General Motors is going 'borderline luxury'

July 29, 2013: 12:58 PM ET

And that's why its new Chevy Impala is winning rave reviews.

By Doron Levin

Impala

Impala

FORTUNE -- In what looks like another "buy" signal for General Motors stock -- as well as its passenger cars -- the No. 1 automaker in the U.S. has won effusive endorsement from Consumer Reports, often a harsh critic of the Detroit-built vehicles.

GM's (GM) Chevrolet Impala last week topped Consumer Reports' ratings of all sedans, foreign and domestic, the first sedan built by a U.S. automaker in at least 20 years to do so. European and Japanese models, such as the Honda (HMC) Accord, have dominated first place -- helping their companies to gain share of the market and shrink those of GM, Ford Motor Co. (F), and Chrysler Group LLC.

The Impala was first shown in the spring to generally strong reviews. But many at GM were holding their breath for the Consumer Reports rating. The magazine is extremely influential in the purchasing decisions of U.S. shoppers; indeed, Detroit-based automakers for years have been frustrated by the publication's strong preference for models like the BMW 3 Series and Toyota (TM) Camry.

"[The] Impala is the latest complete overhaul that demonstrates GM is serious about producing competitive products in every segment," said Alec Gutierrez, senior analyst at Kelley Blue Book. "With the 2014 redesign, GM has been able to shed the Impala's reputation as forgettable and reestablish it as a borderline luxury full-size sedan."

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He said the new Impala has enjoyed a healthy increase in unit sales, which isn't surprising. Many new models initially sell well. The best news for GM is that retail transaction prices on the new Impala are averaging $4,000 higher than on the version it replaces.

The Impala isn't the first Detroit-built model to be endorsed by Consumer Reports, though it may be the most significant. For GM, it's a welcome endorsement following a brutal bankruptcy in 2009 and a four-year retrenchment. Investors should be particularly heartened to hear good news about GM's newest full-size car model, since a disproportionate profit burden rests uncomfortably on the Chevrolet Silverado full-size pickup truck and variants based on it, like the Suburban.

"The Impala's performance is one more indicator of an emerging domestic renaissance," said Jake Fisher, director of Consumer Reports automotive testing. "We've seen a number of redesigned American models -- including the Chrysler 300, Ford Escape and Fusion, and Jeep Grand Cherokee – deliver world-class performance in our tests."

Best of all, Consumer Reports said Impala, which starts at about $27,000, holds its own in comparison to luxury cars costing $20,000 more, including Audi A6, Lexus LS460L, Acura RLX, and Jaguar XF. This opinion may sound near-delusional to anyone who recalls the string of Impalas that have been memorable mostly as darlings of the daily-rental fleets.

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Oddly, the new Impala won't qualify for Consumer Reports' "recommended" status until enough owners of the car report positively on its reliability and durability.

The investment community is taking note of GM's successes. The automaker has been posting solid profits. Its stock is up almost 28%, this year to date, in a stock market that's up about 18%. Ford stock is up almost 30%.

Karl Brauer of Kelley Blue Book pointed out that Chevrolet's Cruze compact, Sonic subcompact and Silverado full-size all represent improvement for the brand, though "Impala's redesign is probably the best example yet of GM transforming previously lackluster nameplates into industry-leading automobiles."

The one weak line in Chevrolet's lineup remains the midsize Malibu, which GM recently revised. But overall GM is showing that it understands the criticisms of its vehicles -- and can mount an effective response.

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