General Motors of Canada Ltd. is profitable and plans to stay that way by halting a long-time practice of chasing market share through heavy incentives and high sales to fleet customers, the auto maker's new president says.
"Our strategy is pretty consistent; it's not rocket science," Kevin Williams said Wednesday. "We're going to be profitable."
Although market share fell to 15.4 per cent in Canada in the first five months of 2010 from 19.1 per cent a year earlier, that's right on target and GM Canada now is stretching its sales goals to higher than 16 per cent, Mr. Williams told a group of reporters Wednesday in his first meeting with the media since being appointed president in March.
He would not reveal actual financial results or whether GM Canada is profitable when revenue from its large manufacturing operations in Canada are stripped out.
But the profit in Canada combined with positive financial results in the first quarter racked up by its parent, General Motors Co., represent a key building block for a successful initial public offering that would enable Canadian and U.S. taxpayers to recoup some of more than $50-billion (U.S.) in financial assistance provided to GM last year.
They also enable the company to invest in its Canadian operations, Mr. Williams said, such as recent announcements of new engines and transmissions to be built at a factory in St. Catharines, Ont.
GM has paid back about $8-billion in loans to the Canadian, Ontario and U.S. governments, but the rest of the money that bailed out the auto maker last year is tied up in shares of the company.
The turnaround in North America has come from a dramatic reduction in costs. Shedding billions of dollars in debt through the Chapter 11 bankruptcy process and slicing labour costs in both Canada and the United States have made the auto maker more competitive. In addition, new vehicles that are now coming to market are winning accolades for their quality and design and generating higher transaction prices than the vehicles they replaced.
Mr. Williams said he has challenged his team to regain the No. 1 sales spot from Ford Motor Co. of Canada Ltd., which has knocked GM Canada off its decades-long perch as the sales leader.
"If that doesn't happen, we are not absolutely going to fall out and think that the world has collapsed," he said. "If you're the most profitable No. 2, it may be a better position in the marketplace."
Weaning customers off incentives such as cash rebates, interest-free loans and subsidized leases is difficult for auto makers that have relied on them for decades as the Detroit Three did for years after then Chrysler Corp. started the practice in the 1970s with its ground-breaking U.S. ad campaign: "Buy a car, get a check."
GM Canada could probably push its market share to 17 or 18 per cent this year, Mr. Williams acknowledged, "but the kinds of things you have to do to get that done are not the kinds of things we're willing to do in the new General Motors."
In fact, a senior executive at a competing auto maker said Wednesday that GM Canada is offering a $5,000 rebate and interest-free loans on the Chevrolet Cobalt, figures that cause him to lose money on his car in that segment.
GM Canada spokesman Tony LaRocca said that's a typical move by any auto maker at the end of a vehicle's life span when that model is about to be replaced.
The incentives on the hot-selling Chevrolet Equinox and GMC Terrain in Canada are considerably less today than they were on previous generations of those vehicles, Mr. Williams said.