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General Motors Co. is cutting prices and reworking ads to revive sales of two sedans that executives consider vital to meeting Chairman Ed Whitacre’s goal for a 2010 profit, reported Bloomberg.com.
The moves are aimed at shrinking dealer stockpiles of the Chevrolet Malibu and Cadillac CTS that ballooned to more than twice the industry average, North American President Mark Reuss said in an interview ahead of next week’s Detroit auto show.
Whitacre’s prediction this week of “positive net income” in 2010 expanded on his challenges to management since becoming CEO on Dec. 1. He has begun early repayments on GM’s $6.7 billion in U.S. loans and replaced more than a dozen executives.
“Those are the two critical vehicles in GM’s lineup,” said Michael Robinet, a CSM Worldwide analyst in Northville, Michigan. “They have to have success there as an anchor to their overall portfolio.”
Malibu and CTS inventory reached a five-month supply in late 2009, more than double the industry average of roughly two months, Reuss said. The CTS was priced too high against models such as BMW's 3-Series, he said.
“Finally GM is willing to look at the price of the vehicle and adjust it to the market conditions,” Dave Butler, general manager of Suburban Cadillac in Troy, Mich., and Suburban Chevrolet-Cadillac in Ann Arbor, Mich., told Bloomberg.com. “They didn’t wait until it got to a critical level.”
Butler said the no-interest financing offered by GM on 2009 Malibus isn’t being matched on the 2010 model, in effect boosting the price. “A lot of purchase intenders may be waiting for that kind of incentive,” he said.
Advertising decisions also played a role in the Malibu’s slowing sales, as GM “walked away” after the vehicle’s initial promotion to focus on other models, Reuss said.
Malibu’s 9 percent 2009 U.S. sales drop was less than the industry’s 21 percent slide, and the 25 percent decrease for the full Chevrolet line, according to industry researcher Autodata Corp. in Woodcliff Lake, New Jersey. CTS sales fell 34 percent, compared with 32 percent for all Cadillacs.
Chevrolet and Cadillac are now more pivotal to GM’s sales, as the automaker trims U.S. brands to four from eight to help end annual losses that began in 2005. Buick and GMC also are being retained, while Saab, Hummer, Saturn and Pontiac are being dropped.
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