What do China, Thailand, India, Mexico, Eastern Europe and Venezuela have in common? They’re not America. Or, if you prefer, the United Auto Workers don't work there. Which is why General Motors is planning on producing its new Gamma Gamma Hey small car platform in these low-cost labor countries– and exporting the wee beastie to the US and other "developed" nations. In fact, it’s increasingly clear that GM is trying to outsource/globalize/synergize its way out of trouble. It seems to make sense: building standardized products in non-unionized factories will save the carmakers billions. But are they going about it the right way?
On one hand, GM seems to know what it's doing abroad. In China, GM uses its proven engineering and manufacturing skills to create the bird-eyed Buick GL-8 minivan and the recently announced Cadillac STS variant (the SLS). Both vehicles demonstrate The General’s ability to modify established products to local tastes. And there’s no question that GM’s reaping the rewards: sales of Chinese Buicks, Cadillacs, Chevrolets, Opels, Saabs and Wulings rose 35.2 percent this year, to a grand total of 665,390 units.
On the other hand, there’s the Cadillac BLS, a Swedish-built Euro-spec sedan riding on GM’s Epsilon platform, powered by a FIAT-sourced 1.9-liter diesel, wearing a US luxury car badge. Or how about the most recent Pontiac GTO, a re-badged Australian Holden Monaro built on an enlarged Opel Omega B platform (formerly used for the Cadillac Catera), sold in the Middle East as a Chevrolet Lumina SS? The failure of these cars to find a sustainable international audience illustrates the challenge of leveraging economy of scale into a viable product– when you start with economy of scale rather than a viable product.
Of course, GM (and now Ford) aspires to the Toyota model: sell the same "world" car (built on the same platform) in as many markets as possible. That’s fine if A) you build the right car and B) you've got deep enough pockets and a lean enough organization to recover from a major bomb. Do we really believe that GM can pull off a Corolla? The new Gamma platform small car was designed by Daewoo; if past history is any guide, they ain't no Toyota. By the same token, when the Toyota Echo went nowhere fast (in every sense of the phrase), the Japanese automaker re-engineered it to become the best-selling Yaris and other local variants. Does GM have the resources it would need to snatch victory from a dud Gamma-woo?
As Toyota has demonstrated countless times in dozens of countries, “world” cars require a coherent and focused sales, marketing and distribution channel. And that's only possible if the car in question is part of a coherent and focused brand. While analysts tend to think of small cars for developing nations as a commodity– if it's cheap enough, it'll sell– branding plays just as crucial a role at the bottom of the market as it does at the top. A Toyota small car is not an Opel, Daewoo or Chevrolet small car. It's a Toyota, and everyone– designers, engineers, auto workers, marketing execs, dealers, salesmen and customers– know what that means.
What IS GM's world brand these days? Oh right, it has four: Buick, Chevrolet, Cadillac and Saab. Although there are basic distinctions between these brands, things fall apart at the local level. Chevrolets are many brands and a wide variety of models to many people around the world– to the point where GM decided to create a separate "Corvette" brand in Europe. A Cadillac is a luxury car made of unobtanium in some markets, and a garden variety mid-priced mid-sized sedan in others. A Saab is a sophisticated European-style sedan in some markets, and a Chevy Trailblazer with the ignition key between the seats in others.
When it comes to international automobile production, GM’s biggest problem isn’t its cost structure; it’s brand management. No matter where they do business in the world, no matter what food items are on the menu, McDonald’s and its customers know who it is. The same can not be said for GM, which, lest we forget, doesn't even exist as a brand. The General's cluelessness on the product branding front threatens any potential production-related savings from multinational platform sharing. Not to put too fine a point on it, low unit costs only create profits if you sell what you make.
This brings us back to the primacy of products over process, and the all-conquering power of coherent brands. GM CEO Rabid Rick Wagoner may be looking around the world and lovin' it, but until and unless GM sorts out its branding issues, globalization will hasten its destruction, not its success.
It's funny that this article would come up now…For the last 3 or so months, I've been noticing more and more "Chevrolets" showing up in France. Until recently, most of the Chevys here were only the grey-market imported SUVs that won't fit in 3/4 of the streets. But giant, impractical vehicles aside, Chevy's entire EU fleet is rebadged Asian crap. Looking at Chevy's UK and FR sites, it looks like their range is basically the same. I bet that not one of these vehicles is made by unionized workers. Maybe not even by adults…ok, sorry, I'm sure that there are many Chinese adults that on their own free will work in Chevrolet's manufacturing facilities. It's just strange, I'm American so I have an image of Chevrolet and here they are importing this Asian crap and calling it a Chevrolet. Doesn't seem like it makes a lot of sense…Do they actually think that they can fool Europeans into thinking that these are "American Engineered Automotive Miracles?"
Toyota Echo went nowhere fast (in every sense of the phrase), the Japanese automaker re-engineered it to become the best-selling Yaris.
The Echo = 1st get Yaris outside the US, a best seller. And platform engineered into the ist/Scion xA + bB/Scion xB, selling well in the US. Making lemonade out of lemons, or something like that.
Brand management? channelling Ronals Zarella!
I understand the criticism. But it seems that they’re trying something, being pro-active in some way, rather than making the same car and the same mistakes. If they didn’t try this approach they would be criticized just the same for NOT following the Toyota Model.
I’m not saying the plan is going to be a huge success, but I don’t think they’re capable of a huge success. Would you rather GM just gave up and called it quits?
Again Bob you are saying what gm, ford & chrysler will just not understand and the hour is late. I know what a camry and an accord are, I can see them in my head back at least 20 years. I don’t know what a cobalt, escape, cts, nitro, etc. are. They have no past (and probably no future), they are the reinvention that all the pundits keep asking the American companies to do to “break out”. The foreign companies do not reinvent themselves by shuffling the deck as you have shown with GM global, they fine tune and improve. When they say the new VW jetta, or passat are improved, I can see the product, my daughter has the old passat. It is not now called the ‘berliner’ or the ‘teuton’, it is still something that VW has spent a lot of money, time, and effort to keep in our concsciousness. Hell, if anyone had more money to reinvent themselves it’s toyota. But the civic, camry, tundra, 4runner, etc. soldier on. They get new bodies, engines, interiors aglong the way, but they are still the descendents of the ones we see on the highway everyday. Toyota will introduce new names on the periphery of these bread and butter mainstays, but their success is not what keeps the money flowing uninterupted to their coffers. It is this relentless pounding on a theme that makes success. You can’t justparachute into what they have from 30 years of fine tuning.
I think G.M. is on the right track outside of north america.As I understand it, its GM north american operations thats bleeding red ink.
It tough in many countries to make in roads,unlike USA and Canada.many car producing countries such as Germany and Japan don’t welcome competion from the big 2.5.
Lets put a 90% North American content rule in and see how well Toyota competes with that.
I wonder if any TTAC people know how much American content is in that new Tundra built in Texas.If somebody knows post it.
At least GM is effecting change in this aspect – Ford’s the latest to the party and they’re the most hurting too.
jerry weber
As a Passat driver myself, I still get blank stares from half the people I talk to. While the example holds true in circles of the well-informed, it’s still no Camry or Accord (the gold standards, at least in top-of-mind awareness). The Passat has also had that name in Europe far longer than here, where it was the Dasher and Quantum before that. But now they’ve got the consistency and are sticking with the name.
