CNN Money quotes GM Product Planner Extraordinaire Bob Lutz: "The reason we made no money on small cars is because hello! nobody wanted them. At $1.75 and $2.25 (per gallon), everybody was happy with full-size utilities with V-8 engines. Now that's shifting, so the profitability is going to go down on trucks and the profitability on cars is going up." Um. No. The reason you made no money on small cars is because hello! you didn't build small cars anyone outside of fleet buyers would even think about buying. Toyota didn't have any problem making money selling small cars. Honda didn't have any trouble making money selling small cars. If you had been as serious about building small cars as you've been about building trucks, if instead of adopting a "throw it against the wall and see what sticks" marketing plan, if you hadn't all but forgotten Saturn existed until last year and if you hadn't parts-bin engineered whatever you could throw together for the rental companies, you'd be well ahead of the curve now. But now you're playing catch-up while the competition forges ahead. Maybe you need to think about something the Marines should have taught you in flight school: to hit a moving target, you have to aim ahead of it.
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TTAC may have to award a lifetime “Lutz” for this statement.
The reason you made no money on small cars is because hello! you didn’t build small cars anyone outside of fleet buyers would even think about buying. Toyota didn’t have any problem making money selling small cars. Honda didn’t have any trouble making money selling small cars. If you had been as serious about building small cars as you’ve been about building trucks, if instead of adopting a “throw it against the wall and see what sticks” marketing plan, if you hadn’t all but forgotten Saturn existed until last year and if you hadn’t parts-bin engineered whatever you could throw together for the rental companies, you’d we well ahead of the curve now.
Kudos for an outstanding rant, Mr. Williams. That summarizes the industry’s problem about as clearly and distinctly as can be. How anyone could possibly deny the truth of this, I don’t know, but I’m sure that some will try.
Passed a Metro XFi yesterday. Years ago an executive who was being grilled re: GM’s constant battle against CAFE increases. His response was “We sell a car that gets 50 MPG. (the XFi) We only sold 5,000 of them last year”
Two points: 1) They put a tin can out there in the days of $1.50 gas and wonder why no one buys and 2) I bet they wish they still had the Metro XFi.
The donut tires that thing are smaller/skinnier than the ones on my Festiva.
Absolutely beautiful. Lutz and Wagoner need to be given a reality show…hosted by Baghdad Bob.
They really can’t believe their own statements, right? I mean it’s gotta be schtick…
Just one more question. How much money did Honda and Toyota make on “small cars” in the 1990s? Are there any figures? It would interesting to see profit margins and volume figures from the era of cheap gas — GM/Ford versus the Japanese. One thing seems certain as a general matter, GM/Ford overall totally blew the Japanese away in NA in sales volume and profits in the 1990s.
The thing I never really understood about the SUV boom was that so many people still held onto the “bigger is better” mentality (which is probably just part of the old post-war US boom mentality). I’ve always valued smaller vehicles for handling and maneuverability, especially in parking lots. Even when gas was $1.25.
detroit1701 Just one more question. How much money did Honda and Toyota make on “small cars” in the 1990s? Are there any figures? It would interesting to see profit margins and volume figures from the era of cheap gas — GM/Ford versus the Japanese. One thing seems certain as a general matter, GM/Ford overall totally blew the Japanese away in NA in sales volume and profits in the 1990s. Of course GM, et al, made more profits in the 90s. They were churning out SUVs with a $10k per unit profit margin. And they put NONE of that into diversifying their portfolio. They just kept chasing immediate profits instead of looking at the big picture and planning for the future. If they'd been able to see past a fat bottom line and put some of those monster profits into small car development, they'd be sitting pretty now instead of scrambling for their corporate lives.
@Sid Vicious: according to Tire Rack, they’re 145/12’s. Low rolling resistance, indeed.
Is Suzuki planning to bring back to the US their own small car (i.e. Swift)?
Utter twaddle.
The reason they focused on SUV’s rather than small cars is because SUV’s were easy money. Plain and simple.
Toyota make a meagre profit on small cars, but that’s a combination of their production techniques and maybe, even, taking a small loss in order to bring more people to the Toyota brand and, thus, more people to upgrade to more profitable models. Toyota were still making money on big gas guzzlers, but keeping a diverse portfolio and it’s paying off now, due to the downturn in pick ups and SUV’s.
GM won’t think that far ahead or that laterally….
I think the more pertinent question is why Lutz still has a job!?!?!
short, sweet, and right on the money. very accurate article.
FW: Of course GM et al made more profits in the 90s. They were churning out SUVs with a $10k per unit profit margin. And they put NONE of that into diversifying their portfolio. They just kept chasing immediate profits instead of looking at the big picture and planning for the future.
Not quite. They did diversify their portfolio with SUV-infused capital, but they did it through acquisition. The notion is just as stupid back then as it was today: SAAB, Fiat, Land Rover, Volvo, Jaguar, etc had no place in Detroit’s lineup. And the cash needed to make these brands relevant in a new global market? The big three never had the capital to properly address it.
Just imagine how great the Impala, Taurus, Focus, Cavalier, Aspire, Metro, etc would be if the SUV-dollars went to them instead.
“Now that’s shifting, so the profitability is going to go down on trucks and the profitability on cars is going up.”
Apparently, I missed that econ class where they talked about something not being profitable at one point in time and with nothing else changing except for time, it is now suddenly more profitable. How is it that the cars are now more profitable than before? Is it because if a GM car has a full tank of gas, it’s value increases?
People I know who know little to nothing about the auto industry seem to know about Lutz. They laugh at the things he says and are the people who would never look at a domestic car. Amazing how he transcends even to those that don’t care about the car companies.
I thought Ford had the start of a good plan in the 1990s…it based the Escort on a Mazda platform and used Mazda components. The result was a decent, reliable car available in several body styles that, with Toyota-like development, could have been developed into a first-tier contender.
It abandoned this plan with the Focus, which could have been a great small car if it hadn’t been hobbled by quality glitches, which then encouraged Ford to let the car wither on the vine (while simultaneously pruning away the most interest models – SVT versions; the wagon).
Let’s hope Ford has learned its lesson and makes the next-generation Focus a contender…at least the current one is selling well enough that Ford perhaps won’t treat the car as the red-headed stepchild.
jolo: Apparently, I missed that econ class where they talked about something not being profitable at one point in time and with nothing else changing except for time, it is now suddenly more profitable.
More than time has changed. Gas prices have increased dramatically, while an imploding housing market has eliminated people who were using their rising home values as an ATM machine. This has increased demand for small cars, which means that dealers can demand more for them, and manufacturers don’t need as many incentives and low-interest loan offers to move the metal.
