Some Soar and Some Crash

General Motors Corp. dramatically has improved the way it brings new vehicles to market, a systematic review of the U.S. industry's product launches finds.

GM ranks third in best launches for 2006 and 2007 — but if just 2007, alone, was considered, the auto maker would be No.1, says Dave Sargent, vice president-automotive research for J.D. Power and Associates, which did the study covering those years.

“GM has shown significant improvement over 2006,” he says, citing 17 launches and particularly lauding the introductions of the Buick Enclave, Chevrolet Malibu and Cadillac CTS.

First in the overall ranking is Toyota Motor Sales U.S.A. Inc., which had 10 major launches in the study timeframe, nine of them considered above average.

Second is American Honda Motor Co. Inc., with four launches; two “not so great,” but the others — for the Honda CRV and Fit — “outstanding,” says Rod Wright, J.D. Power's vice president-automotive operations.

Ford Motor Co., Nissan North America Inc. and Chrysler LLC in that order rounded out the top six. J.D. Power did not reveal worst performers.

The research firm's Vehicle Launch Index uses a 1,000 point scale to quantify information. Performance is measured against industry and segment benchmarks. A 2-year examination of 70 vehicle launches was conducted to develop the index.

J.D. Power will offer its index and services to auto makers for assessing impending launches, says Gary Dilts, the company's senior vice president-global automotive. Fifty-one major vehicle debuts are slated for this year, although the number likely will be scaled back due to economic conditions, he says.

The difference between a good and bad vehicle launch can be billions of dollars in revenue, Dilts says at the National Automobile Dealers Assn. annual convention in New Orleans, where the new tracking tool is introduced.

“Manufacturers are now able to gauge the marketplace success of their newly launched vehicles through an external, independent source,” Dilts says. “The (index) provides a real-time, comprehensive view into marketplace activity, allowing manufacturers to quickly respond to ever-changing industry conditions.”

The index uses six factors: dealership inventory-turn rates, dealer gross profit, price sustainability, incentive spending, residual values and a vehicle's ability to draw customers with quality credit.

The study finds a 96-day difference in inventory turn rates between the best and worst vehicle launches. In dealer gross profit, there is a $1,500 difference.

Correct vehicle pricing from the get-go earns high scoring on the index. “When the price starts high and drops, that's a warning sign,” Dilts says. “That's the whole system talking back.”

The poorest launch brought an initial net revenue of $350 million, while the best raked in $2.3 billion, according to the study.

For incentive spending, $3,200 was the difference between the best and worst launches reviewed, says Wright. “Some of the best are spending less on incentives 12 months after the launch. With the worst, you can see by incentive spending early on that things are not going well.”

The study shows a 20% difference between the best and worst residual values.

Addressing creditworthiness of customers, the study finds the worst launches attracted customers with low credit, while the best ones drew a mix, Sargent says.

Wright notes some launches are boosted by the mere superiority of a vehicle, which the index takes into account.

“But the study is not just about the vehicle itself,” he says. “It is a measure of how well the manufacturers and dealers played the hand they were dealt. Obviously, some hands are better than others.”