But those manufacturers have stuck with pretty consistent names, even when the platform and sheetmetal have changed drastically (in a good way, not in the Impala way). I just don’t get why GM brought another Opel over here and called it the Saturn Aura instead of making it the new L-series…or Chevy Malibu, etc. Aren’t they just saying “please forget about our previous offerings, we’re starting fresh again”?
Similarly, the Ford Fusion should have been the new Taurus, IMHO. Better yet, the Mondeo should have been brought here instead, to underpin 2 or 3 new cars (it doesn’t get any more “world car” than “mondeo”, sheesh). I understand letting a mediocre car like the old Taurus fade away, but why squander two decades of brand awareness when you can transfer it to a competitive new vehicle? Not to veer off-topic, but this notion holds for all the American brands right now.
mikey,
Notice how a 90% North Am. rule would allow Mexican built. Are you happy about all the U.S. jobs going to Mexico? At least T. and Ho. and Hy. are building here in America and not Mexico. Your rule would only force the 2.5 to build them in Mexico instead of China. How would that be better for your union facory workers?
I think your missing the point rodster205
A lot of other countries do NOT allow fair trading practices and do NOT open their market to foreign competition so they can PROTECT native companies. I think the good old US of A should do the same and slap a nice $2500 levy on cars made by foreign companies (hows that for protectionism) … maybe GW will listen to the big 3 CEO’s today! Either open the global market for all or close the US market to the foreign companies.
Toyota has been eating their cake long enough… time to put them on a diet
I get the point, but the reality is that some countries (like Japan) will not ever allow fair trade. So you want to punish American consumers by jacking up the price of imports? Say that works and people start buying Impalas and Cobalts like crazy. How is that better? Then GM would (wrongly) deduce that they have a good product and are now on a ‘level field’ price wise. Do you think GM would improve their product or give us 8 more years of the same Impala and Cobalt with only mild updates? I bet on the latter.
Besides, do you really think that even with a completely open market INSIDE Japan the 2.5 would gain significant market share there? Surely you jest.
ash78:
I agree that Ford squandered tons of ‘history’ by letting the Taurus wither and die. However I think they had no choice – by neglecting the car for as long as they did it left a bad taste in people’s mouth. The replacement products needed a fresh start, and the name had to die, albeit if only temporarily…..
They killed the ‘Taurus’ name because it didn’t start with an F.
I stated from the beginning and I am not going to waver in my belief that the US has to close its market to foreign products (not only autos) as this increases the trade defecit. Think about this… lets say that GM, Chrysler, and Ford go belly up… who becomes the biggest … probally Toyota… oh.. wait… now they have to compete against a new car company importing from China selling brand new vehicles for $4999. with a 10 year b2b warrranty… now Toyota will have a Deathwatch here at TTAC.
Either open the Global market to fair trade or close the US market to companies that come from countries that wont open their market. ONE OR THE OTHER!
In the next couple of years you will see a major shift in GM designs with Bob Lutz heading the design teams. Rick has given him the freedom to design the cars and than the engineers have to make it work… this is backwards to what GM used to be as before the engineers would give the designers the dimensions and they would have to try to design a car around the chasis… Dont give up on GM yet they have a lot of exciting products in the pipeline that could very well turn the tables. I understand people are frustrated from past experiences and word of mouth had done a considerable amount of damage to GM’s reputation but they have turned a milestone. I really do believe that GM is in a lot better position to recover than some other domestic auto companies.
From what I’ve seen American cars already have at least a ~$2000 price advantage over their foreign-branded competition (by the time you figure in all the discounts and incentives that the domestic brands typically give) and they’re still getting their asses kicked by the imports.
So what does that tell you?
It tells me that tacking on another $2500 import tariff would have a negligible effect on sales of domestic brands. People would grudgingly pay the tariff and direct even more venom at the big 2.5. So besides being a political non-starter, all it would do is reinforce the popular image that domestic products just can’t compete with the import brands on a level field.
Actually building cars in Mexico would keep a lot of the so deviled illegal mexicans in Mexico. Freeing landscapping jobs for the UAW. ;-)
cykickspy, do you wear “clothing?”
where was said clothing manufactured?
this is the most ridiculous argument – close the borders because american car companies are getting destroyed by foreign competition. Hmmm. Yep, makes sense to me to; force the consumer (you and me) to buy inferior products or pay more because our freaking manufacturing companies can’t figure out how to make a decent product.
Not sure about Chrysler though. They’re not really American anymore.
I’ll agree with people who say that it’s not really a level playing field. The American manufacturers are stuck with legacy costs that their foreign competition doesn’t have, but does this excuse them from making god-awful cars that most people don’t want? When I look at the cars for sale in the US, there is virtually zero made by American companies (and it’s not guaranteed that their product is even made in the United States) that I like.
the whole argument is futile anyway. The US isn’t going to introduce any tariffs on imported vehicles, and besides that, those Camrys aren’t made in Japan anyway. The 2.5 has to get their heads out of their asses and make decent f–king products that Americans want to buy. And stop whining that this-or-that is unfair. It’s called a global economy. Maybe you read about it in those 1950s textbooks that they had in Econ 101.
In the Middle East, BMWs are taxis. Mercedes are mass transportation in Germany, and objects of worship in China. Lexus has barely launched in Japan. Infiniti still hasn’t. The archetype of BMW vs. Mercedes vs. Lexus may have crystallized in your mind, but it certainly hasn’t across all the world’s markets.
In China, GM is the market leader and is outpacing average sales growth nearly two fold. You’re badmouthing one of GM’s successes to stroke your fantasies about brands.
shivak
I wasn’t bad-mouthing GM’s China success. In fact, I gave credit where credit’s due, and Mr. Williams is busy writing a piece on that very subject.
I am simply saying that GM’s international branding is in bad shape, as opposed to Toyota’s (not Mercedes or BMW or, for that matter, Toyota’s sub-brands). If GM tries to copy Toyota’s production process without copying their branding, there’ll be tears before bedtime.
And I’m not sure what you mean by “brand fantasies.” Unless you consider Adriana Lima a brand…
cykickspy:
I stated from the beginning and I am not going to waver in my belief that the US has to close its market to foreign products
I’m assuming NAFTA excluded; let’s see: just to name a few, no more:
– underwear
– other clothing
– laptop computers (batteries, parts)
– desktop computers (mobo’s, esp.)
– mp3 players
– flat screen TV’s
– passenger airplanes (parts made overseas)
and
– US built cars (who do you think builds the ECU’s?)
Mr. Farago, GM’s brands are certainly in bad shape. Achieving intra-market consistency is important, but achieving inter-market consistency is simply not a realistic or relevant business objective. If Cadillac and Buick had to mean the same thing in China as in America, GM would be toast. (So would Mercedes.) GM’s success in China is proof positive that brands are not the all-important entities you think they are.
GM’s internationalization isn’t hastening anyone’s demise except UAW’s.
I am glad someone is drawing attention to the fact that a Saab 9-7x is a Chevy Trailblazer with the ignition between the seats.
A lot of other countries do NOT allow fair trading practices and do NOT open their market to foreign competition so they can PROTECT native companies. I think the good old US of A should do the same
Uggh, what you don’t understand is that the whole point of international trade is to IMPORT stuff for your own benefit. That’s why free trade ALWAYS benefits consumers. If other countries can’t embrace free trade, that’s their mistake and their problem. Since my next new car will most likely be Japanese, I’m not going to tolerate special interests in Detroit stealing another $2500 out of my pocket, and I doubt the 99.9% of Americans who are NOT autoworkers would do so either.
