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Can simplified trims and options help Chevy compete in D.C.?

General Motors recently began shipping cars and crossovers to Chevrolet dealers in the Washington, D.C., market with a guarantee attached: They’ll get 500 bucks for any vehicle that sits on the lot longer than 90 days.

That’s a gamble for GM. After all, it’s common for its dealerships to be sitting on more than 90 days’ worth of inventory on average.

But there’s a catch: To qualify for the guarantee, dealers must order those vehicles from a short, predetermined list of trim packages and features — ones that GM believes are sweet-spot combinations that will move quickly.

It’s a joint experiment between GM and nearly 30 D.C.-area dealers aimed at making Chevy competitive in the market. The premise is that Chevy’s array of model configurations is confusing to consumers compared with the relatively simple selection offered by Toyota and Honda, which dominate the Washington market. Simply stocking Chevy dealers with the right mix to line up better against rivals, the thinking goes, will make it easier to advertise and sell against them.

If it works, Chevy could apply the strategy to fine-tune and streamline its product mix in other metro markets where it badly lags import brands, such as New York.

“For sure, this approach could translate in other markets where the competition has a stronghold in cars,” Chevrolet U.S. Vice President Brian Sweeney said in an interview.

Maxima’s ‘zero options’

Chevy’s move mirrors a trend among mainstream automakers toward more simplified build combinations. It helps manufacturers cut cost and complexity at the assembly plant, eases dealer ordering and makes it easier for consumers to find what they’re looking for online or on the lot. Nissan, for example, plans to offer five trim packages and “zero options” on the redesigned 2016 Maxima sport sedan, which rolls out this summer.

For Chevy, stocking lots of model configurations might not be as problematic in a Midwest market where Chevy dealers do big volume — a Cruze sedan equipped with, say, a sunroof and safety package but cloth seats instead of leather might still find a buyer. But the problem grows in coastal areas, where consumers are more accustomed to the simple good-better-best lineups of the Japanese brands.

So since early this year, D.C.-area dealers have been encouraged to order from a canned list of models that carry the $500 guarantee on four of Chevy’s core nameplates: the Cruze and Malibu sedans and Equinox and Traverse crossovers. In April, nearly 90 percent of orders for those vehicles from Washington-area dealers were for models on the list.

“We were never getting on people’s shopping lists because of the way our cars were equipped and priced,” says Harry Criswell, owner of Criswell Automotive, which includes a Chevy store in Gaithersburg, Md., and several other franchises, including Honda and Nissan.

“Now, we have vehicles that match up head to head with the No. 1 leaders in these segments,” says Criswell, who helped devise the program. “We’re going to market completely differently than we ever have before.”

The dealers and GM are confident that the fresh approach will aid a broader turnaround plan for the market, where Chevy’s market share has fallen in each of the last four years, to 7.1 percent in 2014, IHS Automotive data show.

Criswell says the Washington-area dealers are targeting a 10 percent market share within three years from a combination of the improved vehicle ordering and beefed-up marketing. And he thinks they can do it while cutting incentives by 25 percent, a byproduct of largely eliminating stale inventory that requires big discounts to move. Sweeney said Chevy’s goal is to expand its Washington-area market share, but he didn’t cite a figure.

The idea sprouted in spring 2014 during discussions between Washington-area dealers and top GM sales executives about how to boost Chevy’s sales in the market.

Beyond the usual gripes about marketing and advertising, a few vocal dealers noted that Chevy’s hodgepodge of build combinations was out of sync with what consumers wanted.

Making a list

Chevy officials agreed to the broad outlines of a program that would steer dealers toward ordering from a preset menu. But who would come up with the list?

Enter Andy Budd, owner of Country Chevrolet in Warrenton, Va., a town about 45 miles southwest of Washington in a bucolic area known for horse farms and wineries.

Budd had grown so frustrated with the complexities in Chevy’s build combinations over the years that he developed his own software program to optimize his vehicle orders. (He won an innovation award from the National Automobile Dealers Association in 2006 for the program, which he has sold commercially to more than 100 other Chevy dealers).

“It became apparent to me that in this market, if you make a mistake in ordering, you’ll live with it for 300 days,” Budd says.

To come up with a core list of the fastest-turning trim packages and options, GM supplied Budd with 12 months’ worth of detailed sales data on those four core models.

The data revealed the extent of the problem. The Washington-area dealers sold about 2,500 Cruzes during that period across 95 build combinations. With the help of Budd and other dealers, GM boiled down the list of preferred combinations to just five.

The numbers also showed how frequently the dealerships didn’t have the right car in stock. One store had to make dealer trades to get nearly half of the Cruzes it sold over that 12-month span. (Budd says his software keeps his dealer trades to around 5 percent of overall sales.)

“It’s hard enough to get a customer into the store,” Budd says. “Once we do, let’s have what they want. And let’s limit the choices so their decision is easier.”

Dealers share the blame for Chevy’s mix. Stores often ignore a “demand sensing” tool that GM offers to help pick the fastest-selling trim packages and options. And in recent years, GM has polled groups of dealers as far as two years ahead of a vehicle launch for input on what options and trims they think would move fastest.

Sweeney said the Washington-area effort is showing early signs of success partly because it was developed jointly between dealers and the factory.

“It’s a lot easier to do this stuff,” he said, “when everyone has had the ability to sketch the program.”

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