Chevrolet's next generation of the Chevrolet Malibu this week will undergo test drives and inspections by journalists, analysts and automotive reviewers in Palo Alto, Calif.. The vehicle is about to enter into production and will go on sale at dealerships prior to year's end.
The car is larger, roomier and lighter than the model it replaces, a Malibu that GM was forced to revise in 2013, in the middle of its normal product cycle of five to six years because of poor sales performance against segment leaders Toyota Camry, Honda Accord, Nissan Altima and Ford Fusion. A frequent customer complaint was that Malibu lacked adequate room for rear-seat passengers.
Motor Trend, the enthusiast magazine, got an early look at a driveable prototype of the new model and gave it high marks for quietness, roominess and lighter weight, as well as attractive styling.
"It's been difficult to win in this segment with 17 incredible competitors," Steve Majoros, marketing director for Chevrolet passenger cars and crossovers, said in April at a sneak peek in New York. "But we think we are ready to win because we think we have a car that meets exactly what customers are looking for."
While GM dominates the U.S. light truck market with Ford (F) - Get Report and Fiat Chrysler (FCAU) - Get Report from a financial standpoint, its passenger cars have been mediocre producers of revenue and profit. Since 2010, when the automaker was reorganized following bankruptcy, its shares have gained about 6% from the initial offering price of $33. The Dow Jones Industrial Average over the same period has gained about 60%.
Some contrarian investors think GM shares present an attractive value and buying opportunity at their current price, with little downside risk since the company boasts an extremely strong balance sheet and has shown impressive earning power during the automotive recovery that began in 2010. The No. 1 U.S. automaker, fortified with government financing, has $21.9 billion cash and equivalents as of the third quarter of this year to withstand a downturn in the U.S. automotive market and around $9.1 billion in debt.
Through October, GM had sold about 172,000 Malibus in the U.S., up 7.6% from a year earlier in a segment that was down slightly as consumers migrated to crossovers. Toyota's (TM) - Get Report Camry led the segment with sales of 361,000, down slightly from a year earlier.
Unit sales are only part of the equation when gauging Malibu's potential impact on the stock. GM typically has overproduced high-volume model lines like Malibu, resorting to profit-killing discounting to airport rental fleets when retail demand has fallen short. But current management has vowed to match production more closely to demand, which means that the new vehicle, if it charms consumers more than previous versions, could be a moneymaker.
Doron Levin is the host of "In the Driver Seat," broadcast on SiriusXM Insight 121, Saturday at noon, encore Sunday at 9 a.m.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.