If you have trouble grasping this, understand that the typical American is FAR wealthier than the typical Japanese, and Japan’s insular trade policies helped cause an insane 15-year depression during and beyond the roaring 90s while resources in the US were freed up to invent the internet, and have left Japan with a fiscal deficit/debt problem a hundred times worse than anything the US has ever experienced in its worse nightmares — just as their population has begun to shrink. Think about that. You want that? I don’t.
shivak,
I don’t concur on that one. Brand is about desirability and if you are to attain that, you should create products that do appeal.
I agree with shivak here.
There are more Mercedes-Benz taxis in the world than any other brand (sorry Ford Crown Vic). In the US we see only a small percentage of the breadth of product they produce for the rest of the world. Their ‘branding’ in the US is about status, luxury, and autobahn-bred performance.
The photo accompanying your article is of the new Chinese-built Chinese-market-only Cadillac SLS. It was designed for local tastes and is VERY different than the US market STS it is based upon: stretched wheelbase for rear passenger room, four-place power rear buckets with rear controls for just about everything, headrest mounted video screens, leather stitched dash and door panels, and the petite 2.8L HF V6 as the base engine (which would never fly for a 4000+ lb car in the US). The complete interior is unique to the Chinese SLS (for now) and is exquisite in execution and materials.
In China, Cadillac and Buick are seen as truly aspirational marques. Here we say, meh.
Make hay where and when the sun shines.
This article hits the nail on the head.
Brand management is an essential. We do not have to stick to automotive brands to demonstrate this. Tide, Marlboro, Levis, Coca Cola, McDonald’s; all global (and American) brands that transcend boarders. GM has simply squandered the meaning of Cadillac, Chevy, Corvette, etc over time, and that is a shame because so much of “global” culture is so integrated with so many classic images that just about everyone around the world relates to.
There are plenty of non-American brands that have a heritage and are global, but there is no question that music, tv and films that generally originate in the US are a mainline to the rest of the world’s psyche.
To the posters writing about levying import tariffs and stuff, you couldn’t be more wrong. How would having to pay another $2,500 for an Accord or a Jetta improve American cars? it would not. Just like in the 70’s the reduced competition would result in lower value for the customer. It is clearly a mistake.
It seems to me that the US auto firms are suffering for a couple of disparate reasons:
The first, which is addressed by the article above,
is largely cultural. The white-collar components of the company, for whatever reason, do not believe in brand value. They do not understand the value of “goodwill” resulting from having a positive brand experience. They do not care about providing honest-to-goodness reliability and value for the customer and instead see cars as disposable products that are meant to be “recycled” at great consumer expense on a regular basis. They switch name tags on cars every couple of years to make older models seem more obsolete and reduce resale value. They allow some horrible dealerships to exist and sour consumers at their expense. It is pretty sad because there is not much reason for “American cars” to be so shitty…
I am sure that Mercedes, BMW and even Fiat, Citroen and many other foreign companies do not see things quite that way. After all, we will all live to make another purchase in the future.
The other problem is the cost structure that the unions impose on the auto business. We have or history of limited competition, naive marketplace, and greed to blame. There is no fixing this problem without some serious pain for everyone in the country. We are arriving at a point when we will need to seriously thing about the consequences of our privatized health care and pension systems. The airlines might be a little ahead of the auto industry on this one, but any scenario that I can think of leads me to think that there is some major pain ahead for us all.
I generally agree with this article, but as in most things, there are interesting contradictions. For instance, in Japan, the big local manufacturers, most of all Toyota, have historically sold their products in as many as three different brands! Toyota tried to imitate GM in its local market decades ago. Also, GM’s move to consolidate/rebrand its Daewoo products as Chevy’s makes more sense then not, eliminating one more brand (Daewoo, except in Korea). Clearly, the Japanese auto companies’ strategy of organic growth (one primary brand) versus buying companies around the globe made/makes sense. GM bought Opel/Vauxhaul/Holden many decades ago. And they were suckers for still buying dying brands like Saab. If GM hadn’t bought Saab, who would have? Or who would want to today?
OK folks read cykickspys comment again.The point being made is the big 2.5 can compete on a level playing field.
Let the other car producing countries open thier markets to fair competion.And let the consumer decide.
Ok thats all car producing countries including Mexico and Japan Korea and France [Ibelieve Lois Chevrolet was a Frenchman]
Mr Rashakor I am more than happy for your landscaping job
oportunity.But if your willing to pay higher wages I think you should offer it to the fella doing the job now In the union world we call that job ownership
@shivak & kaisen
This is material for a book, but briefly stated the reasons GM is doing well in China are directly related to perceived brand power.
A brand is not something one agrees upon in a board room – it is created inside the heads of actual or potential consumers through brand experiences and aspirations.
Right now, the GM brands are not doing well in the U.S. because they are lagging several product cycles behind comparable brands that answer more directly to the needs of U.S. consumers.
In China, consumers are looking at the cars on offer in a less sophisticated manner than what we have trained ourselves to through our experiences with different manufacturers’ cars and offers.
Where we’re OK with Japanese cars and German cars, the Chinese have big difficulties with Japanese cars. (There have been actual sabotage attempts against Japanese manufacturers’ plants in China and historical hostility between the two powers works against a general acceptance of Japanese makes.)
In contrast, the U.S. carries a more positive aura in the Chinese market, much as it did when the former Soviet Union opened up, and people lined up for hours to buy Big Macs at the Moscow McDonald.
General Motors carries positive connotations to Chinese consumers who are looking for an inexpensive car to purchase, and who want it to have a brand cachet that is acceptable to their peers as a sign of success.
The Japanese brands do not today convey the same cachet.
Interestingly, GM is doing better than Ford in China, and it is claimed that this is due to the ‘general’ in the name, as this martial emblem is thought to convey power. Who knows? (Cadillac is also seen to be the ultimate car in the U.S. by less sophisticated Chinese consumers …)
But saying that it’s not brand value that is carrying GM in China betrays a misunderstanding of what a brand is.
As to Mercedes’ taxi problems. This is something that they are painfully aware of, and it is the chief reason behind their redesign of the cars. Notice how the roofline has been taken down and turned into a smooth slope – and how the rear wheel wells have been brought in. All to make it less likely that a Mercedes is chosen as taxi transportation in the future.
The fact that they were, because of their roominess and reliability, worked against the “I have achieved success” cachet of the brand. Not much success to signal by driving a car that fills up ever taxi rank …
Using Toyota as an example of selling multiple brands isn’t really direct, since they have pretty well established the marketspace for each. If I drew a Venn diagram with three circles, there would be no overlap from Scion to Toyota, and just a little from Toyota to Lexus.
OTOH, a Venn of Ford in the US would be three nearly overlapping circles. I have no idea what the differences are, nor what Ford wants them to be (the more important element–positioning). All I know is Ford people apparently like trucks, country music, getting up early, and being on time. Mercury people somehow identify with a 20-something scantily-clad model who puts on some extra clothes and is supposed to represent soccer moms. Lincoln has new ads that are aimed at working dads, but this makes me thoroughly confused because it doesn’t align with who I see actually driving Lincolns (ballas, wanna-be mafiosi, etc). GM is just all over the board in the same manner.
