The Race for Second Place

They are tearing down the old Chevrolet building at General Motors’ Tech Center in Warren, MI. By the looks of things they will be done by the end of February.

Leaders like Ed Cole, John DeLorean and Pete Estes occupied offices in that building, where product decisions generated significant market share for Chevrolet.

The slogan “Baseball, Hot Dogs, Apple Pie and Chevrolet,” arguably the division’s best advertising pitch, was approved there, and Chevrolet dominated Ford for brand leadership when the division occupied that space.

Now the building is gone, perhaps to portend a less optimistic time for Chevrolet in the U.S. sales race.

Typically, auto analysts focus on who is going achieve the coveted No.1 sales slot. Recent headlines touted the emergence of Toyota as the No.1 global seller in 2013.

In the U.S., the top position trophy went to Ford last year, beating Chevrolet for the fifth year in a row. The reason: Ford continues to meet customer needs with a far more effective portfolio than Chevrolet. (The F-150’s dominance doesn’t hurt, either).

Getting the first-place trophy is important. However, the race for second place will be far more interesting.

OK, it won’t be an epic international battle (Chevrolet gave that race up when it abandoned Europe). But it will be a serious battle of cars vs. trucks: Chevrolet, a dominant light-truck player, against Toyota, the perennial favorite among car buyers.

The bragging rights for No.2 in America is at stake and Chevrolet, a division that captured America’s heart with “See the U.S.A. in your Chevrolet,” will lose its second-place status to Toyota, a brand with a substantial “local” footprint.

Back in 2000, Chevrolet beat Toyota by more than 1 million units, a gap that is greater than the volume put up by most U.S. sales divisions. More recently, Chevrolet’s dominance over Toyota has been much more modest, with second place won by fewer than 90,000 units in non-crisis years.

Admittedly, the race for second place will go down to the wire in 2014. But the fact it is a close race signifies a substantial gain for Toyota and a dramatic fall for Chevrolet.

The first lap of this year’s sales race was won by Toyota, beating Chevrolet by 5,626 units. While both companies registered January volume and share declines, the RAV4 helped Toyota claim leadership over the GM brand.

The balance of this year’s race covers terrain filled with opportunities and pitfalls for both divisions. A serious incentive battle could be brewing given the high level of stock for both companies. With production schedules continuing to show substantial growth, any hiccup in sales during the first quarter could make both companies nervous.

Out of the blocks, Chevrolet is winning the public-relations war, with awards for both the Silverado and Corvette. Toyota remains hampered by recalls, dealer notices and lawsuit settlements. Chevrolet wins the media perception lap, but it may not matter when customers reach for their wallets.

Consequently, the sales race will come down to vehicle-portfolio strength and dealer focus. Both brands bring a number of Consumer Reports-recommended vehicles to the race. Chevrolet also has more new-product announcements to leverage.

However, Toyota has a significant volume and loyalty advantage in the core small and midsize segments. There are a few factors that will be important for maintaining Toyota’s lead: The revival of the Corolla and continued dominance of Camry and Prius in their segments. Squeezing out more volume at the RAV4 plant also should be at the top of any winning strategy.

For Chevrolet, the Equinox CUV and Impala sedan’s improved performance and the introduction of the Colorado midsize pickup will not be enough to close the significant advantage held by Toyota.

When it comes to fullsize trucks, Chevrolet has a wide lead. The new Suburban and Tahoe will help boost this advantage.

Additionally, the Silverado will be supported by deep discounts throughout the year. Chevrolet has allowed the days’ supply to get out of hand and appears to have elected to clear the stock with incentives rather than reduce production. Any lowering of production in the first or second quarter would almost guarantee Toyota’s victory.

Chevrolet also has the advantage in the small-car segments, with Spark and Sonic contributing more volume than the Venza. Finally, Toyota has no counterpunch to the sporty Camaro and Corvette.

Toyota has three products with the potential to influence the outcome. The Sienna, in a race with Honda’s Odyssey for the top spot in vans, clearly will outpace Chevrolet’s Express Van. Increased Avalon production, and more imported 4Runners, will provide the winning edge for Toyota.

The balance of their respective portfolios won’t have any serious influence. If anything, they just represent clutter in the showroom.

At Chevrolet, the SS and Caprice seem to be attempts to support global plants and possibly catch Ford, rather than fill gaps in the portfolio. However, being a global brand does not mean you have to take products from everywhere in the globe. These products lack focus, take time to manage and divert attention from selling core products effectively.

Toyota has some of the same issues. It clearly could sell more Yaris volume without Scion in the way. It also is tough to argue FJ Cruiser provides any real segment advantage.

All in all, it will be a tight race for second-place bragging rights. Toyota may smell blood in the water and see a potential for claiming that crown in a market unimpeded by industry disruptions – a real victory after long years of hard work. It appears to have a dealer group that pushes cars over the curb more effectively than the “new Chevrolet.”

If the GM brand is to have any chance of staying ahead, it needs to find not only new roads, but the right ones.

Warren P. Browne is president of WP Browne Consulting and has extensive experience in the global automobile industry. During the past 20 years, he has held senior executive positions at General Motors, including in Brazil, Poland and Russia. He currently serves as an adjunct professor of economics at Lawrence Technological University.