Lo­cal deal­ers brace for change af­ter GM shifts its focus

Auto gi­ant will put more em­pha­sis on trucks and SUVs

Richmond Times-Dispatch Weekend - - LOCAL PERSPECTIVES - BY TAMMIE SMITH [email protected]­dis­patch.com (804) 649-6572

In the Rich­mond area, Moore Cadil­lac Rich­mond on West Broad Street is the place to go for GM’s sig­na­ture lux­ury brand.

Known for a vel­vety smooth ride, the Cadil­lac brand has its fans — just not enough of them these days.

Gen­eral Mo­tors on Mon­day an­nounced plans to move away from slowselling cars and focus on trucks and SUVs while also sink­ing money into new tech­nol­ogy for self-driving and elec­tric ve­hi­cles.

The gi­ant au­tomaker said it was clos­ing four plants in the U.S. and one in Canada that pro­duce a num­ber of its ve­hi­cles, in­clud­ing two Cadil­lac mod­els, plus the Chevro­let Cruze, the Chevro­let Volt, the Buick LaCrosse and the Chevro­let Im­pala.

Moore Cadil­lac Rich­mond sells both Cadil­lacs that are on the chop­ping block — the Cadil­lac XTS, which starts at more than $46,000, and the CT6, which, loaded with all the bells, whis­tles and lat­est gad­getry and safety fea­tures, can cost nearly $70,000.

“There is no ques­tion it will have some im­pact. The ques­tion is how much,” said Jac­ques Moore Jr., owner of the deal­er­ship.

“If there are no re­place­ments of any kind, that would be a lit­tle in­con­ve­nient for us, in that sedans in Rich­mond have been a pretty good seller.”

Moore said a forth­com­ing big­ger en­gine ver­sion of another Cadil­lac model, the CTS, may off­set the loss of the CT6 model.

“Some of that im­pact will be light­ened by the fact that the CTS with a very pow­er­ful V6, V8 en­gine is go­ing to be in­tro­duced here shortly and that’s built at a dif­fer­ent plant. We do have the CTS, which is a very, very suc­cess­ful, a very well-ac­cepted sedan. Some of that [lost CT6] busi­ness would drift to the CTS,” Moore said.

At fam­ily-owned Luck Chevro­let at 516 S. Wash­ing­ton High­way in Ash­land, Gen­eral Man­ager Ross Luck said the loss of the sedans and the small cars will be felt.

“We sell the Cruze, Im­palas, the Volt. My aunt just bought one a month ago,” said Luck, re­fer­ring to the hy­brid Volt, which runs on gas and bat­tery power.

“While the bulk of our busi­ness is trucks, crossovers, SUVs in our area in Ash­land, it’s go­ing to be tough not hav­ing those cars. They’re great cars.

The Im­pala re­ceived Con­sumer Re­ports’ high­est marks ever for a large car. The Cruze was re­designed in 2016,” Luck said.

“We re­ally feel for the work­ers, the folks in the fac­to­ries,” he said.

The plant shut­downs and lay­offs are part of

GM’s on­go­ing “trans­for­ma­tion” al­most a decade af­ter emerg­ing from bank­ruptcy.

More than 6,000 jobs at five pro­duc­tion plants are be­ing elim­i­nated. The com­pany also is trim­ming 15 per­cent of its ex­ec­u­tive work­force.

“If there are no re­place­ments of any kind, that would be a lit­tle in­con­ve­nient for us, in that sedans in Rich­mond have been a pretty good seller.” Jac­ques Moore Jr., owner of Moore Cadil­lac Rich­mond

OOO

GM, once the dom­i­nant au­tomaker in the U.S. with 57 per­cent of the na­tion’s auto mar­ket share in 1972, still reigns in this coun­try, though with a much smaller mar­ket share in a much more frag­mented mar­ket, ac­cord­ing to auto in­dus­try ex­pert Ge­orge Hof­fer, cit­ing data from the Au­to­mo­tive News Data Cen­ter.

