariff-free trade deals with 25 countries, McAlinden says. That makes it an ideal place to bring in raw materials and then ship cars or parts. In fact, if Chinese carmakers want to invade the North America market, building in Mexico might be there best bet. McAlinden says that 16% of North American vehicle production is in Mexico and he expects it to grow to 20% in the next few years. Japanese automakers have even asked suppliers to set up shop in Mexico--not Asia--to supply parts to their U.S. plants, McAlinden said. The U.S. will still go begging for those jobs.

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  • Nissan's Ghosn gambles big on electric cars

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    Nissan Motor Co. CEO Carlos Ghosn made the rounds in the U.S. the last two days pumping up his electric-car plans. He said the automaker and its global partner, French carmaker Renault SA, will be able to build 500,000 electric cars a year by 2014. To back up his bold plan, he announced a $1.7 billion investment in a lithium-ion battery plant in Smyrna, Tenn. All told, Nissan is dropping $5 billion from 2007 to 2012 for its ambitious play to be the leader in electric cars. The U.S. government loaned Nissan $1.4 billion of the cash for the battery plant. So in essence, we all have a piece of his gamble.

    And it's a big one. The challenges to selling electric cars in big numbers are pretty obvious. The Leaf, Nissan's five-passenger compact that hits the market later this year, can go 100 miles before needing to recharge. That recharge takes hours. And be careful about that 100 miles. That's in the city, where stop-and-go driving recharges the battery. Out on the highway, it could get half of that, says Jim Hall, principal of auto consulting firm 2953 Analytics. That will limit its appeal, especially because American city boulevards aren't exactly electric avenues lined with charging stations. The cars aren't cheap either. The Leaf will sell for $25,280 after U.S. tax subsidies. That's at least $5,000 more than most cars its size.

    Cue up the ire of green-car fans. They hate hearing that electric cars might not populate every garage from here to Shanghai. Yes, many Americans only drive 20 miles to work and back. For them, the Leaf will be wonderful. Ghosn is also counting on China to snap up a lot of these. He said that his goal of selling half a million EVs would be less than 1 percent of the global car market.

    All of that makes sense. But Ghosn will be rolling out cars faster than most big car markets--namely the U.S., Europe and even China--plan to install public charging stations. Renault and Nissan won't be the only companies selling some kind of high-tech car. Ghosn says he doesn't see the Chevrolet Volt as a rival to the Leaf since the Chevy has a small gasoline engine to recharge the battery, while the Leaf is electric-only.

    I beg to differ. Some buyers want something green and clean. Whether the car runs only on electricity or gets super-high gas mileage makes little difference to some of those customers. To them, the Volt is more practical and has the same high-tech, green appeal. It will be an alternative. Adding more to the fray, Ford plans to sell two electric vehicles by 2012. Toyota is now teaming up with Tesla to build an electric car.

    Is Ghosn crazy? Plenty of critics said so when Renault bought a stake in troubled Nissan in 1999. Ghosn made a money maker out of it. He may be overreaching this time. But he remains undeterred. He said the critics will not change the path he is on. He could prove them wrong again by becoming a leader well before others have the derring-do to go electric. He may also lose a lot of money in the process.

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  • Compact Luxury Cars are Long on Amenities, Short on Love

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    To hear some auto industry executives tell it, even luxury cars will get a downsizing in the next few years as new fuel economy standards kick in and a global economic recovery pushes fuel prices back up. Americans, being the pampered consumers that we are, will still want our creature comforts, but we'll be willing to accept a smaller car loaded with them. Or so goes the speculation.

    For that to become reality, these phat little cruisers had better find some love soon. As nice as they are, the tiny luxury cars aren't selling. Take the Audi A3. I gave it a test drive a couple weeks ago. Loaded to the roof with luxury amenities like satellite radio, heated seats and the like--plus a clean-diesel engine--the small wagon I tested is priced at $37,500. (It starts at $27,270) Like BMW's 1-series, you can get a luxury brand name, great driving performance and all kinds of posh features.

