G6 Selling at 1/2 Grand Am Levels!

[srivendel]

'Oprah' buzz works no magic for Pontiac G6

Sales of Grand Am replacement 'awful'
March 22, 2005

BY SARAH A. WEBSTER
FREE PRESS BUSINESS WRITER

So much for Oprah's magic touch.

In September, the woman who made Dr. Phil a household name, launched her own magazine and drove countless books onto the best-seller list gave 276 members of her "Oprah Winfrey Show" audience a new Pontiac G6 -- a move heralded in marketing circles for its wide reach and emotional impact.

General Motors Corp. and marketing experts were abuzz with speculation that Winfrey's powers might cascade through the automotive retail world.

Indeed, Gary Steilen, the marketing manager for the G6, reported that the new midsize sedan, which replaced the 21-year-old Pontiac Grand Am, is "doing very well."

But industry researchers said the G6 -- which has been on the market for six months -- has been a flop, with nothing special to set it apart except, perhaps, the panoramic sunroof. And that's optional.

As evidence of the car's meager performance, auto experts note that the world's largest automaker has dramatically ramped up rebates on the car just to get it selling at modest levels. The automaker offered more than $3,600 in incentives on it last month, and it sold less than half of what the Grand Am was averaging per month.

Ronald Tadross, an auto analyst with the Banc of America Securities brokerage firm, said the disappointing performance of the G6 -- an important piece of the GM portfolio -- doesn't bode well for at least part of the company's financial future.

"I would say it ranks in the top quartile of car products to watch out of GM, and unfortunately, it's been a challenge," he said.

Tadross specifically cited the sluggish performance of the G6 as a "key reason" he warned investors in a report last month to sell their stock in GM, sparking a sell-off on Wall Street that damaged the automaker and local investors. He said he believes sales are "at least 30 percent below" where they need to be to keep the G6 factories running at capacity, which he estimated at 200,000 vehicles a year.

"The thing that is most disappointing is how fast the incentives went up," Tadross said. "And the volume is still below what we think is full capacity."

Art Spinella, president of CNW Marketing Research Inc. in Bandon, Ore., agreed, characterizing the performance of the G6 as "awful."

"The reality is, this car was supposed to do something, and it didn't do it," Spinella said. "It just hasn't reached the level they had hoped for. It's not doing as well as it should."

GM's Steilen said he is frustrated with such opinions.

He defended the car's performance, saying that it takes about a year for a vehicle with such high volume projections to ramp up, and he noted that most of the G6 variations, such as the four-cylinder version and convertible, aren't even on the market yet.

"To me, it's anything but a disappointment," he said of the G6's performance.

But the proof may be in the numbers.

Consumers bought an average of 195,949 Grand Ams a year, or an average of 16,329 a month, between its release in 1984 and last year, according to the research firm Autodata Corp. of Woodcliff Lake, N.J.

In February, consumers bought 7,043 G6s, which would translate into about 84,516 in annual sales.

To get those volumes, GM has had to offer substantial incentives, such as cash-back rebates and discounted financing rates. Buyers in this region today can get at least $1,500 cash off of the G6, or $500 off plus special interest rates of 2 percent or less for loans up to 72 months.

Automakers do not publicly report how much they spent on incentives. But according to the consumer Web site, Edmunds.com, one of several companies that estimate incentive spending, GM offered $3,635 in G6 incentives in February, up from $1,291 in October, the month after it was released.

Meanwhile, the average transaction price of the typically-equipped G6 was $22,339 in February -- its lowest since its release. The vehicle has a starting price of $23,486.

Without a doubt, the auto retail market is tougher than it was in 1984, and the G6 is facing a market that now prefers trucks to cars. But the ramp-up of the G6 has been significantly slower than the ramp-up of the Grand Am.

Since Winfrey's media-splash giveaway, consumers have purchased 27,332 G6s. But in the first six months of the Grand Am release, 31,673 cars were sold, according to Autodata. So the G6 is selling about 86 percent as well as the Grand Am did half a year into its launch.

Detroit Free Press auto critic Mark Phelan saw problems with the G6 coming. He gave the car two out of four stars in a review last year, noting: "They are attractive, comfortable and competent cars, but a high price, iffy interiors and oddly tuned steering leave them well short of sporty competitors."

Spinella said neither GM's marketing department nor Winfrey can be blamed for the market performance of the G6.

"It's one thing to have that kind of a major marketing coup, but you need to back it up," said Spinella, who said he believes that the vehicle is an underwhelming package in a competitive marketplace.

"Even though the G6 is new, it's not new or fresh enough," he said. "It's not a breakthrough design. It's what's forcing Ford to redesign the Five Hundred."

In fact, Spinella said, GM's marketing department should be credited with getting the lackluster G6 so much attention.

CNW's research shows that GM is tops in the marketing department, getting some of the best showroom traffic among automakers. Currently, Pontiac is sponsoring the NCAA men's basketball tournament, giving the G6 a new round of high exposure.

With the G6 not selling as well as the vehicle it replaced, GM continues to lose market share. GM's share of the market was down to 25.1 percent for the year through February, compared with 26.9 percent a year ago and 27.5 percent for all of 2004.

But even though GM's products, marketing and even prices might be good, Spinella said, "You have to be great in order to gain market share."

And that's a hard truth not easily disguised -- even with a little of Winfrey's polish.

[sammm]

I admit I've never been a Pontiac fan. I know they are supposed to be GM's 'Performance/Sport' division, but their dashes always seem to have (had - haven't looked at any new ones) more small buttons, switches and useless gadgets than a 747!

[srivendel]

The only Pontiac I'd like to own is a 2005 GTO. 400 Australian HP sounds like fun!

The G6 does nothing for me. Give me Ford's new Fusion, please.



It's the first domestic sedan that I've really been jazzed about in some time. I'll take it with the I4 and a 5-speed. Should get decent mileage and have better weight distribution than the V6. Just please let the same team who tuned the Focus chassis work on the Fusion, too. Mazda 6 platform bodes well.

S.

[rx7gslse]

Yeah, I used to drive a Grand Am in college... Needless to say it wasn't my choice...

I had one as a rental car last week, and they havn't improved much. The G6 looks better, but I cannot see how it could possibly be any worse sales. The grand am is pure Ameican crap :)