Wagoner: Buick Doesn’t Need Fleets for Profits

LOS ANGELES – Buick is going lean with fewer products, fewer rental fleet sales and a combined distribution channel that General Motors Corp. executives say is key to their strategy for improved profitability of the brand.

In launching the new Enclave cross/utility vehicle here, GM Chairman and CEO Rick Wagoner says Buick no longer needs to push volume through fleet sales to meet its targets.

“We can tailor the products much more against a market here in the U.S. which is fragmenting quite a bit,” Wagoner tells reporters on the eve of the media opening for the L.A. Auto Show.

“We think that’s going to be a competitive advantage if we can set up the distribution network so the dealers can make money. That’s the theory of putting Pontiac, Buick and GMC in one channel.”

Through October, Buick sales are down 15.4%, according to Ward’s data. But Buick has no plans to go back to offering seven models in its lineup as it did just three years ago, General Manager Steve Shannon says. For that reason, Shannon contends year-over-year sales comparisons are going to be “less relevant.”

“If we can get it down to, as an example, four really great Buicks…we think we can grow retail volume,” Shannon says. “Because four really great Buicks can retail more than five or six or seven less-differentiated Buicks.”

“Frankly, they weren’t in each case uniquely executed products that were the standard we want for Buick going forward,” Wagoner says of the brand’s models of a few years ago. “So think in terms of fewer, better, more distinctive Buicks.”

Enclave production begins in April.

GM still is pushing Buick, Pontiac and GMC dealerships to consolidate. Shannon says the auto maker will reach its goal of generating 70% of U.S. sales for the three brands through the consolidated dealerships this year. The goal is 80% for 2007, he says.

China is expected to surpass the U.S. as Buick’s biggest market this year. Wagoner says there are no immediate plans to export Buicks from China to the U.S., but he doesn’t rule it out.

He’s less direct about whether Buick is profitable.

“Buick used to be very profitable,” he says. “It is less profitable now.”

The Enclave and its Saturn Outlook and GMC Acadia platform mates hold a vaunted position in the GM lineup. The auto maker is betting sales of the CUVs can offset or even surpass flagging minivan demand.

Earlier this month, GM canceled a program to build minivans on the midsize CUV architecture and will exit the sector once the aging Saturn Relay, Chevy Uplander and Pontiac Montana end production in 2008.

“I think it’s going to eat into it,” Wagoner says when asked if CUV sales are taking a bite out of minivan demand. “I think for the people that have been buying minivans for all those good reasons, now they can get a product that frankly is a little more exciting and stylish, and I suspect we’ll draw some from that category.”

Enclave production is slated to begin in April at GM’s new Lansing (MI) Delta Township Plant, and dealers should be receiving them by June, Shannon says.

Wagoner was accompanied by 31-year-old golf legend Tiger Woods, who drove the 8-passenger Enclave through a paper wall and onto the stage.

“As you know, I’m getting a little older now,” Woods quips. “It’s nice to have room for eight.”

Woods says seeing the plans for the Enclave was a reason he signed on to be Buick’s pitchman five years ago.

“When I was little, my mom used to drive a Buick,” he says. “I never thought I’d be a part of something like this, something that’s transformed Buick…into a more hip, more bold, more elegant company.”

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