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'New' GM has old problem: stagnant U.S. market share

Daniel Ammann, President of GM, speaks next to the Chevrolet Corvette Stingray C7R racing version during the press preview day of the North
Daniel Ammann, President of GM, speaks next to the Chevrolet Corvette Stingray C7R racing version during the press preview day of the North

By Ben Klayman and Paul Ingrassia

DETROIT (Reuters) - General Motors Co has much to celebrate at this year's Detroit auto show, the first since 2009 that the company is not partly owned by the U.S. government.

Last month, it named its first female CEO and automotive writers on Monday voted the Chevrolet Corvette Stingray and Silverado as car and truck of the year, respectively.

Yet the "new" GM remains bedeviled by a decades-old problem: stagnant or sliding share of sales in its home market.

The past two years have seen one of the biggest new-product blitzes in company history; GM has launched new products to replace 70 percent of its U.S. sales volume since 2011.

But GM's U.S. market share remained stuck at 17.9 percent last year, the same level as 2012, and down from 19.6 percent in 2011, when it was only two years out of bankruptcy.

While GM executives voice optimism that the company will soon post gains, they acknowledge that changing perceptions after decades of lackluster products will take time.

"Market share increases are not instantaneous," Mark Reuss, GM's new chief of global product development, told reporters at the Detroit auto show on Monday. "We've got a lot of baggage. Don't underestimate what people thought of us, or these brands, through these hardships and 30 years."

There are other issues too: rapid-fire executive turnover in the company's marketing ranks, factory furloughs for retooling to produce new models and, on a more positive note, a newfound pricing discipline that puts profit ahead of market share by reducing costly buyer discounts and low-margin fleet sales.

"Our third-quarter (profit) margins ran over 9 percent," said Reuss. "That's a big deal." Indeed, the company's profit has rebounded sharply after the disastrous 2009 bankruptcy.

DECLINING CHEVY, FLAT CADDY

Still, some numbers are startling. Today GM's entire U.S. market share is just over half what Chevrolet, its largest single brand, enjoyed in the company's heyday 50 years ago, when GM accounted for more than half of all U.S. car sales. Back then, GM's market share was about twice as much as Ford Motor Co's .

While GM remains America's No. 1 car company, as measured by sales volume, its lead has shrunk to just a couple percentage points over Ford, which still ranks second, ahead of third-place Toyota Motor Corp <7203.T>. But Ford, unlike GM, has increased its share modestly in recent years.

Ford, however, has less baggage than GM. Unlike GM, Ford did not go through bankruptcy and a government-funded bailout. And its marketing ranks have not had anywhere near the level of turnover as GM's.

The turmoil started with the August 2012 departure of global marketing boss Joel Ewanick, followed by the departures last year of Cadillac global marketing head Don Butler and Chevrolet marketing chief Chris Perry. GM last year hired Tim Mahoney from Volkswagen North America to become Chevrolet global chief marketing officer and former BMW executive Uwe Ellinghaus to be Cadillac global chief marketing officer. Last week, it promoted Paul Edwards to succeed Perry at Chevrolet.

Chevrolet remains a huge concern. In the past two years, Chevy has seen its U.S. market share decline to 12.5 percent from 13.9 percent, despite launching such important redesigned models as the mid-size Malibu and full-size Impala sedans and the full-size Silverado pickup.

"Chevrolet is really struggling," said Larry Dominique, a former Nissan Motor Co Ltd <7201.T> executive who heads leasing specialist ALG. "Stingray being named Car of the Year is great for the Corvette brand, but it probably doesn't help Chevy dealers sell more Malibus or Cruzes."

Cadillac's U.S. market share also is flat from 2011 to 2013, at 1.2 percent, even though the brand added two new sedans, the compact ATS and full-size XTS, and redesigned its volume model, the CTS.

Dominique said buyers of Asian and European brands do not tend to cross-shop GM's four U.S. brands: Chevrolet, Cadillac, Buick and GMC. And GM dealers tend to be clustered more in the Midwest, the traditional heartland of its audience, while the import brands dominate the coastal markets.

"We want to grow GM and that means growing market share and profits, but it's not at all costs," said Reuss, who until his recent promotion had been president of GM North America since the 2009 bankruptcy and reorganization.

FOCUS ON RETAIL

GM still has among the highest average sales incentives in the industry, but it finished 2013 with the highest average transaction prices in its history, said Alan Batey, who has been interim global marketing boss since Ewanick's departure and succeeds Reuss this week as president of North America.

Batey said GM has been putting more emphasis on sales to retail customers while limiting sales to lower-margin fleet customers.

"Our focus has really been on retail and that's where we've got the growth," Batey said.

"I like to think of market share as an output, not an input. But I think with all the great things that are going on, the momentum we've got, there's no reason why all four brands cannot achieve a gain, year-over-year increases."

(Additional reporting by Paul Lienert in Detroit; editing by Matthew Lewis)

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