Chevrolets are rarely seen on the streets

Posted by admin | General Motors | Saturday 4 October 2008 3:46 pm

Chevrolets are rarely seen on the streets of Paris. But General Motors (GM) has chosen the Paris Motor Show, which opens to the public on Oct. 4, to launch one of the most important new Chevy models in years.

The Cruze, a compact sedan set to go on sale in Europe next March and in the U.S. in 2010, will be Chevrolet’s first global small car. With its sleek, arched roofline and high-tech interior, “it’s one of the global Chevrolet products that are the future of where this brand is going to be,” says Wayne Brannon, Chevy’s European chief.

GM has been trying for several years to establish Chevrolet as its main global brand. Unlike rivals Toyota (TM) and Honda (HMC), GM has a balkanized brand portfolio—with Chevy dominant in the U.S., Opel in Europe, and Buick in China. After taking over South Korea’s Daewoo in 2002, GM rebranded some of its models and now sells them under the Chevrolet name in Asia and Europe.
A Crucial Moment

But the Cruze is a brand-new design—and it comes at a critical time. GM needs foreign growth to offset a deep U.S. auto sales slump (BusinessWeek.com, 10/1/08). At the same time, Chevy is counting on the Cruze to fight its way back into the compact car market in the U.S. (BusinessWeek.com, 9/15/08), which has now become vitally important as customers flee gas-guzzling SUVs and trucks. Though the company hasn’t yet disclosed fuel-efficiency figures for the Cruze, it has promised they’ll be “north of 40 mpg.” (BusinessWeek.com, 9/15/08).

European motorists will be a tough audience for the Cruze. Fuel economy of 40-plus miles per gallon (under 5.9 liters/100 km) may impress Americans, but it’s ho-hum to Europeans who drive Volkswagen (VOWG.DE), Ford (F), and even Mercedes (DAI) models getting 50 to 60 mpg. Fuel efficiency is crucial in the Old World, with gas costing $8 a gallon and up in most countries.

And while the Cruze’s design is a big leap forward from Chevy’s existing Cobalt compact, it won’t stand out in the crowded field of stylish European models. Another problem: Most Western Europeans prefer hatchbacks, while the Cruze is a 4-door sedan.

“It will do moderately well, but it’s unlikely to change Chevrolet’s fortunes,” says Paul Newton, an auto analyst for consultancy Global Insight in London. He predicts only 12,000 Cruzes will be sold in Western Europe in 2009 and 30,000 in 2010—barely a drop in the region’s 14.2 million total annual auto sales.
Eastern Strategy

For now, Chevy is pinning its hopes for the Cruze mainly on the Continent’s eastern rim, in countries such as Russia, Poland, Hungary, Romania, and Turkey. Brannon says the Cruze will be positioned as a “good value for money” vehicle, with marketing emphasis on the brand’s “iconic” American roots. Chevrolet hasn’t announced pricing for the Cruze, though it has said the U.S. version will cost more than the Cobalt, which sells for $15,000 to $17,000.

Chevy has reasons for optimism in Eastern Europe. Its Polish-made Aveo, a Daewoo-developed subcompact, is selling well in the region, and Eastern European drivers are more partial to four-door sedans than their counterparts in the West.

Already, strong sales in Russia and Ukraine helped Chevy rack up an impressive 23% sales growth Europewide during the first half of this year, after a 26% rise in 2007. Still, Chevy’s market share in Europe as a whole is barely above 2%. Global Insight reckons Cruze sales in Eastern Europe will be no more than 50,000 in 2010. Western European automakers, including VW with its Skoda brand, already have built strong customer bases in the region, Newton says.

The European version of the Cruze will have a 1.6-liter or 1.8-liter gasoline engine, or a 2-liter diesel engine. It will be manufactured initially in South Korea, although GM plans to open an assembly line in St. Petersburg, Russia. The U.S. version will be built in Lordstown, Ohio.

Will the Cruze be a game-changer? Perhaps not in Europe. But if it can post respectable sales in this fiercely competitive market, it could give a big boost to Chevy’s global brand aspirations.

With David Welch in Detroit
General Motors Corp. displayed the most important car in its global turnaround plan Wednesday night on the eve of the Paris motor show.
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The Chevrolet Cruze, a roomy and stylish compact sedan, will be built on at least four continents and become the face of GM’s effort to transform Chevrolet from a parochial American brand into a global powerhouse like Toyota, Ford and Volkswagen.

“The Cruze is much more important to GM than the Volt,” the celebrated extended-range electric car Chevrolet will launch in 2010, said Stephanie Brinley of consultant AutoPacific. While the revolutionary Volt has generated reams of positive publicity for GM, it will initially sell in small numbers and almost certainly lose money.

