GM's Revamped Malibu a Ray of Hope

Zacks

General Motors Company (GM) revamped its Chevrolet Malibu with a better engine and design and showcased it at Detroit. The automaker is keen to  get a better hold in the mid-sized sedan market and its 2014 Malibu version is pitted against Toyota Motor Corporation’s (TM) Camry, Honda Motor Co.’s (HMC) Accord and Ford Motor Co.’s (F) Fusion.

Keeping customers’ demands in mind, Malibu features all-new 2.5-liter, 196-horsepower, four-cylinder engine in the base model that boosts gas mileage, 1.25 inches of extra back-seat legroom, a restyled front end, an updated interior and suspension changes. The engine provides the same horsepower as the current one, but it is equipped with new valve system that ensures fuel efficiency.

In addition, a new technology in the car shuts off the engine at stop lights and restarts with the release of brake. The city-highway mileage is upgraded to 27 mpg. However, Nissan Altima with 31 mpg and Accord with 30 mpg will still provide tough competition on that note.

The increasing competition is putting pressure on the automaker to redesign its vehicles if they don’t match with the consumers’ expectations. General Motors revamped Malibu just one year after it hit the U.S. showrooms. The sales of Malibu were 12% down in April, compared with Accord and Fusion, both recorded a 25% increase in April sales.

In order to attract buyers, General Motors also offered discount on Malibu. It is expected that this modification will help General Motors to avoid the price discount.

GM reported a 28.0% fall in earnings to 67 cents per share in the first quarter of the year from 93 cents in the same quarter of 2012 (all excluding special items) due to lower profits generated from the company’s all geographic operations except Europe. Despite this, the automaker’s earnings exceeded the Zacks Consensus Estimate by 11 cents per share.

Revenues in the quarter slid 2.4% to $36.9 billion, despite a 3.6% rise in retail unit sales to 2.4 million vehicles globally. Nevertheless, revenues were higher than the Zacks Consensus Estimate of $36.4 billion.

General Motors is gearing up for more than 40 major vehicle launches in 2013 across the globe in order to drive sales and revenues. In addition, the company expects its European results will improve further based on its cost reduction measures. Currently, shares of GM retain a Zacks Rank #3 (Hold).
 

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