At this year's> New York International Auto Show, I made a beeline for the General Motors (GM)
Perhaps the GM pre-IPO road show last summer was too successful, elevating expectations for sexy new fuel-efficient models like the Chevrolet Volt, for growth in China and emerging markets and for gains in U.S. market share. Declining market share in North America has long been GM's Achilles' heel, and though market share is up for 2011's first quarter, it's still not clear whether the heart of the problem -- product appeal and quality -- has yet to be surmounted.
So far this year, GM shares have fallen 13.5% to $32. Ford (F)
When I finally found the GM display, I was encouraged by three young men clustered around a good-looking new Buick Regal. This is exactly the demographic GM -- and Buick specifically -- needs to cultivate to escape the taint of middle-age stodginess that had enveloped the brand. Brian White, 21, and his buddies had driven down from upstate Potsdam, N.Y., for the show, and they said they "liked" the Regal. But White quickly added for the money (about $27,000) he preferred the new Ford Focus and Mustang. The car he really liked was the Cadillac CTS-V Series -- but at $62,000-plus it was well beyond his price range.
Across the aisle was the much-anticipated Volt, now available in seven markets and soon to be distributed nationally. The accompanying statistics boasted that it achieves the equivalent of 93 miles per gallon, which is pretty eye-popping. But the afternoon I was there, it was garnering scant attention. Leroy Gilbert, 43, from suburban Mt. Vernon, N.Y., said he admired the car and felt GM "had come a long way." But like others I spoke to, the all-electric concept was still too new for him.
The real buzz at the GM display was over a trio of new Chevrolet Camaros, one in sizzling orange, another in Green Hornet green and the third a convertible. Droves of young men were climbing behind the wheels and jockeying for photos with the muscle cars, inspired by the 1969 Camaro SS. GM has captured the imaginations of this key demographic with a car that delivers both performance and reasonable fuel consumption at a modest price (all sell for less than $30,000).
Indeed, value was a theme I heard over and over, a reminder that high gas prices and malaise about the economy are having a profound effect on consumers, even the auto buffs who tend to populate car shows. This struck me as a marketing challenge for GM. Much as many shoppers seemed to like the GM offerings, nearly all of them cited models they deemed better values elsewhere at the show.
Ford, in particular, had a crisp, coherent value theme at its display, prominently featuring three models with average fuel economy exceeding 40 miles per gallon the Fiesta, the hybrid Fusion and the new Focus. Overhead screens featured the same models and reinforced the point. And Ford has also figured out that shoppers seeking fuel economy don't necessarily want to skimp on creature comforts. Some of the Fiesta and Focus models, with accessories like heated leather seats, are so luxurious I wondered why anyone would trade up to a brand like Lincoln. In Ford's earnings this week, which beat expectations, the company said consumers were opting for more costly add-ons, boosting margins.
I agree with Volt shopper Gilbert that GM has come a long way, both in its radical restructuring with a more rational cost structure, and in the appeal of its new models. I think both GM and Ford will continue to benefit from post-recession pent-up demand for new cars (overall car sales rose nearly 18% in March.) But my conclusion is that the easy work has been done. GM faces some formidable competition. It needs to focus relentlessly on quality and value. If its modest market-share gains start to reverse, then I'll be following the U.S. Treasury to the exits.