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Analysts: GM still on course despite profit plunge
LORDSTOWN
Concerns about the future of General Motors appear to be overblown, some analysts said.
The company maintains a strong position and lower sales numbers just reflect that Japanese automakers have taken back the market share they lost after the tsunami in 2011 that struck Japan’s coast, said Jesse Toprak, vice president of market intelligence at TrueCar.com,
GM was initially able to take advantage during the resulting disruption within the supply chain for Toyota and Honda, Toprak said.
Earnings for GM were down by 41 percent worldwide Thursday, but nationally the company’s sales are up 3 percent.
“The U.S. market is expected to continue to increase,” Toprak said. “GM sales should continue to go up in the U.S. as long as the company doesn’t lose market share.”
The worst-case scenario for any GM plant, including the Cruze plant in Lordstown, would be for production to be slowed by the company, Toprak said.
“They don’t want to produce too many vehicles because then they would have to give them away with incentives and promotions,” he said.
Incentives and promotions hurt the resale value and production costs of the vehicle, Toprak said.
The issues in Europe that are hurting GM are not going to be fixed for a couple of years, but the strength of the American and Chinese markets will help the company, he said.
“This is the best line of vehicles that GM has ever had,” Toprak said.
Dave Green, president of United Autoworkers 1714, said he agrees with Toprak’s assessment.
“At one time GM didn’t really have a lot of great cars,” he said.
Now just in the small-car segment the company has several vehicles, including the Cruze, Spark, Sonic and several others that are selling well, Green said. At one point, the only two vehicles in the small-car segment for GM were the Cobalt, which was built in Lordstown, and the Aveo.
“GM is growing share in the small-market segment,” Green said. “That’s important because that’s where young people buy their first car.”
The key is getting people to try the Cruze, said Glenn Johnson, president of UAW 1112.
“If people will go to their showrooms and try all the vehicles in our segment, I think they’ll see Cruze is head and shoulders above the rest,” he said.
One of the major issues facing GM is problems with its marketing plan, Toprak said.
The company has failed to reach consumers in large cities on the East and West coasts, where consumers prefer vehicles from the Japanese automakers.
Johnson said that while he does not agree with all actions the company takes to market the Cruze, “They’re doing the best they can.”
GM has been successful in marketing the vehicle online to a younger demographic, he said.
“They’ve been more aggressive marketing [the Cruze] online than they have been on television,” Johnson said.
GM, despite ousting marketing chief Joel Ewanick, has stated the company will make no changes to its marketing strategy, according to Associated Press reports.
“There is no change in direction, there is no change in priorities,” said Alan Batey, GM’s new interim chief marketing officer. “The team is focused on executing.”
He added: “This has nothing to do with our strategy. ... You shouldn’t read anything into this that we didn’t announce.”
Toprak said marketing program commitments and advertising purchases make it impossible for the company to make any immediate marketing changes.
But it wouldn’t make sense for them to fire their marketing head unless changes were coming eventually, he said.
“I think they’re just buying time,” Toprak said.
“Hopefully they’ve got a plan,” Green said, “because we’re counting on them.”