After months of holding out hope that U.S. truck sales would rebound, General Motors Corp. is accepting that the market shift toward more fuel-friendly vehicles isn't likely to end.
The automaker, which has made billions off its hefty trucks and sport utility vehicles over the years, said last week that it's been overpromoting its largest vehicles and plans to change course.
Instead, GM will implement a "dramatic redesign" of its marketing strategy that places a much greater focus on its lowmileage cars, new hybrids and other fuel-efficient vehicles.
"We've been promoting our trucks more than we should have," Mike DiGiovanni, the company's top sales analyst, said at a bankers' conference in Warren, Mich. "We're going to shift our marketing toward fuel economy and hybrids."
The automaker's new strategy will blanket the Internet with advertising to drive home a message that GM can compete with industry rivals on fuel economy. When speaking to the media, company executives will talk up GM's high-mileage vehicles and commitment to new fuel-saving technologies, such as hybrids and battery-powered vehicles.
Even in ads promoting trucks and SUVs, GM will focus on the fuel economy of its lineup relative to like-sized competitors. The Chevrolet Silverado pickup,for example, gets about 1 mile per gallon more than the Ford F-150 and Toyota Tundra, its top rivals, according to the car shopping Web site Edmunds.com.
GM's move comes as U.S. truck sales continue to spiral downward amid a weak economy and rising fuel prices. Jittery consumers are holding off on major purchases, while record oil prices have those who are buying vehicles searching for more budget-friendly options. Meanwhile, a slump in newhome construction has eaten away at pickup purchases by contractors, who comprise a key part of the segment.
Through April, full-size SUV sales are down 30 percent and large pickup sales are down 17 percent industrywide. GM's light truck sales are down 17 percent through April compared with a year ago; car sales fell 4 percent.
"There have been a lot of questions about whether the U.S. economy is in recession," GM Chief Operating Officer Fritz Henderson said at the bankers' conference. "The U.S. auto industry is definitely in a recession."
If the economy worsens, GM may be forced to cut capital expenditures or sell off parts of the business that aren't core to building cars and trucks, Chief Financial Officer Ray Young said.
Right now, the company has enough liquidity to spend onhighway driving.
GM used high-priced ad time during the Super Bowl to pitch its hybrid GMC Yukon SUV, and earlier this year the automaker launched a green campaign for its Chevrolet brand with the tagline "From gas friendly to gas free." The company also has generated major hype around its efforts to deliver the batterypowered Chevrolet Volt to the masses by 2010.
But the No. 1 U.S. automaker still relies heavily on larger vehicles and their high profit margins to boost the bottom line, a reliance that contributed to GM's $3.3 billion first-quarter loss. The financial hurt has been exacerbated by a parts shortage created by the ongoing strike at American Axle & Manufacturing Holdings Inc. The stoppage has cut into GM's truck production,product development and for retirement incentives and buyout packages being rolled out to all of GM's hourly workers, he said. At the end of the first quarter, GM had $24 billion in liquidity and access to about $7 billion in U.S. bank loans.
Promoting a fuel-friendly message isn't new for Detroit's automakers.
Ford Motor Co. is making an effort with its "Drive One" campaign, which features Ford employees praising the automaker's commitment to green vehicles.
Chrysler LLC boasts that its lineup includes five models that cost less than $20,000 and get 28 miles per gallon or better incosting the automaker $800 million in the first quarter.
GM plans to do all it can to shift the focus toward more gasefficient offerings. Even when GM pitches its SUVs and pickups, the message will focus on the fuel efficiency of those vehicles relative to the competition, GM spokesman John MacDonald said.
One ad, for example, features football-star-turned-commentator Howie Long in a Chevy pickup, giving a ride to drivers stranded when their trucks ran out of gas.
"Whether a consumer sees a GM ad about one of our cars, crossovers, or trucks/SUVs, we want them to think fuel economy and hybrid technology," Mac-Donald said.
Asian-based rivals of Detroit's Big Three have long dominated the green image war, especially Toyota Motor Corp. with its iconic Prius hybrid. Honda Motor Co. is the only major automaker able to boast a U.S. sales increase for this year and - as GM's DiGiovanni pointed out in his presentation - Honda's vehicle fleet also boasts the industry's highest average fueleconomy.
GM vehicles often match or beat comparable cars and trucks built by foreign-based rivals, said Jeremy Anwyl, CEO of Edmunds.com. But GM for years has neglected more fuel-friendly segments, such as small and midsize passenger cars. As a result, the company's portfolio is far more heavily weighted toward trucks than cars at a time when cars comprise a larger share of the auto market.
"They probably have a better story than most people think, so it's smart to be out there promoting it," Anwyl said of GM. "The broader issue is the conundrum where automakers have such a large volume in the large trucks and SUVs."
Now, GM is looking to make the case that it's about more than Escalades, Suburbans and Hummers. The automaker will roll out 14 new passenger cars and crossovers in the next 18 months, DiGiovanni said. It's made some headway with the well-received new Chevrolet Malibu, the new Saturn Aura sedan, the redesigned Pontiac Vibe and a new trio of large crossovers.
"We have a foundation to really start promoting these vehicles," DiGiovanni said. "We're as well-positioned as anybody."
Business, Pages 82, 83 on 05/18/2008