Cobalt brings an element of refinement

By DON SHILLING
VINDICATOR BUSINESS EDITOR
CHEVROLET UNVEILS ITS new Cobalt this week in Los Angeles with the hope that it will be seen as more than the replacement for the Cavalier.
The new model to be built at General Motors' Lordstown Assembly Plant is positioned as a premium small car, not just an entry-level economy car.
The upscale Cobalt features new styling, refined interior and an optional engine that's more peppy than the Cavalier's. It also is expected to top the Cavalier in another important feature -- price.
Shoppers will like the upgraded features, but it's too soon to say if they will pay thousands of dollars extra for them, analysts said.
"It's going to be a tough battle for GM," said Erich Merkle, auto analyst at IRN Inc. at Grand Rapids, Mich. "You don't just create a premium-positioned product overnight."
Much competition
David Cole, director of the Center for Automotive Research in Ann Arbor, Mich., said the Cobalt is competing with many other new products for the attention of car buyers. Chevy alone has 10 new or redesigned models coming out over the next 22 months.
Merkle is one of the selected people who has seen the Cobalt in advance of its debut this week at the Greater Los Angeles Auto Show. The car will be shown to the press Monday, with the public part of the show beginning Saturday.
"It's OK," Merkle said. "It's not bad, but I'm not crazy about the styling of the Toyota Corolla either."
Analysts didn't expect a radical design for the Cobalt because it needs to please many people as a high-volume car.
Chevy calls the styling sophisticated.
It hasn't announced prices yet but hopes the Cobalt can command prices similar to the Corolla and Honda Civic.
Merkle said, however, that obtaining a higher price for the Cobalt won't be easy because it looks somewhat like the Cavalier.
Chevrolet wants buyers to forget about the Cavalier, not because it was a bad car, but because it has been heavily discounted in recent years, he said. Premium vehicles aren't supposed to have discounts.
Selling point
Price had become a main selling point for the Cavalier, which was the top-selling car with a transaction price under $12,500, said an online report last month by CNN/Money. The Cavalier had 17 percent of the under $12,500 price segment, according to industry data.
Kelley Blue Book said the most common selling price for the base model 2004 Cavalier is $10,500, compared with more than $13,000 for the base model Civics and Corollas. Better equipped models cost more.
Chevy doesn't want the Cobalt selling for around $10,000. It is introducing the Aveo, which is made in Korea, for the entry level market. The smaller car will start at just under $10,000 for the base model.
Merkle said he thinks Chevy eventually will have to offer rebates to keep Cobalt sales high. Through November, the Cavalier is GM's second-best selling car this year with 234,900 sales.
Business plan
Moving the Cobalt to a premium niche is a key part of GM's business plan because it wants all of its models to be profitable, Cole said. Previously, GM accepted losses with its small cars because they brought buyers into the GM family and helped it meet federal fuel-efficiency standards.
The push for profits from Cobalt also will be helped by GM's growing expertise at controlling costs, Cole said.
GM has standardized its manufacturing and purchasing efforts after identifying the best practices, he said. This has allowed the company to cut purchasing costs, inventory and training expenses by standardizing equipment and software, Cole said.
For example, GM used to spend $35 for each of the red and green lights on control panels on machinery used throughout its plants. Those lights now cost $5 each.
The cost of dies used to stamp body parts for cars has been cut by two-thirds over the past five years, Cole said.
The improvement of labor-management relations in Lordstown also will help the Cobalt become profitable, he said. The union has agreed to reduce the number of job classifications, which will help make the plant more efficient, he said.
GM had insisted on having more flexibility among workers before it approved spending more than $500 million to upgrade the Lordstown assembly and fabricating plants, he said.
Look for it in fall
The Cobalt will go on sale next fall. If sales are slower than hoped for, look for GM to put another model in the plant, Cole said. One of the priorities in auto manufacturing today is to keep plants running at capacity, he said.
The best way to do that is to make plants capable of building more than one model, he said. GM is developing other vehicles that will use the same underbody features as the Cobalt, which is called its Delta architecture.
The Lordstown plant also will make a twin of the Cobalt, the Pontiac Pursuit, which will be sold only in Canada.
Whether GM has to add other models to the Lordstown plant depends on how successful the Cobalt is, and that rests with car buyers in the showrooms, not industry analysts sitting at their desks, Cole said.
"But I would say that the Cobalt has a good shot at succeeding," he said.