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2 Cars Illustrate GM's Challenge

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BY KEN BENSING

Los Angeles Times

Published: February 21, 2009

For a year, General Motors has been singing the praises of the new Chevrolet Malibu, voted by auto writers as the 2008 North American Car of the Year and billed by GM Chairman Rick Wagoner as "the finest midsized car this country offers." To promote its launch, GM spent nearly $250 million on advertising, dubbing it "the car you can't ignore."

Meanwhile, GM has been quietly making and selling a similarly sized and priced sedan: the Chevrolet Impala. GM hasn't run a national ad for the full-size Impala in three years, scarcely mentions it in news releases or conference calls with Wall Street analysts, and made little hay about its winning the Fleet Car of the Year award three years running.

Yet last year, for every two Malibus that GM sold, it delivered three Impalas. Unpromoted, hardly noticed, the Impala finished the year with 265,840 sales, making it the best-selling American sedan and the No. 8 vehicle by volume in the United States.

On Tuesday, GM submitted its restructuring plan to the Treasury Department, a document that is supposed to explain how it intends to reduce debt and cut costs and prove it merits further government support beyond the $9.4 billion in federal loans it has received.

Many industry experts, however, question whether cost-cutting and debt reduction will be enough to save GM. They say the company has deep-rooted structural problems, with too many dealers, too much production capacity and too many models, leading to huge cost problems that destroy any chance of making a profit.

The Impala and the Malibu, which sit next to each other in many Chevy showrooms, provide a window into many of those problems and into how difficult saving GM really might be.

"Symbolically, these are cars that separate the old and new General Motors," said Jesse Toprak, senior analyst at Edmunds.com. "If they want to change the way they do business, the Impala may have to go away. But how do you turn your back on a car that sells so well with so little effort?"

If the Malibu - a sharply styled car developed to do battle with the Toyota Camry and Honda Accord and change the public's image of the automaker - represents the new GM, the Impala would seem to be a dinosaur, left over from the bad-old-days when GM cars were known as rolling rust buckets.

Built in Canada on a 20-year-old platform, the current Impala debuted in late 2005. Its generic styling, 29 miles per gallon highway fuel economy and user-friendliness (buyers can even choose bench or bucket seats) make it popular with police departments, car-rental companies and other commercial customers.

Ed Peper, general manager of Chevrolet, said more than half the Impalas GM sold last year went to so-called fleet sales, compared with roughly 20 percent for the Malibu. He calls the Impala "very profitable" even though fleet sales are often made at a discount and can put downward pressure on retail pricing.

Yet when the Impala does make it into dealership showrooms, the car it competes with most directly appears to be the Malibu.

"They probably would have been able to sell many more Malibus if not for the Impala," said George Peterson, president of the research company AutoPacific. He argues that vehicles such as the Impala overextend GM's resources.

To become a profitable company, he argues, GM should eliminate more than two dozen models and half of its U.S. brands. "They have too many products, and some shouldn't exist," Peterson said.

Now, with the company's future very much in doubt, GM has begun to show signs of change.

In the restructuring plan GM submitted to Congress in December, it discussed reducing its dealerships and focusing on four of its eight U.S. brands. Hummer is on the block, and Saturn may be next.

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