Sales Down, But Outlook Up at Buick

OAK BROOK, IL – While Buick retail sales rose 1.5% in the first seven months of the year, total sales – including fleet – fell 5.3% from year ago to 104,589 units.

Yet, when digesting the numbers, Brian Sweeney, vice president-sales for the General Motors brand, sees the glass as half full and filling up.

Total demand slipped because low-profit fleet sales were slashed, but in doing so, moves were taken to boost profitability, he says.

“We've reduced daily rental and fleet sales, which has increased residual values on our vehicles, and have sharply increased our leasing rate. Those moves have really paid off,” Sweeney tells WardsAuto in an interview.

The move to launch a new 24-month lease has paid dividends, he says, because leasing guarantees a return showroom visit by the customer and the chance for the dealer to lease, if not sell, again.

“We started our new 24-month leasing program (Buick Experience) in mid March. We hadn't really been known as a luxury leasing division before. At the time our lease rate was only 15%, a very low number" he says, well below Audi's estimated 50% and Infiniti's 60%.

“At the end of June our lease rate rose to 36%, and 40% of those are for 24 months,” Sweeney says. “Leasing has really caught on. That's important because the customers who lease are the ones who our dealers will see coming back to their showrooms in 24 months. It's a way to keep those customers in the Buick family.”

The Buick Experience program includes 24-month, no-cost maintenance, as well as free OnStar and XM Satellite Radio service.

Jennifer Nardicchio, marketing manager for the Verano compact sedan, tells the Midwest Automotive Media Assn. here more leases and fewer fleet sales “helps Buick brand health.

“In fact, there won't be any Verano fleet sales the first model year, and we'll keep fleet sales to about 5% of the mix after that,” she says.

Also giving Buick confidence is the performance of its Enclave cross/utility vehicle. Sales are up 11.0% so far this year, despite the fact the model is in the last few months of its lifecycle, with a redesigned version due to bow in the fourth quarter.

In addition to fresh styling and upgraded interiors, the revamped Enclave will offer a sophisticated infotainment system that’s lacking in the current generation.

Sweeney says the current Enclave is holding its own in the market, despite the fact every auto maker now offers a rival in the segment.

“The competition is tougher, but the sales pace has picked up in the last 45 days, and we should have a good sell-down of the current model and get off to a strong start with the new ’13 model when it comes out later this year.”

Sweeney blames a drop in Regal sedan deliveries so far this year in part on the new Verano.

“It's not that people are staying away from Regal,” he says. “It is when they came to see Regal, they now saw a Verano as well, a vehicle that fits their needs as well as price range.”

The Regal had been serving as the entry-level model into the Buick family, and the model with a 2.4L 4-cyl. engine had offered buyer incentives. But the spiffs essentially ended when the Verano arrived as the new entry model holding down the low end of the brand’s pricing spectrum.

Ironically, Sweeney says 40% of all Veranos are sold fully loaded with all the bells and whistles, such as leather seats.

While the LaCrosse is Buick's leading seller, the Verano claims a role that is vital to Buick and GM’s health.

“Buick's conquest rate is 41% for the division as a whole, but the conquest rate for the Verano is 50%, highest for any of our vehicles. And 21% are conquests from imports,” Sweeney says. “So Buick is doing what it is supposed to do for GM, conquest from other car lines and get people into our family.”

And the buyers the Verano is winning over are coming from the biggest sellers in the industry – with the top five models traded in the Toyota Camry and Corolla, Nissan Altima, Honda Accord and Hyundai Sonata.

Chicagoland, where leasing is strong, is the No.1 Verano market in the country.

To capitalize further on the Verano's success, Buick will begin offering a higher-performance, 250-hp turbocharged model in the fourth quarter. But Sweeney is mum on other variants, insisting, “We have a lot on our plate now and there's no need to talk about future product.”

Nardicchio says turbo versions of both the Regal and Verano are part of Buick's “get ’em and grow ’em dual marketing strategy” aimed at attracting both young and older buyers to the same car by offering a turbo performance version for the younger set and making high-mileage, more luxury-oriented versions minus turbos available for older consumers.

“Buick is the only brand to reduce the average age of its buyers by three years (to 58) at a time when the average age of buyers industry wide has risen by three years,” Sweeney says, noting the brand has a new luxury subcompact Encore CUV coming in first-quarter 2012, imported from South Korea. Chevrolet will get a version called the Trax, but it won't be sold in North America.

The subcompact Encore will help Buick attract an even younger audience and conquest even more business for Buick than the LaCrosse, Enclave, Regal and Verano, he says.

“We introduced the Encore at this year's Detroit auto show and it had twice the hand-raisers, people who contact us for more information, than the Verano did when it was unveiled at last year's show.”

While Nardicchio concentrates on safety systems in the Buick lineup for ’13 during her presentation here, she insists the goal is to strike a balance between safety, performance and fuel-economy features and not be top-heavy in one of those three.

“We want to be known for all three not just one."

Nardicchio says the No.1 safety system Buick buyers have asked for is a rear-view backup camera. U.S. government mandates call for all vehicles to have backup cameras by 2014, but a final rule has been repeatedly delayed and now is expected to be issued by regulators before the end of the year.

“With a backup camera in the ’13 Verano, the system now will be in all Buicks,” she says.

Buick will make IntelliLink in-car connectivity standard on all its ’13 models, including the redesigned Enclave and all-new Encore.

The system is designed to be used with two hands on the wheel as often as possible. IntelliLink’s layout was created with an emphasis on minimum distractions and can be activated with voice command.

It even will play music selections from the audio system by recognizing nicknames, Nardicchio says. “So rather than call up Bruce Springsteen tunes, you can simply say, ‘Boss.’”

Sweeney says unsold inventory of the discontinued Lucerne sedan is at “only about 100 units country-wide.”

Some Lucerne owners have stayed in the Buick family by switching to the LaCrosse. Others have switched to the Verano, Nardicchio notes.

“Empty-nesters or those who don't need as much size now need greater maneuverability and mileage in a smaller car.”