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Don’t let off accelerator, analysts advise GM



Published: Wed, September 7, 2011 @ 12:00 a.m.

By Karl Henkel

khenkel@vindy.com

LORDSTOWN

If auto sales are a race, then the Chevrolet Cruze has the lead.

That answers last year’s question: Can the Cruze drive GM back from near-oblivion?

Now, GM faces a new question: Does the Cruze have enough gas in the tank for the long haul?

Analysts say yes, but General Motors Co. can’t be content with the success of the first-year product.

“With the Cruze, it’s just kind of getting started,” said Kristen Andersson, auto analyst at TrueCars.com, who noted the car’s increasing popularity in the compact-car segment.

The Cruze has racked up sales of about 170,000 through the first eight months of 2011 and should top the 240,000 sale mark by year’s end, said George Magliano, senior principal economist of American automotive industry at IHS Global Insight.

It’s an astonishing total for the freshman vehicle, and a total that would surpass the best single-year total of the car it replaced, the Chevrolet Cobalt. It had 212,667 sales during its first full year on the market.

“You look at the Cruze versus Cobalt and it’s night and day,” Magliano said. “The Cobalt wasn’t a very nice car, and it didn’t have much going for it.”

Magliano said the Cruze is a 180-degree turn from the Cobalt, but GM can’t afford to sit still.

The automaker already has offered free features on its 2012 model that previously cost an extra $500 in 2011.

Rumors have circulated about potential convertible, two-door and hatchback models, but GM previously quashed those ideas. But in July, GM said it will make a diesel model starting in 2013.

Magliano said the announcement is a start, but to compete with cars such as the Honda Civic, which regularly posts annual sales of 300,000, the Cruze needs more variant models.

“The four-door is the bread and butter,” he said. “If you want to be a big player, you need the variance.”

Honda offers a coupe, sedan and hybrid Civics in a variety of package types.

Also important to the car’s success: Listen to the customers.

“Slight modifications always appeal to the consumer,” Andersson said.

Those changes, said Dave Green, president of United Auto Workers Local 1714, could be small, such as the extra two miles per gallon for 2012 Cruzes. He said if customers demand it, GM must oblige.

“It could be something as small as moving a cup holder,” Green said. “If they say to move it, then GM needs to move it.”

Cup-holder placement may be nitpicking, but there’s one aspect of the Cruze — and all compact cars — that gets the most attention: fuel efficiency.

With gas prices still well above $3 a gallon and the economy in flux, the Cruze is a viable option. However, if gas prices decline, that could mean a softening of Cruze sales.

“When the gas prices go down, this segment never really gets back to the point before the gas decreases,” Andersson said.

But outside factors aside, Andersson and Magliano agree the ball is in GM’s court.

“Is it going to take over for the Corolla and Civic?” Magliano asked. “I don’t know.

“This is a business that has a long time span,” he added. “You can age very rapidly. But to build a reputation, you need to be at it for a long time.”


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