BMW doesn’t need to advertise their “ultimate driving machines.” After decades building and selling vehicles offering sporting luxury, BMW has trained its customers to intuitively understand their products' appeal. Brands take years if not decades to develop, millions to billions of dollars to engender, and require careful stewardship to sustain. Contrary to much of this website’s commentary, GM’s management is not stupid. They know that Buick, GMC, Pontiac, Saab and Saturn are “damaged brands” in North America. But unless General Motors’ execs follow Bimmer's lead, and soon, the company will fail.
Branding isn’t metaphysics. It’s simple economics. Well defined brands lower the costs of customer acquisition and retention. Last year, GM spent some three billion dollars marketing and advertising in North America. But with eight supposedly unique brands, the vast majority of these dollars are wasted. (This doesn’t include the billions spent engineering and/or badge-engineering dozens of also-ran products to fill-out the eight brands’ portfolios.) Question: why bother?
In 2007, Buick/Pontiac/GMC’s combined market share stood at 6.4 percent. That’s roughly the same share as Dodge (6.6 percent) and only slightly more than Nissan (5.8 percent). Despite a largely revised lineup, Saturn’s mustered a 1.5 percent market share. Saab barely shows up at 0.2 percent.
These five GM brands combined account for 8.1 percent of 2007 total U.S. light vehicle. Honda’s U.S. market share was 8.5 percent. In other words, five of GM’s seven domestic brands (assuming HUMMER goes away) don’t even equal the total sales of a [growing] competitor with a single, well-defined brand image.
All of these five money-sucking GM brands are damaged beyond repair. Buick’s website doesn’t even offer a strapline (“When better Buicks are built…”). GMCs are all Chevy clones. Pontiac is car? How generic can you get? Again, Saab isn’t on the radar– even if it is “Born from Jets.” Saturn never made money and consumers shunned/ignored/never heard about its recent Euro-flavored makeover.
Here’s the rub: it’s too late to cut the deadwood. Even with GM’s four new “sales channels” (Buick/Pontiac/GMC; HUMMER/Cadillac/Saab; Saturn and Chevrolet), the automaker can no longer afford to euthanize its zombies. Chief Financial Officer (now COO) Fritz Henderson admits the math doesn’t work; the cost to terminate the brands (a decision that would launch a thousand franchised dealer lawsuits) and the loss of cash flow would doom GM.
It’s the ultimate quandary. GM can’t afford to bolster its brands with distinct and appropriate vehicles and effective marketing. But The General can’t not feed them– else the brands will wither and die and take GM down with them. This is, of course, exactly what’s happening right now.
Bankruptcy protection provides one way out: an escape from all GM’s dealer and brand commitments– at an unknown but cataclysmic cost to consumer confidence in the company. Otherwise, there’s only one option. GM must replicate their HUMMER strategy and stop all corporate support for Buick, GMC, Pontiac, Saab and Saturn dealers.
We’re talking about cutting off all product development and advertising– other than promoting current sales. Crucially, GM must also refuse to pay its franchised dealers to close; the store owners will eventually see there’s no future and take appropriate action to shutter their stores (i.e. disappear like Isuzu).
As GM slices spending on soon-to-be dead brands, it must also pour all of its remaining resources into Chevrolet and Cadillac.
Any forthcoming product refreshes should be channeled into these two remaining brands. For example, the Traverse CUV remains a Chevrolet, the GMC Acadia and Saturn Outlook go away, and the next Buick Enclave becomes a Cadillac. In this case, GM pares four vehicles into two, and the Lamda- platformed Chevy and Caddy are clearly differentiated in price, design and amenities.
By the same token, the Australian Pontiac G8 becomes a limited edition Chevrolet, while the rest of Pontiac’s lineup takes a dirt nap. The next Buick Lucerne becomes Chevrolet’s large car (which its current lineup lacks).
GM can and must rearm Chevrolet and Cadillac with unique, differentiated vehicles supported by marketing that best defines each brand. Vehicles that will make consumers stand up and notice.
Chevrolet can take the fight straight to Toyondissan with refined, value-priced Chevrolet products, boldly and widely marketed. Who knows? Chevy might even start a genuine American Revolution. Meanwhile, with unique styling, concentrated engineering and “American” comfort, Cadillac could return to its upmarket roots as the “World Standard,” competing with the Germans and Japanese.
As the Robert Burton said, there’s many a slip 'twixt the cup and the lip. There’s no guarantee that GM could survive with two excellent brands. But it’s a sure bet that it CAN’T survive with any MORE than two brands. The old adage recommending concentrated firepower is no less true for carmakers than military campaigners.
but why kill the brands?
What stops GM from selling the Buick Lucerne as the luxury choice at a Chevrolet dealer, or the entry choice at a Cadillac dealer? It could still be a Buick.
The problem is not only “too many brands, models and dealers”, but also differentiation within the line-up. Buick could still exist and fill a need in GM:s portfolio, if there where no other similar choices at Chevrolet and Cadillac. And still be a Buick.
The problem is Buick is supposed to be a luxury brand. GM already has that in Cadillac, and to a lesser extent Saab (or vice-versa). GM is trying to sell three different luxury brands with badge engineered models.
Do you see Honda, Toyota, or Nissan with a third luxury brand outside of their respective upgrade brands? There’s a reason for that – they know it doesn’t work.
Buick and Saab are not needed in any way in GM’s lineup. There’s no reason they couldn’t do a two brand solution like their competitors are doing.
