Stop The Presses! GM Making Money With A Compact Car!

Edward Niedermeyer
by Edward Niedermeyer

Though GM’s new Cruze is likely to qualify for taxpayer funded “efficiency retooling” money, its predecessor the Cobalt is finally coming into its own. Automotive News reports that transaction prices and profitability are headed up for the Cobalt. Average transaction prices for the Cobalt rose $775 since mid-April, thanks to surging interest in one of GM’s most fuel-efficient cars. And the upswing in Cobalt-generated revenue is turning Detroit’s argument that it can’t make money on small cars on its head. GM’s marketing manager for small cars and crossovers, Brian Brown, says profits on the Cobalt are up six percent since 2007. “I don’t think anyone thought this shift of moving into smaller, more fuel-efficient vehicles would be as dramatic and happen as quickly as it did,” Brown tells AN. “I have to laugh: In the last 90 days, one of the top five trade-in vehicles for a Cobalt is an F-series pickup.” Please note that Brown is laughing about getting trade-ins from a competitor’s truck rather than his company’s total inability to see this one coming. GM added an extra Cobalt shift in August, to keep up with the 9.6 percent (supply limited) increase in Cobalt sales on the year, which still lag behind booming sales of Ford’s Focus. Sales are doubtless being helped by the addition of the fuel-efficient (25/36 mpg) Cobalt XFE model, while sales of fully-loaded models are helping profitability. Taken together, the trend is clear: well-equipped, fuel-efficient small cars can sell in volume and turn a decent profit. If only Detroit had realized this a decade ago. Everybody else did.

Edward Niedermeyer
Edward Niedermeyer

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  • Ptrott Ptrott on Sep 08, 2008

    So what exactly is wrong with the Cobalt? Not a bad looking car, and the Cobalts I have driven have not been junky or rattle like some others. Am I missing something?

  • Billc83 Billc83 on Sep 08, 2008

    Meh. People are running out now to buy whatever fuel efficient car they can get their hands on. That's the only way I can see people buying an Aveo (which I've seen a startling amount of lately). If more people are interested in a small car like the Cobalt, less incentives will be offered, ergo, a higher average transaction price.

  • Ash78 Ash78 on Sep 08, 2008
    billc83 Exactly. The "efficient new car" market segment was unprepared for the massive rush in demand, so it's still a little bit dealers are getting close to MSRP for them (or in Honda's case, above!). If fuel prices drop back to under $3 again, we'll be seeing headlines that accuse the public of demanding more small cars but not actually buying them. It'll be SUV boom in reverse.
  • GBG GBG on Sep 08, 2008

    Ptrott: Well, I rented a Cobalt about a year ago, to drive out of the city 20 miles on a 1 day errand. I had a mix of city and highway. Performance was something the car could only dream of. The car had as much personality as my toaster. It was beige inside and out, a color perfectly suited for it. For all the money we dump into our cars, there should be some entertainment value. This car had none.