    The problem: Audi has sold just over 2,000 copies of the A3 this year. BMW has sold fewer than 4,000 of the 1-series through April. With regular unleaded gasoline selling for $2.84 a gallon on average, according to AAA, they're a tough sell for Americans who equate luxury with size and roominess.

    Don't get me wrong. The A3 is a terrific car. Its clean diesel engine gets a combined 34 miles per gallon in city and highway driving. It's zippy and handles wonderfully. Inside, the A3 has the great craftsmanship of larger, more expensive Audi cars like the A6. If you really want a small luxury car, this is a nice one. But after climbing in and out of the back seat of the A3 and 1-series, gas prices will have to rise a lot higher for these little luxury cars to take off. Americans will be enamored with their big sedans for a long time to come.

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  • GM's loan payment sparks criticism, but boosts the company's image

    • Surprise, surprise. After all of the nattering by Congressional Republicans and the anti-bailout crowd, General Motors' image got a nice bump from the April 21 announcement that the company paid off its government loans. Recall that last month GM said they paid off $8.4 billion in loans to the U.S. Treasury and governments of Ontario and Canada. Then Chairman and CEO Ed Whitacre touted the early payoff in some nationally-televised ads.

    The news bumped GM's buzz rating, as measured by YouGov Plc's BrandIndex. Check out the details in this Bloomberg story. As Republicans like Senator Chuck Grassley and Representative Darrell Issa, raised a stink, GM's buzz index scores fell a bit. But overall, GM got a nice boost from the whole affair.

    What does it all mean? First of all, it shows that the vociferous griping of the anti-bailout, "government motors" crowd doesn't really resonate with the majority of the public. That group may never buy GM's cars. It's an issue the company will have to wrestle with in its marketing efforts. But they really didn't cut through the perception that GM is slowly, gradually getting back on its feet. Car buyers, for the most part, seem to be more interested in whether GM is showing enough stability to be able to back up its warranties and whether its new cars are appealing than what is said in the commentariat on cable TV news.

    Let me make one thing clear. Whitacre's claim that GM paid its debt back "in full" certainly glossed over the fact that the majority of the government's $50 billion investment is tied up in the Treasury's 61% ownership in the company. He neglected to mention that GM won't be able to pay the remaining $40 billion of the government's investment until the company launches its planned initial public stock offering, which could happen in the fourth quarter. The $8.4 billion was just the debt portion. The other critical point is that the $50 billion investment in GM was, in retrospect, more than the company needed. The Treasury Department gave GM a big slug of cash in case there was a double dip in the recession or if wary consumers really fled the company's brands. As the car market got a boost and some of GM's new models sold well, it was clear that GM didn't need all of that cash. So GM just paid back the $8.4 billion in debt with government money.

    Still, Whitacre didn't lie, as some critics have suggested. He made a bigger meal of the debt payment than he should have, perhaps. The price? If my inbox full of angry reader mail is any indicator, the crowd that hated the bailout is even more livid. GM will have a much tougher time winning them over. Some of those consumers may be gone for good. But the majority of the public seems unperturbed. Despite all of the criticism, GM's image appears to be slowly improving.

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  • GM pays back its loans and Whitacre stirs up some controversy

    • You’d think that General Motors Chairman and CEO Ed Whitacre, who built AT&T; with $200 billion worth of deals, would be a savvy poker player. Well, judging from the grousing over his recent television ad, in which he talks about paying off the government’s loans ahead of schedule, he may have overplayed his hand. Yes, GM paid off $8.4 billion in loans to the U.S. Treasury and the governments of Ontario and Canada about five years early. But crowing about it in a television commercial has generated some controversy.

