GM North America Chief Says ‘Strong Product’ Behind Pricing Story

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TRAVERSE CITY, MI – Mark Reuss, president of General Motors North America, says the auto maker will continue into the year’s second half with the strong product pricing that is boosting its turnaround, despite a moderating economy and the resurgence of Asia car companies.

“We have good pricing, and it’s appropriate pricing,” Reuss tells journalists after addressing the Center for Automotive Research’s Management Briefing Seminars here. “We spent a lot of time fixing our pricing, and it’s starting to produce some results.”

The executive’s remarks come the same day GM reports second-quarter earnings of $2.5 billion, solidly beating Wall Street estimates by posting profitable results in every region for the first time in years.

The solid earnings mark GM’s sixth-straight quarterly profit and are another signal the auto maker’s rapid post-bankruptcy recovery remains on track.

Importantly, GM earned a before-tax profit of $2.2 billion in North America, driven by more-robust pricing strategy to cover higher material costs.

With Asian competitors handcuffed by low inventory levels as they try to ramp up production after Japan’s earthquake and tsunami in March, GM has been able to keep incentives low and margins up.

Reuss’ “strong product” entries, such as the Chevy Cruze small car and Chevy Equinox and GMC Terrain small cross/utility vehicles selling briskly, enabling stronger pricing.

In the past, GM was forced to heavily discount its vehicles to compete with superior entries, especially from the Japanese.

GM strong car lineup “like never before,” Reuss says.

GM’s share of U.S. sales has stayed above 20% through six of the year’s first seven months, according to Ward’s data. Conversely, Toyota and Honda have seen their shares fall precipitously over the same period. Korea’s Hyundai has grabbed a larger piece of the pie, as well.

“If you look at things like the Cruze (Eco) at 42 mpg (5.6 L/100 km), I’m not sure there are competitors for that,” Reuss says. “Equinox, Terrain – no matter where the Japanese are or are not in the market, those vehicles have been capacity-constrained.”

At the same time, the Asian auto makers’ efforts to return to normal production will manifest in the year’s second half. “I fully expect our primary Asian competitors to be back with a vengeance,” Reuss says. “We don’t underestimate them.”

Looking ahead, GM in a few months will bring to market redesigned models of the Chevy Sonic compact and midsize Malibu sedan, and all-new Buick Verano premium small car to further hold pricing. “We’ve never had cars before like these in our lineup,” he says.

Reuss uses the annual conferences here to announce the arrival next year of the Cadillac XTS large sedan and a small sports sedan codenamed ATS. Both have been expected but not confirmed with a timetable until today.

GM particularly has been pining for the small Cadillac, which finally gives the brand a solid competitor in the important dog-eat-dog, entry-level performance luxury segment now dominated by three German auto makers.

“We’re going to take buyers out of an only foreign, and in some cases only German, entry,” Reuss says. “We are going to offer a uniquely American solution that’s very fun, very beautiful, and with more technology from an infotainment and powertrain standpoint.”

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