It’s interesting to note that Lexus hasn’t had much success in Europe in the few years they’ve been over there. Europeans place far more value on brand heritage than Americans. They’re making inroads, but it’s been a wake-up call for them after 15 years of rocketing sales in the US. Americans don’t care if it’s a new brand–if they’re a good value, reliable, and competitive, they sell. We SHOULD be the easiest market to sell to, but apparently we’re not.
All this talk of tariffs is silly.
Why do you think Honda, Toyota et co set up North american assembly plants in the the first place?
90% American content rule? That would guarantee an instant car-free america. ;-)
I think the problem is that the US makers let their products go so long between improvements that when they do release a new model they feel they shouldn’t saddle the new car with that image of stagnation. Sadly, you just end up with a new name and new marketing and in 6 years, the same stagnation.
On the free trade issue: American cars were junk until Japanese beetles began washing up on our shores. Now, in terms of reliability, American cars are MUCH MUCH better than they were, say, in 1990, and they are more reliable, overall, than European cars. If the US market were protected, we’d still be driving junk. According to the latest Consumer Reports, the Fusion has around the same reliability as the Accord and the Camry.
So we owe the Japanese a debt of gratitude for pushing our native industry to build more reliable cars. It’s a damn shame this hasn’t made them more exciting.
Dear Big 2.5 Lobbyists (those in D.C. and posting comments here):
Please don’t lock non-‘Merican car companies out of my country. My commute is too far to walk and our sidewalks aren’t wide enough to accommodate the rush of Segway traffic. Why say all this? Because, I DON’T WANT TO BUY YOUR CRAPPY CARS.
I thought I made that clear the last time I cast my dollar votes on a Honda. Made in Ohio.
Signed,
John Q. Public
IMHO, GM needs to get rid of their marketing staff. STAT. These geniuses are spending hundreds, if not millions of dollars on market research to identify who their core customers are, and what they want, then trying to dupe them into buying something they don’t want. All because the “30-something single power daters that like matching shoes tell us that a good cupholder is what is important to them”.
I took part in a couple of GM market surveys, and the first thing I noticed is that the questionaires we were given had “baited” questions. It was manipulation at its most mediocre.
As someone in marketing, if I tried to pull stunts like what GM has done for so long, I’d be fired, then re-hired so that I could be fired again.
Case in point: How much money was put into the silver “GM” badges on all new GM vehicles? The reasearch, the studies, the design time, the appoval committies, the manufacture and implimentation all cost money. Why? Brand awareness? Does that make sense to anyone?
My $.02: hire 100 college kids with marketing degrees, and have them work in the dealerships for a year trying to actually move the iron off the lots. The ones that make it a year (and I’d be willing to bet the attrition would be quite high), would have more of a real world understanding of what it takes to sell a car. Maybe then you’d have some people in place that will push for better product, not pining over the “24 to 34 super-urban computer literate dateless mall shoppers with witty t-shirt market” that they are missing out on now.
Somt thoughts:
is a Honda made in Ohio more or less american than a Chevy made in Canada?
Besides that, I live in America, I can have anything my heart desires. Isn’t that what we beleive?
Hondas and Toyotas are boring, mostly. Also, vanilla is the best selling ice cream flavor, by far.
If Big 3 cars were just boring, they would sell very well.
Americans make some of the best selling and worst selling cars in the world. Its NOT about the workers. Or the union. Its about management decisions. Workers rarely get the opportunity to choose what they are going to produce today.
BTW, the new Mercury Fusion clone is cool looking. amazingly.
I agree that the reliability of domestic autos has improved dramatically over the past decade to decade-and-a-half.
There is much room for improvement still, finishes and fittings are still sub-par and largely shared between model lines. I don’t have a problem with sharing of components (interior or otherwise), but the components should be worth reusing. I imagine that there isn’t much grousing over the shared interiors of, say, a BMW 520i and an M5; the knobs and buttons were pretty damn good to begin with.
Back on reliability and quality:
I think that these figures are almost useless because they are very subject to expectations. For example If I buy a Cobalt, it is likely to be for basic transportation, some some rattling is all right (I turn the radio up). But if I paid several times the money for the refinement of an Audi A3 I would be much more likely to find annoyance at more “little things.”
GM’s got a cachet of brands that evoke some sense of nationalistic pride at a local level, but don’t translate on a global level. Think Holden in Australia, Opel in Germany, and Daewoo in Korea. All these produce models appropriate for global consumption, why not group them into some sort of global brand?
Oh wait…they already tried that….remember Geo? (bringing you the Metro, Storm and Tracker). I guess their products were so bad, GM had to bury it, but only after absorbing the profitable models into Chevrolet.
How about Saturn, GM invented that pseudo-global brand for the North American market with some measured success, why not stamp the Saturn badge on Daewoos for the Chinese market? At least it wouldn’t tarnish the true Chevys, Buicks and Cadillacs, if such a thing exists nowadays.
If they want a marque with some historial clout, they might as well start selling Oldsmobiles everywhere except North America…lol. GM’s problem is that they have too many brands that haven’t got the corporate mandate to be what they’re supposed to be.
Alas Mr. Cykickspy, a form of the tariff/quota system was actually tried in the early 1980’s (Reagan later admitted it was the worst mistake of his Presidency – you can do what you want with that). What did the quota do? Well, the Accord went from a hatchback sized vehicle to a mid-size vehicle in very short order. The quota did not cause the Japanese to open plants here, the price of labor did. It was cheaper here. Japanese pickups have long had a tariff on them, and they own the small pickup market anyway. If your goal is the French economy, shoot for all that tariff/quota/controlled market stuff. You might want to take a close look at that economy before you embrace it however.
Actually Bonkbonkbonk, I would just fire all the marketing guys period. The great investment whiz, Peter Lynch, used to recommend the “walking around” approach. If you see an interesting product, see who makes it, and buy the stock. Maybe if Ricky spent more time walking around mall parking lots in S. California rather than meet-up times with the Prez he could have a better idea of what the market wants. Sorry, fantasy moment.
No one is going to ‘lock out” foreign competition. But it would be nice to have the opportunity to sell domestic products to foreign states at the same volume.
I know I’m a little late to the party but to answer some of Mikeys content question, I drive a 2005 Tundra Double Cab. The NA content on it is 80%. The only major parts built in Japan was teh engine and transmission. With the new plant in San Antonio, they are added an engine building facility so the NA content will rise from that.
Alabama is home to factories for the Odyssey/Pilot (including engines), the Hyundai Sonata, and the Merc ML/GL/R-classes. I’ve never heard a single negative about their presence here in a traditionally “Buy American” state. OTOH, I also haven’t seen any efforts from these companies to sell their products in the region via emphasizing their contribution to the local economy. I don’t know if it has been deemed ineffective or what, but I definitely feel good in seeing the benefits these companies bring to relatively rural areas. I’m far more prone to buy one of those models than I am an American car just for the sake of its being American. I wish I could crunch the numbers, but I’m guessing that buying an American-made Honda from an American Honda dealer has more benefit to them than the infinitesimally small additional number to the bottom line of the Japanese parent.
I wonder how Honda and Toyota are viewed in the regions where they have US plants. Or even BMW in SC, for example.
Hey gcmustangly good research.1984 I couldn,t agree more.
