GM's Turnaround Rides on a Successful Chevy

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market is going—more cars and small crossover SUVs."

Greater Focus on Chevy

Consider that in the first half of the year, Chevy sold only 76,000 Malibu sedans—its best reviewed and most acclaimed family car, designed to specifically take on Toyota's Camry—compared with 150,000 Camry/Solara models. And for years, Chevy has been barely competitive in the compact crossover segment with its Equinox SUV, which sold 25,000 in the past six months, compared with 62,000 Toyota RAV4 SUVs and 79,000 Honda CR-Vs. The all-new Equinox, launched earlier this year, is substantially better than the old model, but it is an example of how Chevy has put up weak entries in important product segments. And it will take time for consumers to even notice some of its latest designs.

To change marketplace perceptions, Chevy may need to overhaul its marketing and advertising. GM's sales and marketing chief, Mark LaNeve, insists a remake is not in order, and that Chevy will benefit from GM's more focused attention. By spreading its dwindling resources the past few years across too many weak brands and dealers, GM shorted Chevy on necessary expenditures to design and sell new cars against Toyota and Ford.

Until the 2007 Malibu launch, for example, Chevy took on Toyota's Camry with only a smallish, generic sedan—the previous Malibu—that was a bigger hit at car-rental lots than dealer showrooms. When the new Malibu arrived, its annual marketing budget trailed Camry's by more than $100 million. Coming out of bankruptcy, LaNeve says, it will take Chevy at least three years to catch up to Toyota's marketing outlays.

High Quality Marks

Through the years, Chevy has been responsible for some iconic advertising campaigns. It dominated pickup-truck culture during the 1980s and '90s with its "Like a Rock" campaign. Its cars were backed for years by "Heartbeat of America." Go back to the 1950s and the brand was easily identified through "Drive the USA in Your Chevrolet." For most of Chevy's history, ad agency Campbell-Ewald, of Warren, Mich., has handled its ads. But the work in recent years hasn't been so memorable. New GM CEO Fritz Henderson says: "There are lots of marketing questions we have to answer, and we will answer them soon." Some of GM's longtime ad agencies will have to fight in the coming months to keep their assignments.

An even more fundamental question needs asking, though: What is Chevy these days? It won't be a discount brand, says LaNeve. "But its chief benefit will be a great car or truck that everyone can afford to own." Put another way, LaNeve says, "Chevy needs to stand for the democratization of greatness in vehicle design, safety, and fuel economy, as well as quality." For a few years now, Chevy has been advertising "An American Revolution." The campaign has had some bright moments, such as John Mellencamp singing to the pickup crowd and Mary J. Blige crooning for cars. But on the whole, it has lacked the iconic quality of past efforts.

Chevy has been making legitimate strides in quality, but that has gone unnoticed by too many car buyers. In the most recent J.D. Power & Associates Initial Quality Study, which measures "things gone wrong" in the first 90 days of ownership, Chevy scored well above the industry average, at 103 problems per 100 vehicles. Toyota scored 101, putting the brands at a virtual tie.

Waiting for the Volt

"That kind of parity in quality is a recent phenomenon," says industry consultant Gorrell. Or, take another area where Detroit has often lagged, vehicle interiors. Only new models such as the Malibu, Equinox, and Tahoe have the kind of upgraded seat designs, instrument panels, and superior-grade plastics that send the right signals of "perceived quality" to the consumer. GM needs to make a habit of that. "It is going to take time and a lot of work to close the perception gap with consumers," Gorrell says.

It's encouraging that Chevy's new Camaro has drawn high praise from reviewers. That shows Detroit, for all its woes, still knows how to engage the public with hot sheet metal. What's unclear is whether GM can make the same connection through fuel economy. Much is riding on the Chevy Volt extended-range electric car, due to hit showrooms at the end of 2010. The car is said to go 40 miles on a battery charge before an onboard gas-powered motor kicks in to power the battery. The electric range alone could give buyers who drive fewer than 40 miles a day an endless number of gas-free driving days, an innovation that GM hopes will catapault the company's reputation, much as the Prius hybrid did for Toyota.

"It will be interesting to see what GM can make of Chevy when it focuses the talent that produces the industry's best pickups, SUVs, and a hot Camaro on turning out equally good small and midsize family cars," says independent marketing and design consultant Dennis Keene. If Chevy doesn't succeed, it's unlikely GM will, either.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.

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