How GM's Chevrolet Cruze Started an Auto Revolution

DETROIT ( TheStreet) -- As automakers celebrate their best month in six years, a sign of the revival of the U.S. auto industry, one car stands out as a symbol of all that has gone right.

That car is GM's ( GM) Chevrolet Cruze. It was introduced on Sept. 8, 2010, three years ago Sunday, as a sort of impossible dream, a compact car made in the U.S. by one of the problem-plagued Detroit Three automakers.

In those days, Ford ( F), GM and Chrysler were all still pickup truck companies that also made cars -- too many cars, made at too high a cost at many plants with too many workers and too many imperfections, then sold at too many dealers. No wonder Chrysler had filed for bankruptcy protection in April 2009 and GM had followed in June, while Ford had brought in a miracle worker CEO from outside the industry and then mortgaged the farm to borrow $28 billion.

GM said Wednesday that its August sales were its best since September 2008, the month when Lehman Brothers filed for bankruptcy protection. Two years later, GM rolled out the Cruze. "What really got the ball rolling was the launch of Cruze, which went into production three years ago (nearly) to the day," said Kurt McNeil, vice president for U.S. sales operations, on the GM sales call.

"Cruze is emblematic of GM's progress on many fronts," McNeil said. "We replaced a competitive car with a great car that was a much better value." (Yes, McNeil did indeed refer to the Chevrolet Aveo as "a competitive car."). Since then, GM has sold about 677,000 Cruzes and has "replicated that success with other global products such as Spark, Sonic and more," McNeil said.

Alan Batey, senior vice president, Global Chevrolet, said Mark Reuss, president of GM North American, should be credited for Cruze. Reuss "was convinced that we had to have success for Chevrolet -- we needed not to compete, but to win," Batey said. "This was a very important launch, important to dealer morale in the future, and we've been able to spin off that. It was a defining moment.

"The retail piece of this is unprecedented in Chevrolet for decades," Batey said, because Cruze is a car that does well in the retail market while its predecessors were generally sold to fleet buyers.

In August, Cruze sales declined 8% to 23,909. But for the first eight months, sales are up 18% to 183,045. For the first seven months, Cruze was the 12th best-selling vehicle and the sixth best-selling car in the U.S. During the period, it ranked third in the compact car segment, behind Honda ( HMC) Civic and Toyota ( TM) Corolla, according to Kelley Blue Book. In July, Cruze sales rose 70%.

Don Johnson, U.S. vice president for Chevrolet sales and service, said Wednesday that the fast sales pace led to an inventory shortage in August. Cruze "had a tremendous 90 days," Johnson said, with sales up 37%. "The supply selldown went a little (more briskly) than we expected." The Cruze inventory is down to 35 days, he said. Cars.com said the 2014 Cruze is averaging 27 days to turn, under the industry average of 62 days for new 2013 and 2014 models in August, but not under the 16-day average turn time for 2014 models.

Kelley Blue Book analyst Karl Brauer said he recently spoke with Reuss, who "was proud that he called for full-on, throttle-down production of Cruze from the start: He set the Lordstown plant up for maximum capacity before the first car got to the showroom.

"Cruze was GM's first world class, no-excuses compact car in decades, maybe ever," Brauer said. "You can't think of a Chevy small car that there isn't some sort of an eye roll or chuckle when you say it -- Vega, Cobalt, Chevette ...." In 2012, Edmunds.com ranked the Chevrolet Vega as the fifth worst car ever made, although it did have some fans.

Brauer said he realized the Cruze was a good car when he first drove the Buick Verano, which is built on a Cruze platform. "It was like when you drive a Lexus ES, which is an effective and convincing luxury car, built on a Camry foundation," he said. "In the same way, the reason Verano is so good is because Cruze is so good."

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

>To contact the writer of this article, click here: Ted Reed

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