Cruze sales should hit hundreds of thousands a year early in the next decade and generate cash. Lots of it, GM hopes.

“Chevrolet is GM’s biggest brand and the third-largest automotive brand in the world,” said GM President and Chief Operating Officer Fritz Henderson. “It’s extraordinarily efficient to have one key brand you throw resources to.”

Using global resources — and assuming high volumes from global sales — allowed GM to give the Cruze a roomy interior and sophisticated features that are a cut above its previous U.S. small cars.

Chevrolet has yet to reveal U.S. prices for the Cruze, which is to go on sale in America in spring 2010, a year after it hits Europe. However, executives expect the car to end GM’s decades-long habit of losing money on most compact cars it sells in the United States.

The Cruze will replace the Cobalt in Chevrolet’s lineup. While GM has sold the Cobalt largely on the strength of heavy incentives, the company expects the Cruze to sell for about the same price as popular compacts like the Honda Civic and Toyota Corolla, said Chevrolet general manager Ed Peper.

“The Cruze has a shot at being Chevrolet’s best-selling car in the United States,” Peper said. Unless the bottom falls out of the market, that suggests Chevrolet expects to sell more than 300,000 Cruzes annually in the United States. Chevrolet sold 200,620 Cobalts last year.

“It’s a real step up in looks and content,” said Rebecca Lindland of analyst Global Insight. “This is a small car they can get more money for.”

In addition to stylish lines reminiscent of the hot-selling Chevrolet Malibu, the Cruze will offer more interior space and better fuel economy than any other compact car sold in America, Peper said. U.S. versions of the Cruze, which will come with a six-speed automatic transmission and a high-tech 1.4-liter four-cylinder engine, are expected to top 40 m.p.g. on the highway.

“The Cruze is really important in North America,” said Jim Hall, managing director of 2953 Analytics, a Birmingham forecasting firm. “Chevrolet needs a fuel-economy leader in a high-volume segment.”

American Chevrolet dealers may eventually get a compact minivan like the Cruze-based Orlando concept car shown in Paris Wednesday. The Orlando could top 30 m.p.g. on the highway, Peper said.

“Chevrolet’s vehicles are becoming exponentially better,” said Joe Phillippi, principal of AutoTrends Consulting, Short Hills, N.J. “I’m very impressed by the Orlando. It’s gotta be somewhere in the product plan.”

GM has grand plans for the Cruze in Europe, where Chevrolet sales have risen steadily since the brand debuted there a couple of years ago.

“This is the car that puts Chevrolet design and value in the heart of the European market,” said Wayne Brannon, executive director of Chevrolet Europe. Chevrolet has been on a tear in Europe, propelling GM to record sales there and gaining customers in new markets, like Russia and the Ukraine, as well as established ones, like Italy.

So far, Chevrolet’s European lineup has relied on vehicles that were designed and developed by Daewoo before GM took control of the Korean automaker.

The Cruze is the first high-volume Chevrolet conceived from the ground up for sale around the world. More global Chevrolets will arrive as the Daewoo models reach the end of their lives over the next several years.

The Cruze uses the next generation of GM’s global compact-car architecture, which was developed in Germany and will also underpin GM Europe’s best-selling car, the Opel Astra that is to debut in 2009.

The Cruze was designed and engineered in GM’s Korean tech center, with input from all the regions around the world that will sell the car. “The team in South Korea really knows how to do a car this size,” said GM design chief Ed Welburn.

GM has used the Chevrolet brand in South America, Africa and other outposts for decades. Previously, everything from basic engineering to the look and color of Chevy’s bow-tie badge varied wildly from region to region. Chevrolets in most of the world were simply small European Opels with a Chevy badge awkwardly grafted on.

Chevrolet enters a new age with the Cruze. “There’s one bow-tie for the planet,” Welburn said.

The Cruze’s appearance and technology are the fruit of many global summits within GM design and engineering. While the car will debut with a direct-injected, turbocharged 1.4-liter gasoline engine and six-speed automatic transmission in the United States, Europe is to get a line of diesel and gasoline engines.

The Cruze’s interior also was developed to cover an array of price ranges around the world. Developing markets will get relatively basic features and materials, while places like America and Europe will offer higher levels of comfort and equipment.

The Cruze goes on sale in Europe next spring with cars assembled in Korea. GM will start building the Cruze in St. Petersburg, Russia, late in 2009. American assembly begins in Lordstown, Ohio, in spring 2010.

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