Why Chevy passed on Cruze wagon for U.S.
Sedan-only strategy reflects GM's new fiscal discipline
DETROIT -- Chevrolet's planned introduction this week of a European Cruze wagon at the Geneva auto show is sure to raise the question: How about selling the wagon in the United States? Or a Cruze hatchback? Or a coupe?
The answer to all three of those is an emphatic no -- at least for now, General Motors officials say.
GM's decision to steer clear of variants for its top-selling car diverges from the strategies of most competitors. Hyundai Motor America this spring will introduce a coupe and hatchback versions as it seeks an incremental sales boost for its compact Elantra. Last year Honda Motor Co. launched a redesigned Civic coupe. Ford launched its redesigned Focus last year in both a sedan and a hatchback.
GM's sedan-only strategy for the Cruze also runs counter to, well, old GM. The automaker always sold different body types of Cruze predecessors, the Cobalt and Cavalier, in the United States, and they were not as successful as the Cruze has been.
There are plenty of reasons why GM isn't chasing incremental volume by offering various Cruze flavors. But the main one is all about profit.
GM CEO Dan Akerson and CFO Dan Ammann have outlined a goal of increasing pretax global profit margins to 10 percent within the next several years, from 6 percent last year. Adding tooling to U.S. assembly plants would add costs that GM might struggle to cover given the anemic demand for wagons and hatchbacks in the United States.
"I think the right questions are being asked: Are you really going to be able to make enough money to justify the investment?" GM spokesman Tom Wilkinson said. "You risk adding a vehicle that might not sell as well as you had hoped, and then it hurts the margins."
Another factor: GM doesn't want to risk having a Cruze wagon cannabilizing sales of its hot-selling Chevy Equinox crossover. The wagon's dimensions are similar to the Equinox; it's just 3.7 inches shorter.
Jim Hall, principal of 2953 Analytics Inc., an automotive consulting firm in suburban Detroit, says U.S. demand for wagons is too weak to justify Cruze wagon sales here.
In Europe last year, wagons and hatches accounted for 51 percent of light-vehicle sales, according to IHS Automotive. In North America: 9 percent.
Hall says a hatch could be an option down the road -- GM already sells Cruze hatchbacks in Europe and Asia. But he believes a U.S. introduction wouldn't happen before GM releases a redesigned version, likely in 2015. Before then it would be too costly for GM to re-engineer a Cruze hatch to meet U.S. crash-test standards, for example.
"The old GM would have kept building body variants even though they were selling it in probably the sub-10,000-unit range" annually, Hall says. "Then they'd wonder, 'Why can't we make money on our small cars?'"
A Cruze coupe would face a small and crowded market of front-wheel-drive two-doors, Hall says. Instead, he thinks GM might add to Chevy's lineup a rear-wheel-drive concept coupe that GM showed at the Detroit auto show, dubbed the Code 130-R.
While GM is shying away from different Cruze body types for the United States, it will offer fresh powertrain versions. GM has said it will launch a diesel engine in the United States next year. Sources also have said that GM is considering a plug-in hybrid Cruze, though GM won't confirm that.
Duane Paddock, owner of Paddock Chevrolet in Kenmore, N.Y., says he doesn't think a hatchback, wagon or coupe would sell enough to justify the investment. Paddock, whose store was the nation's No. 2 Chevy dealer last year, with 4,353 units sold, said he would rather see Chevrolet offer an all-wheel-drive option.
Plus, he says the combination of body styles that used to populate Chevy's lineup created inventory headaches.
"We want to keep things simple, lower the build combinations, improve color selection," Paddock says. "We'd rather work on tweaking things, instead of reinventing things."
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