By Jeff Green and Keith Naughton
Jan. 8 (Bloomberg) -- General Motors Co. is cutting prices and reworking ads to revive sales of two sedans that executives consider vital to meeting Chairman Ed Whitacre’s goal for a 2010 profit.
The moves are aimed at shrinking dealer stockpiles of the Chevrolet Malibu and Cadillac CTS that ballooned to more than twice the industry average, North American President Mark Reuss said in an interview ahead of next week’s Detroit auto show.
“The CTS is going to be fixed, now,” said Reuss, 46. “We’re going to be right on the back of that working on Malibu. We’ve got to have Malibu selling a lot more than we do right now. We’re looking at what we should be doing with the car versus where we’re at.”
Whitacre’s prediction this week of “positive net income” in 2010 expanded on his challenges to management since becoming chief executive officer on Dec. 1 when the board ousted Fritz Henderson. He has begun early repayments on GM’s $6.7 billion in U.S. loans and replaced more than a dozen executives.
The former AT&T Inc. CEO and chairman is pushing his team to keep U.S. market share at about 20 percent, after 2009’s 19.9 percent, said three people familiar with the goal who asked not to be identified because the plans aren’t public. Whitacre told reporters this week he wasn’t commenting on his plans.
2010 Outlook
Holding onto that share may require boosting sales by about 200,000 units, from 2.07 million last year, based on GM’s forecast for industry volumes of as much as 11.5 million. That heightens the importance of the CTS, Cadillac’s 2009 U.S. top seller, and the Malibu, the No. 2 Chevrolet car after the Impala. GM unveiled the current CTS and Malibu designs in 2007.
“Those are the two critical vehicles in GM’s lineup,” said Michael Robinet, a CSM Worldwide analyst in Northville, Michigan. “They have to have success there as an anchor to their overall portfolio.”
President Barack Obama, whose administration oversaw Detroit-based GM’s government-backed bankruptcy last year, alluded to the Malibu in a March 30 speech as one of the models that is “now outperforming the best cars made abroad.”
Malibu and CTS inventory reached a five-month supply in late 2009, more than double the industry average of roughly two months, Reuss said. The CTS was priced too high against models such as Bayerische Motoren Werke AG’s 3-Series, he said.
GM slashed CTS prices this week by as much as $3,000, said Steve Shannon, executive director of marketing for Cadillac. One popular version was pared to $39,990 from $42,255, with monthly lease payments dropping to $369 from $417, he said. BMW’s U.S. Web site advertises 3-Series leases for as low as $379.
‘Didn’t Wait’
“Finally GM is willing to look at the price of the vehicle and adjust it to the market conditions,” said Dave Butler, general manager of Suburban Cadillac in Troy, Michigan, and Suburban Chevrolet-Cadillac in Ann Arbor, Michigan. “They didn’t wait until it got to a critical level.”
Butler said the no-interest financing offered by GM on 2009 Malibus isn’t being matched on the 2010 model, in effect boosting the price. “A lot of purchase intenders may be waiting for that kind of incentive,” he said.
Advertising decisions also played a role in the Malibu’s slowing sales, as GM “walked away” after the vehicle’s initial promotion to focus on other models, Reuss said.
“There’s going to be a whole bunch of things we’re going to do look at and do, and it’s not going to take me a year to do it, either,” Reuss said of the Malibu, declining to elaborate.
Sales Slide
Malibu’s 9 percent decline in 2009 U.S. sales trailed the industry’s 21 percent slide, and the 25 percent decrease for the full Chevrolet line, according to industry researcher Autodata Corp. in Woodcliff Lake, New Jersey. CTS sales fell 34 percent, compared with 32 percent for all Cadillacs.
The Malibu and CTS aren’t GM’s only efforts to woo car buyers after focusing on light trucks in the 1990s and much of the past decade. The Chevrolet Aveo RS show car, with hidden rear-door handles and exposed headlamps to emulate motorcycle styling, will debut next week in Detroit at the North American International Auto Show.
Chevrolet and Cadillac are now more pivotal to GM’s sales, as the automaker trims U.S. brands to four from eight to help end annual losses that began in 2005. Buick and GMC also are being retained, while Saab, Hummer, Saturn and Pontiac are being dropped.
Reuss said he will present his 2010 priorities to the board next week, which include promoting vehicle quality over incentives to create profitable North American sales growth. New models reaching showrooms this year include a two-door CTS, Chevrolet’s Cruze and plug-in Volt, and Buick Regal.
Reuss said he’s using a page on the Facebook social networking Web site to keep in contact with customers and buff GM’s image one buyer at a time, if necessary.
“I’ve been here two weeks and I’m right in the middle of it,” said Reuss, whom Whitacre named to the post on Dec. 4. As to the CEO’s 2010 challenge for net income, Reuss said, “We’re going to make that, I think. I want to get the place profitable, I’m tired of it.”
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net
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