Young Car Buyers Challenge Detroit

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Another wild card that could work in the favor of U.S. carmakers is Barack Obama. The new President has already talked more about the U.S. auto industry in three months than the last two Presidents in their collective 16 years, and he is invested heavily in the success of the restructuring of the companies.

"A year or two of Obama emphasizing the restructured GM and Chrysler, which he has staked his reputation and taxpayer money on, and you could start to see Gen Y take a lot more interest in these brands and looking at them in a new light," says Keene. Chrysler executives have already been playing that card. "President Obama thinks the new Chrysler is a good investment, and he is putting more than $4 billion into it," said Chrysler Vice-Chairman James Press when discussing the automaker's sales.

Potent Cheerleader

An Obama commitment to cheerlead the industry could help not only with younger buyers but also in certain geographic regions. GM, Ford, and Chrysler have very small shares of the passenger-car market in California, the Boston-Washington corridor, and Southeastern states. Ford, for example, says its market share in California is less than 2% after subtracting Ford pickup and Mustang sales. It's comparable for Chevy and worse for Dodge. In the first quarter of this year, Detroit as a whole held but 27.6% of California, compared with 51% nationally. Japanese brands held 53.3% of California new-car sales, vs. 38.2% nationally.

In the Washington region, Ford holds around 5% of the passenger-car market. When GM conducted focus groups for perhaps its best car, the Chevy Malibu, among college-educated women in the Washington area, the results overwhelmingly showed the women scoring the car extremely high for design, styling, and features. But when they were shown it was a "Chevy Malibu," acceptance "dropped off the table," said one GM executive who saw the results.

The U.S. industry will need the President boosting its image. Brands that are already popular with Gen Y are in expansion mode. Volkswagen is ramping up a big push with a new U.S. factory. Automakers in China and India are preparing to enter the U.S. And AutoPacific's study shows that 49% of Gen Y would gladly consider a Chinese vehicle, compared with just 21% of the country as a whole. Thirty-four percent will consider cars from India, vs. just 14% of the country overall.

That's disconcerting, to say the least. If GM is going to bounce back, it is going to have to change some minds. The Chevy brand represents more than 13% of market share in the U.S., and about 65% of GM's sales today. That share will only rise after GM lops off its other brands. Chevy is going to be by far the most important brand for GM—whether it makes the company, or breaks it.

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

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