    You don’t have to go too far to find someone in the commentariat grousing about how GM paid back the loans. The gripe is that GM paid the debt portion of the government’s investment with cash the company got from the government’s equity investment. Here’s how it works. When GM emerged from bankruptcy, it got $49.5 billion in cash. The U.S. Treasury and governments of Ontario and Canada gave GM $8.4 billion in loans. The rest of the money was given to GM in exchange for stock. The U.S. government owns 61% of the company and Canada owns 11.7%. Back in July, the feds decided to give GM enough cash to get through a longer, deeper recession, according to a former member of President Obama’s Auto Task Force, who asked not to be named because the discussions were private. As the economy started to recover and auto sales have climbed, GM found it had more cash on hand than it needed. Repaying the government loans wasn’t such a hard thing to do. So when Whitacre goes on television saying “we have repaid our government loans, in full, with interest, five years ahead of the original schedule,” his comments raised a few hackles. “They were repaying Uncle Sam with money they already got from the government,” snapped Maryann Keller, an independent consultant in Stamford, Conn. Senator Chuck Grassley (R-Iowa) weighed in during his weekly webcast calling Whitacre’s television appearance, “a little bit disingenuous.” He also said, “They’re paying it back with bailout money that they have from the federal government in the first place.”

    To be fair, there is plenty of politics in play. Some critics simply didn’t like the bailout in the first place. The early payment is a small sign that GM’s business is getting back on track. If the company’s sales were tanking and cash flow was a problem, they’d keep all of the money until things turned around. GM’s sales are up 18.4% this year. GM-North America President Mark Reuss has done a commendable job of reining in incentive spending, giving GM better pricing on its cars. The company may turn at least an operating profit this year. So far, Whitacre and GM are doing many of the things they need to do to turn the business around.

    The problem is that the early payoff shows only that GM is stable enough to give some money back. They aren’t making big profits yet. It’s one small benchmark on a longer haul. Going on television raised a hue and cry to a feat that some see as pretty marginal. There’s one other problem with Whitacre’s ad. He kicks it off by saying, “a lot of Americans didn’t agree with giving General Motors a second chance. Quite frankly, I can respect that.” Why would Whitacre want to remind Americans that the company needed to be bailed out? GM has a bit of momentum in the market. Vehicles like the Chevrolet Camaro, Buick Lacrosse sedan and Cadillac SRX and Chevy Equinox SUVs are red hot. Clearly, plenty of consumers are getting past the now-tired “Government Motors” tag and buying GM’s cars on their merits. If Ed goes on TV again, he might want to start with that.

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  • Detroit's opportune moment. American cars are better than Asian cars, Americans say

    • Well, I haven’t heard too many people say this since the late ‘70s: American cars are better than Asian cars. No, really. Associated Press and GfK Roper Public Affairs and Media conducted a survey of 1,000 adults in early March. The results showed that 38% of Americans said that they think American cars are the best-made vehicles and 33% said Asian cars are the best. The same survey done in December 2006 showed that 46% of Americans thought that Asian cars were the best and just 29% favored American cars.

    This is especially good news for Ford and General Motors, both of which are in different stages of a turnaround. Chrysler gets a bit of a boost here, too, though the company’s product line has yet to get the same kind of overhaul as its two larger Detroit rivals have done. Making some hay of this kind of sentiment will be tougher until Chrysler has some new cars to tout. All three can capitalize on this newfound respect if they continue to build better models and if, a big IF in GM’s case, they can market the cars well. They also need to show better business results.

    There is one big question. How long will this last? The survey was done March 3 though March 8, when Toyota’s recall news hit a fever pitch. Toyota has been the talisman of Japanese industrial superiority. When its brand image takes the kind of body blows Toyota has sustained in recent months, you can bet the others will feel some of the pain. Remember, too, that Ford was also putting out good news. The Dearborn, Mich., automaker is firmly in the black and sales are surging. A lot of the change in consumer attitude comes from reversing fortunes at Toyota and Ford.

    GM could burnish its image further in mid-May when the company will release its first-quarter earnings. Already riding a high from the fact that it paid off $8.4 billion in government loans about five years early, GM could look sharper still by reporting a tidy profit, which is possible. It may only be an operating profit, with one-time charges and problems in Europe still dragging earnings down. But the company is expected to show a profit.

    This could be an inflection point for Detroit. After years of losing to Japan, GM, Ford and Chrysler became a symbol of American failure. While Google and Yahoo showed the way to the Internet and Apple has dominated Sony in portable music players, Detroit continued to strike out. If Motown carmakers put out a few more hot cars and keep improving quality, they may be able to finally steal back respect and a lot of customers.