For example, as I recall, when the current generation Civic debuted, the dealers were willing to deal, and most buyers wanted the automatic transmssion…my friend who was recently car shopping passed on the Civic because the dealer basically said “take it or leave it” regarding the price, and told him there is a several-week wait for manual-shift sedans.
I need a little education. Explain to me why, in REAL terms, Toyota and Honda can build a compact sedan here with top notch materials sourced in north america and profit from them and Ford, Chrysler and GM say they cannot. What makes the cost structures so significantly different that the domestics are unable to source parts and materials that are of equal quality at the same prices paid by the imports? I like the domestics, and have been very satisfied with the quality, performance and value, however I do understand the criticism made by so many consumers. Any comments/answers?
No. That is not the reason. Here it is again, as described to me: building a small car like that is a career dead ender at GM. It is not macho.
We were looking at Honda’s small cars. The person with me was in GM mgt. That’s why.
Also GM has a pretty high labor cost, so the margin of profitability on a small car would be be even thinner than for others.
“GM/Ford overall totally blew the Japanese away in NA in sales volume and profits in the 1990s.”
The Japanese gained market share is NA during the 1990s, so they were hardly blown away. I don’t have regional profitability numbers, but I do know that on a global basis Toyota and Honda also blew away Ford and GM for overall profitability during those years. By the end of the 1990s the total market value of Toyota’s stock was greater than that for Ford & GM put together.
The only thing GM & Ford had going for them in NA during the 90s was the easy money from body of frame trucks and SUVs. Instead of using the easy money to shore up their entire product line they sat back on their heels and raked in the easy money whilst letting the rest of their operations whither on the vine. Meanwhile, Toyota and Honda kept their entire range fresh, became the best suppliers of minivans, took the lead in the now hot small CUVs range and brought hybrid technology to market. GM and Ford in the 1990s did what? Made a lot of cheap to build, high priced trucks.
Lutz was a driving force behind many of these bone headed decisions, and many of us called him out on it then … so this is not simply hindsight.
Ptrott
Culture, in part. Honda’s non-unionized Alabama plant (Odyssey and Pilot) has everyone in white jumpsuits, regardless of job. Not only does this improve (or at least smooth out) morale, but they insist that the white color allows them to spot dirt and grease more easily, which means there is a probably a process improvement that can be made. Combined with a Walmart-esque mentality toward cost cutting without sacrificing quality, they get the job done.
Not saying this can’t be done in a union environment, but I just don’t see it as easily in an “us-vs-them” culture that UAW shops typically have.
Why does Lutz have a job?
Well, he’s cheesecake* for GM fans. He says all the right things to make GM, it’s staff, it’s fans and certain members of the media feel good (well, up until recently) despite what’s really going on. The man had a direct hand in designing some of Detriot’s most appealing (well, appealing in a testosterone-pumped way) products, flies a fighter jet (how much more manly can you get), hates greenies and likes big, fast, shiny cars. But more importantly, he’s “tells it like it is.”
If you’re familiar with anyone else who “tells it like it is”, you’ll recognize that Lutz is basically a demagogue. And just like most of that type he’s basically preaching to the choir.
The problem is that the lustre has worn off Lutz. You can only pull the same schtick for so long without demonstrable results (remember the Cobalt puff pieces from Car & Driver?). Bob has a few hits (CTS, Malibu) as product czar, but he’s had more misses and more importantly, hasn’t succeeded in changing GM’s culture; in fact, GM has more or less absorbed him; he’s basically pushing the same party line as Wagoner, but with more bluster: same ivory-tower isolationism.
And he’s been reading his own press clippings for too long to do any different. When the media and your fanbase spend five years lapping up everything you say and giving you pass on your mistakes, why do any different?
Lutz could have been good for GM if his attitude was ever so slightly different. People say he’s a car guy, which is true, but he’s not a product guy, he’s an enthusiast, which means that he only cares about cars that appeal to him. If he worked at Porsche, this would be ok; heck, if he were given the task of managing just Pontiac and Cadillac, that would work, too. But they gave him the whole thing and–this is important–never told him what we was doing wrong because, well, admitting failure is just not something GM management does.
GM has been losing market share to companies that specialize in small cars for decades. Honda has increased its US market share 14 out of the last 15 years and they did it without any full-size SUV’s or V8’s. Honda has shown that is entirely possible to make and sell small cars in America successfully and at a profit. One of GM’s many, many problems is that they make excuses and promises better than they make cars, and far better than they make money.
I don’t understand. Weren’t people buying Civics, Sentras and Corollas in the 90’s into the 2000’s?
I clearly remember my friends buying those cars and supping them up. They were really popular! Even my parents friends were buying those cars! In fact I even remember Nissan’s commercial for the Sentra where they talked it up as a cool car…the premise why should all the top cars have all the fun…our small car is cool too!
What about the Accord? Or even the Camary? Or even the Maxima?
If there were no profits for small and sedan cars why were these built?
Lutz is a moron!
John Horner: The only thing GM & Ford had going for them in NA during the 90s was the easy money from body of frame trucks and SUVs. Instead of using the easy money to shore up their entire product line they sat back on their heels and raked in the easy money whilst letting the rest of their operations whither on the vine.
What GM and Ford needed to do in the 1990s was revamp their factories and negotiate a contract like the one they just did with the UAW. The problem is that no one – union or management – was interested in making these changes until their backs were against the wall.
John Horner: Lutz was a driving force behind many of these bone headed decisions, and many of us called him out on it then … so this is not simply hindsight.
Lutz did not join GM until 2001. He cannot be blamed for GM’s focus on trucks and SUVs during the 1990s.
He can be blamed for adopting the “go along, get along” approach towards GM’s strategy of accelerating the introduction of the current GMT-900s at the expense of other projects, and towards its overall attitude regarding smaller cars and the need for better fuel efficiency.
psharjinian: Bob has a few hits (CTS, Malibu) as product czar, but he’s had more misses and more importantly, hasn’t succeeded in changing GM’s culture; in fact, GM has more or less absorbed him; he’s basically pushing the same party line as Wagoner, but with more bluster: same ivory-tower isolationism.
The problem is that GM never hired Lutz to change the corporate culture. He was brought in to revamp the vehicle development process; he has succeeded in doing that. GM’s leaders basically wanted Lutz to come in, develop some profitable hits, and then go away so that they could operate as they always did. As recent events are showing, this is not nearly enough…GM needed an Alan Mullaly, and it settled for a Bob Lutz.
SUVs and Pickups only had 50% of the market in its best times meaning that passenger cars were still and always important.
Basically Ricky and Bobby were caught pants down with their hands in the cookie jar (quite a mental picture) and need to make up excuses to cover their mistakes and bad management. Bunch of crooks if you ask me.
