Local dealers brace for change after GM shifts its focus
Auto giant will put more emphasis on trucks and SUVs
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
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.
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.”
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.