Newjeseydevil your chevy impala is about 40% American 50% Canadian Your Ohio HONDA 30% American 70% Japanese
In Canada our market is completly open to American cars is Japan? If Japan or Germany opens thier market to American cars I might buy into thier myth.Anyone who thinks buying A Honda from Ohio is helping the USA economy think again.
“No one is going to ‘lock out” foreign competition. But it would be nice to have the opportunity to sell domestic products to foreign states at the same volume.” – 1984
What makes you think we’re locked out? We just have to make something they want. The company I work for sells stuff all over the world. We also make stuff elsewhere and sell it all over the world and bring some of it here. We make products people want.
I very much doubt that we’re “locked out” of the Carribbean but every island I traveled to a couple years ago was infested with smallish 8-passenger minivan-taxis, many of which had diesel engines. Does GM make those?
Another note on free trade. Whether the 2.5 are in fact asking for protection or not, they seem to have no problem asking for others’ protections to be removed:
Detroit also wants the International Trade Commission to end tariffs on corrosion-resistant galvanized steel. But this tariff is supported by many Democratic members of Congress..
I’m not saying I agree with the steel tarriffs either, just pointing out the [potential for] hypocrisy here.
Mikey,
I usually think highly of your opinions, but not today.
I bought my Ohio-built Honda because I thought it was the best car in its class. The idea of purchasing a car based on whether it kept a UAW worker employed in the US didn’t cross my mind. Not for cars, or for any other product I purchase.
The Japanese and German markets have been open to Americans for years. Ironically, GM and Ford made more money in Germany during WWII than they have in the last several years. And Toyota even helped GM try to sell cars in Japan, marketing Caveliers through Toyota dealerships.
Competition is good. Always. It is less than “American” to say otherwise. Government intervention to distort markets should only be used in the most critical of times only.
“Our” companies should have to raise their game in order to compete. It is not like the Germans and Japanese don’t have high labor and material costs, and they have to put their stuff on a boat to sell it to us; somehow manage to offer a better product.
Competition, just like in other aspects of life, is a good thing. It may be unpleasant at times, but it ultimately makes us better.
Unfortunately our domestic market is still sentimental about the domestic brands. Why is GM still selling push-rod engines for instance? The answer is because they can, so GM is not the only one that is at fault here.
the reason that “american” cars are not so popular elsewhere is because:
– they are way WAY to big. My Golf is a large car in Rome.
-engines are WAY too big and too thirsty. Gas is 6 bucks a gallon
-No Diesels – duhhhh – everyone likes diesels better than we do, for better or worse.
I am constantly amazed at just how small cars are in europe – and everyone seems to get along just fine anyway.
No one here wants a tiny Fiat Panda or a 500, or a a renault twingo size car. And no one but us wants huge hulking suv’s.
As long as gas here is cheap (relitively speaking), there will be no incentive for people to buy very small cars. Ford. GM and DCX will continue to put dollars into building bigger and thirstier and faster vehicles because people HERE will buy them.
I just wish to hell that we had some cool small domestic cars to choose from. I like VWs and Mini Coopers for example. I’d be happy to buy one.
No business person in their right mind would pay good franchise money to import cars from america that can’t even fit down the street. Or do we insist that they knock down buildings so two Durangos can pass each other on the same street?
Please . Americans dont even want these things any more. Why in the world do we expect that anyone else will?
I’ve been to about 20-22 foreign countries and the only one where I ever saw a significant number of American cars was Kuwait. Wide, new streets and gas at .25/gallon make them popular (plus big V-8 engines to pump the absolutely essential air conditioning.)
Driving a military HMMWV down the roads and through the towns in Hungary and Croatia was an interesting experience. We basically straddled the middle of the road and when we passed oncoming traffic, we’d duck over to the right side, only to swing out to the middle again after we passed. The roads were quite narrow, by American standards, and flanked by deep ditches (and in Croatia the ditches often were mined) so we stayed in the middle. Most anyplace else I’ve been, American vehicles were physically too big by at least a factor of 50%.
So, bottom line (to bring this back on topic), other countries aren’t going to widen their roads and demolish their towns to accomodate bigger American cars, so if American car makers want to be able to sell the same car in the US that they sell overseas, they need to make them physically smaller so they’ll fit the roads in other countries. No trade barrier is needed to keep out vehicles that are too big and too thirsty to fit the intended market.
Part of RF’s editorial was that GM is develping platforms that are more ‘world-friendly’. Certainly Opel, GMDAT (Daewoo), and Vauxhaul already produce those platforms. GM benefitted from their relationship with Fiat as well.
Check out the new Opel Corsa for a glimpse at GM’s ability to produce small cars that people want. Unfortunately for the General, they haven’t yet figured out that there are some Americans that want them too.
Infrastructure, as Martin Albright mentioned, is only a piece of it–though a big one!
Another is taxation based on displacement/weight/carbon emissions. When is the last time you saw Americans leading the way with performance-per-liter? You don’t, because we don’t need to engineer them like that. It’s like software programming–when the computers have huge resources, the need for software efficiency goes way down (eg: WinXP)
Although I was surprised to see so many Chrysler T&C vans and Grand Cherokees in England this past summer. However, I believe both are predominantly outfitted with diesels over there.
While you, Robert Farago, makes a lot of valid points in the article you seem to look at the state of GMs brands as now and ignore where GM looks to be going with them.
GM does not have a global brand like Toyota so they had to create one. They tried with Opel in the 90s but that did not work as Opel in its core market had to move up market.
So next they went with Chevrolet. Now they could taken Chevrolets core product, american made huge puckup trucks, to the four corners of the globe but I do not think that would have worked.
The Chevy line up may not be as globally consistent as Toyota’s but they are moving that way. The Aveo is the first step.
I bet GM wished they had Toyotas global brand but they do not so they have to build it. This takes time. Will Gm f%%% it up? Based on history there is a good chance they will but I think they at least trying.
Also the Gamma platform will be built in Germany by union labour.
When is the last time you saw Americans leading the way with performance-per-liter?
Saturn Sky Redline
2.0L@260 HP
Also the Gamma platform will be built in Germany by union labour.
Gamma will be built (or assembled from kits) in GM factories in Korea, China, Thailand, India, Germany, Mexico, Columbia, Venezuela, Vietnam, and Poland.
GM plans worldwide capacity for up to 1.4 million units per year.
1984
That’s the Opel GT engine, but good example–if GM had continued to operate as the US=vacuum, I don’t know that we’d ever see something like that over here. That’s par for the course on the other side of the pond, for small performance cars anyway.
I am a huge fan of GM’s 2.0L direct-inject Ecotec turbo. It will be in several other performance oriented cars sold HERE in the US in the next couple years. 130 horsepower per liter is fantastic output, especially one warranted for 100,000 miles.
RF,
Whenever you write about GM, the sky is falling. Using FIVE brands in China, GM Sales were up over 35%, and you turn this into a global brand problem for GM. Why so much venom? Did Willie Durant run over your great-grandmothers dog or something?
When the Deathwatch reaches 100, I fully expect there to be to be a balloon drop!
Symbolically, the drop will be turkeys over WKRP in Cincinatti.
Uggh, what you don’t understand is that the whole point of international trade is to IMPORT stuff for your own benefit. That’s why free trade ALWAYS benefits consumers. If other countries can’t embrace free trade, that’s their mistake and their problem.
Agreed! Now Americans complain that they buy too much from China. But do you know that there is a similar debate in China? Some scholars said it’s not wise to sell everything to the US for that paper USD.
