Detroit’s big three have come a long way since the depths of the recent recession. They’ve improved vehicle quality and management enough for investors like me to root for an American comeback. While consumer perceptions are difficult to turn around, Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) have gone to great lengths to convince consumers that domestic vehicles can once again compete.
That said, in many ways General Motors Company (NYSE:GM) still trails behind rival Ford Motor Company (NYSE:F). Its vehicle portfolio is much older, contributing to its market-share losses. The common jab of “Government Motors” highlights the negativity its brand image has battled over the last few years. General Motors Company (NYSE:GM) still ranks second in global sales and needs to refresh its vehicles and improve its marketing to become a better investment. Let’s look at a few recent events that might show General Motors Company (NYSE:GM) is ready to turn the corner and start fixing its vehicle portfolio and marketing weaknesses.
Tim Mahoney is Chevrolet’s new global marketing chief. General Motors Company (NYSE:GM) hopes he will bring stability and creativity to its often bland marketing strategies. In the past it’s been difficult to create an image that can encompass such a large number of brands and models. The last attempt, “Chevy Runs Deep,” didn’t run very far or very long. It’s remarkable that with the slogan not translating well into other languages, Chevy still represented 54% of General Motors Company (NYSE:GM)’s global sales. Imagine how sales could rise if Chevy finally creates a marketing campaign that consumers can relate with and buy into.
It will be no easy task, as Chevy is about to tackle its wildest vehicle portfolio refresh in the brand’s 102-year history. It will redesign numerous models in the United States this year, including its highly profitable Silverado. The Impala and the buzz-worthy new Corvette will also roll out in new styles. Chevy will then continue its redesigns into early 2014, with the Suburban and Tahoe due to release.
Mahoney’s first job will be to make sure Chevy’s cash cow, the Silverado, is positioned correctly. It has a year’s head start on Ford’s redesigned F-150 and must take advantage of that to secure its market share. Ford Motor Company (NYSE:F) and Chrysler both have been touting fuel efficiency, which, in KPMG’s 2013 survey, is the consumer’s No. 1 factor in purchasing a vehicle. Ford Motor Company (NYSE:F) is showing off its popular EcoBoost engine whenever possible, and it’s catching on with consumers. The turbocharged V6 saves fuel while providing equivalent power. GM’s other rival, Chrysler, has been parading the Dodge Ram in recent commercials as a best-in-class 25 mpg on the highway. Finally, GM has prepared a response to its rivals’ advertisements.
Mahoney is fighting back with a different viewpoint. Rather than arguing fuel efficiency, it says the Chevy Silverado 1500 has the lowest total cost of ownership. That includes transaction prices, operating costs, maintenance, and fuel consumption. It’s the second year in a row it earned the “5-Year Lowest Cost to Own” award. If Chevy can market this idea well, it will pay off. While fuel efficiency is definitely the top priority for most consumers, highlighting additional benefits the consumer receives by purchasing a Chevy truck could be a compelling story. Unfortunately for GM, it opted to sit on the sidelines for the Super Bowl, which would have provided a huge audience for its message.
On a higher level, General Motors Company (NYSE:GM) will embark on its “Find New Roads” campaign. It’s supposed to inject emotion back into its brand image and as a bonus will translate well for its global markets. The first 90-second commercial gives a preview of how it will showcase its vehicles and let them shine for themselves. I was a fan of the Frank Sinatra bit myself, and the rest was an improvement on previous advertisements.
Issues remain
Make no mistake: Fixing its weaknesses in marketing won’t cure all of GM’s ills. As millennials age, they will become the future of purchasing power. The group currently represents 79 million people and $170 billion of purchasing power, and GM will need to prove it can adapt its marketing as Ford Motor Company (NYSE:F) is doing.
Aside from marketing, it still has a long way to go to fix its less-than-desirable margins and earnings. Its management must also prove to investors it can consistently make good decisions before the stock price rises accordingly. Management was criticized for being slower to close plants to match demand in Europe, causing massive losses. Ford Motor Company (NYSE:F) also incurred losses, but it reacted much faster, which could set the stage for a quicker breakeven date.
Bottom line
While issues remain and General Motors Company (NYSE:GM) still trails Ford Motor Company (NYSE:F) in many factors, there’s still a lot of potential in GM as an investment. It represents a real chance to be No. 1 in global sales for 2013, and if it can create more operating efficiency it will see a surge in earnings. I believe Detroit learned some very difficult lessons during the recession and thus far is reluctant to resort to the old ways of high incentives and poor management. Detroit is slowly but surely convincing consumers that it competes with imports on quality and price. Investors should keep an eye on how GM executes its “Find New Roads” campaign, as it will be key to the success of its portfolio refresh. As long as weaknesses are fixed one at a time, the road ahead should much better for GM investors.
The article Is GM Ready to Turn the Corner? originally appeared on Fool.com and is written by Daniel Miller.
Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford and General Motors and owns shares of Ford.
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