It always seemed to me that the “Americans don’t want small cars” was a self fulfilling prophecy. While they failed to sell anything competitive in the small car range then they could always claim it to be correct
Sajeev Mehta Says:
Not quite. They did diversify their portfolio with SUV-infused capital, but they did it through acquisition. The notion is just as stupid back then as it was today: SAAB, Fiat, Land Rover, Volvo, Jaguar, etc had no place in Detroit’s lineup.
GM bought SAAB, a sports cars manufacturer, and it ended up selling SUVs. GM set up Saturn as an import (small car) fighter, and it ended up selling SUVs. Ford bought Volvo, a specialist safe boxy sedan maker, and it ended up making tall tipsy SUVs. There was even talk of the next Jaguar X-type being a two box SUV. It seems Detroit were so intoxicated on SUV profits that even when they tried to expand their horizons they ended up doing the same thing over and over again.
sitting@home: It seems Detroit were so intoxicated on SUV profits that even when they tried to expand their horizons they ended up doing the same thing over and over again.
EVERYONE was intoxicated with SUV fever. Toyota, Nissan, Honda, Mercedes, BMW…their lineups all are now heavily sprinkled with SUVs and crossovers, and in the case of Toyota and Nissan, big, body-on-frame pickups.
Dudes, stop dissing the Focus. My 05 ST has been trouble free and has a sweet 5-speed with great steering and brakes. Problem is I hear Ford was losing $1,000 on every one of them. Mine was built in Indiana. Is Ford still losing as much on each or did decontenting solve the problem?
EVERYONE was intoxicated with SUV fever. Toyota, Nissan, Honda, Mercedes, BMW…their lineups all are now heavily sprinkled with SUVs and crossovers, and in the case of Toyota and Nissan, big, body-on-frame pickups.
NONE of those companies forgot how to make good small cars in the meantime.
This has got to be the TTAC blog of the day.
Hello!
Maximum Bob says no one bought their cars because they were comfortable with $1.50/gallon gasoline? No one bought compact American cars because they were outclassed everytime by the imports so it’s no wonder GM/Ford/Chrysler didn’t make any money on them. If you build a shitbox on wheels, how the heck would you expect it to win against the goldbox cars that are Japanese? Even the Koreans have them outclassed for Pete’s sake.
cdnsfan27 Says:
Dudes, stop dissing the Focus. My 05 ST has been trouble free and has a sweet 5-speed with great steering and brakes.
I don’t think anyone is dissing the Focus because it is an admirable car, but it was one great shot that Ford had and they let it languish for 10 years with refreshes while the competition kept evolving their products. Wouldn’t have expected anything more from Detroit.
I distinctly remember reading (several times) that in the nineties, that up to ninety percent of Honda’s profit came from US or NA. The Japanese domestic market is complicated and brutal, and Europe has been a challenge for the Japanese. Back then, Honda was primarily selling cars only.
M1EK :
“NONE of those companies forgot how to make good small cars in the meantime.”
+1
OK, this is where I get to acknowledge the magic ‘stop the spin’ button.
“The reason you made no money on small cars is because hello! you didn’t build small cars anyone outside of fleet buyers would even think about buying. Toyota didn’t have any problem making money selling small cars.”
Completely untrue. Toyota’s sales of the Tercel and Echo were absolutely terrible for most of the last two decades and couldn’t hold a solitary candle to GM’s sales. Not even close. In fact Toyota’s sales were so bad that they went on a very public smear campaign on the Neon when it was first released.
GM had a highly disproportionate number of buyers in large cars, SUV’s, and trucks for a long time and many of their sales did indeed come from fleets. However the overwhelming majority actually came from individuals. The S-Series, Cavaliers, Sunfires, Sunbirds, and Cobalts may not be enthusiast cars. But they can all generally last 200k+ if they are conservatively driven and well maintained. I’ve seen plenty of versions with more than 250k at the auctions and if the public wants a car that is thousands cheaper and lesser in quality than a Civic, that’s their decision.
“Honda didn’t have any trouble making money selling small cars.”
Honda is the extreme exception for the North American market. They were able to put virtually all their automotive research and development towards the development of small cars for a very long time. In practice, they are to the small car market what BMW is to the entry level luxury/executive car market. That’s fine. GM has the same competency when it comes to full-sized trucks.
“If you had been as serious about building small cars as you’ve been about building trucks,”
They actually sank multi-billions into the J-platform, Z-body and Delta platform. Their greatest trouble came in two distinct areas. Too long model runs, and too many divisions to support. If GM was composed of only Chevy and Cadillac this would have been a non-issue.
“if instead of adopting a “throw it against the wall and see what sticks” marketing plan, if you hadn’t all but forgotten Saturn existed until last year”
Again it’s the model runs. Saturn and the Chevy/Pontiacs have been on what loosely can be called an alternating revision schedule. Saturn in 1991, Chevy/Pontiac in 1995, Saturn in 1997, Saturn in 2003, Chevy in 2005. Five generations. The Civic had four generations go through at that time. But they were far more extensive in their revisions due to their talents in that area.
“If you hadn’t parts-bin engineered whatever you could throw together for the rental companies, you’d we well ahead of the curve now.”
They all use their parts bins to an extensive degree. As far as the rental car companies, they were used primarily to help the Big Three meet CAFE requirements. That was a function of their successes with SUV’s and pickups. These also happen to be market segments where Toyota and Honda offered massive levels of publicity only to disappoint in the end.
Overall I hear what you’re saying Frank, and agree with you to a point. But every time I see a laughably bad Ridgeline, an overhyped Tundra (which cost Toyota billions), or a Honda SUV that is little more than a rebadged Isuzu (49% owned by GM at the time), I realize that there’s a lot more to the learning curve than just throwing something at the proverbial wall.
There really isn’t anything wrong with GM that the removal of union driven concessions, dealer driven state franchise laws, and upper management decision making couldn’t resolve. Throw in a level of support and protectionism provided by the Korean and Japanese governments and give it to OUR American companies, and I’m sure that GM and Ford would still have many of the strengths and challenges that exist now. The difference is they would likely be given the same level of media- driven support that a company like Toyota can take for granted.
Yes an outstanding rant. You need a wider audience to make it viable. Maybe one with some folks who CAN make a difference.
Send one to Lutz and Wagoner to really have an impact!
But, that kind of audience might kill the Death Watch.
Excellent post macarose!!
But isn’t that flaming the site??!?!
It kinda let the nitrogen outta the tires on this runaway train??!?
I’ve got to believe that one of (if not the) root cause(s) of the problem here is Wall Street and thereby corporate America’s obsession with “making the quarter.”
With business – GM included – so myopically focused on delivering shareholder value at the end of the next quarter, no one thinks long term. Or, as Frank so rightly put it, shooting ahead of the target.
