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GM’s Spark, a Surprise Hit, Shows Globalization

Southfield, Mich. — As a two-time Toyota buyer, Ashley Potts didn’t even think to look at a Chevrolet when she began shopping for a small car with better fuel efficiency.

“They’ve been big gas guzzlers,” Potts, 34, who works in human resources at a hotel in Boston, said last week. “I’d never given it much thought. I’d been happy with my Toyotas for 10 years.”

Then, during a chance encounter in April, she stumbled upon a Chevrolet Spark, a mini car that looks almost like a cartoon with its bulbous headlamps, exaggerated grille, a color palette with options such as Techno Pink and body length 3 feet (0.9 meter) shorter than a Toyota Corolla. It gave her a taste of the dramatic changes taking place at General Motors’ dealerships nationwide.

“It was fun to drive, and it had all of the bells and whistles that I wanted,” she said of the Spark. She immediately bought a Spark, which starts at $12,170, and can come with features usually found on bigger cars, such as Bluetooth and keyless entry.

Modern GM has never successfully sold such a tiny car in the U.S. The Spark’s success today, 26,869 U.S. deliveries in its first 12 months, exceeds GM’s initial expectations by as much as 35 percent, said one person familiar with the company’s internal planning.

GM, Ford and Chrysler have all gained share in the first five months this year, the first time that has happened in at least 18 years, as they sell some of their best cars in a generation. The Spark ranked No. 2 for quality in its segment in J.D. Power & Associates’ Initial Quality Study, an important industry benchmark.

Unlike past attempts with the larger Chevy Aveo, the Spark is being sold with good audio systems and other features not typical for low-entry-level cars, said Larry Dominique, executive vice president of Santa Monica, Calif.-based auto researcher TrueCar Inc.

“When you start making it not just a cheap box and start adding some pizazz and features to it that people want, the appeal grows,” he said. “And I think GM has done a good job with that.”

GM could add those elements because Spark is largely sold outside of the U.S., giving it the scale required to make a vehicle that wouldn’t do enough business otherwise.

The company sold 275,228 Sparks last year around the world. While the car first went on sale in the U.S. in June of last year, it arrived in South Korean showrooms in 2009. GM has sold more than 720,000 globally, according to the company.

The Spark’s design was led by designers in South Korea, where small cars are more popular, which underscores the progress GM has made in developing cars using its global resources. It’s the same team that led development of the Chevrolet Cruze and Sonic, compact cars that are still larger than the mini Spark and that have seen sales success around the world.

Alan Baum, an industry analyst with Baum & Associates, had expected an annual sales rate of 25,000 in the U.S., while 35,000 now looks more likely, he said.

“The price is obviously aggressive and resulting in good sales,” Baum said last week in an email. “In addition, the car is doing well because its competitors (which are few) have been less focused on the U.S. market.”

U.S. sales of the Spark through May this year totaled 14,484, a little more than 3,000 behind Chrysler’s Fiat 500 at 17,562 and about half as many as the larger Ford Fiesta’s 28,801. Toyota’s Scion iQ sold 1,919 during the same period.

At $14,563, the Spark had the lowest average transaction price in the segment last month, according to Edmunds. The average segment transaction price was $19,038, while the Fiat 500 had a so-called ATP of $19,739. The Ford Fiesta averaged $17,094.

While not a best-seller for a company that delivered 418,312 Chevrolet Silverado pickups in the U.S. last year, the Spark is bringing in a new kind of customer. It has the highest percentage of buyers younger than 35 among Chevy models and attracts the largest percentage of first-time new car buyers, according to the company’s internal figures.

All of that is important for rebuilding Chevrolet, Cristi Landy, marketing manager for the car, said in an interview.

“It helps people look at Chevy differently,” she said. “It forces people to say, ‘Oh geez, this is a Chevy.’ ”

GM is eager to hook young consumers and keep them as they buy more expensive vehicles as they get older. A major initiative of Chief Executive Officer Dan Akerson is improving customer retention among GM’s brands as part the company’s efforts to boost North American operating margins to 10 percent by mid-decade from an average of 7.4 percent during the past three years.

GM estimates that every percentage point of customer retention improvement will generate $700 million in additional revenue.