Take Notice

Gary Cowger has just returned from paradise. No, he wasn't vacationing in Aruba or Bali. He was visiting Ft. Wayne, IN, where The Tom Kelly Group which sells numerous GM brands including Saturn, Buick and Pontiac-GMC claims an astounding 48% share of the city's market. He's my new benchmark, jokes Cowger, who showed up for the grand opening of Kelly's new Cadillac dealership. Then again, maybe he's

Gary Cowger has just returned from paradise.

No, he wasn't vacationing in Aruba or Bali. He was visiting Ft. Wayne, IN, where The Tom Kelly Group — which sells numerous GM brands including Saturn, Buick and Pontiac-GMC — claims an astounding 48% share of the city's market.

“He's my new benchmark,” jokes Cowger, who showed up for the grand opening of Kelly's new Cadillac dealership.

Then again, maybe he's serious. Cowger, president of General Motors Corp.'s North American operations, is part of a hard-charging executive team that is trying to lead GM to three consecutive years of market share gains for the first time in more than 20 years.

The chances of GM succeeding aren't good. The auto maker needed to post just under a 32% market share in November and December to beat the 28.6% stake it had in 2002.

GM's market share hasn't been that high for two straight months since 1998, according to Ward's data.

But a confident Cowger, who spoke with Ward's editors in early November with just over 40 selling days remaining in 2003, still believed GM could pull it off.

His optimism isn't tempered by a schedule that calls for GM to launch eight vehicles at its assembly plants during the fourth quarter. Introducing new products often temporarily lowers output and inventories.

“We really had a very poor start in the first quarter this year that kind of got us behind the eight ball,” Cowger says.

“But we've been coming on strong. We've been improving share through the year. I'm cautiously optimistic. But I feel really good about next year.” (However, by late November GM number crunchers were backpedaling and far less confident than Cowger about this year.)

Behind Cowger, a window from his 37th floor office in GM's Renaissance Center affords an impressive view of the Detroit River as a freighter navigates the waterway. It's moving slowly, unlike GM.

The auto maker's pace is feverish and sometimes unorthodox, but it needs to be. After decades adrift in market-share decline, bad quality and poor labor relations, a unique approach is needed to right this ship.

Earlier this year, GM initiated the “Road to Redemption” marketing program, which took the odd step of reminding the public about GM's past quality problems. The advertisement concludes with J.D. Power rankings showing GM's improving quality and a glimpse at promising new products.

The ads, which still are running, are a direct and aggressive appeal to the public to put aside a negative attitude toward GM formulated decades ago and give the auto maker a fair chance. GM leadership also has taken the risk of making similar appeals during speeches to the media and securities analysts in the last 12 months.

“We'll continue to do what we think is right to continue to build the brand back,” Cowger says. “But at the end of the day, we've got to get more ‘gotta-have’ products out there than anybody else.”

Whether that will happen remains to be seen. But if GM fails, it won't be for lack of effort. In 2004 the auto maker says it will introduce nearly 30 new models. “Eventually,” Cowger says, “someone will notice the amount of incredible product portfolio refreshing that's happening at General Motors.”

Consumers are taking notice.

Late last year, Cadillac continued its lineup expansion by offering 99 special edition XLR roadsters, at $85,000 each, through high-end retailer Neiman Marcus. The cars were sold in 14 minutes. “That's the fastest they've ever sold out, with 2,000 people left on the line,” Cowger says. “Of course my question was: ‘Did you get those names?’”

Every sale counts — even in a market where industry deliveries regularly top 16.5 million units.

Cowger expects total industry sales to tally about 17.2 million in 2004. And GM plans to fulfill that forecast. It's currently rolling out the Chevy SSR roadster, Buick Rainier SUV, Cadillac SRX cross/utility vehicle, Chevy Malibu midsize sedan, Pontiac GTO sports car, Chevy Aveo subcompact and GMC Canyon/Chevy Colorado midsize pickups.

Next year, GM product introductions include the Chevy Equinox compact CUV, the Chevy Cobalt compact car, the Saab 9-2x and four new minivans (GM is calling them crossover sport vans).

Not surprisingly, dealers are overjoyed about the product onslaught. “We came off of what I thought was one of the best dealer meetings (in September) in Las Vegas,” Cowger says. “We have been promising them: ‘We're going to completely refresh this product portfolio.’ It's one thing to hear the words. It's another to actually start seeing the hardware.”

But not all GM dealers are happy, or getting new products. The auto maker continues to phase out its Oldsmobile Div., a reminder of GM's troubled past. The only Olds products still in production are the Bravada SUV and Alero midsize car.

