Gm Sees Tepid Sales of New Models
Essay Preview: Gm Sees Tepid Sales of New Models
Report this essay
General Motors Corp., already bracing for a tough 2005 because of flagging truck sales, is now showing signs of trouble selling two of the new cars it had been expecting to pick up the slack this year.
The company in the last week or so has increased incentives on the Pontiac G6 and the Buick LaCrosse as a result of sluggish sales, and has prepared to scale back production at the factory that assembles the G6.
GM recently told workers at its plant in Orion, Mich., that it is reducing the number of cars it wants produced each hour and delaying the start of a second shift of production until after the companys annual plant shutdown in July.
The company had planned to start the second shift in the spring.
Paul Ballew, GMs executive director of market and industry analysis, said production is ramping up slowly at the plant because not all versions of the G6 are in the market yet, such as a model with a four-cylinder engine. “We dont get the coupes until the summer, and we dont get the convertible until after that,” he said. “Weve been delayed in bringing some of the the new versions of the G6 out.”
Mr. Ballew said G6 sales are “pretty good” but acknowledged they are “not off the charts.” GM expects to sell about 6,000 G6s this month, up from about 4,000 last month, he said.
The slow start of the G6 and LaCrosse sales comes at a difficult point for GM, the worlds largest car maker. In 2004, GM lost market share and was forced to cut production as Japanese rivals such as Toyota Motor Corp. and Nissan Motor Co. posted substantially higher sales of mainstream cars. At the same time, luxury-car makers such as BMW AG are expanding further into midprice segments that GM once dominated.
In January, GM said 2005 earnings would fall by about a third to between $4 and $5 a share, as a result of a $1 billion increase in health-care costs, a substantial loss in Europe and lower profit at its financing arm.
It is also suffering from an aging line of pickup trucks and big sports-utility vehicles, such as the Chevy Suburban and GMC Yukon, that normally generate substantial profit. These sales are falling as GM prepares to launch new versions in 2006.
The LaCrosse and especially the G6 were supposed to help smooth the ride in the meantime. The design direction for both vehicles was heavily influenced by GMs vice chairman and product chief, Bob Lutz, who has promised that eye-catching styling would pull new customers to GM brands.
GM has promoted the G6 heavily in TV commercials and got a boost last fall when it was featured on the Oprah Winfrey show. Ms. Winfrey surprised her audience by giving each member a G6, about 100 cars in all, a publicity coup that generated reams of coverage on TV, and