Chevrolet truly GM's Global Brand

[Flybrian]

Chevrolet Europe targets booming new Eastern markets
Neil Winton: European Perspective

Chevrolet Lacetti
Link to Original Article @ DetNews

KILLARNEY, IRELAND -- General Motors may be having to beg, plead and bribe for every sale in the U.S., but its blue-collar subsidiary Chevrolet is on the crest of a wave in Europe.

Chevrolet sales are booming, but the model names won't mean much to Americans, with the tiny Chevrolet Matiz, and other small cars like the Kalos (the Aveo in the U.S.), Lacetti and Tacumas swarming off dealer lots across Europe. The Captiva, Chevrolet's new Sport Utility vehicle launched recently here in south-west Ireland, won't mean a lot to Americans either, although if you look closely you'll realize it is a Saturn Vue in all but name. Chinese readers will know it as the XL7.

Chevrolets are doing best in new markets like Poland, Ukraine and Russia, where buyers are often finally able to buy their first cars, but it is also competing well in Italy and Spain, where little and cheap go down big.

GM already has two important brands in Western Europe, German-based Opel and British Vauxhall, and until recently it used its Korean subsidiary Daewoo to spearhead sales in less developed markets. It was one of General Motors' better ideas to change the name of products made by its Korean subsidiary Daewoo, to Chevrolet.

Daewoo made worthy cars, but the brand name had zero power in the dealership. You might say that Chevrolet isn't very well known either in Europe, although motors like the Chevrolet Impala and the Corvette had their admirers here.

Chevrolet, the global brand

So why dump Daewoo and start all over again with Chevrolet?

"Chevrolet is GM's global value brand, it is our foundation brand and it is GM's largest global brand. Chevrolet stands for affordable products that offer durability, high quality, expressive design and, above all, outstanding value for money. When GM decided to significantly expand its value brand activities in Europe with a range of small and compact vehicles sourced from GM's Korean operations, it was only natural that the choice was Chevrolet," said Wayne Brennan, Executive Director, Chevrolet Europe, in an interview with Detroit News Online.

And Chevrolet Europe has expanded its value brand activities significantly.

500,000 by 2011

Chevrolet Matiz

Automotive consultancy CSM Worldwide expects Chevrolet sales to hit 500,000 a year by 2011.

Chevrolet's global sales in 2006 totaled 4.3 million.

"Chevy broke the 300,000 barrier last year and we expect the bulk of these new sales to come from central and Eastern Europe," said Walt Madeira, Manager, European Vehicle Sales Forecasts for CSM.

"It is the Russian, Ukraine and Poland markets that are exploding. Daewoo did well for GM, but Chevrolet does have a positive image. Last year sales were split close to 50/50 between western Europe and the rest, but going forward we see sales slipping in the west to about 30 per cent, with 70 per cent in eastern and central Europe. That makes sense; conditions in the West are cutthroat and sales overall are stagnating. Better to go where markets are rising and new buyers are emerging," Madeira said.

Russia is now the market that excites car manufacturers most in Europe.

"At the end of this year, the Russian market will be as big as Italy's and just behind the U.K. and Germany," Jonathan Browning, GM Europe's vice president of sales and marketing said in a speech last month in Prague, the Czech Republic.

Trust and confidence

Chevrolet Tacuma

Germany is Europe's biggest market, accounting for just under a quarter of West Europe's annual sales of close to 14.5 million cars. German sales totaled 3.4 million in 2006. Russian car sales were 2.1 million in 2006.

Chevrolet's Brannon wouldn't comment on the 500,000 forecast made by CSM, but did say this.

"The speculations of CSM certainly show trust and confidence in our performance."

Why not use Opel and Vauxhall, which have a wide range of vehicles from little city cars to big sedans, to push for sales in Eastern Europe?

"Opel/Vauxhall are respected brands with the GM brand portfolio, but they are mainstream and positioned above the value brand products that Chevrolet offers in different segments of the market. Chevrolet vehicles and Opel/Vauxhall products are targeting very different customers," Brannon said.

On the money

Chevrolet Kalos

Ralf Landmann, automotive partner with Roland Berger Strategy Consultants in Frankfurt, Germany, believes GM's strategy is on the money.

"Their sales targets look realistic and I do believe they will have success. Yes, Chevrolet is growing in Europe and it has potential not only in the East but in the West as well. They've done a very good job in launching the brand and it is on the radar, even here in Germany".

It made good sense to use the Chevrolet brand for lower priced cars.

"It all depends on how far you can stretch a brand. Yes there are the established brands like Opel and Vauxhall, but in the lower price segment Chevrolet is much better positioned than Opel. They took an established, well-known brand (Chevy) and used it to their advantage. Sensible," said Landmann

Some analysts point to the possibility of cannibalization of Opel sales by Chevrolets. For instance, a version of the Chevrolet Captiva is going to be sold by Opel and Vauxhall as the Antara.

Completely different

Chevrolet Captiva

"The Opel Antara and the Chevrolet Captiva are based on the same vehicle architecture. However, they are completely different vehicles, not only in the sheet metal where each part is different, but also in the interior design and specifically the ride and handling. Captiva offers great value for money for families while the Antara addresses an audience likely to be without children -- it's only got five seats -- looking for more specification and additional refinement," Brannon said.

