GM's New Malibu Measured Up to Camry After Wagoner Raised Bar

Jeff Green

Jan. 18 (Bloomberg) -- Gary Kovacic was putting the finishing touches on plans for the 2008 Chevrolet Malibu two years ago when his boss raised the bar.

What would it take to make the car better than the competing Camry that Japan's Toyota Motor Corp. had just put on sale, General Motors Corp. Chief Executive Officer Rick Wagoner wanted to know.

The question forced Kovacic and his engineering team to put two months into a part-by-part comparison of their car with the Camry and to propose hundreds of design upgrades. The result was a vehicle that Car & Driver magazine rated better than the Camry and close to Honda Motor Co.'s new Accord. The GM sedan this week was named North American car of the year by 45 auto reporters.

The Malibu "is probably the best sedan GM has ever produced in the midsize segment," the industry's most competitive, said Jesse Toprak, an analyst at Edmunds.com in Santa Monica, California. The company tracks vehicle pricing and shoppers' impressions.

One early measure of success is that the Malibu is selling for almost full sticker price in Southern California, a market dominated by Toyota City, Japan-based Toyota, Toprak said. GM Vice Chairman Bob Lutz this week predicted that Malibu sales will top 200,000 this year, almost double the volume of the previous version.

"This was the car that we knew the company could build, but due to a lot of internal constraints, they hadn't built yet," said Michael Robinet, an auto forecaster at CSM Worldwide Inc. in Northville, Michigan.

Camry as Top Seller
Toyota executives aren't conceding defeat, and nobody predicts Americans will buy more Malibus than Camrys. In 2007, the vehicle was the best-selling car in the U.S. for a sixth straight year, at 473,108 models. GM, based in Detroit, sold 116,879 Malibus last year.

"Our guys have driven it," said Jim Lentz, president of Toyota's U.S. sales unit, in an interview this week. "It's a good car. There are a lot of really good players in that segment."

GM's U.S. sales fell 6 percent in 2007 and its market share dropped to 23.7 percent, the lowest since 1925. The company hasn't had a sales increase in its home market since 1999. The value of GM, the world's largest automaker, fell to $13 billion this week from $29 billion when Wagoner took over in 2000.

Until January 2006, Kovacic's mission with the new Malibu was to improve exterior styling and upgrade the interior. Kovacic, 52, was lead engineer on three earlier car-development projects in his 29 years at GM and managed the previous version of the Malibu. Wagoner's push to beat Toyota, the global auto quality leader, was a surprise.

Surprise Demand
"This is the first time someone has come in and said, "What are you going to do to beat them?"' Kovacic said.

For the past two decades, GM and its Detroit rivals counted on earnings from pickups and sport-utility vehicles, where Toyota and other foreign automakers weren't strong, said Jack Nerad, an analyst for Kelley Blue Book in Irvine, California, a provider of auto information to consumers. The surge in fuel prices and new competition wrecked big trucks as a profit machine.

"Suddenly the imports were breathing down their necks on trucks, and they had the definite desire to fight back in cars," Nerad said in an interview in Detroit, where he was attending the North American International Auto show this week. The review of the Malibu plans culminated in an hour-and-a- half meeting in July 2006 at GM's Warren, Michigan, technology center with Wagoner, Lutz and North American marketing chief Mark LaNeve. Kovacic and his engineers gave an "honest assessment" of what the car needed.

"Go Do It"
The changes included shoehorning in a new, unplanned 6- speed transmission with the 4-cylinder engine, without delaying the start of production in October 2007. The team needed to make the car quieter and smoother to drive, and plan to sell more high-mileage versions, Kovacic said.

"Rick said, OK, that sounds good, go do it," Kovacic said. "There was no debate about whether it was worth doing it, or a question about resources."

In about August 2006, Lutz and Jon Lauckner, Lutz's top deputy, came to drive an early model at GM's Milford, Michigan, test track. It didn't go well, Kovacic said. The 4-cylinder engine was too noisy, and Lutz concluded the car wasn't yet "good enough," Kovacic said.

"His criticism sort of rang through the company here," Kovacic said. "It had everyone on point that what we had here wasn't acceptable."

Engine Noise
Kovacic's team added an engine cover equipped with five chambers, called attenuators or tuners, that change the air flow around the motor and cancel out the frequencies of unwanted noise, Lauckner said. The upgrades probably added $100 to $200 to the cost of the car, he said.

GM needed to be able to sell the Malibu for less than a Camry. The car is priced at $19,995 for the LS model, expected to account for the greatest volume, compared with $20,280 for the competing Camry version. Chevy's top-of-the-line model sells for $26,995, while the premium Camry is $28,780.

Wagoner calls the effort a success. "There is no finer midsized car being offered today in America than the Chevy Malibu, and don't take my word for it, read the reviews," Wagoner said in a Jan. 4 Bloomberg television interview.

$100 Million Campaign
GM's Malibu advertising budget of more than $100 million is bigger than for any car campaign at the company in the past two decades and comparable to Toyota and Honda spending on new sedans, LaNeve said.

GM peppered television broadcasts of the baseball World Series, National Football League games, college sports and specials such as the Country Music Awards with 15-second commercials emphasizing changes in the car and comparisons with the Camry and Accord.

"We have to get credibility again in the midsize market," LaNeve said. "A lot of people out there are indifferent, and we think we've got a good shot at them." To contact the reporter on this story: Jeff Green in Detroit at jgreen16@bloomberg.net

Last Updated: January 18, 2008 00:33 EST

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