Buick is paying dividends for GMOctober 31, 2011: 5:00 AM ET
Treasury officials considered shutting down GM's also-ran luxury brand in 2009. Now, the decision not to is looking brilliant.
By Doron Levin, contributor
FORTUNE -- U.S. Treasury officials weren't sure in 2009 whether General Motors ought to shut down its Buick division as part of the government-sponsored bankruptcy. Their decision to hang on to the brand is looking better by the day.
Buick (GM) sales in the U.S. soared 48% in 2010 from 2009 on the strength of the fullsize LaCrosse sedan and Enclave crossover and another 24% this year following the successful introduction of the smaller Regal sedan.
The latest entry, dubbed Verano, will be arriving shortly to Buick's 2,100 dealers and it looks like a strong contender as well. The Verano intends to compete among higher-end compacts; it features the same architecture as the Chevrolet Cruze and Opel Astra, with lots of tweaks, rakish lines, high-fashion touches and advanced engineering to give it a more luxurious feel.
GM, with its Buick brand, is turning the tables on more prestigious brands such as Toyota's (TM) Lexus and BMW by offering premium features at a more competitive price, according to Roger McCormack, Buick director of marketing. The Regal, for example, sells for about $27,000, or about $8,000 to $10,000 less than a similarly sized and equipped -- though much higher-powered -- Lexus ES350 and BMW 3 Series.
That tactic is paying off. "About 40% of our sales are conquests from non-GM brands," McCormack says, indicating that lots of new prospects to Buick are liking what they see. Just as importantly, GM isn't simply cannibalizing sales from Chevrolet and Cadillac, two of its other remaining car brands.
According to TrueCar.com, an automotive buying service, Buick buyers at an average age of 67, were older than any in the industry, as of 2008. But the average has been trending younger lately, mostly because of the Enclave, with an average buyer age of 50. All luxury car manufacturers struggle to win younger customers they hope to convert into repeat buyers.
Image is also an important factor. "A few years ago no one in Southern California wanted to own a Buick. But suddenly there were waiting lists for the Enclave," a big favorite with soccer moms, said Jesse Toprak, TrueCar.com vice president for industry trends. Buick isn't yet a cool brand in Southern California "but the brand has made some headway," he says.
Buick's marketing strategy has been geared to attract a different sort of luxury customer, one that (as in the old days of the brand) isn't trying to make a statement of wealth or class. Just as doctors once avoided Cadillac because it sent the wrong message to patients and neighbors, today's Buick prospects may very well disdain "Master of the Universe" or Wall St. status.
The brand's marketing team chose NCAA sports as a venue for its advertising and created a "highlight reel" of collegiate stars involved in charities meant to help the needy. With former University of North Dakota basketball star Manny Ohonme, originally from Nigeria, Buick contributed more than 2,000 pairs of shoes and socks to children during the 2011 Final Four championship. But Buick still has headway to make in coming up with a sticky tagline that encompasses what the brand stands for.
Because Buick is deliberately side-stepping status-seekers, its engines aren't necessarily chosen for raw horsepower or high amounts of torque. Indeed, its new eAssist system, offered first on the LaCrosse, is meant to improve fuel efficiency by stopping the engine when the car stops at a light or in traffic and using electric assist to help it at speed.
Effort has been applied to cabin quietness, a virtue of Buicks for decades. Engineers studied how to remove or block sounds, and applied high-tech materials to subdue ambient noise. The goal is to allow passengers to converse in a normal speaking voice between front and rear rows while traveling, a small and important factor in a pleasant driving experience.
Buick has miles to go before it is a real challenger to BMW or Mercedes. But for the first time in decades, it has a shot at relevancy. And that may very well vindicate the decision of two U.S. presidents to make sure that GM didn't go out of business.