General Motors has announced that its Daewoo Group unit will now sell all of it vehicles under the Chevrolet name. The Korean Daewoo operation has suffered from falling sales and a reputation for shoddily built cars. So what is GM’s answer to these challenges? Change the name!
The name change game has been played before when GMAC became Ally Financial. More recently, GM introduced the “all new” Chevy Sonic, which is an updated Aveo. This smoke and mirrors marketing philosophy will only take GM so far before the public asks, “Is this all GM has got?”
The Chevy brand has had less success than General Motors’ Buick, Cadillac and GMAC brands. While Chevy sales were up 16% last year, a closer examination of the numbers unveils some less rosy indicators. It is essential to analyze the quality of the sales growth at Chevy when considering the state of GM, since Chevy is the bread and butter brand.
Low profit fleet sales at Chevy through November of last year topped 35% of sales. “The Truth About Cars” website reports that fleet sales of some Chevy models topped 50% for the year. Through November, actual retail market share fell from 18.6% to 16.8%. That is a huge drop that must be concerning to GM executives.
Renaming Daewoo will give Chevy increased sales figures to report, specifically overseas. The ploy gives one the sense that General Motors is on the verge of desperation when it comes to coming up with ideas for driving sales figures. GM CEO, Dan Akerson (in photo), recently acknowledged a drought of new models and analysts at UBS and Soleil Securities (two investment banks not making huge profits on the GM IPO) have pointed to weak product launch as a risk to GM share price. In addition, the fact that Akerson has touted the Chevy Volt as the future of GM shows how dire the situation is. Sales for the Volt are expected to be 10,000 in 2011 and not significantly higher for years. Compare that to the Ford Fusion which sold over 219,000 in 2010 and you realize how absurd it is to believe that the Volt will have any near term impact on GM’s prospects for success. Especially since GM loses money on every Volt sold.
The quality and value of the vehicles offered by Chevy will be the key to success or failure. The problems that led to General Motors’ bankruptcy were less than competitive vehicles, poor management and the costs of UAW overhangs. None of these factors have been removed by the bankruptcy. If GM is to have a successful turnaround, management should stop the smoke and mirrors ploys and focus on building higher quality vehicles that appeal to the mass market. They have been given billions of taxpayer dollars to buy them enough time to accomplish this. The time frame, however, is not indefinite and they should change course immediately.
Mark Modica is an NLPC Associate Fellow.