GM has 16.8 per­cent of the U.S. light ve­hi­cle mar­ket, a cat­e­gory that in­cludes cars, SUVs, light com­mer­cial vans and trucks up through 1-ton pick­ups. Ford is next, with a 14.5 per­cent mar­ket share, fol­lowed by Toy­ota, 14.1 per­cent; Fiat Chrysler Au­to­mo­biles, 13.1 per­cent; and then Honda, Nis­san, Hyundai/Kia and Volk­swa­gen, Hof­fer said.

Hof­fer said GM Chair­man and CEO Mary Barra is do­ing what lead­er­ship of Ford Mo­tor Co. and Fiat Chrysler Au­to­mo­biles have done — es­sen­tially giv­ing up on the sedan mar­ket.

“She rec­og­nizes that her firm is too big,” Hof­fer said. “She’s got too much ca­pac­ity in the U.S., and so I sym­pa­thize with her cut­ting pro­duc­tion ca­pac­ity be­cause it is un­needed over­head.”

“On the other hand, I think it is very short­sighted and dis­ap­point­ing that what she is do­ing is ef­fec­tively, like Ford and Chrysler, per­ma­nently ced­ing the au­to­mo­bile mar­ket in the United States” to Asian and Euro­pean au­tomak­ers, he said.

Ford Chair­man Bill Ford an­nounced ear­lier this year that the com­pany was phas­ing out “slow-sell­ing tra­di­tional sedans” and shift­ing 90 per­cent of its North Amer­i­can ve­hi­cle lineup vol­ume to SUVs, pickup trucks and com­mer­cial ve­hi­cles. Ford also plans to de­liver a full bat­tery elec­tric SUV with a 300-mile range in 2020.

Fiat Chrysler Au­to­mo­biles in early 2016 an­nounced plans to em­pha­size pro­duc­tion of SUVs, Ram pick­ups and hy­brid or elec­tric cars.

At the lower end of the sedan mar­ket, car com­pa­nies out of Korea, China and Ja­pan will ben­e­fit when U.S. com­pa­nies re­duce car pro­duc­tion. At the higher-end sedan mar­ket, Mercedes, BMW and Jaguar stand to gain, Hof­fer said.

“No mat­ter how at­trac­tive some­thing looks to­day, we know it never stays that way. The au­to­mo­bile will come back,” Hof­fer said.

While au­to­mo­biles sales have been flat for the past four to five years, auto com­pany prof­its are ris­ing be­cause of the mix of ve­hi­cles. More trucks are sell­ing. Trucks cost less to make and can com­mand higher prices be­cause there’s less com­pe­ti­tion from Asian and Euro­pean au­tomak­ers.

Prof­its also are ris­ing be­cause au­tomak­ers can charge a pre­mium for some of the ve­hi­cle ad­dons that cost them prac­ti­cally noth­ing to make, Hof­fer said.

OOO

Amer­i­can tastes have been shift­ing away from sedans for a while. Rel­a­tively cheap gas prices have helped fuel the love of roomier and higher-sit­ting SUVs, crossovers and trucks.

“We pride our­selves here on be­ing a Chevro­let truck town,” said Ben Clarke, gen­eral sales man­ager for Her­itage Chevro­let at 12420 Jef­fer­son Davis High­way in Ch­ester­field County.

“I would say 45 per­cent of our busi­ness is truck sales. We have a full line of SUVs,” he said. The deal­er­ship’s top sell­ers are the Sil­ver­ado pickup and the Equinox and Tra­verse SUVs. The Cruze comes in af­ter that, he said.

While sporty SUVs have tra­di­tion­ally been viewed as ap­peal­ing to a younger de­mo­graphic, Ross Luck at Luck Chevro­let said the deal­er­ship’s SUV cus­tomers are of all ages.

“What we are see­ing is peo­ple, our older cus­tomers, are trad­ing out of a four-door sedan into a com­pact SUV,” Luck said.

“They are trad­ing larger cars and then get­ting into our Equinox or Trax just be­cause that load-in height is a lit­tle higher. It gives them a bet­ter van­tage point sit­ting up a lit­tle higher . ... The fuel econ­omy is so good on those ve­hi­cles now that you are not sac­ri­fic­ing a whole lot go­ing from a car to a com­pact SUV,” he said.

GM said that over the next two years, it plans to dou­ble re­sources al­lo­cated to elec­tric ve­hi­cles and self-driving or au­ton­o­mous ve­hi­cles.