So GM’s weak management team and useless board buckles under to the temptation to keep cranking on whatever will enable them to make the numbers a quarterly earnings time. We see how well that worked out long term.
M1EK: NONE of those companies forgot how to make good small cars in the meantime.
The original criticism was that GM and Ford introduced crossovers and SUVs under their acquired nameplates. Except that EVERYBODY was pursuing that market up until recently. Volvo and Saturn, in particular, needed a good crossover to capture new customers and prevent defections from the brand.
The idea that GM and Ford shouldn’t have introduced crossovers for Saab, Volvo and Saturn just doesn’t work (especially since the Volvo crossovers sold well, as did the original Vue). Even VW is still rushing SUVs to market…witness the introduction of the Tiguan.
Mr. Horner,
The fact remains that in the 1990s two things happened: (1) GM/Ford essentially conceded the compact car, and to some extent mid-sized car, to foreign competition, for more profitable trucks and SUVs; and (2) the Japanese, although gaining some market share due to this concession, did not make the profit margins in the 1990s that the US automakers were making. That’s why I have always been looking for numbers. For example, how much profit did Toyota make on a Camry, and Honda make on a Civic in 1995? How many were sold?
The bottom line, and people on this blog have pointed it out time and again, that the Japanese were uniquely positioned, probably more out of fortuity than cosmic vision, to benefit from rising gas prices. I will sharply disagree with anyone who keeps pounding the drum that it was obvious in the late 1990s that gas would quadruple in price be $4/gallon by 2008.
What aids the GM-detractors is a fundamental misunderstanding of everything came to be. The Japanese, and Europeans, have been living in expensive fuel land for about thirty years. Hence, the idea of a quality small car is one that these cultures have had to live with for a long time. Plus factor into account high population density and great public transportation — neither of which the U.S. has. Driving is more integral to the North American way of life. In other words, we need comfortable highway cruisers — that’s what the U.S. automakers designed and succeeded at since the end of WWII.
Hence, it is not that Tokyo saw the writing on the wall that gasoline would rise to Euro-Japanese levels in the span of a few years — and crash developed a Prius, Fit, or Yaris. All of these cars were developed in (and FOR) places where gasoline was $4/gallon or more since at least the late 1990s. The process of retrofitting these vehicles to meet American standards was an intelligent decision. The rest of the established line-up — the Civic and Corolla were part of a market that GM/Ford had abandoned. Now GM/Ford are doing the EXACT same thing as the Japanese, albeit a few years late — retrofitting fuel efficient euro models.
The Japanese are simply in the right place at the right time. Just as GM was in the right place at the right time from the 1950s until the 1990s.
To the external world, Lutz is a buffoon. Not good, doesn’t contribute anything, but no great harm. Internally, my guess is he’s destructive. If he really believes that global warming is a crock of shit, how can he possibly contribute to the solution? How can he put himself into, or even be supportive of, efforts that deal with the problem? Of course the real question with Lutz goes to Wagoner as in why is Lutz still talking in public or even around? What does he do that’s positive? What happens to somebody under Lutz who pushes a green agenda? My guess is they keep quiet, hence GM’s situation.
What aids the GM-detractors is a fundamental misunderstanding of everything came to be. The Japanese, and Europeans, have been living in expensive fuel land for about thirty years. Hence, the idea of a quality small car is an idea that these cultures have had to live with for a long time.
Last I checked, Ford’s European division, Opel and Vauxhall were owned by companies based in Detroit. They chose to avoid learning from their own employees, so it’s hard to pity them.
The bottom line, and people on this blog have pointed it out time and again, that the Japanese were uniquely positioned, probably more out of fortuity than cosmic vision, to benefit from rising gas prices.
It’s this mindset that keeps causing Detroit to lose.
Toyota and Honda did not “get lucky”, they worked hard for the business. It took years for them to figure out the American consumer, but once they did, they have continually improved their offerings and expanded their audience.
That is talent. Toyota and Honda are better managed than the Detroit companies. Period.
More competent. More skilled. Better products. More attention to detail. Greater customer orientation.
The constant unwillingness to acknowledge defeat and strive for redemption dooms GM in particular for failure. It’s like the Monty Python sketch of King Arthur fighting the Black Knight, with Bob Lutz starring as the knight: http://www.youtube.com/watch?v=zKhEw7nD9C4
Macarose,
I agree with your last sentiments. If GM weren’t hosed, they’d be in great shape!
detroit1701: Driving is more integral to the North American way of life. In other words, we need comfortable highway cruisers — that’s what the U.S. automakers designed and succeeded at since the end of WWII.
This is where I have the issue – comfortable highway cruisers do not have to be unreliable, bottom-feeding on fuel efficiency, and overlapped endlessly across a ton of brands under the parent umbrella.
It’s a given that the market was different from most of the world, but it was foolish for Detroit to just leave the segments to everyone else, and manage it the way they have. $1.25/gal gas or not.
And Macarose – the Echo and Tercel were only part of a portfolio of small cars, and you conveniently leave out the Corrolla. Obviously there were overlap and quality issues with those models, along with appeal. But the key is that Toyota didn’t just forget the segment and leave something to languish well beyond it’s design…
As the Brit`s say: Spot on report my fellow chap!
Couldn`t be more accurate.
GM could not cope with the small but efficient car competition in the `60’s where VW ruled with the Bug and it`s siblings nor after the Japanese took that market over in the late `70’s.
Mr Lutz just was as technically incompetent at Chrysler but at least was under control by Mr.Lee the master.
The Neon was a fine automobile then for it`s price and what it delivered.Would have never seen the light if Lutz had anything to say.He`s a second row overpaid guy that under Eaton( a technical disaster himself) never showed any symptoms of the slightest technical awareness.
He is just hanging on to that path at GM as well, collecting money until they finally kick him out.
Detroit1701: Just as GM was in the right place at the right time from the 1950s until the 1990s.
During which it lost half its market share and nearly went bankrupt (1992). Yes, it was a great era for GM. Try 1920 to 1950.
Good pic of MB listening to those voices in his head.
And how much more R&D went into that Suburban? How much more development money into the category? It’s not surprising that the price is double the Impala, considering the Impala hasn’t had a complete overhaul for as long as I’ve had a drivers license…(1994)
For shits and giggles, how about comparing the price of the Accord for those periods, which has had substantial upgrades, designs, and research done?
More money into it = Higher price.
Pch101 — I appreciate your comments. You always make great points on this blog.
But I have to disagree on a macro level. If GM/Ford had made it a priority to pour resources into, and compete in, a small/mid-sized car market in the 1990s it could have done so. But it did not. When Ford actually went after small and mid-sized cars with the pre-1996 Taurus and the post-2000 Focus, by all accounts it leapfrogged the Japanese competition (until the products were cut off from further development). Let us not forgot that the Japanese were unable (or perhaps unwilling) to produce a light truck, full-sized truck, or SUV that came even close to GM/Ford in the 1990s.
