Short on new models, GM pitches smaller cars

Published 4:00 am Friday, January 14, 2011

DETROIT — Even as it unveils cars this week that it says are designed to beat the best, General Motors still may not have enough new models to win market share this year.

Analysts at Credit Suisse Group, JPMorgan Chase and Morgan Stanley say GM’s lineup is older and inferior to rivals such as Ford. GM lacks enough new cars and will replace them at a slower rate in the near term, the analysts said. Automakers that replace vehicles at faster rates tend to gain market share, which helps drive profitability, Bank of America Merrill Lynch said.

Chief Executive Officer Dan Akerson pitched the Chevrolet Sonic, one of the first new vehicles revealed since the automaker’s initial public offering in November, at the North American International Auto Show in Detroit on Monday. The Sonic and Buick Verano help Detroit-based GM fill holes in its car lineup and build on earnings momentum in its most profitable market.

“What GM has to do is use the arrows they’ve got in the quiver,” said Jim Hall, principal with consulting firm 2953 Analytics Inc. in Birmingham, Mich. “This is all about marketing now. You have to market what you have, and you can only market what you can sell.”

GM’s product replacement rate trails the industry this year and is expected to be in line with competitors in 2012 and 2013, according to Bank of America Merrill Lynch’s annual “Car Wars” report published last year.

The percent of GM’s sales from “new or heavily redesigned” vehicles fell from 40 percent in 2007 to less than 14 percent in each year through 2010, according to Credit Suisse estimates. The portion of sales may be 12 percent this year before rising to 30 percent in 2012 and 26 percent in 2013, analyst Chris Ceraso has written.

GM’s U.S. market share may fall to 18.6 percent in 2011 from 19.1 percent last year, according to Jeff Shuster, director of forecasting for researcher J.D. Power and Associates.

“We’re looking for more of a stability story than a growth story,” said Schuster, who is based in Troy, Mich. “They’re going to try and sustain share during that lull period that occurs in most product planning. Everyone goes through it from time to time.”

Akerson has told top executives to look at pulling ahead specific vehicle introductions in the company’s home market, said Stephen Girsky, a vice chairman. The automaker delayed some new models during its bankruptcy in 2009 and will increase model launches in 2013 and beyond, he said.

At the show, GM unveiled the Sonic and Verano, a compact car that begins sales in the fourth quarter. Sonic is scheduled to start deliveries in September.

The Sonic and Verano share the underpinnings of GM’s Chevrolet Cruze, which started deliveries late last year. Sales of the Cruze rose 35 percent from November to 10,865 in December.

“The bigger issue today does not seem to be the desirability of GM’s new cars but, rather, the simple lack of enough new cars,” Himanshu Patel, an analyst at JPMorgan in New York, wrote in a research report dated Dec. 28.

The Verano gets an estimated 31 mpg on the highway, GM has said, while the Sonic is expected to get more than 40 mpg on the highway, Reuss said yesterday. The average price for a gallon of gas in the U.S. climbed to $3.09 last week, the highest since October 2008, according to the American Automobile Association.

The Sonic will be available as a four-door sedan and five-door hatchback, and is as much as 22 inches shorter and 2 inches narrower than the Cruze.

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