Looking ahead to a long run by Chevrolet’s Cruze

Looking ahead to a long run by Chevrolet’s Cruze

A few weeks ago, a chill went up the economic spine of the Mahoning Valley with an announcement by General Motors — sparse in detail — that it was pushing back the launch of its new Lordstown-built product, the Chevrolet Cruze.

For nine months, the area had been operating on a projected launch date of April 2010 for the Cruze and the Oct. 28 announcement that the date was being shifted to some time in the third quarter of the year was unnerving.

There appears, once again, to be reason to relax, even to smile. Last week The New York Times and Associated Press reported in some detail the reasons for the delayed launch, and the primary reason is this: GM is taking some time to improve the marketability of the new car, especially by engineering as much fuel economy into the Cruze as possible.

It’s worth waiting a few months to launch the Cruze if those months are used to make refinements that could well mean hundreds of thousands of additional sales over the life of the model.

The stories detailing GM’s work on the Cruze broke at the same time as another story out of Detroit, a prediction by Ford Motor Co.’s top sales analyst that small-car sales will continue to grow in the U.S. and likely will become the largest segment of the market by 2013.

The right niche

The analyst was talking about a range of smaller passenger cars, including those in the premium small car market where the Cruze will compete.

That shift will be driven not only by gasoline prices, but by the economic realities of the foreseeable future. Younger middle-income buyers will have less disposable income, which means that all car companies have to look at small-car sales as a potential money maker. The idea of using small cars as loss leaders to attract future buyers of bigger, more expensive, more profit-driving vehicles is a relic of the past.

And older buyers who are beyond child-rearing years are looking for smaller vehicles and any way to protect more of their retirement income from being wasted. They’ll be demanding high quality and practicality.

Every car company — including General Motors, arguably especially General Motors — has to produce cars of high quality, high efficiency and at reasonable prices. Oh, and they have to make a profit on each model.

The area was looking forward to that early launch of the Cruze, but now that there’s a better understanding of the reasons behind the delay, we can all take comfort in an old adage: Good things are worth waiting for.

George Pipas told the Automotive Press Association in Detroit on Friday that downsizing baby boomers and millenials entering the market, looking for compacts and subcompacts, will drive increased sales.

He also said early sales results show that November U.S. car sales are looking much like October, which was a decent month for the U.S. industry. October sales were flat compared with the same month last year after months of sales declines. U.S. sales are down 25 percent so far this year.

Pipas said small cars such as the Honda Fit and Ford Focus made up 21 percent of U.S. Sales in 2003 but will rise to 36 percent in 2013. Volatility in gasoline prices, he said, and memories of $4 per gallon gasoline also will fuel small car sales.

Pipas includes small crossover vehicles in the small-car segment, which he said will see sales higher or equal to the midsize segment by 2013. That group includes vehicles like the Toyota Camry, Ford Fusion and Honda Accord, by 2013.

Ford has bet a large part of its future on the U.S. market shifting to small cars, although some analysts question whether U.S. buyers will continue down that road if gasoline prices stay in the current range of $2 to $2.50 a gallon. Many think Americans will still buy the biggest cars they can if gas prices stay low.

But Pipas said even if gas prices stay relatively low, demographic changes — including baby boomers who have less wealth than they once had — will push small car sales up.

“There is much, much more in play than gas prices,” he said.

Ford plans to put its Fiesta subcompact on the market in the first half of next year, and a new European-designed Focus compact will hit showrooms later in the year. The company also plans to build up to 10 different models off its Focus-sized frame by 2012, he said.

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Senior General Motors executives pushed back the launch of the Chevrolet Cruze for more time to improve engine performance, reports said.

The Associated Press and The New York Times this week quoted GM officials as saying the shifting and quietness of the car needed to be improved to match industry leaders.

Since the delay that was announced last month, GM has been running the Cruze in 80 mph test runs with the Honda Civic to find ways to match the segment-leading model, The Times reported.

The reports provide more details than GM released when it announced that its Lordstown complex would launch the car in the July to September quarter of 2010, instead of April. Officials last month said the automaker just wanted to be sure the launch would go smoothly.

Klaus-Peter Martin, a Chevrolet spokesman, said Friday that executives are striving for a flawless launch, so they are testing all systems on the car, including those mentioned in the news reports this week.

“There are a million things that need to be checked before the start of production. The engine and transmission calibrations are part of it,” he said.

Erich Merkle, an industry analyst in Grand Rapids, Mich., said all the reasons for the new launch date probably will not be known, but he welcomed the new date.

GM is under intense political pressure for the Cruze launch to go well because federal officials want GM to become a leader in fuel-efficient vehicles, he said.

With such pressure from the federal government, which now has an ownership stake in GM, the automaker is better off taking its time and making sure the launch of the 40-mpg car goes well, he said.

“If something goes wrong with GM’s big small-car launch, it wouldn’t look good. It would solidify in many minds that GM just can’t make a good small car,” said Merkle, who is president of Autoconomy.com.

Jim Graham, president of United Auto Workers Local 1112 in Lordstown, said pushing back the launch isn’t as big of a deal as it might seem.

GM simply is returning to its original time frame, he said. Earlier this year, officials decided they could have the car ready for market in April instead of the July-to-September period.

“I’ve been around a long time. Every time you push a project forward, you make a mistake. We can’t make a mistake on this car. I’m delighted that we pushed back the launch to the original date,” Graham said.

GM executives told The Times that pushing back the Cruze was a sign of how far the automaker has come in reducing its bureaucracy and changing how its operations are managed.

Mark Reuss, vice president of global vehicle engineering, said executives would have been afraid to raise concerns about a product launch in the past.

“No one wanted to do anything wrong, or admit we needed to do a better job,” he said.

The newspaper said the Cruze delay was the first test of a new product review system put in place by Fritz Henderson, GM’s chief executive.

In the past, GM had up to 70 executives review changes to a product plan. Decisions took as long as two months as they wound through several committees.

The new system created an executive committee that meets weekly and has the power to make decisions on the spot. It is headed by Henderson and Thomas Stephens, the company’s vice chairman for product development.

On Oct. 23, Reuss and Terry Woychowski, director of GM’s vehicle engineers, told the committee they thought the Cruze needed extra tests, and the delay was approved and announced within five days.

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Key dates for General Motors’ next small car, the Chevrolet Cruze:

July 8, 2008: GM announces the Cruze will be built at its Lordstown complex, starting in mid-2010.

July 16, 2008: GM releases the first official photograph of the Cruze in a presentation to workers.

Oct. 1, 2008: GM unveils the Cruze to the worldwide automotive press at the Paris Auto Show.

Jan. 11, 2009: GM shows off the Cruze at a car show in Detroit and says $350 million will be spent to upgrade the Lordstown complex.

Feb. 6, 2009: John Donahoe, Lordstown complex manager, says renovations will allow for the production of five or six vehicles at Lordstown and that the launch is now scheduled for April 2010.

Sept. 24, 2009: The Lordstown complex produces first test model of the Cruze.

Oct. 28, 2009: GM moves the Cruze launch from April 2010 to the third quarter of that year.