Detroit-born Brannon has been in post since January 2006, arriving via various GM posts around the world including Africa, the Middle East and South America.

Chevrolet's success in Europe is in vivid contrast to GM's Cadillac luxury division. Last year, Cadillac's Dutch importer said it would sell 20,000 Cadillac's and Corvettes in Europe by 2010. According to Automotive Industry Data, in the first half of 2007, sales were going into reverse, slipping to 2,600, from 3,000 in the same period of 2006.

CSM Worldwide's Madeira said GM is ahead of the game with its use of Chevrolet.

"In the East we see that all ships are rising in the high tide. As volume grows every one gets a bigger slice. The Japanese have been very quick and are well established in large markets like Russia. But we see European efforts trailing. Renault (of France) with its cheap, world vehicle the Dacia Logan (made in Romania) has done well, but Volkswagen and Peugeot are dragging their feet with a world budget vehicle. Fiat is trying again. The worry is that China will come into those markets and beat the Europeans with a budget vehicle," said Madeira.

Russian politics

There is one potential cloud on the horizon for companies seeking to climb on the bandwagon of booming sales in Eastern Europe. Recently, Russia has been flexing its political muscles and making scary noises about arms buildups and missile shields.

This isn't going to have a long-term impact on business in Russia, according to Roland Berger's Landmann.

"No. Not at all. Look at the sales figures in Russia and they are all growing by double digits and this success will be long term. Yes, there are rows now, but I don't think these political developments will gravely influence the sale of cars in Russia long term," Landmann said.

With the clamor for smaller, more fuel efficient vehicles, will any of these little Chevys find their way to the U.S. market?

"The Chevrolet Aveo is already successful in the U.S. market place, in fact it has been the best selling sub-compact over a long period. If the demand is there, Chevrolet is certainly in a good position to introduce small cars from its portfolio in the U.S. market," said Brannon.

[FUTURE_OF_GM]

KILLARNEY, IRELAND -- General Motors may be having to beg, plead and bribe for every sale in the U.S., but its blue-collar subsidiary Chevrolet is on the crest of a wave in Europe.

WTF?!?!?!?!? Last time I checked, Chevrolet wasn't really doing any of those.

but Chevrolet does have a positive image.

Well, now that the cat's out of the bag on that, it won't be long until it's altered.

If the demand is there, Chevrolet is certainly in a good position to introduce small cars from its portfolio in the U.S. market,"

The demand is here, now where are those introductions GM?

[dimitri0917]

This is good news. But why does every other place outside of the U.S. get cars that look like they were produced 15 years ago? That Lacetti really looks like a '94 Cav!

[Dragon]

if they are doing well in Spain, its hard to tell. I just got from Madrid, Bilbao, Pamplona & San Sebastian and I hardly saw any.

I probably saw more Chevy's in 3 days in Budapest than I did in 8 days in Spain

[wjfox]

That Lacetti really looks like a '94 Cav!

It might look a little like a '94 Cav, but it looks a lot like a Suzuki Reno, or a Buick Exelle or a Holden Viva. Maybe Badge engineering works if you do it on different continents.

[CARBIZ]

It seems odd to me that on the one hand GM seems to be doing what a global powerhouse should do by moving its top executives around and letting them cut their teeth in international markets (even Wagoner did a stint in South America), so why does it seem that when it comes to launching models in North America they seem to fall flat on their face?

There are a lot of smart people working at GMNA. We keep hearing that nobody on this shore wants small cars or that GM can't build them profitably, yet Toyota keeps proving people will buy anything with a T on the hood.

I am very happy for GM that it is doing so well overseas, but Rome (Detroit) is burning and all anyone in the RenCen can do is slap each other on the back because, well, "we are doing so well in Europe/Russia/Brazil/China/India.

Unless they plan on shuttering all production here and just importing all vehicles to the U.S. market and beating Japan Inc at their own game. Now, that would be delicious irony. Shove that up your ass, Washington!

[enzl]

It seems odd to me that on the one hand GM seems to be doing what a global powerhouse should do by moving its top executives around and letting them cut their teeth in international markets (even Wagoner did a stint in South America), so why does it seem that when it comes to launching models in North America they seem to fall flat on their face?

There are a lot of smart people working at GMNA. We keep hearing that nobody on this shore wants small cars or that GM can't build them profitably, yet Toyota keeps proving people will buy anything with a T on the hood.

I am very happy for GM that it is doing so well overseas, but Rome (Detroit) is burning and all anyone in the RenCen can do is slap each other on the back because, well, "we are doing so well in Europe/Russia/Brazil/China/India.

Unless they plan on shuttering all production here and just importing all vehicles to the U.S. market and beating Japan Inc at their own game. Now, that would be delicious irony. Shove that up your ass, Washington!