Nei­ther con­cept is fully ready for prime time, said Hof­fer, who thinks GM’s chair­man is stak­ing too much on them too soon.

“The elec­tric car has been a po­lit­i­cally cor­rect toy for up­per-in­come sub­ur­ban­ites,” Hof­fer said. Con­sumers who buy elec­tric cars are el­i­gi­ble for fed­eral tax cred­its of $2,500 to $7,500.

“Can you imag­ine liv­ing in the Fan or Church Hill, are you go­ing to run a wire out­side in the mid­dle of the night to charge your car? The tech­nol­ogy is not there,” Hof­fer said.

Jac­ques Moore had sim­i­lar thoughts. His deal­er­ship’s top sell­ers are the XT5 cross­over, the CT6, the XTS and the Es­calade.

“Right now, elec­tric cars are not the answer. If you live in a typ­i­cal Amer­i­can neigh­bor­hood if you plug ev­ery car into the elec­tric grid, it will crash the grid,” Moore said. “It’s not de­signed for that kind of pull.”

The hy­brid Chevy Volt is an “awe­some car,” Ross Luck said. “To be able to have that gaso­line en­gine backup was huge.”

He is less en­thu­si­as­tic about the fully elec­tric Chevy Bolt.

“They wanted a large in­vest­ment to be able to be a qual­i­fied Bolt dealer, but they couldn’t prom­ise us any num­bers to sell. It was a big in­vest­ment, but we may have been able to sell one or two per year,” Luck said.

“Ini­tially, it wasn’t a wise de­ci­sion for us to in­vest,” he said. “If that be­comes more pop­u­lar and the trend is go­ing that way, we have the abil­ity to sign up at any time.”

Hof­fer said a lot of in­no­va­tors and third-party ven­dors are work­ing on self-driving car tech­nol­ogy and that who­ever comes up with the best ver­sion is likely to sell the tech­nol­ogy. Some of those com­po­nents are al­ready avail­able, such as lane de­par­ture warn­ing sys­tems and col­li­sion avoid­ance sys­tems.

“There is a lot of study­ing be­ing done and a tremen­dous amount of money be­ing put into this. My ar­gu­ment is the auto man­u­fac­turer re­ally doesn’t need to do this,” Hof­fer said.

“I think it’s a mis­take to throw lots and lots of money at that when the mar­ket will de­ter­mine who has the best sys­tem,” he said.

Don Hall, pres­i­dent and CEO of the Vir­ginia Au­to­mo­bile Deal­ers As­so­ci­a­tion, said some of GM’s moves to trans­form the com­pany have been ques­tion­able, of­fer­ing this ex­am­ple. Three years ago, the Cadil­lac head­quar­ters was moved from Michi­gan to a trendy sec­tion of New York City.

Cadil­lac lead­er­ship said the move was to po­si­tion the brand to com­pete with Lexus, BMW, Mercedes and other lux­ury brands, Hall said.

The Cadil­lac brand for a time was the car to own, he said.

“[GM] spent huge amounts of money only to have their sales fig­ures con­tinue to shrink, mar­gins shrink. So now they’ve moved [the head­quar­ters] back and fired the guy who was in charge of it. They’ve had other brands that they’ve put huge money into it. Oldsmo­bile, as an ex­am­ple, was killed be­cause they put all this money into Saturn, which failed mis­er­ably,” Hall said.

“Deal­ers are still very per­plexed in terms of where GM is go­ing,” Hall said. “I do wish and ul­ti­mately hope GM is mak­ing good, solid long-term de­ci­sions and it’s not just about pad­ding their bot­tom line.”

JOE MA­HONEY/TIMES-DIS­PATCH

ABOVE: Jac­ques Moore Jr., owner of Moore Cadil­lac Rich­mond, stands next to a Cadil­lac XTS with a CT6 at left at the deal­er­ship on West Broad Street. Both sedan mod­els are slated to be dis­con­tin­ued. “There is no ques­tion it will have some im­pact,” Moore says. “The ques­tion is how much.”BE­LOW: Sales­man Allen Ste­wart sits in a new Cadil­lac sedan. The deal­er­ship hopes sales of the CTS model will off­set the loss of the CT6 line.

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