GM Shifts Its Strategy, Will Rely on Small-Car Imports Indefinitely
In a major shift in its so-called Asian strategy, General Motors Corp. now expects to import small cars from Japan indefinitely and no longer plans to replace them with GM-designed subcompacts built in the United States, according to a top GM official.
As a result, GM’s Chevrolet Division, traditionally the company’s main channel for sales of inexpensive small cars, will not develop any new “entry-level” cars for modest-income, first-time buyers without Japanese help for the rest of the decade, the official said. Instead, Chevrolet will sell small cars imported from Japan, as well as those Japanese-designed cars built in California by GM’s new joint venture with Toyota Motor Co.
“I don’t see an all-U.S. small car at Chevy below the Cavalier (Chevrolet’s J-car, positioned on the border between the subcompact and compact segments of the car market) coming” in the foreseeable future, said Thomas McDaniel, Chevrolet’s director of international marketing and the head of its import programs.
Abandoning ‘Bridge’ Strategy
“Earlier, we were talking about a ‘bridge strategy,’ to import small cars to give us time to develop a domestic product,” McDaniel said in an interview here Friday during the preview of the Chicago Auto Show. “But not anymore. We are now in business to import Isuzus and Suzukis in perpetuity.”
Ever since GM first announced several years ago that it would start importing small cars in 1984 from its two Japanese affiliates, Isuzu Motors Ltd. and Suzuki Motor Co., GM has insisted that it planned to import small cars only until it could develop a subcompact car in the United States that would be cost-competitive with the best products of Japan.
GM described its “bridge” strategy as a way to make sure that it retained a sizable market share in the small-car segment while its widely publicized Saturn project worked on a new import fighter. GM officials often pointed out that it had followed a similar strategy in the light-truck market--GM imported the Luv pickup from Isuzu until it developed its own mini-trucks, known as the Chevrolet S-10 and GMC S-15 models.
GM previously said that Chevrolet, which is the only GM division selling the Isuzu and Suzuki cars and which will also be the exclusive distributor of the joint-venture cars, would have its own new American small car before the end of the 1980s that would make further imports unnecessary.
New Distribution System
But GM now has decided that, when its Saturn small cars are ready in 1988 or 1989, they will not be sold through Chevrolet or any of GM’s other existing passenger car divisions. Instead, GM has created Saturn Corp., a wholly owned subsidiary that will develop a new distribution system and dealer network to sell the Saturn small cars. Chevrolet, which had been counting on selling Saturn products, now will have to rely on imports.
“The cars we are talking about now (Isuzu, Suzuki and joint-venture cars) are the ones that will be in place through 1990,” McDaniel said. He said Chevrolet’s decision to count more permanently on imports was made before GM decided to split Saturn off from the rest of the company. But he added that the fact that Chevrolet will not be able to sell Saturn small cars underscores Chevy’s need to import cars from Japan indefinitely.
The shift in GM’s strategic thinking won’t come as much of a surprise to most industry analysts on Wall Street, however. All along, they have been skeptical of GM’s claims that its Asian strategy was just temporary. With the Japanese still enjoying a $2,000 production cost advantage, they couldn’t see a time when GM could become fully competitive with Japan or other Asian nations in the production of small cars.
So far, however, Chevrolet’s Japanese strategy hasn’t picked up much steam. Import quotas on Japanese cars still limit the number of Isuzu and Suzuki models that GM can import, and the GM-Toyota joint venture has yet to reach full production.
Last May, Chevrolet began importing the Chevrolet Sprint, a Suzuki mini-car that is the smallest model that Chevy has ever sold, while the Chevy Spectrum, a larger subcompact produced by Isuzu, was introduced in November. But import quotas so far have limited Chevrolet to importing just 17,000 Sprints and 27,500 Spectrums a year, forcing GM to offer the Sprint only on the West Coast and the Spectrum only in the East.
280,000 Imports Planned
But if quotas are removed, Chevrolet plans to import about 200,000 Spectrums and 80,000 Sprints annually, making Chevy one of the largest importers of Japanese cars. McDaniel said that Isuzu and Suzuki each have the capacity now to ship Chevrolet 100,000 units a year and could expand quickly to meet Chevy’s needs if quotas are removed. The fourth year of quotas expires March 31.
At the same time, the GM-Toyota joint venture in Fremont, which began operations in December, plans to build about 250,000 Toyota-designed Chevrolet Novas annually when it reaches full production, probably in 1986. Still, the joint venture is gearing up slowly and only plans to build 41,000 cars in its first full year of operations in 1985. When the Nova is introduced in June, it will be available only in the central United States.
To complement these Japanese products, Chevrolet now has just one GM-designed entry-level subcompact--the Chevrolet Chevette.
But the Chevette, little changed since its introduction in 1975, is expected to be dropped by Chevrolet sometime in the next few years, as Chevy’s new imports steal sales away from it. Robert D. Burger, Chevrolet’s general manager, said at a press conference here Friday that Chevette production is likely to be continued for another year or two, but he added that the Chevette will be kept only on a “year-to-year” basis after that. Without the Chevette, Chevrolet’s smallest GM-designed, U.S.-built car will be the Cavalier J-car.
Warnings From Iacocca
Ironically, in successfully arguing for Federal Trade Commission approval of the joint venture in 1983, GM Chairman Roger B. Smith dismissed warnings by Chrysler Corp. Chairman Lee A. Iacocca that the project would eliminate jobs in the United States by allowing GM to drop the Chevette. Smith insisted at the time that GM planned to continue to produce the Chevette despite the addition of Chevrolet’s new Japanese products.
GM’s strategy of importing small cars isn’t limited to Chevrolet. The Pontiac division, GM’s other small-car distributor, also plans to drop the last of its U.S.-built subcompacts within the next few years and will sell only Korean-built subcompacts instead, Pontiac officials say.
When the Chevette is dropped, Pontiac also will be forced to cancel its Chevette twin, the Pontiac 1000, its only subcompact smaller than the Pontiac 2000, its version of the J-car. Instead of building the Pontiac 1000, Pontiac will import subcompacts from a new Korean joint venture GM has formed with Daewoo Group. The joint venture will produce small cars designed by Adam Opel A.G., GM’s West German subsidiary, and will supply Pontiac with about 75,000 subcompacts annually in time for the 1987 model year, Pontiac spokesman Bruce MacDonald said Sunday. He added that the Korean small car will be the only replacement for the Pontiac 1000 when the U.S.-built car is finally dropped.