Keeping in mind the term “hindsight,” do you really think you could have walked into Ford’s board room in 1994 and tried to pitch that the company should roll significant resources into the Escort, over the development of a new Explorer. One would have been laughed out of the room. GM/Ford did not accurately predict where the market was going (and the ONLY reason the market went that way was fuel prices) — that does not make them lousy engineers and developers. In fact, as far as I know, who in the U.S. actually saw it coming? Farmers? Wall Street? The US Government? Steel industry? Hmmm. Looks like none of them did.
Given that conscious decision to divert resources into larger more profitable vehicles, the Japanese benefitted from a vacuum at the bottom of the line-up, high-volume, small, and less-profitable vehicles.
I think it is pretty impressive even today that GM brought the new Malibu seemingly out of nowhere, and produced a car just a great in terms of fuel economy, quality, and aesthetics as the class-leading Accord and Camry (some say “better than”). But it’s all relative, I guess.
Paul — Loss of marketshare is understandable and inevitable post-1960, since you actually had some foreign competition. Pre-1950 was zilch (ok, maybe a few European luxury cars).
Keeping in mind the term “hindsight,” do you really think you could have walked into Ford’s board room in 1994 and tried to pitch that the company should roll significant resources into the Escort, over the development of a new Explorer. One would have been laughed out of the room.
Yes, they would have, but that is again a management problem.
Every major car company should ALWAYS have a great compact and midsized sedan for the US market. Not sometimes, but always. These are mainstay products, they always sell in relatively large numbers no matter what is fashionable or how the economy is performing.
There is simply no excuse for letting products in this category slide. They are ultimately profitable because they communicate the brand values of the company, and indirectly help to sell the other vehicles.
Vehicles like the Camry and Lexus LS offer a symbiotic, positive relationship for Toyota. The Camry gives confidence to the Lexus buyer that the Lexus is worth the money — if the Camry is that well built, then the Lexus must be at least that good. Likewise, the Lexus provides a halo that tells the Camry customer that a company that can build a car that good must provide some trickle down benefit to his Camry. They help to support each other, and grow both brands as a result.
Ford and GM got greedy. As mentioned before, they took the profits and went on a spending spree, buying other companies instead of improving their own.
Ford could have taken the money spent on PAG to improve Lincoln and Mercury, but didn’t and ended up selling PAG at a loss, struggling with Volvo, and still owning a version of L-M that can’t help but suck wind. GM did the same with more companies than I can count, including non-automotive businesses like Hughes.
They had ample opportunity to improve these products, but didn’t. They should know better than anyone that it takes years to develop new vehicles and brands, so that they must maintain consistency to address any change in market conditions. That inflexibility is their own fault, and it’s their own greed and shortsightedness that kept them from seeing it.
Its not an either SUV or subcompact decision. If it was SUV’s makes perfect sense given their massive profits versus subcompacts. GM deliberately chose not to pursue the subcompact market segment that is their own fault and that is wwy they are to blame. They wisely put a lot of resources into SUV’s but they unwisely did not put a larger share of their resources into subcompacts. Thewy should have never invested in Saab, Fiat EDS Hughes etc
In fact, as far as I know, who in the U.S. actually saw it coming? Farmers? Wall Street? The US Government? Steel industry? Hmmm. Looks like none of them did.
Let’s see:
How about the people who lived through 1973, the people who wonder why we are fighting in Iraq, the people who read about attempts to blow up the Alaska pipeline, people who see pictures of Nigerians cutting holes in their pipelines, the people who have heard Chavez talk, economists who watched the amount of oil we buy from outside increase every year, the contractors helping the rulers in Dubai spend their petro dollars building a new city, the people who wondered why our congress let PUs and SUVs avoid rules for better mileage, and finally the atheist who are worried about religious nuts trying to start another holy war.
Wow, the post that my previous one was in response to disappeared…
edit – Canyoneros! LOL
This just reaffirms GM’s mentality that they have always had and always will:
To Toyota and Honda a small car is something people want to buy because they like to drive them. To GM it is a penalty box someone buys because they can’t afford anything bigger and will ditch the second they get some extra money (so why bother making it good quality, competent, and especially luxurious?). Even if they do start building good small cars (HAH!) if gas goes down in price they’ll start letting them rot while they roll out the new Canyoneros.
Some people don’t want to drive big, stupid, ugly cars with terrible handling and poor fuel efficiency(even when gas is cheap). The imports are the only companies that have consistently made cars that appeal to people like me without fail.
The latest Echo was sold in the US from 1999 – 2005. Even when it reached the very low four digits Toyota let it languish and virtually no improvements were made.
I would also argue that Toyota had the Previa (1991 – 1997) , Celica (1994 – 1999), and Supra (1986 – 1992) (1993 – 2002 in Japan) for far too long. Each one of these models had substandard sales and were substandard values. Toyota simply let them languish and in two of the cases just reduced trim lines instead of finding niches.
“GM/Ford did not accurately predict where the market was going (and the ONLY reason the market went that way was fuel prices)”
I have to disagree, the SUV fad was already showing signs of ending before Fuel prices jumped – and anyone with a brain knew that when SUVs began to be tied to “soccer moms”, the party was over. Unfortunately no one in Detroit can do anything without a stack of management tools justifying the obvious, so they fiddled on until the market burned them. Strategic management means judgment, not just doing whatever the decision matrix tells you – something that American corporations no longer seem to understand.
I know it got good mileage, but let’s not heap too much love on the Metro. In 1994 I had the pleasure of renting one for almost a week. (Hey, it was cheap.) I put a lot of miles on it, scouting new jobs and cities to move to.
I started referring to it as the ‘Jitterbug’, both for its metallic ladybug appearance and for its semi-random steering habits on anything but the smoothest asphalt.
If the roadway was rutted from studded tires or heavy truck traffic, the little ‘Tro would jump from one tire groove to the other and back, since its narrow track width couldn’t drive in both grooves at once.
Either my rental had worn tie-rod ends, or it needed a bit more rolling resistance.
Many posters have identified various reasons why GM (and Ford and Chrysler) neglected small cars, but one hasn’t been mentioned: break-even point.
Gross profit margin by model is a closely-guarded secret, but obviously a $15,000 car yields a smaller margin (if any!) than a $40,000 SUV.
