GM, Ford in Overtime with 4-Cylinder Cars
Sales of small 4-cylinder equipped cars have surged as gas has risen. That's good news for carmakers, but there's a problem: They don't have enough of them
by Jim Henry
BusinessWeek
2008 Chevrolet Malibu 4-cylinder engine
Inspired by the success of the Prius, many manufacturers added hybrid models, including some big hybrids from GM, such as the GMC Yukon Hybrid SUV, increasing the scarcity of batteries from a limited number of suppliers. GM's vice-president for North America vehicle sales, service, and marketing Mark LaNeve said, "We have a long way to go, in terms of an adequate battery supply,".
Meanwhile, four-cylinder gasoline engines are the mass-market fuel-saving method of choice, far outselling the more expensive hybrids.
GM said four-cylinder models accounted for 40% of its total retail sales in June. That's nearly double a 22% four-cylinder mix in the year-ago month, and despite the fact that most GM trucks are six or eight cylinders. "We have dramatically shifted our mix as quickly as we can," says LaNeve. For instance, GM is making more four-cylinder engines, and building more vehicles in growing car and crossover segments, even as it cuts production of trucks and SUVs.
GM announced on July 1 it was increasing overtime or adding Saturday shifts at the plants that build the Chevrolet Malibu, Saturn Aura, and Pontiac G6 cars, which share a common architecture.
"We ran out of some car lines," in June, LaNeve says. Specifically, he says dealers were low on the Cobalt, and Malibu.
General Motors estimated it could have sold an additional 8,000 to 10,000 vehicles in June if it had better availability of four-cylinder models. "For the last 120 days at least, with higher availability we could have sold more vehicles and had higher market share," LaNeve says. "With more inventory, more selection, the dealers do more business," he says.
At Ford, the company said four-cylinder variants of the Ford Escape accounted for almost half of June sales for that model, up 13 percentage points from the year-ago month. Four-cylinders accounted for about 70% of Ford Fusion sales, up from 57% a year ago, the company said.
Jim Farley, Ford group vice-president for marketing and communications, said the presence or absence of a four-cylinder variant within a particular model lineup has become an important purchase consideration. "The customer is motivated by power-train choice as much as they are by segmentation," he said in a July 1 conference call. Segmentation is how the auto industry breaks different models up into a set of logical competitors. The usual considerations are size, price range, body style, luxury vs. non-luxury brands, etc.
"Where the consumer has a choice between four and six cylinders, we have certainly seen significantly lower days-supply for fours," he said.
Ford is having trouble building enough of the redesigned Ford Focus. George Pipas, Ford U.S. sales analysis manager, says Focus production this year should be 245,000, the first time in more than five years the Focus has passed 200,000. That 2008 target is a 28% increase from 2007. Next year, Ford expects to build 280,000 Focuses, he says.
Ford had a 39-day supply of the Focus on July 1, up from only 24 on June 1, Automotive News said. The industry benchmark is a 60-day supply.
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