China has about $1 trillion reserve, mostly in USD. And that amount quickly depreciated 30% over the last 3 years due to the faltering USD. The Chinese are rethinking their stategy. They probably will accept a combination of USD, EURO and gold in the future, to mitigate the risk. Bad news for American consumers; their dollars will be worth less.
With all due respect, I sometimes wonder how many of you read the article before launching into a defense (or attack) of GM. This rant is about branding. It's not about GM's engineering prowess stateside or abroad, or its ability to transfer that technology and expertise between countries. It's not about the wisdom of multi-national platform sharing, or trying to sell gas-hungry SUV's to Europeans, or trying to sell miserly econoboxes to Americans. This editorial is about GM's lack of brand consistency, and how that negatively impacts their international efforts. To that end, you might want to check this out from Jerry Flint: http://www.forbes.com/2006/11/12/cadillac-mercedes-bmw-oped-cz_jf_1114flint.html?partner=autos_newsletter
There’s a very strong argument for having inconsistent branding around the globe. Using the fast food analogy for example, you are right in that McDonald’s has the exact same brand everywhere around the world. In China, McDonald’s outlets have the same look, menu, and even tagline “I’m Lovin’ it” (translated into Chinese). The food tastes the same. Guess what, McDonald’s is far less successful than KFC or Pizza Hut in China, who have more upscale images than their stateside counterparts and menus modified to better suit local tastes.
In the GM World, if the Chinese perceive Buick to be an aspirational prestige brand, so much the better. Who in their right mind would dumb-down Buick in China to match its US image? The sad truth is that most GM brands enjoy a far better image abroad than they do at home (perhaps with the exception of Cadillac), so it’s better to maintain those images abroad and hope that as the world shrinks some of that shine will rub off back to the US.
Speaking of GM brand-ing, whatever happened to the plan to put a big block “GM” badge on all of their vehicles?
On the two subjects:
#1 UAW:
I’ve said it before and I’ll say it again: The unions aren’t as bad as GM and the others want us to think. Costs for the human factor in producing a car are rather small. They are only a problem if you have way too many employees or if your productivity is bad (or in most cases both). Japan also has very high labor costs, but it also has a high productivity.
#2 Branding:
Robert, you mention Buick, Chevrolet, Cadillac and Saab as GM’s world brands. I’m afraid they aren’t even that. According to GM’s own web site, Buicks are only sold in Canada, the US, Israel, China and Taiwan. While Cadillac might sell vehicles world wide, I can say that at least in Europe they’re virtually nonexistant and in any case something very exotic. Chevrolet is a similar matter although not quite as bad.
I think the other problem of those “world brands” is that they sell quite different cars in different coutnries under the same badge. Chevrolet for example are Daewoos in Europe and Opels in South America. Now Cadillac started selling Saabs in Europe and Saturn is also selling Opels in America…
I think that’s not necessarily bad, it only starts to hurt as soon as people don’t know what they’re actually buying. Before Chevrolet re-entered the European market, it stood for big American cars, then all of a sudden, cars that used to be Daewoos started to wear the Bow Tie and people thought WTF??? Most GM customers are feel a sympathy for a specific brand, not for GM. Most people [outside the US] probably don’t even know which brands belong to GM and would feel alienated to find out that their beloved Opel brand doesn’t only belong to GM but also sells Isuzu cars under the lightning badge.
GM should either go with the regional approach, or just go forward and tell the world “We’re GM and we’re GREAT!” But this wiggeling in between doesn’t help anyone.
Over the years Toyota has evolved its slogan to “Moving Forward”. Not only is it witty, thus appealing to intelligent buyers, it hints to its leadership in safety, design, efficiency, and hybrid technology. Even though the large majority of Toyota vehicles do not utilize hybrid drives or sophisticated technology, Toyota’s halo vehicles do, and Toyota customers vicariously share the confidence of owning a car from a brand leader.
GM could learn a lesson from Toyota in global branding. As a general approach GM’s branding strategy is confusing, complicated, and ineffective.
Thanks R.F., this was another insightful post.
The facts (and everyone knows them)… GM,FORD,and DAIMLER-CHRYSLER will bounce back profit wise because of lower overhead. It’s the only way. Yes this means huge layoffs, plants shutting down and a burdon to everyone. The automotive is the life cycle of Ontario, biggest employer in the Province. The industry built over 1 million vehicles last year from the Chrysler 300 to the Toyota Matrix. So to get back at the facts, to make money selling cars, as the imports have shown us, you need to produce multiple vehicles in one plant. At the Alliston Honda Plant they build 6 vehicles under one roof; Civic, Ridgeline, Pilot, MDX, C-RV, and Odyssey. As you can see it’s a little more complex then say making a Ford look like a Mercury. Except for the Civic all the others are built in limited amounts for North America, thats the key for keeping a vehicle fresh. This is the future, for the time being everyone should hang tight until the retooling and flexible plants are built and the old ones are gone for good. Even if North American means built in Canada.
Tom,
You have made some good points. After all, what is a brand? It is more than a label.
A brand represents a kind of promise to the consumer that certain values consistent with that brand are maintained. Certain brands stand for absolute quality or novelty or perhaps a certain kind of convenience. A consumer expects his purchase of whatever good to be consistent with that particular brand’s promise.
I think that GM’s shuffling of different brands in very short-sighted. Maintaining a diverse portfolio with discrete qualities would allow GM to respond to changing market conditions in each separate market by directly importing whatever model addresses the market’s emerging needs.
Lack of cachet and novelty in the US market, seeking a responce to the Mustang GT? Why not bring a couple of Holden models over (as Holdens)?
China getting into SUVs? bring over the whole GMC portfolio. Brand dilution is bad, brand focus is good.
I think that Ford has not fallen into the same trap and deserves a commendation for that (no Mustang-derived Astons or Land Rover hatchbacks).
Mr. Farago,
GM’s lack of brand consistency might be messy, but it isn’t necessarily illogical. If GM rebadges Euro Opels as US Saturns or sells a Chevy here and a different car as a Chevy over there, it doesn’t necessarily “negatively impact (GM’s) international efforts”.
The world is getting smaller, but I (and most Americans) still don’t converse daily with Germans or Chinese so branding efforts can go on independently in different countries without much problem.
Stein X Leikanger: Shhhhhhhhhhhhh…. You’re letting one of the cats out of the bag. The more people that think that GM is absolutely doomed and that they have absolutely nothing going for them, the more we can cash in by buying beleagured GM stock.
Just a thought: 1.4 million Gammas/year- maybe good, maybe bad. But how many other companies can even attempt such a vast project? Only one (Hint: starts with “T” and ends in “A”.)
Despite a market cap. 6x that of GM, Honda couldn’t even dream of attempting something like this.
ThriftyTechie:
The internet age is upon us. Any informed consumer can cross-compare between markets.
That new Saturn I’m thinking of getting is a four year-old Opel design? It doesn’t seem so new to me now…
Not to harp on GM too much. I can see for myself what the future of the Golf is if I go to the German or global VW site, I can do the same in regard to the Civic. In fact I did recently. A friend of mine was quite excite about the US model… until she saw the Fifth Gear review of the next revision “Ummm… the next one looks even neater, I think I’ll wait.”
This is going to be something that all of the companies are going to have to come to grips with; but GM is still treating all… ALL! of it’s customers like morons by constantly repackaging the same goods.
