The current major marketing campaign for Chevrolet, the largest division of General Motors Co. (NYSE: GM), talks about the record number of J.D. Power “initial quality awards” it has received recently. Chevy says it has topped the industry, based on the number of its models that have won the award, for each of the past four years.
The awards did not help the company’s sales last year. As the industry grew, Chevy sales fell 1.4% to 2,096,510 in 2016, compared to 2015. Among the reasons may be that much of the Chevy model line is made up of cars for which sales have underperformed more popular sport utility vehicles (SUVs) and crossovers. And Chevy’s full-sized pickup, the Silverado, which is the second best-selling vehicle in America, had a sales loss of 4.3% to 574,876.
One Silverado model has an extremely sharp discount. One version of the pickup has discounts that total $11,140 in “average total value.” And across much of the Chevy model line, 2016 versions carry 0% APR financing for 60 months for qualified buyers.
The Chevy dilemma shows how quality measures can be trumped by trends. Fiat Chrysler Automobiles N.V.’s (NYSE: FCAU) Jeep line often gets poor grades for quality, but its sales have risen consistently, primarily because it is an “all SUV” brand.
Another sign of GM’s problem with the Chevy line, and others, is the partial idling of plants. GM changed the schedule of one of the plants that makes it Chevy Impala, the sale of which fell 17% last year to 97,006.
Most industry experts say that discounts and incentives will erode industry profitability, and that as sales in the United States stagnate, the financial problem will get worse. That has not stopped Chevy from plans to clear its lots of cars that have not sold well, as its inventory has ballooned. Awards only take sales so far.
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