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The Globe and Mail

Why GM's Canadian sales are in reverse despite parent’s recovery

GM Canada’s market share has plunged by more than half to just 13.5 per cent, which is believed to be the lowest level since the 1920s.


As General Motors Co. executes a comeback from the greatest crisis in its history, its Canadian sales unit is missing in action.

General Motors of Canada Ltd., No. 1 in the Canadian market for the better part of a century, slid to third place last year on the back of its seventh-consecutive annual drop in vehicle sales. Its parent company, by contrast, posted its third straight increase in the U.S. market.

The 7-per-cent sales slump by GM Canada – a decline that came as overall industry sales in Canada rose 6 per cent to the second-highest level yet – reflects the new reality of fierce competition in the auto industry that prevents one company from gaining the kind of domination GM enjoyed for decades.

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Market share and sales fell in part last year because of an aging product lineup and aggressive incentives by competitors. GM Canada is also still dogged by the elimination in 2009 of the Pontiac brand.

Pontiac accounted for a much larger proportion of the company's business in Canada than it did in the United States.

As sales dropped steadily since 2005, GM Canada's market share has plunged by more than half to just 13.5 per cent, which is believed to be the lowest level since the 1920s.

The slide is being closely watched by the approximately 460 dealers across the country and competitors to see how the company will respond. The auto maker is in the midst of one lawsuit with a group of its current dealers and another involving many of the 240 dealers it terminated in 2009.

Dealers not involved in the lawsuits were so worried in the midst of last year's lacklustre performance that they undertook a survey to show GM how unhappy they were and presented it to GM North America president Mark Reuss at a dinner in a Toronto hotel in late October.

"The survey gave the state of the nation and it's simple to see," said George Badanai, who owns Badanai Motors Ltd., a Chevrolet Cadillac dealership in Thunder Bay, Ont., and is a member of the dealer communications team that advises GM Canada on issues affecting its retailers. "We're down on market share and we want to see a turnaround. It's that simple. We need volume."

He said dealers were told in 2009 that GM was aiming for annual market share of 17 per cent.

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"If you stopped at sales and market share, you'd say not a great year," GM Canada president Kevin Williams told a small group of reporters Monday at the North American International Auto Show in Detroit.

But the plan GM Canada put in place after the parent company's bankruptcy restructuring amid the Great Recession in 2009 is all about boosting the company's financial performance. It calls for lower fewer? incentives, less reliance on sales to rental companies and other buyers, improved brand awareness, and an increase in the resale values of vehicles and their value when consumers bring them back from leases, Mr. Williams said.

"Prebankruptcy we had the lowest brand opinion in the marketplace, prebankruptcy we had the lowest residual values in the marketplace, we disproportionately put a lot of vehicles into fleet – particularly into rental companies – and we had to price at the bottom of the market," he said. "That's the old General Motors."

Competitors offered heavy incentives last year and, in some months, fleet sales represented 40 per cent to 50 per cent of some auto makers' sales in Canada, while GM Canada remained disciplined, he said.

Mr. Reuss, GM's North America president, said the company's recovery in Canada is lagging about a year behind the U.S. comeback, in part because Pontiac was a more important brand in Canada than the United States.

GM cut back drastically on spending to develop new vehicles while it was in bankruptcy, so the lack of new vehicles affected both Canadian and U.S. sales, Mr. Reuss said.

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The announcement late last year that production of the Chevrolet Camaro will be shifted to Lansing, Mich., from a plant in Oshawa, Ont., infuriated GM Canada workers and angered the governments of Canada and Ontario, which contributed $10.6-billion to the $60-billion bailout of the company's parent.

The decision to shift Camaro production to Michigan, Mr. Williams said, is an example of the new discipline – consolidating all rear-wheel-drive vehicle production in Lansing will make the company more efficient and save money.

New vehicles such as the Buick Encore small crossover and GM's redesigned full-sized pickups should help market share recover, he said.

Mr. Badanai and other dealers are looking forward to those vehicles.

Peter Heppner, general manager of Preston Chevrolet Buick GMC Cadillac in Langley, B.C., said dealers are encouraging the company to offer more aggressive incentives and have already seen such moves in the first part of January.

"The moves they've made in the past 10 days have been significant and we're thinking they're an absolutely correct first step," said Mr. Heppner, who is also chairman of the dealer advisory group.

"Is it enough? That's the question. It's a competitive business. The real test will be when competitors respond. Do we have a will to be in the game? That's the question."

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