DETROIT (Bloomberg) -- General Motors Co., introducing cars this week that it says are designed to beat the best, still may not have enough new models to win market share this year, analysts say.
Analysts at Credit Suisse Group AG, JPMorgan Chase & Co. and Morgan Stanley say GM's lineup is older and inferior to rivals such as Ford Motor Co. GM lacks enough new cars and will replace them at a slower rate in the near term, the analysts said. Automakers that replace vehicles at faster rates tend to gain market share, which helps drive profitability, Bank of America Merrill Lynch said.
GM CEO Dan Akerson on Monday pitched the Chevrolet Sonic at the North American International Auto Show in Detroit, one of the first new vehicles revealed since the automaker's initial public offering in November. The Sonic and Buick Verano help GM fill holes in its car lineup and build on earnings momentum in its most profitable market.
“What GM has to do is use the arrows they've got in the quiver,” said Jim Hall, principal with consulting firm 2953 Analytics Inc. in Birmingham, Mich. “This is all about marketing now. You have to market what you have, and you can only market what you can sell.”
GM's product replacement rate will trail the industry this year and is expected to be in line with competitors in 2012 and 2013, according to Bank of America Merrill Lynch's annual “Car Wars” report published last year.
GM's aging fleet
The percent of GM's sales from “new or heavily redesigned” vehicles fell from 40 percent in 2007 to less than 14 percent in each year through 2010, according to Credit Suisse estimates. The portion of sales may be 12 percent this year before rising to 30 percent in 2012 and 26 percent in 2013, analyst Chris Ceraso wrote in the Dec. 28 report.
GM's U.S. market share may fall to 18.6 percent in 2011 from 19.1 percent last year, according to Jeff Shuster, director of forecasting for researcher J.D. Power and Associates.
“We're looking for more of a stability story than a growth story,” said Schuster. “They're going to try and sustain share during that lull period that occurs in most product planning. Everyone goes through it from time to time.”
Akerson, 62, has told top executives to look at pulling ahead specific vehicle introductions in the company's home market, said Stephen Girsky, GM's vice chairman. The automaker delayed some new models during its bankruptcy in 2009 and will increase model launches in 2013 and beyond, he said.
“You'll see continued emphasis on replacing some of the legacy products,” said Mark Reuss, GM's president of North America. He declined to name specific vehicles GM is considering pulling ahead.
Sonic, Verano debut
GM showed the Sonic and Verano, a compact car that begins sales in the fourth quarter. Sonic is scheduled to start deliveries in September.
The Verano shares the same underpinnings of GM's Chevrolet Cruze, which started deliveries late last year. Sales of the Cruze rose 35 percent from November to 10,865 in December.
“The bigger issue today does not seem to be the desirability of GM's new cars but, rather, the simple lack of enough new cars,” Himanshu Patel, an analyst at JPMorgan in New York, wrote in a research report published in late December.
The Verano gets an estimated 31 mpg on the highway, GM has said, while the Sonic is expected to get more than 40 mpg on the highway, Reuss said. The average price for a gallon of gas in the U.S. climbed to $3.09 last week, the highest since October 2008, according to the American Automobile Association.
“Verano could be the right car at the right time for Buick if fuel prices stay where they're at or continue to increase,” said Dave Sullivan, a product analyst at AutoPacific Inc. in Troy, Mich.
The Sonic will be available as a four-door sedan and five- door hatchback and is as much as 22 inches shorter and two inches narrower than the Cruze. The Chevrolet Spark, which will be even smaller than Sonic, will go on sale in early 2012.
“The standard level of features in these cars is designed to beat other entries, not just compete with them,” Reuss said of the Sonic and Cruze. “If you know me very well, I hate the word ‘compete.' We gotta win.”
The vehicles are part of GM's push to expand and refine its smaller-car lineup. Bigger cars including the Chevrolet Impala and several new pickups and SUVs are expected to be refreshed for the 2013 model year or later.
b>Filling a gap
“What they're trying to do is take some of the positioning they've had in the midsized and larger vehicles and shift that down to be competitive in the small segments as well,” J.D. Power's Schuster said. “This was a gap in the lineup.”
Ford's product in North America is “younger and more attractive than GM's current lineup,” Morgan Stanley analyst Adam Jonas said in a report dated Dec. 28. “It may take many years for GM to catch up.”
Product is one of the few qualms that Morgan Stanley's Jonas, who is based in New York, and the analysts at Credit Suisse and JPMorgan have with GM. Each analyst initiated coverage of the automaker since Dec. 28 with recommendations that investors buy the shares.
“There may be some share movement around that issue, but it's not going to be life or death,” said Mike Jackson, CEO at AutoNation Inc. “They'll be all right.”
AutoNation is the largest U.S. auto retailer.