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General Motors Fails to Halt Toyota Sales Gains in U.S. Cities

From bloomberg| April 09 , 2007

Two years ago, General Motors Corp. promised dealers it would do whatever it took to reverse falling sales in the American cities that set the industry's trends. The slump has only worsened.

Toyota Motor Corp. outsells GM two-to-one in Los Angeles and by a slightly smaller margin in Miami, according to U.S. data compiled by R.L. Polk & Co. In the New York City metropolitan area, where GM had a 4.5 percentage point lead in market share five years ago, Toyota has surged to a four-point advantage.

``In some of these markets, our share has fallen off rather dramatically,'' Mark LaNeve, GM's head of North American sales and marketing said in an interview. ``You can almost re-enter the market like you would enter a new country.''

Gaining market share in big cities is important to car companies because, like many other consumer trends, car-buying habits are set there. Without significant presence in places like New York, GM can't gain the brand awareness to attract affluent buyers and return to profitability.

``If GM wants to be viewed as a cool brand, they've got to pay more attention to some of these markets where there are cool, urban people,'' said Russell Winer, a marketing professor at New York University's Stern School of Business. ``People in Des Moines want to drive what's hot in L.A.,'' he said.

The company will unveil prototypes of new, small cars at the New York auto show beginning tomorrow. The subcompacts, which can travel 40 miles on a gallon of gasoline, will be a foot shorter than the 12.5-foot Chevrolet Aveo, the smallest GM model.

Dealer Meetings

In 2005 meetings with dealers, GM Chief Executive Officer Rick Wagoner made regaining market share in Miami, Los Angeles and other large cities a priority. He promised more advertising and other resources to boost sales.

Toyota sales have risen 36 percent in the New York, Los Angeles and Miami metro markets since 2002 while GM's dipped about 20 percent in those three markets combined, according to data compiled by Southfield, Michigan-based Polk. GM's best showing was in Miami, where its sales dropped 1.9 percent.

GM, which lost more than $12.4 billion over the last two years, will increase marketing expenses by 20 percent to 50 percent this year, primarily in New York, California, Southern Florida and Washington D.C., LaNeve said. He wouldn't disclose amounts. LaNeve was appointed in March 2005, shortly before Wagoner introduced the big-city campaign.

Local Incentives

The automaker spent about $67 million in New York, $58 million in Los Angeles, $11 million in Miami and $25 million in Washington last year, according to TNS Media Intelligence, which tracks advertising spending.

GM also will try localized incentives such as lower lease rates and special consumer events, LaNeve said. He declined to discuss specifics. He said he will also give urban dealers more consideration in distributing popular models.

New York is the media capital of the U.S., Washington is where government policy is developed, Florida is a concentrated Hispanic market, and Los Angeles is both a trend-setting area and a focus of environmental groups -- all populations where GM needs a better image, LaNeve said.

In New York, the Detroit automaker's market share fell to 13.9 percent last year from 16.6 in 2004 as Toyota rose to 17.9 percent from 15.1 percent, according to Polk data, compiled from vehicle registrations. The totals don't include sales to commercial customers, such as rental-car companies.

`Still Suffer'

John LaSorsa, owner of LaSorsa Chevrolet Buick Pontiac in the Bronx, New York, said he's ``definitely'' felt the pinch of slower sales in New York in recent years. He said he posted a roughly 10 percent decline in 2006 to about 1,500 vehicles.

``We still suffer from this perception of'' poor quality, said LaSorsa, 44, in an interview. ``If they really want to get more people in this market to buy, they've got to focus on the quality in their marketing because Toyota on the coasts is just a very strong brand.''

GM will look to new models such as a redesigned Chevy Silverado pickup and the new Saturn Aura sedan to help gain sales in the market. Wagoner has said 40 percent of GM's volume this year will come from vehicles on sale 18 months or less.

``We feel like we have more bullets in the guns and maybe it was premature to even try a real concerted, highly resourced effort until this year when our product cadence really favors us,'' LaNeve said. He would be happy even if GM were able to gain two- or three-tenths of a percent in market share in big cities from last year, he said.

Import Brands

What's happening in New York and Los Angeles is part of a larger U.S. trend, said Lonnie Miller, an automotive consultant at Polk. Buyers are much more likely now to consider a foreign car than at any time in the past and ``that's where the tide has absolutely turned,'' he said.

Even in their home state of Michigan, GM, Ford Motor Co. and DaimlerChrysler AG Chrysler's combined market share has fallen from 87.3 percent in 2001 to 83.8 percent in 2006. Toyota rose to 13.1 percent from 10.4, Miller said.

GM retail sales fell to 13.7 percent of Los Angeles metro area sales last year, from 15.4 percent in 2005 as Toyota's chunk of the market rose to 28.3 percent from 24.9 percent, Polk reported. New York and Los Angeles metro markets together account for 14 percent of all U.S. retail auto sales.

Los Angeles buyers' taste for small, fuel-efficient cars makes it increasingly difficult for GM to compete with import brands, such as Toyota and Honda Motor Co., said Kevin Naimi, 58, the owner of Santa Monica Chevrolet Buick.

Other Countries

``I don't think GM is trying hard enough in America,'' the Los Angeles-area dealer said. ``They are making their money in other countries now and that's their focus, China, South America.'' Over the last two years GM has sold more autos outside the U.S. than within.

GM's Miami market share still slipped to 13.7 percent from about 14 percent in 2004, according to Polk. That's a drop from 15.3 percent in 2001.

Losses in the Miami metro area were much smaller than in Los Angeles and New York in part because the automaker beefed up spending on Hispanic advertising to attract buyers to Chevy models and worked more closely with dealers, said Sonia Green, who was assigned to Miami in 2005 to help halt a five-year skid in the South Florida market.

Green, a former Avon Products Inc. marketing executive, helped create a television commercial for the Chevrolet Cobalt sedan filmed in Florida using Miami locations and Reggaeton dance music popular with young Latin Americans.

Hispanic Market

A local radio disc jockey, DJ Laz, drove a Cobalt around Miami for the summer as part of a giveaway promotion. The activity helped increase Miami Cobalt sales 41 percent, said Green, who was born in Puerto Rico and has lived in Mexico.

``Toyota and Honda have been doing Spanish marketing for years,'' said Ed Williamson, 61, owner of four dealerships in Miami where he sells Cadillac, Hummer and Saturn models. ``It has been like pulling teeth to get GM to pay more attention to that market here.''

Williamson said he's been heartened by GM's recent moves to market more to Hispanics in the Miami area, including hiring Interpublic Group of Cos. advertising agency Accentmarketing, based in Coral Gables, Florida. ``They've been doing a good job for GM, but they've basically had to start from scratch,'' he said.

GM's U.S. sales fell to 4.1 million last year, the lowest since 1970. The automaker's U.S. market share plunged to 24.6 percent, the lowest since 1925.

The Detroit automaker had some good news in February when U.S. sales rose 3.4 percent -- California also gained 7 percent. GM sales analyst Paul Ballew was cautionary, saying one month doesn't mean a trend. GM said this week U.S. sales fell 4.2 percent in March.

It will take many more months of gains and a change in perception to reverse the momentum that Toyota has over GM in the key urban markets, Miller said. ``Whether there's an initiative established for a couple years or not, that's a wave that was going to hit them anyway.'' GM was ``already in the hole.''


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