General Motors has emerged from bankruptcy. Now it must step out of the long dark shadow of its own reputation.

For years, GM churned out sub-par vehicles that badly lagged Japanese rivals in reliability. Now, there is substantial evidence that GM is pulling abreast of Toyota (NYSE:TM - News) and Honda (NYSE:HMC - News). But nobody seems to know it. Or believe it.

"The perception gap is a very real problem," said Jack Nerad, executive market analyst for Kelley Blue Book. "Old perceptions die hard."

Bob Lutz, the 77-year-old vice chairman who recently took charge of GM's advertising, is determined to bring consumer perception in line with reality. Despite all its financial woes, GM has been moving up the quality charts for years. Ads can tell that story, Lutz believes. But for many years, he contends, GM's were weak.

"Our prior advertising was frequently risk-averse. We didn't make any claims," Lutz told IBD. He recalls a top Procter & Gamble (NYSE:PG - News) executive telling him: "I don't know what it is about your advertising, but it's meaningless."

Lutz is moving to change all that with a marketing blitz. Ad spending, which in recent years had fallen as low as 40% or 50% of average spending by rivals, will likely top rivals' spending by 20% in 2010 and 2011, Lutz says. GM will also target wealthy enclaves with promotions designed to get skeptical luxury car buyers to test drive GM's upscale, higher-margin line-up.

Hard-hitting TV ads have already begun to directly compare GM vehicles with the competition. "May the Best Car Win" has become the slogan of a company on the attack. "We are going to continue letting the product do the talking," said Lutz.

Don't expect montages of families packing their Chevy for picnics or wheeling their Buick along winding country roads. Lutz is convinced GM can and must sell on the specific virtues of its products.

"We want an ad to have stopping power. It's got to grab attention," he said. "It must carry some new information when the bulk of viewers say 'Wow, I didn't know that.'"

Bob Lutz, Myth Buster

The aim is to address what Lutz sees as outdated myths: GM quality is suspect. All GM models burn more fuel than their Japanese rivals. Cadillacs are "big boats with no dynamic excellence."

Ads will have to be convincing to reverse the decline in GM's once-dominant U.S. market share, now under 20%. But while the lemony after-taste of bygone GM models has soured many consumers, objective evidence suggests many newer models are world class.

Indeed, by many measures, GM -- and Ford (NYSE:F - News) -- have pretty much closed the decades-old quality gap with Japanese automakers.

Catching Up On Quality

J.D. Power & Associates conducts an annual vehicle dependability study that measures reported problems for autos over their first three years of ownership. Based on responses from 46,000 owners of 2006 model vehicles, Buick tied (with Jaguar) for No. 1 among 37 auto brands for the most dependable. Buick has ranked among the top 10 nameplates since 2003.

J.D. Power also tracks "initial quality," measuring the number of problems encountered in the first three months after new car purchases. Cadillac was No. 3 in the latest study and Chevrolet No. 9. Owners of these GM vehicles reported far fewer problems than the industry average.

Over the last three years, GM has outpaced the industry in quality gains, notes Steve Witten, executive director of U.S. Automotive Research at J.D. Power. While the industry as a whole has reduced vehicle problems by 13%, GM has improved by 16%. In the last year, GM has improved by 10% vs. an average auto industry gain of 8%.

And future numbers could show much stronger gains. Because of GM's desperate need to shed assets, Pontiac, Saab, Hummer and Saturn will be gone. These were GM's worst nameplates in terms of quality, notes Witten. The four remaining brands -- Cadillac, Buick, Chevy and GMC all rank higher.

But just as it took years for Japanese carmakers to convince Americans of their quality, buyers nurse memories of trouble-prone GM cars. In 2004, 40% of polled auto shoppers said they would avoid GM for short- and long-term reliability issues. By 2008, the number had swelled to 42%, reports Witten. GM's bankruptcy and rebirth as "Government Motors" probably has not helped.

Time To Hit The Beach

Nowhere is this problem more acute than on the coasts. Driving a Chevy or Buick in places like Boston or Los Angeles is almost like wearing the Scarlet Letter. Patriotic sentiment and concern for American workers have motivated few in these hip cultural bastions to buy American cars.

In the first nine months of the year, GM had an 18% market share, according to auto consultancy R.L. Polk. But it was just 9% in California and 10% in Boston.

In L.A., Boston and other coastal urban areas, women and highly educated consumers have enormous spending power. GM's ads never properly addressed these demographics, Lutz agrees. "It was a Midwestern style advertising created by Midwestern-style people," he said.

GM ads will not specifically target women. But GM will try to do a better job of appealing to both sexes. Lutz cites the Howie Long ads comparing GM and Honda fuel mileage as showing strong appeal with women. A former NFL lineman (and ex-Nissan (Other OTC:NSANF.PK - News) pitchman), Long delivers his pitch with a jaunty but light touch. Future ads will also emphasize safety and security features, which are "extremely important" to women, according to Lutz.

Caddy With Your Coffee?

GM also will target the high-end market. Cadillac has never fully recovered from its "big boat" image. But GM says once people sit behind the wheel, perceptions change. "The surest way to get people out of competitors' luxury cars is the driving experience," says Lutz.

GM has identified "fewer than 10" zip codes in which 80% of all Lexus RX vehicles are sold. To get people in those wealthy enclaves to consider a Caddy, GM will set up tents near luxury malls and invite people in for coffee, canapes and a test drive of the Cadillac SRX.

"We've got to go where these people shop, eat and work. We can't wait for them to come to us," he explained.

Is Lutz overly confident of Cadillac's ability to challenge the revered Lexus line?

A recent Motor Trend Magazine comparison of the Cadillac SRX with the Lexus RS 350, a pricey and profitable luxury crossover, suggests he's not. "The Cadillac SRX is more fun and rewarding to drive," Todd Lassa wrote in Motor Trend. The Lexus holds the edge in fit and finish, but Lassa chose Cadillac as winner of the road test showdown. "Simply put, the new Cadillac SRX drives the way it looks: sexy, fun, apart from the pack," he concluded.

Making The Sale

With auto buffs also applauding vehicles like the 2010 Buick LaCrosse and Chevy Malibu, GM may finally have the bullets to pepper the opposition. Witten applauds GM for challenging rivals with "May the Best Car Win." But he thinks GM must go even further. "They need to push it a little bit harder."

One sign that the ads have some bite comes from Kelley Blue Book's Nerad: "I know for a fact they've gotten under the skins of people at Honda."

The new GM ads must now prove that they are persuasive as well as provocative.

Changing perceptions will be hard and GM needs a fast revival. It lost $1.15 billion in Q3, even with the Cash for Clunkers program. Q4 will be worse, the company says.

Because of its bad reputation, GM often must sell its cars for less than those of its Japanese rivals. And the high-margin SUVs and large trucks that GM long relied on may never fully recover.