Don’t get me wrong, I want to be a fan of GM (and the other 1.5) but at the moment “my hometown teams” are sucking it pretty badly, and I am not going to give them my patronage until they give me something worth spending my money on. I am sure that I am not alone in this sentiment.
From what I’ve seen American cars already have at least a ~$2000 price advantage over their foreign-branded competition (by the time you figure in all the discounts and incentives that the domestic brands typically give) and they’re still getting their asses kicked by the imports. – Martin Albright
You are confusing price and cost. Foreign brands get more money for their cars AND have a cost advantage in NA because of current differences in legacy costs.
In China, consumers are looking at the cars on offer in a less sophisticated manner than what we have trained ourselves to through our experiences with different manufacturers’ cars and offers.
Where we’re OK with Japanese cars and German cars, the Chinese have big difficulties with Japanese cars. – Stein X
No, Chinese consumers are quite sophisticated and demanding. Further, when foreign companies negotiate their way into China, they have to offer up their most current products. When GM entered the market with the Buick Regal, they were still building the old A-body Century, which would have been easier to transfer over there, but didn’t because of their agreements with the Chinese gvt. The products from foreign makers are state of the art.
The Chinese government did/is making it difficult for the Japanese makers to enter the market. Somehow, I’m not shedding any tears over this….
On the free trade issue: American cars were junk until Japanese beetles began washing up on our shores. – David Holzman
David, please go re-read that history book….
Mr. Farago:
I’m not as far at odds with you in this DW as others. Fair criticism about global brand management. GM is still figuring out how to do this. A couple comments:
– to be fair, the main problems right now are in NA and Europe. Far East and South America are going great guns, but don’t count for enough volume to overcome weaknesses in Europe and NA (although China is coming fast) I think you kinda say that without saying it.
– Opel was one of the strongest brands in Europe in the mid-90’s, just before the first wave of “global” at GM took ’em down a few pegs. Find some mid 40’s German guy and ask him what he thought about the Calibra at time. Most will get all weepy and wobbly…it was one of the most beautiful shapes on the road at the time, and had a turbo four that was good for kills on many BMW’s and Porsche’s back in the day. They are fighting their way back right now, and don’t count them out, they are a revered brand, especially in Germany.
– Echo was out quite a while before Toyota put it out of it’s misery. And Yaris isn’t exactly being hailed as the worlds greatest B-segment car (Fit is, right Jonny?) and isn’t bitch slapping Aveo yet. Several nasty reviews of Yaris out there….
– I agree with you on one point, GM can’t afford too many (any?)more pop ups or strike outs. Toyota doesn’t get many products right the first time (think about Previa, Echo, T-100, Gen 1 and 2 Tundra, hell, think about the Toyopet) but they now have the resources to fix what they screw up. Big 2.5 don’t have those resources anymore.
Lack of cachet and novelty in the US market, seeking a responce to the Mustang GT? Why not bring a couple of Holden models over (as Holdens)?
We did. It was called the Pontiac GTO.
Lack of advertising + relatively bland styling = low sales.
Low sales = DEATH.
If GM did that again, it’ll have to be a better effort.
@Tungsten
I write: In China, consumers are looking at the cars on offer in a less sophisticated manner than what we have trained ourselves to through our experiences with different manufacturers’ cars and offers.
Where we’re OK with Japanese cars and German cars, the Chinese have big difficulties with Japanese cars.
You write:
No, Chinese consumers are quite sophisticated and demanding. Further, when foreign companies negotiate their way into China, they have to offer up their most current products.
You confuse technical sophistication with consumer ditto. My entry was about the latter. Yes, the Chinese govt is insistent that the foreign manuacturers set up state-of-the-art facilities (with very amusing results, as they build exact copies of the plants elsewhere, to build “rebadged” vehicles).
But please don’t tell me that the Chinese consumer is as sophisticated and well-informed about cars as are Westerners who have been exposed to information about cars for decades, through print, PR and advertising — as well as direct exposure.
The entry was about brand sophistication. There are many very demanding Chinese customers, in the premium categories. (Viz. the Cadillac SLS).
And the Chinese are masters at applying themselves to whatever they want insight in — but the “average” consumer has a way to go — and is willing to think that Buick and Cadillac are trueblood exemplars of automotive excellence.
No matter – if GM can use China to put needed funds into its war chest then so much the better. They can use that money to improve their offerings elsewhere.
Capt T said: You are confusing price and cost. Foreign brands get more money for their cars AND have a cost advantage in NA because of current differences in legacy costs.
Apples and oranges. I wasn’t addressing cost issues, I was addressing sales and purely from the consumer point of view.
As a consumer, I don’t give a rat’s ass whether a company’s legacy costs are $2000 per car or $0, all I care about is what my $20k will buy. My point is that consumers are actually willing to pay $2000 more for a Honda or Toyota that, on paper, offers them no more than a Chevy or Ford (IOW, it has essentially the same equipment, no additional “frills” over the domestic brand.) I was addressing the rather ludicrous notion that if the government slapped a $2500 tariff on import-badged vehicles, then somehow American buyers would start preferring American makes to foreign brands.
As I said above, if American car buyers are already willing to pay $2000 more for a vehicle with an H or a T on the hood, then that just goes to show you how far they’ve sunk on the credibility scale.
I remember when GM launched the first STS in Frankfurt Germany (1995?). It was the first time Cadillac launched a new car outside the U.S. first. It was an attempt to “prove” to the world that they finally produced a world class car. GM did manage to sell a few thousand of them in Europe but the thing was poorly put together and had the driving dynamics of a umm 1990s Cadillac. How did GM live with the embarrassment? MBAs have no shame.
Topgear (U.K.) wrote a piece awhile back on the Cadillac SRX and had a headline that read “An American car that is not rubbish.” Now that is a great honor!. I dont know how well the SRX is selling in Europe.
I think GM should have 3 global brands. Chevrolet, Cadillac, and Hummer with about a dozen Chevrolet models and 1/2 dozen Cadillac/Hummer models.
Does anyone think that that is where GM is ultimately heading? Besides Chapter 11 that is.
(Captain Tungsten: The Opel Calibra was indeed a great car!…Sob…Sob… It is what the Chevy Cobalt should have been.)
Hi guys. You may be interested by how far and wide the global empire of GM stretches…Hummer H3s to be produced in South Africa!
Hummer SA starts rolling
10 October 2006
General Motors began the first production outside the United States of the Hummer H3 sports utility vehicle at a plant in Port Elizabeth, South Africa on Tuesday.
GM said it expected eventually to produce more than 10 000 units of the H3, the newest and smallest model in the Hummer range, for export to Europe, the Middle East and Asia under a US$3-billion contract awarded to its South African subsidiary in April 2005.
… And don’t forget an impending H2 plant in Kaliningrad, Russia.
And the Chinese are masters at applying themselves to whatever they want insight in — but the “average” consumer has a way to go — and is willing to think that Buick and Cadillac are trueblood exemplars of automotive excellence. – Stein X Leikanger
Good point, i’m sure the customers in Beijing and Shanghai are more sophisticated than the ones living in the shadow of the Great Wall. However, they are the ones buying most of the cars, so should be the ones you are tooling up for.