Their last full year of production likely will be 2004. More than 2,600 Olds dealers have signed transition agreements. Less than 1,500 active Olds franchises remain. “I think it's going extremely well,” Cowger notes.

The former head of manufacturing and labor relations, Cowger also is pleased with the 4-year contract GM reached with the United Auto Workers union in September.

With the economy struggling and GM dealing with massive health-care costs and an underfunded pension account, some industry watchers expected labor strife. But negotiations were relatively uneventful, and GM avoided a work stoppage, even though it was the last auto maker to reach a deal — three days after the Sept. 15 deadline.

The contract calls for hourly workers to receive a $3,000 signing bonus this year, a performance bonus next year, a 2% raise in the third year of the agreement and a 3% wage hike in the contract's final year.

“I give (UAW President) Ron Gettelfinger and (UAW Vice President) Dick Shoemaker a lot of credit for understanding that the companies, in many cases, had very different needs,” says Cowger. “I think the contract allows us to continue to improve our quality and productivity so we can continue to get great cars and trucks out there.”

In 2003, GM also took care of another key matter: its pension fund, which was short by $19.3 billion at the end of 2002 and the subject of much concern on Wall Street. Only a year later, Cowger says GM's pension obligations will be fully funded in the near term. Improved equity markets resulting in better asset returns helped close the gap. GM also sold $13.5 billion in debt securities (the largest corporate debt offering ever), and contributed $900 million in Class H common stock.

With a UAW contract in hand, the pension fund addressed and a bevy of new products on the way, Cowger is relaxed — right? Nope. “Only the paranoid survive,” Cowger says.

Despite the improvements at GM, he has many reasons to worry.

GM faces several challenges from competitors in key market segments in 2004. For example, Ford Motor Co. and Nissan Motor Co. Ltd. are introducing impressive all-new fullsize pickups. GM's offerings in the segment, the Chevy Silverado and GMC Sierra, bowed more than five years ago.

Chrysler Group is moving its LX cars to a rear-wheel-drive architecture next year, and Ford debuts the sexy GT super car in 2004 with a sticker price well over $100,000. GM has no image-enhancing super car or high-volume rear-wheel-drive platform.

“We're bringing in the ('04) GTO (from Australia), which is basically the Holden (Ltd.) platform,” Cowger says. “Given the success of the GTO, which we think it will be, there'll probably be an opportunity to localize that platform here and drive more derivatives off that.”

Speculation revolves around eventually moving GTO output to North America and shifting Chevy Monte Carlo and Impala (and possibly a revived Camaro) and Pontiac Grand Prix to RWD, which is considered the optimum layout for large and performance-oriented cars.

GM certainly could stand to make more vehicles here. Its capacity utilization currently is 92%, and Cowger is steadfast in his goal to hit 100%. That means several GM plants — notably those in Baltimore; Wilmington, DE; Linden, NJ; and Lansing, MI — need to be closed or make products that are better sellers.

Baltimore is closing in 2005, and Wilmington is rumored to be getting the yet-to-be approved Kappa platform, which includes the Pontiac Solstice roadster and possibly similar cars for Saturn and Vauxhall brands.

Another issue GM still is struggling with is its effort to re-establish itself as the industry's technological leader. Several high-profile rollouts have stumbled or flopped, recently, including its lightweight composite pickup box, 4-wheel steering and infrared night vision.

GM spent some $60 million, alone, on the composite box effort. The box chopped vehicle weight by 50 lbs. (23 kg), and was meant to replace plastic pickup bed liners sold and installed at the dealership.

It was supposed to be viewed by consumers as a highly desirable option that would give GM pickups a leg-up on the competition, but it didn't work out that way. Buyers balked at the $850 price tag, and dealers preferred selling standard plastic liners — on which they make a tidy profit.

The so-called “take rate” was only 10% of the projected 50,000 units annually, so the option was killed for the '04 model year.

GM's 4-wheel steering and night vision options also were supposed to be features that would wow consumers and enable GM to steal sales from competitors, but so far most buyers seem unimpressed, and take rates also are far below planned levels.

“There are hundreds (of technologies) that do make it, and we don't seem to dwell on those as much,” Cowger says.

The composite box, 4-wheel steering and night vision programs required heavy involvement from suppliers. Cowger says GM is working to improve its interaction with parts makers.

But he doesn't believe reports that GM has an embattled relationship with its suppliers.

“I think our suppliers — from what I'm hearing — are glad they're a GM supplier, because we've kept the (production) volumes up. I would suppose you could go find a supplier that's on a product program that didn't meet expectations and could not be happy. But generally overall, our volumes have fundamentally been up. I'm just not hearing the same thing I'm reading about.”

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish