01 October 2009

GM To Boost Output Of New Models

Story from the Wall Street Journal

General Motors Co. dealers are pushing the car maker to boost availability of some of its hottest-selling models, forcing the company to reconsider production plans for 2009.

GM Vice Chairman Bob Lutz said Tuesday the car maker underestimated demand for a slate of new products that hit the market after its bankruptcy filing in June. The miscalculation was due primarily to the fact GM aimed to be overly cautious as it planned production volumes, and because its conversations with dealers earlier in the year led the company to expect softer demand than GM has seen in recent weeks.

"We need to look at our plans," said Mr. Lutz, interviewed at a GM product launch in Plymouth, Mich.

While stopping short of laying out specific additional production beyond plans GM announced last week, he said the auto maker may need to add a second plant for compact crossover-vehicle production beyond the facility it uses in Canada. GM also is looking to add workers to factories that are short-staffed, including at a crossover plant in Michigan.

The Chevrolet Equinox crossover, Camaro sports car, Buick LaCrosse sedan and Cadillac SRX crossover are among new vehicles Mr. Lutz indicated are outpacing the company's initial forecast.

"We are selling every Cadillac SRX, every Equinox, every Buick LaCrosse and every Camaro within 48 hours of being delivered to us," said John Bergstrom, owner of several Wisconsin GM dealerships. "These products are home runs."

GM has a 33-day supply of vehicles on dealer lots, down 45% from the beginning of August, according to Ward's Automotive Group. In trying to replenish the pipeline, GM executives say they will have to balance the outcry for more cars from dealers with the need to control supply so that it doesn't flood the market.

The promising start for new models is a rare bright spot in what continues to be a dismal environment for both GM and most competitors. After the industry's short-term boost in July and August triggered by the government's "cash for clunkers" incentive program, most dealers and industry analysts, including Mr. Lutz, are projecting a return to historically low U.S. sales for the foreseeable future.

"So far, September is weak and the month is not meeting anybody's expectations," Mr. Lutz said, predicting volumes for the industry will be below levels achieved in September 2008. Nevertheless, he said the market is showing signs of stabilization.

Ford Motor Co. Chief Executive Alan Mulally said Tuesday his company expects the industry to sell 10.5 million to 11 million cars and light trucks in the U.S. this year, after running at an annual rate of less than 10 million in the first half. "Some people think we're being conservative," Mr. Mulally said in an interview. Ford has been gaining market share in recent months and posting sales increases.

That GM's new products are finding a receptive audience underscores the company's strategy for responding to its widely criticized bankruptcy and government bailout.

GM's U.S. market share has fallen by more than two points in 2009, and it is banking on a sweeping advertising campaign touting new, more fuel-efficient products and a 60-day money-back guarantee to stanch the decline.

In Tuesday's interview Mr. Lutz gave specific figures on the company's demand miscalculations. GM, using dealer feedback, initially estimated it would need to build 7,700 Equinox crossovers in October, but dealers now want 29,000. It estimated it would need 3,600 Lacrosse sedans, but dealers have asked for 9,600. And dealers want 11,000 GMC Terrains, compared to the 4,300 GM estimated.

"A lot of great things that were in [GM's] hopper are now coming out," said Karl Brauer, editor of consumer-research Web site Edmunds.com. "They're being consistently well received, which is what GM needs."

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