Their success internationally is easily explained:

1. They're entering into new markets, so growth will be more than arithmetic for awhile

2. Most of that growth is through proven products made in low cost countries

3. The only exception to 1&2 is Western Europe, but the competition is so fierce that even the average product is pretty good

Their problems here are tougher to manage:

1. A workforce that gets paid no matter what, basically

2. A lack of focus on low margin products like small cars

3. The US fiefdom is not used to taking orders from other parts of the company...they protect their turf by rejecting or otherwise meddling with perfectly good product (Vectra, Astra) and needlessly duplicating work to create G5, Cobalt, Ion, G6, Malibu & Aura

4. Their bread & butter product (GMT-900/800 programs are basically responsible for all of their profits in the last 10-15 yrs.) are under direct assault from all competitors and gas prices

[Windy-57]

1. A workforce that gets paid no matter what, basically

2. A lack of focus on low margin products like small cars

3. The US fiefdom is not used to taking orders from other parts of the company...they protect their turf by rejecting or otherwise meddling with perfectly good product (Vectra, Astra) and needlessly duplicating work to create G5, Cobalt, Ion, G6, Malibu & Aura

4. Their bread & butter product (GMT-900/800 programs are basically responsible for all of their profits in the last 10-15 yrs.) are under direct assault from all competitors and gas prices

Good points. Some additional thougths:

#2 is affected by #1; #1 makes it tough to make business cases for low-margin vehicles.

They are working on #3 and are making serious strides toward truly leveraging their economies of scale - now if the critics would just give GM a break and not complain everytime they import a vehicle.

And, you mentioned that their global success is partially to do with entering new markets. Very true, but there's a flip side to that...it's tough to defend market share as new, strong competitors enter your established markets ala North America.

[enzl]

Good points. Some additional thougths:

#2 is affected by #1; #1 makes it tough to make business cases for low-margin vehicles.

They are working on #3 and are making serious strides toward truly leveraging their economies of scale - now if the critics would just give GM a break and not complain everytime they import a vehicle.

And, you mentioned that their global success is partially to do with entering new markets. Very true, but there's a flip side to that...it's tough to defend market share as new, strong competitors enter your established markets ala North America.

North America is becoming like the Western European marketplace. Fractured marketshare amongst dozens of players.

Just as the Mid-level manufacturers have had their ups and downs in Europe (VW, Fiat, Rover, Ford, Opel, et al.) so will the players here, once the market settles out a little (i.e. Big 2.8 marketshare finds a bottom.)

The problem for the 2.8 is that their exclusive stranglehold on Big trucks is over. That's what they made money with and were content to either concede markets (subcompacts) or offer loss-leading also-rans (compacts, midsize cars) because their trucks were bringing in great margins. Now with gas prices and competition, they are starting to get squeezed and must play catch-up in the above-mentioned segments, trying to product truly competitive products at reasonable prices...something they haven't had to do in a generation!

If you couple the above issues with the low-end squeeze by Hyundai & Kia (which will sell a combined 1 million units in the US this year), you've got a massive problem.

How the 2.8 address these concerns will dictate whether they survive into the next decade. It's that serious. The only thing that may avert complete disaster is the fact that they are leveraged to the hilt, thus the banking community/private equity has so much invested in them that they will not be allowed to fail. Donald Trump once said that if you owe a bank 1 million dollars, they own you, but if you owe them a billion dollars, you own them...I think that may be the case here.

[Windy-57]

North America is becoming like the Western European marketplace. Fractured marketshare amongst dozens of players.

Just as the Mid-level manufacturers have had their ups and downs in Europe (VW, Fiat, Rover, Ford, Opel, et al.) so will the players here, once the market settles out a little (i.e. Big 2.8 marketshare finds a bottom.)

The problem for the 2.8 is that their exclusive stranglehold on Big trucks is over. That's what they made money with and were content to either concede markets (subcompacts) or offer loss-leading also-rans (compacts, midsize cars) because their trucks were bringing in great margins. Now with gas prices and competition, they are starting to get squeezed and must play catch-up in the above-mentioned segments, trying to product truly competitive products at reasonable prices...something they haven't had to do in a generation!

If you couple the above issues with the low-end squeeze by Hyundai & Kia (which will sell a combined 1 million units in the US this year), you've got a massive problem.

How the 2.8 address these concerns will dictate whether they survive into the next decade. It's that serious. The only thing that may avert complete disaster is the fact that they are leveraged to the hilt, thus the banking community/private equity has so much invested in them that they will not be allowed to fail. Donald Trump once said that if you owe a bank 1 million dollars, they own you, but if you owe them a billion dollars, you own them...I think that may be the case here.

Right on. As the market becomes more competitive, GM can't get away with stuff they used to.

Still, I don't think it's vital that GM has a dominant A-car for the U.S. It would be nice, but not necessary. Their main areas of need are improving the Impala, Malibu, Cobalt, and Equinox and then defending their trucks as best as possible.

And to my previous point, the only way they will be able to have competitive vehicles smaller than the Cobalt (Aveo and Beat) is to import them.

[Camino LS6]

Good discussion in this thread, valid points raised throughout.

I would say though, that the truck outlook is still quite good for the domestics. They still own the market and the competition still doesn't have their product where it needs to be.