GM Eager to Retain Pontiac-Saturn Customer Base

DETROIT – General Motors Co. is entering the free-agent market.

The auto maker will reach out next week to some 1.6 million customers affected by the wind-down of its storied Pontiac brand. Susan Docherty, vice president-U.S. sales, calls these consumers “free agents” and says GM will attempt to steer them to Buick-GMC or Chevrolet dealerships by offering free oil changes.

GM also will distribute information about Buick, GMC and Chevrolet product portfolios as it tries to keep these customers “in the family,” Docherty says, adding a similar campaign is being planned to woo Saturn-brand customers.

Penske Automotive Group Inc. had intended to keep Saturn alive using, in the near-term, GM-built vehicles. But those plans imploded earlier this month after a key Penske partner backed out.

Docherty, on the job as sales chief for less than 10 days, describes next week’s marketing campaign during a media briefing designed to demonstrate how GM has advanced since emerging from bankruptcy in June.

Against a backdrop of encouraging data for October, she and GM sales analyst Mike DiGiovanni paint a picture of a company that is struggling mightily to leave behind the business model that triggered its embarrassing collapse.

GM is making progress, Docherty says, but executives are not ready to “declare victory.”

As GM trims its dealer network to 4,200 stores by year end, its inventory is weighed down by 12,000 Pontiac vehicles and 20,000 Saturn vehicles. But Docherty is unfazed.

GM sales chief Susan Docherty encouraged but not ready to “declare victory.”

October could mark the first month since January 2008 that GM can claim a year-over-year sales hike. “Our dealers are very optimistic,” she says, attributing their confidence to the appeal of key vehicles such as the new-for-’10 Chevrolet Camaro muscle coupe and the redesigned ’10 Equinox cross/utility vehicle.

This year could see the Camaro outsell its archrival, the Ford Mustang, Docherty says. After outselling the Mustang during the third quarter, 23,754 to 17,892, the Camaro trailed by just over 12,500 units, according to Ward’s data.

The Mustang has been on the market all year, while the Camaro went on sale in April, Docherty notes.

Meanwhile, the Equinox has been so hot, inventory is in the range of 10 days’ supply, she says, adding GM has approved a third production shift at the Ingersoll, ON, Canada, plant where it is assembled.

Docherty assumed GM’s top sales job Oct. 16 following the departure OF Mark LaNeve. And already, two things are keeping her up at night.

Languishing residual value of GM products continues to discourage sales, she says. But early indications from newly launched vehicles such as the Equinox suggest an upward trend.

Equinox buyers can expect to recoup 45% of its cost, a 13-point jump over the previous model, Docherty says. At the top end, a 52% residual value is attached to the redesigned-for-’10 Cadillac SRX CUV – 21.5 points higher than the outgoing model.

Dealer throughput for the SRX has tripled to nine per dealer, per month.

Proper incentive management is critical to improving GM’s residual values, she adds, admitting the auto maker ranks among the industry’s biggest spenders at $3,500-$4,000 per vehicle, on average.

That number will come down, Docherty adds, but incentives will not vanish. “They’re part of the sales equation,” she says.

The other issue causing Docherty’s insomnia is GM’s relatively poor showing in the latest vehicle ratings published by Consumer Reports magazine. Though the publication recommended 12 ’09 models, up from prior-year’s 10, nearly half of the 48 vehicles returned average scores for reliability.

While GM normally scores high on safety and performance, she expects reliability ratings will improve as consumers spend more time in GM’s newly launched vehicles.

Docherty also reveals GM’s lease penetration will come in this month at 2%-2.3%, which is markedly lower than the auto maker’s historic 20%-22% average but less than the 11%-15% target range.

Docherty says GM is carefully managing its lease penetration by nameplate, instead of following a portfolio-wide, across-the-board strategy.

DiGiovanni echoes Docherty’s optimism regarding GM’s current performance, but warns the industry is “not out of the woods” because damaging effects of the global recession still linger.

Banks burned by rising default rates are still clutching their purse strings, while consumers keep a wary eye on the job market.

“Until we see employment levels rise over time, people are going to continue to be cautious” with spending, he says.

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