Detroit staggers under the weight of enormous overhead expenses and fixed costs. The latter–tooling, plant, machinery and such–are of course incurred by all vehicle manufacturers, but the transplants had an advantage of starting with modern factories. Most importantly, the transplants aren’t burdened with huge retiree-related expenses. (Or vastly overpaid executives.) So they don’t have to sell as many units for the gross profits to recover the overhead cost and have every extra car sold yield a NET profit tantamount to sales price minus factory labor, parts and marketing expenses.
The lure of badge-engineering is it promises to increase sales volume further beyond the break-even point. The danger is that additional costs of tooling, parts inventory and marketing will torpedo the plan.
Macarose, I see the point you’re trying to make, but I’m sorry. Just because Toyota let a couple of models that it made languish doesn’t excuse GM for letting every single one of the small cars it has ever made languish. I’m not saying imports are infalliable, but you can’t ignore the plain and simple FACT that they have always made appealing, good-selling small cars that people want while GM has hardly made any.
As for your examples, let’s go one by one:
Echo: Yep, substandard. But the Tercel sold very well for many years, and had a very loyal following. The replacement was a dud. But now the Yaris has succeeded it and is selling well by all accounts. Whether it is good enough to sell well if gas goes back down is debateable though.
Previa: Wasn’t terrible, but definitely wasn’t a contender. But the replacement in all but name, the Sienna, has found success in the market.
Celica/Supra: Toyota abandoned these car with all of it’s sporty/sportscars. They weren’t the only ones. Nissan also abandoned this market(dumped 300ZX and 240SX) until the 350Z came out. Honda has only the Civic Si left (NSX, Prelude and RSX are dead, S2000 soon will be). But the Ford Probe has been dead for years and years and was made in even fewer numbers, Mustang has always been around in some form or another though. GM abandoned everything even remotely sporty except the Corvette until the Sky/Soltice twins and Cobalt SS came out quite recently.
An excellent rant, Mr Williams.
A point (I think) missing from other comments here: At the sales end, Detroit iron was marketed toward the immediate price, with confusing blizzards of options (by too many myopic dealers?) in order to cover many price points.
Toyondissan marketing was more focused toward longer term value, with fewer options and (relative to the domestics ‘competition’) higher initial prices. Resale and post-manufacturer warranty costs were values alien to many domestic buyers. The ‘deal’ was it.
Toyondissan’s marketing culture was an aid in selling value in small cars. Detroit had no such culture.
“Gross profit margin by model is a closely-guarded secret, but obviously a $15,000 car yields a smaller margin (if any!) than a $40,000 SUV.”
Yes, and as many have pointed out, a company-subsidized low-end portfolio makses for a very loyal customer base. A Toyota owner has no doubt in mind that his good experience with the Yaris will extend when he trades up to a Corolla or Camry. A former loyal buyer of GM-cars would not touch a GM car with a teen foot pole after being buttfucked by his bad experience of owning and servicing a Cavalier.
What most large car manufacturer has done since time begun, is making a large portion of near non-profitable small and cheap cars, and earn money from volume (Fiat, VW), or produce high-end cars and earn money from premiums (Rover, Mercedes).
An estimate I heard about Volksawgen is that they have to produce at least 4 million cars through any genereation of platforms before break-even. That’s why there’s so much platform sharing going on in Wolfsburg.
this plan can backfire, as BMC showed in the 60’s, when their two bestsellers, the ADO16 and Mini was underpriced so much that they actually lost money on every Mini sold. They found themselves in a position when their high-end low volume cars didn’t sell enough to generate money, and their low-end high-volume cars generated even less, or was even made at a loss. The end resulat is logical and known. And some people in Detroit should have learned that lesson.
But you CAN make a profit, with dedication, hard work, research & development, quality, following up customer loyalty, and a dedication to better the product so it evolves with time. As Toyota and Hoda has shown.
The problem now is that the Big 2.8 doesn’t have small cars for sale, and their former cash cows doesn’t generate any income at all anymore, or are even made at a loss. So, where will their money come from?
“to hit a moving target, you have to aim ahead of it.”
-Exactly.
GM is always just reacting to the market. Their hybrid technology is MUCH more expensive than Toyota or Honda.
Give me a freaking break!
ETHANOL
GM has been touting ETHANOL as a savior to gas mileage. Burning a year’s worth of food for a family in a gas take in a a week is not economical. We need corn to feed cows to have cheap beef on the table, not a REDUCTION in fuel economy.
Give me a freaking break!
Hydrogen cars?!
water = green? nope, hydrogen needs energy to get it out of water. Second storage of hydrogen cannot be for long. It evaporates. If I leave my car idle for a week without driving it will have an empty tank!? THUMP! Who will buy or make hydrogen?
Give me freaking break!
The Volt
Battery pack costs $10,000, while Tesla’s VP says their costs $20,000. Tesla gets 220 mile range while GM gets 40 miles. Who is screwing up at GM? Or rather why is Tesla so much smarter than GM?
Give me freaking break!
Ford cars,
With no money for future cars their showroom floors will remain stagnate for many more years to come. Remember the ranger. Image the entire lineup (minus euthanasia of some brands) of cars still being sold in dealerships in 4 years.
Give me a freaking break!
Gas mileage,
All over Europe and including Japan gas mileage is king. With huge fuel taxes the Europeans demand high mileage. In Japan their standards for all cars are high mileage compared to the US.
While Japan regulates MPG based on weight, the USA has CAFE or averages for all models excluding weight so the big 3 could sell pickups. Pickups are also not as safe as cars with their body on frame construction. So high margin death traps.
So GIVE me a break GM. I look at the stock crashing and the cash burn with the red ink on bottom line and I feel as if someone spilled blood.
Leapfrog for godsake, break some contracts and move quicker with your suppliers to react. Smaller startups with good batteries and with properly used technologies are going to eat these guys for lunch.
Someone will finally get the investment to make an affordable carbon fiber lightweight 150mpg car made from a mold with the color already added and snapped together like a lego car. – oh wait Aptera!
Carbon fiber cars will eliminate massive steal presses, the welding and all the expensive robots. It will also eliminate painting the cars because color can be added into the carbon fiber when it is molded. That removes the 2 highest costs to building a car.
I am convinced that GM took great pains to make it’s small cars crappy as part of market segmentation strategy. By God don’t let anyone who makes more than minimum wage settle for an Aveo. Don’t let anyone who makes more than $9 an hour settle for a Cobalt!
The way I envision it–
Boss: What? You want to put a CD player in a freaking AVEO? What are you thinking?
Minion: But sir, the radios without CD drives cost twice as much and have to be custom built by craftsmen!
Boss: Get that CD drive out of there idiot! And do something to uglify the front end! We don’t want anybody to WANT this turd!
gm stock is up 35% since Rick delivered his plan.
since when are reputations made on what you plan
on doing.
the Volt is to be ready in 3 months>? this looks
like a bold-faced lie.
jeez i wish this stock would drop soon; i bet the
farm on it.
i saw the Malibu yesterday and even peeked inside.
not too bad; too bad they are unavailable.
my brother says that gm producs are alot better
than they used to be. i dont doubt it; still he
bought a Hyundai Azera. very nice car indeed.
