GM's Turnaround Rides on a Successful Chevy

With General Motors leaving bankruptcy, can its core brand churn out cars and crossover SUVs that stand up to Toyotas, Hondas, and Fords?

By David Kiley

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As General Motors emerges from bankruptcy reorganization to launch a new era, it is no exaggeration to say that as goes Chevrolet, so goes General Motors.

The Chevrolet brand has always been central to GM's fortunes. It's the division with the largest sales volume, after all. But at times, Chevy has suffered, along with GM's other brands, from neglect, mismanagement, and the automotive equivalent of malnutrition—a shortage of competitive models, and models sitting without updates in showrooms well past their sell-by date.

To see the results, just look at some market-share numbers. Through the first half of this year, Chevrolet had a 12.3% slice of the U.S. auto market, according to Autodata. GM as a whole had a 19.7% share. GM has agreements in place to sell Saab, Hummer, and Saturn, and it is closing Pontiac. The brands that will remain with the new GM, besides Chevy, are Buick, GMC, and Cadillac. Together, those three accounted for just 4.4% market share.

Suffering from Brand Dilution

Today, Chevrolet markets six passenger cars, eight sport-utility vehicles and vans, and three pickup trucks. That's 17 distinct product lines, adding up to a little more than 12% market share. Toyota (TM), not including Scion and Lexus, has 17 models, and 14.1% share. That doesn't speak well of Chevy's efficiency. And yet, so low are the expectations for GM that many people might think the gap between Chevy and Toyota was even larger.

"If GM had not diluted and shortchanged Chevy over the years to prop up brands like Saturn, Saab, and Hummer, it would be a more powerful brand right now," says Earl Hesterberg, CEO of Group 1 Automotive (GPI) and former top marketing executive at Ford Motor (F), Chevy's nemesis. Group 1, a large automotive retailer, has five Chevy dealerships.

Indeed, through the years, billions went into marketing and designing cars and trucks for those ultimately unsuccessful GM brands. Budgets were stretched so tight that GM continued to sell essentially the same vehicles across its hungry brands to fill out their showrooms, with little money to substantially differentiate, say, a Saturn Outlook SUV from a GMC Acadia SUV. And in the case of those SUVs, Chevy didn't even get its version until more than a year after Saturn. The whole system left Chevy dealers scrambling to compete for customers against GM's own Saturn and GMC, instead of focusing on beating Ford and Toyota.

Japanese Stumble with Trucks

For all its problems, though, Chevy emerges from bankruptcy with strengths that Asian carmakers can't match. "The reaction to the new Camaro has been very strong, and its pickup truck and large SUV remain at the top of those categories," says Hesterberg.

Indeed, Toyota, Honda, and Nissan have all stumbled in trying to sell full-size pickup trucks. Toyota sold just over 9,000 Sequoia SUVs in the first half of the year, whereas Chevy sold almost 50,000 Suburbans and Tahoes. Toyota has sold just 36,000 Tundra pickups in the first half, compared with Chevy's 150,000 Silverados. And neither Honda nor Toyota have competed much in the muscle-car category, where the nifty new Camaro plays.

What worries GM, though, is not so much the pickup and SUV business, where it will continue to battle Ford and to a lesser degree, Dodge. "Chevy's, and GM's, worry is how the company will perform in the passenger car and small SUV business, where Toyota has dominated Ford and Chevy," says Dan Gorrell of industry consultancy AutoStrategem. "That is where the U.S.

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