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 Rex Boyd's Posts - Automotive Social Network 
  • But, emails don't sell cars

    • Today I caught up on a couple of blogs (www.dealerrefresh.com and autoventures.wordpress.com). Admittedly, I’m a tech guy. Therefore, I found myself sucked into some of the "gee-wiz" elements of the highlighted companies and contributors’ best practices. After stepping back for a few minutes, a thought rushed to my head. Are some salespeople so wowed by technology and smoke & mirror promises that they forgot the most basic tenant of sales—“Relationships sell.”

    It doesn’t matter if you are selling cars or widgets. A successful salesperson builds a relationship and this is rarely done in an email conversation. I know that some say, "but my interned customers don't want to talk on the phone, so email sells." I counter that the purpose of their email-first approach is to determine if they want to have a phone conversation with you. It is akin to taking a date out for a cup of coffee to determine if you can stand the person's company for all of dinner and a movie.

    The purpose of email is to drive a telephone call. It is possible that I can be bold and say that most of the gee-wiz technology in the automotive sector should always be litmus tested against the question "does this drive my salesteam into relationships that sell cars".


    more >>

  • Frustrating today...

    • I have talked to no less than 10 independent dealers TODAY who insist that the best follow-up for internet leads is to print out the lead and hand it to a sales rep. The owners of these dealerships swear that their 40 internet leads a month do not require any sort of "tracking tool." In our brief conversation they always share that their XYZ Lead Provider is not what they used to be, that the leads provided do not lead to sales, and that they haven't any way to measure their ROI for these lead providers. But, again, we do not need a lead management tool. We don't need a way to track phone-ups and walk-ins and we don't care that iLeadTools costs as little as $56 per month. Oh and did I share that they believe an emailed lead needs only to be responded to (email OR phone!) once within the first couple of days.

    Whew, thank you for letting me get that off of my chest. I have had too many of these calls today and needed a community who could understand how ridiculous this logic sounds.


    more >>

 Rex Boyd's Posts - Automotive Social Network 
  • But, emails don't sell cars

    • Today I caught up on a couple of blogs (www.dealerrefresh.com and autoventures.wordpress.com). Admittedly, I’m a tech guy. Therefore, I found myself sucked into some of the "gee-wiz" elements of the highlighted companies and contributors’ best practices. After stepping back for a few minutes, a thought rushed to my head. Are some salespeople so wowed by technology and smoke & mirror promises that they forgot the most basic tenant of sales—“Relationships sell.”

    It doesn’t matter if you are selling cars or widgets. A successful salesperson builds a relationship and this is rarely done in an email conversation. I know that some say, "but my interned customers don't want to talk on the phone, so email sells." I counter that the purpose of their email-first approach is to determine if they want to have a phone conversation with you. It is akin to taking a date out for a cup of coffee to determine if you can stand the person's company for all of dinner and a movie.

    The purpose of email is to drive a telephone call. It is possible that I can be bold and say that most of the gee-wiz technology in the automotive sector should always be litmus tested against the question "does this drive my salesteam into relationships that sell cars".


    more >>

  • Frustrating today...

    • I have talked to no less than 10 independent dealers TODAY who insist that the best follow-up for internet leads is to print out the lead and hand it to a sales rep. The owners of these dealerships swear that their 40 internet leads a month do not require any sort of "tracking tool." In our brief conversation they always share that their XYZ Lead Provider is not what they used to be, that the leads provided do not lead to sales, and that they haven't any way to measure their ROI for these lead providers. But, again, we do not need a lead management tool. We don't need a way to track phone-ups and walk-ins and we don't care that iLeadTools costs as little as $56 per month. Oh and did I share that they believe an emailed lead needs only to be responded to (email OR phone!) once within the first couple of days.

    Whew, thank you for letting me get that off of my chest. I have had too many of these calls today and needed a community who could understand how ridiculous this logic sounds.


    more >>

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