Consumers don't like the look of the new Chevrolet Cavalier and Pontiac Sunfire. So General Motors Corp. will scrap the designs and start over, delaying the program and possibly rebidding millions of dollars in supplier contracts.
In late May, the Detroit-based automaker told suppliers it had ``indefinitely canceled'' plans to produce the next-generation Cavalier and Sunfire, according to three supplier sources and a toolmaker involved in Delta, GM's high-volume, small-car program.
According to those suppliers, GM most likely is postponing production while it decides how to proceed. The carmaker said last week that will delay production of those vehicles until 2004 — a two-year delay from its original 2002 timetable — and shift resources to future truck programs.
Another small-car model on the Delta global platform, a new Saturn S-series car, is expected to proceed on target for 2002.
Yet, suppliers said even the 2004 date for the Cavalier and Sunfire is in doubt.
GM's drastic action follows consumer tests of vehicle mock-ups that proved disastrous, sources said.
The Cavalier and Sunfire were expected to boost GM's small-car program, an area showing diminishing returns.
GM sold more than 338,000 Cavalier and Sunfire models in the United States last year, according to Automotive News, a sister publication to Plastics News. Those figures were down more than 15 percent from 1997 results.
With a sharp new design, the carmaker had hoped to more than double those annual sales figures, industry sources said. GM has not released expected sales volumes for the Delta cars.
Several suppliers, including some plastics processors, had invested millions in product development for the Cavalier and Sunfire before GM made its surprise retreat. The carmaker awarded several large contracts for Delta, including one to make instrument panels that was estimated to be worth $450 million to $500 million annually.
Dearborn, Mich.-based United Technologies Automotive received that contract last fall before being bought this year by Lear Corp. of Southfield, Mich.
But GM's design effort — and its progress on the vehicles — ground to a halt in May. The carmaker conducted a series of consumer clinics, a standard practice on many new-vehicle programs. Consumer groups looked at vehicle mock-ups and drawings of the Cavalier and Sunfire and were asked to evaluate what they saw.
The results were consistently negative, including one brought in after the tests, according to several supplier sources.
``Consumers showed a very poor reaction and had a general dislike of the cars,'' the source said. ``GM knew right away that the [cars] needed to be more desirable from the consumer side.''
After that feedback, the automaker brought in supplier groups to brainstorm for new ideas. Lear and other companies asked their Tier 2 suppliers for help before meeting with GM last month, according to one Tier 2 plastic-part supplier to the program.
``GM went back to the drawing board and scrapped the whole interior,'' the Tier 2 supplier said. ``They wanted to radically change the design.''
The suppliers' efforts were not enough to prevent GM officials from putting on the brakes. GM spokesman Pat Morrissey said last week the decision was made in the past four to six weeks.
GM officials said they were shifting resources to future light-truck models, a more profitable segment than small cars. The carmaker is conducting a feasibility study on converting assembly work at its Oklahoma City plant to truck production, Morrissey said. That plant now assembles the Chevrolet Malibu and Oldsmobile Cutlass.
Morrissey admitted that consumer test results contributed to the vehicle delays. But he said it is not unusual for GM to make design changes after clinics.
``It would be off-base to say that clinicing was solely responsible for program delays,'' Morrissey said. ``We looked at the overall strategy for our next-generation small cars, and we decided it made sense to free up resources for trucks.''
According to sources, GM also delayed the program to deflect attention from its Lordstown, Ohio, plant before talks with the United Auto Workers began last week.
The Lordstown plant — where GM now makes Cavaliers and Sunfires — was a lead candidate for the Delta program. GM officials have said that they wanted to use the plant as a test bed for a more-efficient modular assembly process.
But UAW President Steve Yokich opposed that plan because it would cost jobs.
The poor show with consumers could have pushed GM over the edge, especially with union talks starting, said David Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan in Ann Arbor.
``When you have a product that doesn't clinic well, the time to deal with that is upfront, and not when you're ready to introduce it,'' Cole said. ``But they need to get cracking fairly soon so they can revise their small-car segment and stay competitive.''
``After the clinics, Delta totally died'' for the Cavalier and Sunfire, said one Delta program supplier.
Since May, GM has remained mum in talks with suppliers on the vehicles' future.
``We've had some communication with GM, but nothing firm as far as plans go,'' said Michael S. Smith, vice president of business development for Inalfa Roof Systems Inc. of Auburn Hills, Mich., a supplier of sunroofs for the Delta program. ``We're concerned about it. But we're awaiting further word.''
Smith was one of the few suppliers who agreed to talk on the record. GM's plan to revamp styling on the entire vehicle ``scares the hell out of suppliers,'' said another source.
Some suppliers said they were not given a 2004 time line or told when development work would restart.
A total redesign could mean that suppliers absorb more design and engineering costs without payment, or that the project will be rebid, sources said.
Several suppliers have begun taking the contracts off their books. A toolmaker associated with the vehicles said he considers the work gone.
Others wondered whether GM will pay cancellation fees for the project. According to one supplier, prototype tools already have been cut, costing upward of $1 million.
GM does not always pay those fees, instead telling suppliers that they will get favorable attention on future bids, according to several sources. But that's not guaranteed: GM has rebid other projects, not as highly publicized as Delta, to other suppliers, sources said.
One expert familiar with the project said GM has spent at least $2 million per month during much of the past year on product development for Delta. Several suppliers have spent hundreds of thousands a month in the same period, the source said.
Lear spokeswoman Karen Stewart said her company's costs would have been much higher had car production continued. By postponing the vehicles' development now, the supplier will not have to invest heavily in tooling and engineering costs for the vehicles.
The company also has a variety of interior parts on current-model Cavaliers and Sunfires, Stewart said. While those programs continue, Lear will gain business, she said.
``The continuation of the [Delta] program would certainly benefit us,'' she said. ``But we can offset some of the costs if it is delayed.''
GM is known for putting a lot of weight on consumer research, according to Craig Fitzgerald, a partner with Plante & Moran LLP, an accounting firm working with suppliers in Southfield, Mich.
``A two-year delay in the [Delta program] is extremely unusual,'' he said. ``They must have been way off-base. But GM is known for consumer-researching programs to death and elongating design and development periods because of it.''