GM Aims to Break Barriers With Chevy Sonic

DETROIT ( TheStreet) -- For the moment, the Chevrolet Sonic symbolizes all that is inspiring about General Motors' ( GM) rebirth.

When production starts in the third quarter in Orion, Mich., Sonic will be the first sub-compact built in the U.S., and the first small car GM has built in the U.S. since Chevette production ended in 1986.

Sonic's principal competitors -- the Ford ( F) Fiesta, Honda ( HMC) Fit and Toyota ( TM) Yaris --- are all built offshore.

"GM has made a commitment to build small cars," said Alicia Boler-Davis, plant manager at Orion as well as vehicle line director, with overall authority for Sonic, in an interview. "We understand that it's a growing segment in the market, and we've got a great team effort working with UAW that allows this to happen. It's a team effort, from design to manufacturing."
Alicia Boler-Davis, Orion plant manager

Among the unique characteristics of the Sonic effort are a contract with the UAW that allows for a two-tier wage system and a management set-up, unique for GM, in which Boler-Davis, a 16-year GM veteran, not only oversees the product but also runs the plant where it is made.

"It's an integrated effort within GM," Boler-Davis said. "I have the engineering and the manufacturing. It's different in that one person owns it -- it's GM being innovative. We haven't decided to do this with any other vehicles."

The effort includes close collaboration and frequent consultation with the UAW within the plant, although Boler-Davis rejected a reporter's comparison to Saturn. "You can't compare it to Saturn," she said. "It's different."

The Orion plant, which will also produce the Buick Verano, will have about 1,550 employees; so far, about half have been hired and work has started on pre-production vehicles. GM is investing about $600 million to renovate the plant, which will also produce the Buick Verano. analyst Jesse Toprak agreed that GM's investment in Orion underscores the commitment to the sub-compact market. "They wouldn't have done it if they didn't have faith in the future of the segment, and I think it's a safe bet," Toprak said. "It doesn't seem like gas prices will come down dramatically anytime soon, and we've seen the subcompact segment become almost fashionable, where it used to be you bought one only because you had to."

Whether similar to Saturn or not, Sonic seems to have been given a better chance, given the UAW's 2008 agreement to reduce contract costs, GM's management restructuring and what appears to be a top-down commitment to small cars. At the Detroit Auto Show, Mark Reuss, president of GM North America, called Sonic "a statement of what can be expected of this foundation company in the years to come" and said it is "designed to turn heads."

The Sonic replaces the Aveo , which GM introduced in 2003. The Aveo has been sold in 120 countries. GM is keeping the Aveo name elsewhere, but has substituted Sonic for the new model that will be built in Orion, the first car built with GM's new global small car platform.

The labor contracts are a factor, of course, but in addition, "the small car market is a lot stronger than it was when we got back into the market with Aveo," said GM spokeswoman Margaret Brooks. "As we look ahead, this will be an area of growth, and once you see a critical mass of market opportunity, it made sense to look at doing the manufacturing in the U.S."

Rising fuel prices, a tight economy and renewed competition in the sub-compact market have combined to stimulate consumer interest, Brooks said. Sub-compacts cars today account for about 3.5% of the industry, but GM thinks it will grow to 4.5% in the next two years, with the potential to increase further if fuel prices rise.

GM has not announced pricing, but Brooks said the car will be competitive with Fiesta, which starts at $13,320, and Fit, which starts at $15,100. The Sonic, however, will not be a bare-bones subcompact, but rather will be roomy -- Brooks said it will have "more capacity than some mid-sized cars" and will have advanced safety features.

Brooks called the Sonic "the little brother to the Cruze," saying it will "be younger and more playful," reflecting its young drivers' "personality and exuberance, with a little bit of swagger." It will get about 40 miles per gallon on the highway, about two miles less than Cruze.

The new Cruze, introduced in the fall , sold 10,865 units in December after selling 8,066 units in November. Meanwhile, Ford has also been making inroads in the small car market. In November, Ford reached its higher share level in the small car market in at least six years, as both the Fiesta and the Focus attracted buyers.

-- Written by Ted Reed in Charlotte, N.C. .

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