GM Seeks Higher U.S. Market Share

DETROIT November 26, 2002; Michael Ellis writing for Reuters reported that for the first time in more than 25 years, General Motors Corp. expects to marginally increase its U.S. market share for a second straight year in 2002, boosted by aggressive incentives and new vehicles.

"I do think we'll show a second consecutive year of share gains. And if we do, that will be the first two years in a row that we've had share gains since 1976," John Smith, who takes over as GM's head of North American sales, service and marketing on Jan. 1, told Reuters in an interview.

GM commanded more than 46 percent of the U.S. market in 1976, when large American cars ruled the road and Japanese cars were an afterthought. But since then, its share has steadily eroded due to the onslaught of foreign competition, quality problems, lackluster design and failure to spot market trends, analysts said.

But over the last few years, GM's quality has improved and its sport utility vehicles have brought back many buyers, as have its generous incentives.

GM's U.S. market share, including its Saab unit, is up slightly over the first 10 months of this year to 28.5 percent from 28.3 percent through all of 2001, when it posted a marginal advance over 2000. Smith said he expects GM to improve its market share from last year over the remainder of 2002.

Ford Motor Co., meanwhile, has lost considerable market share this year, falling to about 21.5 percent including its Jaguar, Land Rover and Volvo brands, from about 23.1 percent last year. Chrysler, the U.S. arm of Germany's DaimlerChrysler AG is flat with about 13.2 percent of the U.S. market.

GM set a "stretch" goal, meant to inspire its sales staff, for U.S. market share of 29 percent this year, which officials acknowledge they'll fail to reach. Nevertheless, Smith notes that GM has been able to lift its share despite reducing its Oldsmobile lineup and decreasing low-margin sales to car rental agencies.

STRONGER MARGINS TOO

Analyst David Bradley of J.P. Morgan Chase said that more important than GM's slight market share gains is the higher margins they have been able to realize, due to strong sales of highly profitable trucks and fewer sales to fleet customers such as car rental agencies and businesses.

"My guess is they can keep (the market share gains) going for another year," Bradley said. "I would speculate that most of the share they have taken has been from Ford. Ford doesn't really get a resurgence in product momentum until '04."

GM has pushed this month to boost sales by offering its dealers cash on each vehicle they sold, but only retroactively if they reached a sales target. If the dealers failed to reach the target, then they don't get the cash, dealers said.

"They're throwing money on the table and they're trying to get the share they think they should have," said Frank Ursomarso, owner of Union Park Pontiac/GMC in Wilmington, Delaware.

Ford and Chrysler are also offering their own versions of the dealer "stair-step" program, which puts all the risk on the dealers, Ursomarso said.

"We've got all three domestic manufacturers stair-stepping their way to glory," Ursomarso said. "The question is, are they going up the escalator or down?"

GM, Chrysler and Ford declined to comment about their dealer incentive programs.

The "stair-step" dealer incentives are on top of the already high consumer incentives -- including zero percent financing, cash rebates and deferred payments.

GM's Smith said that while incentives are high "by any historical comparison," the alternative would be to let sales drop sharply and suffer from lower profits and revenues.

He said that the launch next year of new mid-size cars -- the Pontiac Grand Am and the Chevrolet Malibu -- and increased production of its popular Chevrolet Impala should help GM grow its U.S. market share again in 2003.

"Next year should be a good year for us," Smith said. "Our ambitions are to grow share every year. We think we're in a relatively good position to strive for that."