And, before you take the Chinese acceptance of Buick and (to a lesser extent) Cadillac as evidence of their lack of sophistication, consider for a moment that in many markets in Asia, where GM brands are being introduced without prejudice, they have market leading acceptance. China is only one. In India, the Chevy Optra (engineered by GMDAT in S. Korea) has been ranked as “best build quality” and “best ride quality” by Overdrive Magazine, one of India’s leading buff books. Toyota Corolla ranked 8th and 9th, Honda Accord ranked 9th and 5th, respectively.
Don’t underestimate the power of perception, the Big 2.5’s poor reputation for quality, earned in the 70’s and 80’s, is unduly coloring perception of their products today.
Oh, and one more clarification. The current “new Gamma” car is the Opel Corsa, it recently launched in Zaragosa, Spain, and was engineered by GM Europe. The NEXT Gamma, will be the platform that consolidates the Corsa and the Aveo, and will launch in 2009, according to Automotive News.
That will be a neat trick, given that today’s Corsa is considerably better equipped than any Aveo on the market. European small cars (from any manufacturer) have to be better than any others on the planet, just to get customers to consider them. And, car companies get more $$ for a car in Europe than for the equivalent vehicle in the US. I have an ex-pat German friend who is returning home later this year. First thing he did after finding out he was leaving was to go buy a Mini. Way cheaper to buy it here and ship it back to Germany, than to buy it there.
That new Saturn I’m thinking of getting is a four year-old Opel design? It doesn’t seem so new to me now…
There is no current Saturn that is a four year old Opel design. It is a common misconception that the ‘new’ Aura is just a re-badged Opel Vectra. It is not.
It is, however, on the same Epsilon platform that underpins everything from the Saab 9-3 to the Pontiac G6.
I said: From what I’ve seen American cars already have at least a ~$2000 price advantage over their foreign-branded competition (by the time you figure in all the discounts and incentives that the domestic brands typically give) and they’re still getting their asses kicked by the imports.
Capt. Tungsten replied: You are confusing price and cost. Foreign brands get more money for their cars AND have a cost advantage in NA because of current differences in legacy costs.
No, I’m not. I’m looking at this solely from a consumer’s point of view. As a consumer I neither know nor care about “legacy costs.” What I care about is what my $22k will buy, period. If it helps the domestics, great. If it doesn’t help the domestics, that’s great too because I just don’t really care.
My point was that from a consumer’s standpoint, import-badged cars offer a better perceived value and therefore I’m willing to pay more for essentially the same product. Therefore, artificially raising the prices via import tariffs (though how you’d put import tariffs on vehicles built in the USA seems questionable to me) will not make me, the consumer, switch to American vehicles, because my perception is that I’m still not getting good value for my money.
In fact, since the root of the problem here is the perception that US cars are worse, an import tariff not only wouldn’t cure that, it would actually exacerbate it because it would demonstrate conclusively that the domestics can’t, and won’t, compete head-to-head with the imports, they’ll rely on using political power to rig the game in their favor. And the fact that this sort of thing may go on in Japan or China or East Bongobongoland doesn’t matter a damn bit to me, because I live here.
@Martin – you cut right to the bone of what matters. Perception, and whether it’s right to turn the U.S. into a walled-in Soviet style command economy to protect manufacturer inefficiency.
Soon you’ll all be driving Trabants. :-)
I love Trabants.
I once saw one towing a BMW 7-series up A9 in Germany back when the East Germans were ummm liberated. They were practicing “free-market Communism” and somehow prefered the 7-seriies over the Trabant….
This is to the guys talking about tariffs on imported cars:
Do you think there are no tariffs now? We impose tariffs on imports already. I wasn’t doing very well with my google-fu today, but here’s what I could find on tariffs:
Cars – 2.5%
Trucks – 25%
Motorcycles – 2.4%
So on a $20,000 imported car, there’s about $500 in taxes added. So it’s not a big deal, but still, I’d rather not pay an extra $500 in taxes, I’m not getting anything for that money.
The big tax is on the trucks! Why do you think the Tacoma and Tundra are manufactured here. Also, that means that $35,000 4runner or $30,000 FJ cruiser are really only $28,000 and $24,000 before import taxes, respectively.
I’m not sure what the 4runner competes with from the big 2.5 (because I’ve never even considered cross shopping), but my guess would be the Tahoe and Explorer as the 4runner is built off of the small Tacoma platform. I know the Tahoe is a full size and the Explorer is/was built off of the small ranger frame, but I don’t think it would be fair to compare a 4runner to a Trailblazer (even one with the ignition between the seats). But with that big import tariff, that means that a $35,000 4runner nets Toyota only $28,000 in revenue compared to a $35,000 Tahoe which nets GM $35,000 in revenue, likewise for Ford (although, I think the Explorer is cheaper). That should put into perspective just how efficient Toyota’s manufacturing is, that they can take an effective $7,000 loss and still turn a profit. Do you think GM could sell the Tahoe for $7,000 less?
Perhaps like other once great American names GM will eventually only exist, at least manufacturing wise, outside of the USA. I can see a day where if you want to buy a Made in the USA car or truck it will have an Asian nameplate on it. Now if you want a car or truck made in Canada, Mexico, Brazila, China, Korea or Russia why then Chevy might be just the name you are looking for.
I imagine that the cars will go first with the trucks to follow. We already see this happening at GM and Ford. Ford’s one hot selling car is a Mexico product. GM’s small cars are increasing Korean. GM runs a big pickup truck factory in Mexico as well. Chevy Impalas all come from Canada.
GM’s grand plan for dealing with the UAW might be as simple as to deal them out of the game.
Do you think GM could sell the Tahoe for $7,000 less?
Yes, and they do. It was stated (or at least rumored) that GM nets $10-15K each before GM-paid incentives.
The above blog says it best. If competition ever forces gm, ford, and chrysler to give back a substantial portion of thoses huge profits on trucks, that would be the ball game for the domestics. It is that truck profit that is the only profit they have. They spread that money into the car divisions that have not made money for a long time. Take that away and the whole program dies, cheap gas (less than $3.00) a gallon is the glue that holds the truck thing together. In Europe a pickup truck hardly exists and suv’s are rare, it’s the fuel costs stupid.
What is a truck that is subject to the 25% import tariff?
Truck – a 4-wheel vehicle which is designed for off-road operation (has 4-wheel drive or is more than 6,000 lbs. GVWR and has physical features consistent with those of a truck); or which is designed to perform at least one of the following functions: (1) transport more than 10 people; (2) provide temporary living quarters; (3) transport property in an open bed; (4) permit greater cargo-carrying capacity than passenger-carrying volume; or (5) can be converted to an open bed vehicle by removal of rear seats to form a flat continuous floor with the use of simple tools.
Many car based SUVs and “cute utes” are NOT classified as trucks by NHTSA, although they may be classified as trucks by the EPA for CAFE purposes.
Also;
For passenger cars and trucks, a vehicle, irrespective of who makes it, is considered as part of the “domestic fleet” if 75% or more of the cost of the content is either U.S. or Canadian in origin. If not, it is considered an import.
“Cost of content” also includes such things as marketing and promotion associated with the vehicle in question along with transportation costs.
Quote:
# mikey:
November 14th, 2006 at 10:52 am
Lets put a 90% North American content rule in and see how well Toyota competes with that.
I wonder if any TTAC people know how much American content is in that new Tundra built in Texas.If somebody knows post it.
A funny thing happened on the way to heaven: At the present, the two vehicles that have the highest NA content wear a Japanese brand: The Toyota Camry and Honda Ridgeline…