DETROIT – A quick glance at the U.S. light-vehicle sales charts indicates a lagging General Motors, whose volume is off 4.4% in an industry down just 1.3% so far this year.
But GM North America President Alan Batey appears more than comfortable with that performance, contending a deeper look behind the numbers points to an automaker that is sitting pretty as 2016 enters its second half.
Part of Batey’s optimism has to do with the market overall. Many forecasters are predicting a downturn ahead, pointing to an upcycle that already has completed its sixth year. Historically, periods of expanding sales in the U.S. tend to peak after three or four years, so the end of the current cycle would appear to be overdue.
While the GM executive admits U.S. sales should flatten out over the next few years, he isn’t seeing anything to suggest fairly high industry volumes can’t be maintained over the near term.
“We think (the market is) going to continue to run at or near record levels,” Batey says in a sales backgrounder with a small group of reporters here. “The industry will plateau at some point, but everything we see right now says into the future the industry is going to remain strong.”
Batey predicts light-vehicle deliveries this year will settle in “at or close to last year’s record levels,” saying to look for volumes of anywhere from 17.1 million to 17.5 million-plus. WardsAuto’s latest forecast is 17.6 million.
Maybe more importantly, Batey says GM’s strategy on products, production and marketing is paying off in raising retail market share, average transaction prices and brand perception, though there’s still more ground to cover.
Among the positive trends spotlighted by Batey:
- GM’s ATPs were up 14% in first-half 2016 from 2012 levels to $35,038, thanks in part to a favorable, truck-rich mix. That compares with the rest of the industry’s 7% gain to $30,128. The automaker also has kept its incentives in check, averaging 10.89% of ATP vs. 10.87% for the industry overall. Some of its key competitors – including Ford, FCA US, Nissan and Hyundai-Kia – are running above 13%. “We have vehicles in the segments that have shown considerable growth, and we’ve capitalized on it,” he says.
- The automaker’s share of the retail market (minus fleet) rose 0.5 points in January-June.
- GM’s pickup strategy – adding the midsize Chevrolet Colorado/GMC Canyon alongside fullsize Chevy Silverado/GMC Sierra models – appears to be working. Combining the two pickup groups with fullsize SUVs, Batey says GM controls a 40.8% share of retail demand in those segments, up from 35.3% three years ago. “I feel really good about the success we’ve had,” he adds.
- The booming market has allowed GM to cut its sales to daily rentals, which now make up about 10% of total volume. Daily rentals accounted for 19% of GM sales in 2010. Batey says the automaker expects to maintain a 10%-13% level, but he admits that “would not work if we weren’t growing our retail share; we would have excess capacity.”
- More-profitable government-fleet business is on the rise, however. Batey says GM has gained 103,000 units in conquesting some 80 large commercial accounts once held by other brands between the ’14 and ’16 model years. “We lost a lot of that government business when we went through bankruptcy and we had to earn that business back,” he notes.
- GM has gotten its production in line with demand and in some cases – including pickup trucks and fullsize vans – is running short on inventory. Overall, vehicle stocks sit at a 70-day supply, the automaker says. Credited for a big part of that is what Batey calls a “comprehensive de-proliferation strategy” that saw the automaker reduce the number of trim levels and options on most models. “We went virtually from having hundreds (of versions of some models) to under 20 in many cases,” he says. “Without that, I don’t think today we would be able to get the sales success we are with 70 days’ supply. This is a dramatic business model, a dramatically different way of thinking than we’ve ever had before.”
- Brand perception is improving markedly. For example, net momentum – a brand-perception score based on periodic consumer surveys – is up 11 points for Chevrolet since its recent low point as a result of a broad ignition-switch recall. Overall customer loyalty across all four GM brands is up 0.4 points year-over-year. “One point (in customer loyalty) is worth $700 million-$800 million in revenue. So it’s a really big deal,” Batey says. “We’ve really been focusing on this the last five or six years. All the pieces are now in place.”
More upside is possible, Batey believes. He calls GMC the automaker’s “strongest, best-positioned brand” and wants to introduce the marque to more buyers. “Our biggest opportunity is to get more people to understand the brand,” he says. “There’s a big opportunity to open up (that) funnel.”
The executive also is confident in Cadillac’s future, despite an overall 9.5% decline in U.S. sales so far this year. The goal is the transform Cadillac into a global luxury brand capable of challenging the Germans. “A lot of the long-term planning and groundwork has been done, but we haven’t been able to truly execute that plan,” he says. “The biggest challenge we have is, we just can’t get (an expanded) SUV lineup out there fast enough.”
Cadillac has plans for a CUV positioned between its XT5 and Escalade expected in 2019 and aimed at the Porsche Cayenne and BMW X5, plus two smaller CUVs that would compete with models such as the Audi Q3 and BMW X1. The first of the smaller CUVs, the XT3, is expected to bow in 2018, according to WardsAuto’s North American Product Cycle data.
And there’s more to come in the hot CUV market for other brands as well, with GM’s long-in-the-tooth lineup finally getting some focus. Refreshed midsize GMC Acadia and Buick Envision CUVs already are at dealers, new small Chevy Trax/Buick Encore models are on the way and “next in line” will be a Chevrolet Equinox/GMC Terrain redo, Batey says.
“The segment continues to grow; it is the biggest in the industry,” he says. “We’re doing everything we can; we’re selling everything we build. But we just can’t keep up with the industry growth at this point.”
Although Batey says he is pleased with GM’s performance overall, he’s not satisfied.“I think we have a strategy that wasn’t invented overnight,” he sums up. “It’s not done; we have a lot of work to do. Our brands are stronger, not strong. Our retail market share is growing, but we’re not the industry leader, and we know there’s further potential.”
[email protected] @DavidZoia
