WALL STREET JOURNAL: GM, Ford Gird for Small-Car Showdown as Customers Shun SUVs

GM, Ford Gird for Small-Car Showdown as Customers Shun SUVs

Auto dealers Five Star Ford and Classic Chevrolet have locked horns for years, fighting for supremacy in the Dallas area’s heated pickup-truck market.

At Five Star, owner Sam Pack adorns small flags to the antennas of brawny F-150 pickups parked under Victorian street lamps at his store. A few miles away, Hagen Durant’s 15-acre lot at Classic is so devoted to pickups that his staff has taken to calling the store “Truck Land.”

However, gone are the days of relying solely on boasts about towing capacities and horsepower to move the metal. Ford and Chevy dealers soon will start talking more about fuel economy and iPod outlets as the companies roll out new compact and subcompact cars.

To prepare, the dealers are remodeling their stores to be more customer-friendly and are becoming more adept online, hoping to connect with car shoppers through social-networking campaigns and email. The goal: attract younger, tech-savvy consumers who rarely think of GM or Ford when buying a small car.

The two companies, along with Detroit rival Chrysler Group LLC, hope to return to a market they all but abandoned to Toyota Motor Corp., Honda Motor Co. and other import brands some two decades ago. Armed with new management, lower costs and newly cooperative unions, the three companies plan to unleash about a dozen compact and subcompact cars combined in the U.S. by 2012.

GM and Ford kicked off this shift last week at the Los Angeles auto show. Ford unveiled its new Fiesta, which is set to hit showrooms in early 2010. Fiesta will take aim at a growing crop of subcompacts including the Toyota Yaris. Chevy’s Cruze, due in August, will square off with established compacts such as Honda’s Civic.

Meantime, the companies hope to retool thousands of dealerships, transforming them from truck lots that happen to sell a few small cars to stores capable of competing head-on with foreign rivals.

Nowhere is the effort more critical than in major metropolitan markets such as Dallas, where small-car sales are the strongest. Import brands have gained sizeable footholds by building momentum among urbanites hungry for cars instead of Detroit’s mainstays, trucks and sport-utility vehicles.

In the first 10 months of 2009, small cars made up 19% of the 8.65 million light vehicles sold in the U.S., while pickups and SUVs composed 46%. That’s a shift from just three years ago, when small cars represented 14% of the market while trucks and SUVs held 53%.

But Detroit is way behind in this growing small-car market: GM, Ford and Chrysler hold just 21% of the segment, according to Autodata Corp., a car-industry data provider.

But now these dealers and thousands more are being asked to shift gears as Ford Motor Co. and General Motors Co. beef up their focus on small cars.

“We’re barely there today,” said Paul Anderson, Ford’s small car marketing-launch manager. Ford currently offers only one small car, the aged Focus, to American buyers.

But some see the tide changing. “Gas prices and lifestyle changes are going to push more people into small cars,” said Tony Pack, general manager and the owner’s son at Five Star Ford.

For this reason, Mr. Durant, Tony Pack’s crosstown rival, and nearly 3,000 other Chevy stores are being asked to focus more acutely on small cars. The effort will mean that an estimated 26,000 salespeople will be retrained by the end of the year.

Kurt McNeil, Chevrolet’s sales chief, said a key element of the training is speeding up response time to online customers. Salespeople will be taught how to discuss fuel efficiency as fluently as they can talk about towing capacities, and they will be equipped to compare their cars against Toyota’s and Honda’s.

GM also wants to give its stores a uniform look, the main feature being a new front exterior with the Chevy logo and a blue entranceway with a receptionist’s desk in front so that the first point of contact for a potential buyer is a greeter, not a salesperson. Import brands already have a similar setup.

The improvements, largely paid for by dealers, are slated to cost $200,000 to $600,000 per location. GM is offering financial incentives for the work.

Ford is deploying a lower-cost emphasis on social media. It will involve dealers using Web sites like Facebook to connect with shoppers. One goal is to lure shoppers to test drives at community events designed to get them behind the wheel.

Starting in January, Ford will send a social-media consultant to its largest 800 dealerships — about 25% of its stores– to build an online infrastructure that, for example, will connect local buyers to the auto maker’s online efforts to offer vehicle updates, videos and games related to its small cars.

But Ford has a long way to go. Its own numbers show that only 7% of “millennials” — people born between 1979 and 1985 — consider a Ford when shopping for a small car.

A lot of the success of GM’s and Ford’s strategies depends on growth in the small-car market. When gas prices moderate, Americans still flock to the largest vehicle they can afford, said Lonnie Miller, director of industry analysis for R. L. Polk & Co, an automotive marketing and consulting firm.

(Source: The Wall Street Journal, 12/08/09)

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