Hey geniuses- GM sold its own version of Toyota’s Corolla, called the Prism. It sold like coldcakes, because the Corolla has and has always been a crappy little car, and anyone buying one is just going to buy the real thing. Not as bad as the Chevrolet Cavalier or the Saturn POS’s, but having taken my driver’s tests in one, it was a miserable appliance. At the turn of the century the only small cars worth a damn were the Ford Focus and Mazda Protegé- the last-gen Civic was a disappointment. NOBODY focused on small cars, and I’d be far more scathing of Ford for making the Focus WORSE.
GM’s problem is the Cobalt wasn’t that great, and the Aveo shouldn’t even have been built.
LOL, why do you listen to this guy?
You can’t make money on small cars unless you sell 200k annually.
You can make big profits off of overpriced Trucks and SUV’s. :p
Lutzy you go boy!
Many Americans wanted small cars. They just didnt want small American cars.
I am having a bad case of Lutz-fatigue.
Can’t we just get the Attorney General to file so that we can get the fraud case started first thing Monday morning?
It’s not surprising that the price is double the Impala, considering the Impala hasn’t had a complete overhaul for as long as I’ve had a drivers license…(1994)
Ummm, the Impala and other full size Chevys were on the RWD B Body until 1996. Then nameplate wasn’t used again until 2000, when it was given to the FWD W Body platform. I’d say moving from one platform to another, from BOF to unibody construction, and from RWD to FWD looks like a pretty complete overhaul.
FWIW, the current Impala is a pretty decent car and gets impressive mileage for its size.
# folkdancer Says:
July 17th, 2008 at 2:08 pm
>In fact, as far as I know, who in the U.S. actually saw it coming? Farmers? Wall Street? The US Government? Steel industry? Hmmm. Looks like none of them did.
Let’s see:
…the people who wonder why we are fighting in Iraq… and finally the atheist who are worried about religious nuts trying to start another holy war.
The only religious nuts who are trying to start another holy war are the jihadis who we’ve been fighting in Iraq.
CNN Money quotes GM Product Planner Extraordinaire Bob Lutz: “The reason we made no money on small cars is because hello! nobody wanted them. At $1.75 and $2.25 (per gallon), everybody was happy with full-size utilities with V-8 engines.
And all those other markets? I can’t remember a time when a small car hasn’t been the best selling car in Canada, including, for a while, the Cavalier. (And then the Civic wrested the title away and hasn’t given it up since)
“I’m not saying imports are infalliable, but you can’t ignore the plain and simple FACT that they have always made appealing, good-selling small cars that people want while GM has hardly made any.”
From 1980 – 1995 the Tercel averaged 100,000 cars per year.
From 1983 – 1998 the Cavalier averaged 350,000 cars per year.
Even with the help of high fuel costs during it’s first couple of years, the Tercel got absolutely clobbered by the Cavalier. By 1998 the Tercel was replaced by the even worse selling Toyota Echo (which sold only 1544 units in 2005) while the Cavalier sent nearly 250,000 in 1998 and stayed well into the six figures for it’s entire model run.
As it pertains to specific models, the only names that Toyota has stuck with over the years have been 4Runner, Land Cruiser, Corolla, and Camry. Everything else has been either exchangeable or expendable.
I won’t even need to dwell into the sales success of the Neon, Escort/Focus, or the Saturn S-Class. To put it succinctly, the only small car ‘Japan’ made that has been a long-term successful model in the U.S. has been the Civic… which I would again argue has more to do with the level of focus Honda had on the subcompact markets.
The only Japanese company that has any street cred in this segment is Honda. Period. Even they weren’t as successful as GM until the last few years.
People keep bringing up the Tercel and Echo as an example of a ‘small car failure’ on the part of Toyota. There’s no denying that these two haven’t exactly set the world on fire with their sales (or lack thereof), but to many Americans, these are smaller than small. These models (and the Yaris replacement) are almost niche vehicles for those who want something smaller and more distinctive than the mass-market Corolla.
Further, these models were/are all built in Japan; the U.S. market Corolla is built in the States. The profit margin on imports in this price range is razor-thin, so it shouldn’t surprise anyone that Toyota barely promotes these models, much less have large numbers of them on dealer lots.
Bozoer Rebbe: Ummm, the Impala and other full size Chevys were on the RWD B Body until 1996. Then nameplate wasn’t used again until 2000, when it was given to the FWD W Body platform. I’d say moving from one platform to another, from BOF to unibody construction, and from RWD to FWD looks like a pretty complete overhaul. FWIW, the current Impala is a pretty decent car and gets impressive mileage for its size.
Bozoer, the post I was referencing was removed…my comment made sense in context to something gmuawtool said, regarding the price of a Suburban vs. Impala in the 80’s. So yeah, my comment looks kinda dull now. However, the current rev of the Impala is a joke on many levels. It looks almost the same as it did in 1999 when they unveiled it, and during that same time period Honda and Toyota and Nissan have revised their competing vehicles twice. And the Impala was gone for 2 full model years to get to that point, which is mismanagement in a nutshell.
Macarose – Comparing the Japanese brands throughout the 80’s to Detroit is just unfair, due to raging “buy ‘merican” sentiment that was held by culture at that point. Of course the Cav outsold the Tercel then. Fast forward to the late 90’s, when the playing field of culture leveled, as well as localized manufacturing of the Japanese brands, as well as only 15-20 years of branding, and those same Japanese brands are starting to overtake Detroit. My parents were loyal GM customers from the 60’s through earlier this year, and even they’ve switched. GM has a much longer history, and therefore had much more brand awareness and loyalty built into the 80’s market that you’re referencing, where a relatively new Brand in a particular marketplace has an obvious uphill battle. Besides, the fact that the Echo wasn’t even competition for the Cav belies your point.
If anything, the points you’ve presented show how GM has sullied 80 years of history and success in just 20 short years, while in that same span the lightweight ‘new’ guys rose through the ranks steadily. There’s your street cred right there.
“Fast forward to the late 90’s, when the playing field of culture leveled, as well as localized manufacturing of the Japanese brands, as well as only 15-20 years of branding, and those same Japanese brands are starting to overtake Detroit.”
Ronin, you should re-examine the sales numbers. If anything, the Neon, Escort, Cavalier and Saturn absolutely dominated the small car niche in North America with the sole exception of the Civic.
Toyota actually went far downhill in sales between the period of 1980 (the height of the anti-Japanese attitudes) and 2005 (when they were non-existent. Overall sales for the 2005 Echo were less than 1600 units.
