Perhaps this should begin with a disclaimer written by a lawyer.
It might go something like this: In the presentation that follows and in related comments by General Motors Corp. management, the use of words “expect,” “anticipate,” “estimate,” “forecast,” and “project” are intended to identify forward-looking statements. While these statements represent GM's current outlook — which the auto maker believes to be reasonable — actual results may differ materially due to numerous important factors such as economic conditions, political stability and fuel prices.
In other words, when preparing sales forecasts and product plans for the North American auto industry — use a pencil, not a pen.
So GM North America President Gary Cowger was a little surprised when numerous media reports surfaced regarding the auto maker's plans to cut production at several plants in early 2005.
“It must have been a slow news day,” Cowger says during an interview with Ward's at GM's world headquarters in Detroit. “We had a lot of discussion about supposed down weeks. When you are looking out to February, March and April, those are just projections at this point. Those are all subject to change, because you've got to be able to react to what the market is currently doing out there.”
He adds: “We continue to adjust production schedules. It's called running the business.”
Look at the madcap conditions confronting GM: sales were up 0.4% during the first 10 months of 2004 but the auto maker's market share is down two-tenths of a point to 27.8%. Then came November sales: off 13.1% compared to November of 2003, prompting a production cutback.
GMC set a new sales record in 2004 with more than 600,000 truck deliveries, and Chevrolet hoped to surpass Ford as the top-selling nameplate in the U.S. after trailing the Blue Oval brand by more than 700,000 units only five years ago.
Cadillac's resurgence continues with deliveries up 9.4% through October. It is one of the hottest brands in the industry, and another promising new product recently has joined the lineup — the STS sedan.
However, efforts over the last few years have failed to re-energize Pontiac, Saab and Saturn. Sales of the once-hot Hummer nameplate are down 20.2% during the first 10 months of 2004, and Buick must be rescued from irrelevance in the minds of a majority of American consumers. Traditional advertising efforts increasingly are becoming less effective, and incentives are devouring company profits.
So are GM's employee health-care costs - the highest in the industry, totaling $4.8 billion in 2003. GM's over capacity issues are leading to job cuts, including plans to cut one shift at plant in Pontiac, MI, in January and permanently shutter another factory in Baltimore about six months later.
Like the carnival tilt-a-whirl ride, the U.S. auto industry is dizzying. GM must hang on tight into 2005.
Cowger anticipates U.S. gross domestic product growth next year to be about 3% - down from earlier forecasts of 3.5% due to higher fuel prices and expected interest rate hikes. Industry sales are forecasted by GM to fall in the low 17 million-unit range. That is about the same sales total Cowger expects the U.S. to post in 2004, but GM will do its part to pump deliveries higher in 2005 with 21 new-product launches.
“We've got the (Chevrolet) Cobalt, which is the Cavalier replacement,” Cowger says. “It's just going to be an absolutely world-class small car…And we need it in that segment. Cavalier has been out there for a long time. So this is an important launch for us.”
Chevy is one of four divisions getting upgraded minivans. The Pontiac Montana SV6, Buick Terraza and Saturn Relay join the Chevy Uplander.
Saab, Saturn, Buick and Pontiac — four GM brands thirsty for expanded or updated lineups — soon will be awash with fresh cars and trucks.
Sales of the Pontiac G6 sedan, which replaces the high-volume Grand Am, are just beginning and will hit full speed early next year. The G6 also will add coupe and convertible models in 2005, and the blandly styled GTO sports car has received some cosmetic attention for ‘05.
Pontiac also gets a version of the Chevy Equinox midsize cross/utility vehicle, called the Torrent, in mid-2005.
Saab infiltrates the SUV market with its midsize 9-7X, based on the same platform as the Chevy TrailBlazer, GMG Envoy and Buick Rainier.
The effort to remake Buick, which began last year with the Rainier's introduction, continues with the addition of the LaCrosse sedan. Introduced in late 2004, LaCrosse replaces the Regal and Century. Buick's first minivan, the Terraza, began arriving at dealerships at roughly the same time.
GM's successful resuscitation of Cadillac the last several years is turning into one of the greatest comeback stories in automotive history. But achieving a similar outcome for Buick will probably be harder.
Buick's brand mission within the GM lineup is narrow, and its styling may be too tame to appeal to younger and more affluent buyers, as Cadillac did with its edgy exterior designs.
Cowger disputes that assessment.
“I don't think it's harder. I think it's different…” he says. “It's a different customer base. Everybody wants great cars and great quality. But we're going for the more traditional, premium American luxury look with Buick. That's a good spot. The high end we're reserving for Cadillac.
“We're going to keep taking Cadillac up-market. Clearly we want to have an ultra luxury sedan for the Cadillac lineup. We haven't made any announcements yet, but it's obviously something we think is important for the Cadillac lineup.”
Saturn gets its first minivan, the Relay, and plans to replace the L-Series midsize sedan in 2006. “We're just going to completely refresh their product lineup,” Cowger says. “One of the strengths of Saturn is the buying experience — data show people like it. Now we want to give it a great vehicle portfolio as well.”
Pontiac and Saturn will be the first divisions to begin selling aggressively priced roadsters built on GM's new rear-wheel-drive Kappa small-car platform. The Pontiac Solstice will hit the market in late 2005 followed by Saturn Sky in early 2006.
GM is reaching out to consumers via unconventional methods. For example, it created a splash in September when it gave away 276 G6s on The Oprah Winfrey Show to promote the car's launch.
“Are we going to spend more money advertising? Yes,” Cowger says. “Will it be in traditional advertising? No. In this age of the electronic media and the Internet, you've got to go where the customers are. They're opting you in. The 30-second commercial on the television simply doesn't break through. I'm not say you abandon that. But you've to be other places, and you've got to be in places where consumers don't expect you to be.”
The GM challenge is for all divisions to contribute to the bottom line. In return, says Cowger, “I'm optimistic about leaving no brand behind.”
