Mark Reuss, president of GM North America, says the automaker has a prime opportunity to get new customers into GM vehicles.
GM is offering new fuel-efficient cars such the Chevrolet Cruze compact and the Chevrolet Volt, a halo car that is burnishing GM's reputation for innovation. Meanwhile, Japanese rivals are enduring production shortfalls due to the earthquake and tsunami.
On May 3, Reuss, 47, spoke with Editorial Director Peter Brown, Editor Jason Stein, Industry Editor James B. Treece and Staff Reporter Mike Colias.
Q: Where do you see this year's sales shaking out?
A: Our production schedules remain pretty flat and constant with around a 13 million-unit [seasonally adjusted annual rate]. I can't predict what's going to happen with the people we compete with here, but that's how we're operating the business. We'll continue to be very agile around things that we run out of or get short of. The mix I think is changing faster than any of us can comprehend.
Are you in a better position to respond to that mix than in the past?
I think so. The capacity footprint we have here enables some flex up and down without really jinxing the break-even point of the company. That's the way we're designed to run. As an engineer, I think our product lineup is equal to or better than -- depending on the segment that you talk about -- most of the competition. We feel good because our car sales are up like 50 percent year-over-year. I have never been in our company where we had car momentum like this. It's always been trucks, trucks, trucks.
With production constraints of some competitors, is there an opportunity for consideration from new customers?
Yeah, I think there is, clearly, just by the math. What we need to do is really make sure that the quality, reliability and durability of our cars is an unexpected surprise for these people. It's sort of a once-in-a-lifetime opportunity for us to get people into our cars and trucks and have them experience the excellence of the product that they may not have given us consideration for in the past.
You've talked about having a contingency plan for higher oil prices.
That's why you see we could do 25,000 Cruzes [unit sales in April]. What do we do with Volt when that happens? How many more Sonics do we want to make? All of that comes right back to what kind of four-cylinder capacity we have globally to feed those lines.
Are you going to need more four-cylinder capacity?
Is GM commanding more money than in the past for small cars such as the Cruze?
The average transaction price is always a great indicator. Last month [the Cruze] was $2,000 to $3,000 over Corolla and Civic. Granted, those are older products. These small cars, they're heavily contented and great cars to drive. So we're seeing a difference in small-car content buying, and we're seeing a lot of people come to Cruze.
How is the Volt ramp-up going?
The ramp-up is absolutely on track. It's almost exactly to plan. We're matching our capacity and sales pretty closely. We're rolling out the service capability in those dealerships so that we don't go into a place where we're not trained on what the car is, how it operates, and then how to service it.
Do you get the sense that suppliers will be able to handle the volumes you may be asking for?
No, I don't think so. If everybody goes through a crisis like we did, we all gobble our break-even points and capacity. Then they run off of a smaller footprint. So adding footprints to some of the supply base is equally difficult. I think it's going to run thin.
Are you working with suppliers to come up with solutions?
We've had trouble getting chips for some of our navigation systems, and this is not a tsunami issue. It's a capacity ramp-up issue. Some of the glass screens in those nav systems were troublesome for us coming out of bankruptcy. It's because the break-even points were already reset.
So everybody is going to reset with their best estimate based on what we tell them, and then when we start to exceed that, we've got to go back and forth and work it and help them and they can help us.
Is the size of the dealer network adequate now?
It's hard to tell. I could give you a chart that would say that our dealer throughput on a per-dealership basis is healthier than it's been in decades. The profitability is along with that. I would also give you the data point from the NADA survey that we just got that we've made the biggest improvement of any manufacturer and the biggest improvement in General Motors history.
Which areas from a geographical standpoint do you still need to work on?
The West Coast and the East Coast are still places that are huge opportunities from a sales standpoint. It's getting that healthy in terms of the right operators, the right places, and help with facility improvements that people haven't been able to do because of the high cost of doing things on the coasts. We have some pretty good programs that help folks do it.
Some dealers have complained that GM's program to have dealers improve their facilities is unfair.
Well, you don't have to participate in it. But they want the money without participating. How does that work, right? We're trying to make it as clear and transparent as we can. There's a facility that we'd like to have to sell our cars in. I don't think that's unreasonable. There's probably some middle ground that we probably need to reach, and we'll give you money to do it.
Their argument is: "If GM gives the money to this guy and I don't get in the program, I'm at a disadvantage."
That's very, very true, and that's the way it works. You're going to compete anyway, so we want you to both have equally competitive stores, and so we offer it to both of you and we don't make anybody do anything stupid.
How different will the GMC and Chevy truck lineups be?
We probably have taken a very siloed, two-company, two-brand approach to trucks to take on our competition that has one. When you do that, and you don't do it right, and you've got price overlap and identical incentives and go-to-market strategies, then you're going to get dilution. I think we can do premium Chevrolets and we can take GMC and move it even further up.
Explain what GM has been doing on incentives.
If you look at GM over the last calendar year, we were about $200 [incentives per vehicle] below the industry. That's pretty disciplined. If you look at any one or two months over that year, you'll see us slightly above or below the industry because we're turning different model years. We're not going to be totally predictable for our competition. But we're going to be very responsible from a price retention standpoint. I think if you look at the data, you'll see that General Motors has the highest average transaction prices in the industry.
Will it matter to you when U.S. Treasury sells its GM stake?
I think it will be a very positive thing for the company. No one's proud or liked the fact that we had to do that for a second chance. It scars people in different ways. I think at the end of the day we have an opportunity to make the company a lot better because of it. I think it's pretty transformational, and we've used it that way.
What's really different in today's General Motors? What's transformed and what still needs transformation?
I think the company was very siloed, and you could argue that it is still somewhat that way in terms of approach culturally. When I go into a product meeting and talk to the engineers or into plants to manufacturing folks for instance, I say, "We have competitors that are running 75 percent cars at 10 percent margins." And so I say, "We are around 7 percent-ish on a margin basis with trucks. Does everybody get that?" What does that mean? It means that we have got to become a full-service automaker again. We have to be able to really value every portfolio entry in this company again. We did this through history at some different points, and we have to be able to do that. I don't think people really get that.