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GM turns focus to trend-setting U.S. cities

From iht| April 11 , 2007

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

Toyota Motor outsells GM two-to-one in Los Angeles and by a slightly smaller margin in Miami, according to data compiled by R. L. Polk. In the New York 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 head of North American sales and marketing, said during an interview. He added that trying to re-enter a market almost required the effort of getting established in 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 cannot 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 the Stern School of Business of New York University. "People in Des Moines want to drive what's hot in L.A."

GM introduced prototypes of new, small cars at the New York auto show that began Friday. The subcompacts, which can travel 40 miles on a gallon of gasoline, or 5.9 liters per 100 kilometers, will be a foot shorter than the 12.5-foot, or 3.8 meter, Chevrolet Aveo, which is now the smallest GM model.

In meetings held with dealers in 2005, the GM chief executive, Rick Wagoner, made regaining market share in Miami, Los Angeles and other large cities a priority. He promised more advertising and other resources to bolster sales.

Toyota sales have risen 36 percent in the New York, Los Angeles and Miami markets since 2002 while GM's dipped about 20 percent in those markets combined, according to data compiled by 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 past two years, will increase marketing expenses by 20 percent to 50 percent this year, primarily in New York, California, Southern Florida and Washington, LaNeve said. He would not disclose amounts.

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 like lower lease rates and special consumer events, LaNeve said. He declined to discuss specifics. He said he would also give urban dealers more consideration in distributing popular models.

New York is the media capital of the United States, 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, GM'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 do not include sales to commercial customers, like rental-car companies.

John LaSorsa, owner of LaSorsa Chevrolet Buick Pontiac in the Bronx borough of New York, said he had 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, LaSorsa said. "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 like 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.

GM retail sales fell to 13.7 percent of Los Angeles-area sales last year, from 15.4 percent in 2005 as Toyota's share of the market rose to 28.3 percent from 24.9 percent, Polk reported. The New York and Los Angeles 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, like Toyota and Honda Motor, said Kevin Naimi, the owner of Santa Monica Chevrolet Buick.

"I don't think GM is trying hard enough in America," Naimi 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 United States than within.

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

Losses in the Miami 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 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. 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.

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

Williamson said he has been heartened by GM's recent moves to market more to Hispanics in the Miami area, including hiring the Interpublic Group 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.

Jeff Green reported from Southfield, Michigan.

The billionaire Kirk Kerkorian, who last week offered to buy the Chrysler unit of DaimlerChrysler for $4.5 billion, said he wanted "a true partnership" with the company's workers and union members.

Such a partnership also would include investors bringing "necessary new funds" to help Chrysler, based in Auburn Hills, Michigan, expand its spending on new vehicles, Kerkorian's investment company, Tracinda, said Friday in a statement.

The proposal to acquire Chrysler would depend on reaching a new labor contract with the United Automobile Workers and DaimlerChrysler's willingness to share unfunded pension liabilities and retiree health-care costs, a longtime Kerkorian adviser, Jerome York, wrote in a letter to the DaimlerChrysler chief executive, Dieter Zetsche.

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