Co. executives report better-than-expected results from a plan for retaining customers owning vehicles from brands the auto maker killed off as part of its bankruptcy last year.
The auto maker sold 183,635 cars and trucks in April, up 7.2% and led by an 11.6% uptick at Chevrolet, according to Ward’s data. Cadillac sales jumped 166.3% to 5,905 as financing loosened further in the month. Buick sales climbed 23.2% and GMC deliveries rose 20.1%. Excluding its wind-down brands, GM sales increased 20%.
GM’s U.S. sales chief Steve Carlisle also tells Ward’s consumer feedback to dealers from a controversial TV commercial touting payback of government loans has been both “positive and negative.”
“They’re getting feedback, and they’re getting both,” he says during a teleconference with journalists and Wall Street analysts today to discuss April’s sales results.
Carlisle says GM and its dealers consider fully repaying ahead of schedule some $8.1 billion in restructuring loans made to the auto maker last year “an important milestone, a step along the way” towards solidifying its turnaround.
GM Chairman and CEO Ed Whitacre revealed the final payments to the U.S. and Canadian governments late last month after announcing a $250 million investment at two U.S. assembly plants to build the next-generation Chevrolet Malibu.
The same day, GM launched a 60-second TV commercial featuring Whitacre saying the loans had been paid back, “in full, with interest, five years ahead of the original schedule.”
But the auto maker has been catching heat because the spot fails to mention the government owns a 60.8% stake in GM after pumping $50 billion into its restructuring, prompting Republican Sen. Charles Grassley to say the ad does not match reality and claims much of the support will not be repaid.
The U.S. Treasury defends the loan repayment, calling it good news for American taxpayers. GM expects taxpayers eventually will get the money back after the auto maker goes public again and the government begins selling off its stake.
Carlisle acknowledges the criticism and suggests it will provide additional motivation to GM and sharpen the focus of its turnaround.
“It’s an indication that we’re building momentum, obviously still subject to some criticism,” he says. “So I think we’re all well-motivated to keep ourselves striving forward to put it all behind us.”
Executives also say 28% of Pontiac and Saturn owners are sticking with GM despite a decision to wind down those brands. GM decided last year to phase out Pontiac and mounted unsuccessful bids to sell Saturn and Hummer as part of a plan to focus on four brands. The auto maker successfully sold Saab toCars N.V.
Brian Sweeney, head of marketing for Buick and GMC, says the two brands nearly replaced all of Pontiac’s sales volume in April. In four months, more than 200,000 Pontiac owners have cycled through Buick-GMC dealerships to receive free maintenance.
“We’ve been talking to those folks via direct mail, phone calls, Internet, emails – almost on a quarterly basis,” he says.
Jim Campbell, who heads Chevrolet, reports similar results from luring Saturn owners. The division has been shifting most Saturn owners to their nearest Chevy dealer for maintenance.
“The Chevrolet dealers are focusing on service first to begin the relationship with Saturn customers, building the relationship and then, as appropriate as consumers get ready to re-enter the market, providing a look at the entire breadth of the Chevrolet lineup, as well as the other GM divisions. And also, as appropriate, offers to make that transition easier.”
Carlisle says the results have exceeded GM expectations when it launched efforts to keep those owners last year, a key element of the auto maker’s turnaround. If they go elsewhere, GM’s share of the U.S. market will decline. The auto maker will not say which rivals are benefitting from the wind-downs.
“We’re encouraged by the response to some of the programs,” he says. “When we reach out to those customers in a particular way, we are seeing a more positive or favorable response than we had maybe expected or planned for. We’re a bit beyond, quite a bit beyond where we expected.”
Carlisle also says sales are helped by GM’s strategy for redirecting money previously spent on incentives toward advertising.
“We’re working hard on that,” he says. “We don’t feel constrained.”
Operating with eight divisions and a limited marketing budget, GM often found itself neglecting certain divisions and models because it did not have enough money to cover each one.
As a result, some cars and trucks would languish simply because consumers were not fully aware of the models, and the product-development dollars spent on them were lost. The Saturn Aura, which won North American Car of the Year when it was launched but never lived up to sales expectations, stands as one clear example.
Carlisle confirms fear over another Aura scenario has led GM to cancel plans to introduce the 7-seat Chevy Orlando compact cross/utility vehicle next year.
“We need to look at the portfolio and cover the important segments and then make sure you don’t stretch yourself too far along any dimension of resources, whether it is product development or marketing,” he says.
“We’ll continue to look at all of those and respond to the market and where we need to go.”
Carlisle says new products are leading GM’s sales gains, with a launch vehicle accounting for one out of every five units sold in April.