Even with the help of high fuel costs during it’s first couple of years, the Tercel got absolutely clobbered by the Cavalier.
This is a bad comparison. These two cars aren’t in the same size class. The Chevette competed with the Tercel, not the Cavalier.
During most of the 1980’s, the Japanese auto makers were subject to “voluntary quotas” that caused them to limit their imports. One of the end results of this was for them to focus increasingly on more expensive cars, so that they could generate more profits out of the number of cars that they were allowed to sell. That meant a greater emphasis on larger cars that they could sell for more money.
Of course, the Cavalier became a standard rental car. Much of the production run ended up in the hands of Avis and National. The Cavalier’s inability to compete was one of the motivations for creating Saturn. The name was retired for Cobalt, because the reputation it built during its run was poor. So on the whole, the car was a failure.
The Echo has also been a flop, but for different reasons. Toyota meant it to be a youth car, but the demographics never worked out that way.
For many years, Toyota has been struggling to find a way to court the US youth market. After not succeeding with the Echo, the strategy was changed and Scion was born.
Scion has had its ups and downs, so whether this will ultimately succeed over the long run remains to be seen. If Toyota is smart, they will stay patient, invest effort in trying to improve it, and give themselves several years to determine whether Scion is worth keeping.
Mac,
Sometimes the numbers don’t take everything else into account, you know? How can the culture change be reflected in the numbers, with regards to the attitude shift of the baby boomers in an increasing global market?
I see what you’re trying to say, but it simply doesn’t tell the whole story. Pch even furthered that. Yes, on paper, the Cav destroyed the Tercel, if you can even make that comparison. I’m sure the Impala and Caprice destroyed it as well. But that doesn’t mean it’s the whole story, and that’s the point. I’m not disputing hard numbers that I care not to research on one model of ‘Yo, a sub-compact that was left to die off in ’05.
Ronin, even when the imports had a strong reputation in this segment Toyota’s sales were poor.
If what you’re saying is true then the Civic would have been limited by the same quota. It wasn’t and the sales numbers between the two models is very telling of their overall competitiveness.
The Cavalier, S-Class, and Sunfire were subcompacts. The Grand Am, Corsica/Beretta, Skylark, Cutlass, Malibu and Achieva (along with the Prism) were the compacts that competed head on with the Corolla.
The Cavalier, S-Class, and Sunfire were subcompacts.
Wrong. These were classified by the EPA as compacts. The Corolla and Tercel were both subcompacts, with the Tercel slotted below the Corolla.
The Grand Am, Corsica/Beretta, Skylark, Cutlass, Malibu and Achieva (along with the Prism) were the compacts that competed head on with the Corolla.
Also wrong. You are mixing together your car classes with this one.
The Grand Am and similar were compacts. It was intended to compete with the Accord and the Camry, which were both compacts.
The Prizm was a rebadged Corolla. Both were subcompacts.
If what you’re saying is true then the Civic would have been limited by the same quota
There’s no comparison. During the 1980’s, Honda had a three vehicle lineup (Civic, Accord, Prelude.) Toyota had several cars, a van, pickups and the precursor to what we now call SUV’s, such as the 4Runner.
Both had quotas based upon previous sales, but Honda had fewer models to sell. Toyota had to make choices about which of its models to prioritize. Honda obviously had an easier time with this.
Nope, on a price basis that’s who competed with who.
The Grand Am along with the other GM compacts were priced thousands less than the Camry/Accord. I’m sure you’re aware of that. They were meant to compete with the Corolla and Civic models as were the other GM offerings.
The Cavalier, S-Series and Pontiac Sunfire were priced to compete with the regular to high end versions of the Tercel and lower end of the Civic (for the most part, EZ models were definitely bargain basement).
A few of the higher end versions of the Cavalier (Z24 & Convertible for instance) and the Sunfire did compete with the higher end Civic models. Those particular models were in a far different niche than the Corolla.
The Tercel was never a hot model in the U.S. It was far too basic and pricey for this market. As we both already know, the Civic was a far different story.
The Grand Am along with the other GM compacts were priced thousands less than the Camry/Accord.
Translation: The only way that GM could move inventory was to deeply discount it. Good to see that some things never change.
The Cavalier, S-Series and Pontiac Sunfire were priced to compete with the regular to high end versions of the Tercel and lower end of the Civic
The goal of the J-cars was to compete with the Civic and Corolla. The fact that they couldn’t tells you that the cars were a failure.
The Tercel was never a hot model in the U.S.
I don’t understand your fixation on the Tercel and your continued desire to ignore the Corolla.
The Tercel was meant to be an entry-level youth car that would transition buyers into Corollas and higher priced vehicles. It was not intended to be the volume seller in the US, but a gateway vehicle that would lead to the larger cars with higher profits.
The Civic and Corolla have been competing against each other for decades. Both lead the compact car class in the US.
Honda and Toyota take different approaches to the market, with Honda acting as the rifle and Toyota as the shotgun. Honda is content with slower growth and tries to sell as few models as possible; Toyota sprays the market with product and divides the market into tighter segments.
Sorry, but the compact cars competed with compacts… not mid-sized. The Olds Cutlass Supreme, Buick Regal, Pontiac Grand Prix and Chevy Celebrity/Lumina were the primary competitors to the Camcords.
If the Tercel was aimed for the young buyer, please give some type of evidence other than personal opinion. The Tercel’s looks alone appealed towards a more mature and ‘economical’ focused crowd than the youth set… which were actually more catered to by the Cavalier variants.
“Honda is content with slower growth and tries to sell as few models as possible”
Yes, but they tend to offer far more variants of their model than Toyota. During the 1990’s, the Civic continually had close to five or six variants throughout while Toyota offered only one to three for the Tercel. The Corolla seemed to have no more than three during that time.
Honda was also far more ambitious with making different bodystyles for the same model. In my opinion, that’s a good analogy for what you describe as a rifle approach.
On the flip side, Toyota was more into the business of pushing the Corolla name onto more than one type of vehicle during the 1980’s (as they did with the Celica). They also did try to copy Honda with bodystyles and variants during the early 1990’s. But they figured out in time that most folks wanted something unique… even if it really wasn’t so. Hence the souped up Tercel became a Paseo and a Camry with two fewer doors became a Solara.
Overall, I don’t think either Honda or Toyota have done a very good job of continuity outside the bread and butter models. It’s a shame because if they had not retired or neglected CRX’s Del Sol’s, Celicas, Supras, NSX’s, Legend’s, Integra’s and their related ilk, they probably would be in a far stronger marketing position right now.
Lettered and alpha-numeric acronyms simply can’t create the cache of a long established name. Just ask Menudo…