Buick and Cadillac is different in the way that Mercedes and BMW are different, or Volkswagen/Audi, or Rover (back in the days) and Jaguar. Luxury brands, similar prices, different bying demographics. There have always been a differentiation between old money/noveau riche.
It reminds me of something I read about the old Jeep Grand Wagoneer. AMC was quite stunned when they realized that the net income for buyers of that car was twice the size of any other american car. The demographics showed that it was a popular third car for buyers of Bimmers, Benzes and Bentleys. People that needed a luxury suv in Aspen. People that wouldn’t touch a domestic with a stick a mile long.
I still don’t see the problem with my hypothesis.
Convert ALL dealerships in NA to either Chevrolet or Cadillac (even offer them a few dollars for renovation costs) and hybridise the line ups (e.g instead of having the same pick up truck over 3 brands just have the Chevrolet Silverado under one brand, cut product overlap etc). Then, let economics do the rest.
The dealers would still be selling GM cars, doing exactly the same job as before and GM would still supply them cars it would just be a name change. Also, the beauty with this idea is that because ALL dealers would be either Chevrolet or Cadillac, this means there will be more dealers fighting for customers. The weaker dealers will die off saving GM the headache (and cost) of buying dealers out.
Trouble is, this will work in NA only. GM has a severely screwed up branding problem globally.
In the UK, we have SAAB, Vauxhall/Opel and Chevrolet. There no need for 2 of those brands. Chevrolet would be the best brand to go with (since it would make more sense globally), but the problem is, their line up doesn’t match SAAB or Vauxhall/Opel’s. which means, GM will have to convert Chevrolet’s line up to appeal to all 3 market segments (i.e Euro cars, luxury Euro cars and budget cars), then convert customers over to the Chevrolet brand. In the long run, this will make more sense. Organic growth yields better customer retention, plus you only have one or two brands to worry about, rather than a fragmented market. If GM had Chevrolet as a clearly defined marque (same applies to Cadillac) they will be much more dangerous to Toyota and Honda. Dare I say it, they may even crack the Japanese market? The Japanese like American marques (i.e Harley Davidson) so a series of good fuel efficient cars marketed under the Chevrolet brand might help? Bit of a long shot, but worth a go.
But hang on, what about Australia? What about Holden? Could GM do the same trick there? I don’t know.
I think the more pertinent question is:
Do GM have the time and money to save their branding before Chapter 11 comes?
To stop bashing GM for a moment. Last year, for a lecture, I ran the numbers for Lincoln Mercury advertising versus BMW ditto; also comparing the size of incentives, etc.
For those who wish to know, Lincoln Mercury was offering 72 month 0% financing to get rid of its luxobarges — while BMW wasn’t.
To achieve this staggering relationship with its customers, LM was spending five times as much money on above-the-line advertising as BMW!
But the editorial has it exactly right — build the brand, and your customers will know where to find you, and will be polite enough to be pleased that you’re willing to sell them a unit, at your asking price (the hotter the brand, the shorter the haggle).
GM, on the other hand — Ford, on the other hand … sigh.
We need to hear from a dealer. Just what do dealership contracts say about GM’s covenants for supplying product, parts and marketing supporting? Do they contain clauses that automatically terminate the agreement in, say, ten years unless mutually renewed?
A de facto termination (destructive actions seen as acting in bad faith) could provoke just as many lawsuits as officially walking away from the stores.
Hmm…I don’t quite see Buick and Saab as being redundant, more like Buick and Caddy, then Pontiac and Saab. The real problem is the lines are so blurred through overlapping models that the unique pieces don’t stand out. Saab is unique with it’s turbo engines, while the performance brand, Pontiac, is saddled with rebadged garbage (G5, please stand up).
The lines just need to be clearly redrawn, eliminating Buick, selling Saab (can they even do that at this point?) or just eliminating it, and even keeping Pontiac, specifically to be the performance brand. I guess Saturn gets the axe as well.
As some have said before (me too), I have no problem with platform sharing, if it’s done smartly. But having the same damn vehicle with different logos on it over 4 divisions, with only an option package standing between them, is flat-out dumb.
Elias has it right. Much blogging is about the past. Staying in business is about the future. Chrysler had a roller coaster ride against Ford And GM without the foreign brands. That old game is over and the new game is far tougher, in fact it’s playing in a higher league. It is time to marshall the resources instead of waiting for the brand band aids to kick in and the fuel crisis to be over. The can has been kicked beyond 2009 for profitability using the newly pruned GM. If GM has to wait until 2010 for profitabilitiy, they might as well use the time to stop the divisional and model nightmare. First these divisions are really fictions and have been for a long time. They really are badge engineering on a grand scale. Every dollar spent on new grilles, tailights, brochures, newsprint ads etc. detracts from real product content. It makes the Job of the competition even easier. They funnel all their resources into limited products and still have money left over for those extras called profits. Imagine if GM & Ford ever got to that point. But as Elias says, they either try and get there quickly or they are history. Every car and truck from GM has to be as targeted as the corvette is in the sports car market. Can they do it in time? This is the question, it is doubtful however, that the present leadership can pull this off. They live in the past, it won’t return not in 2010 not ever.
KatiePuckrik ,“Convert ALL dealerships in NA to either Chevrolet or Cadillac”
I’m not sure they can do that. If I buy a franchise there usually is some language defining geographic or territorial rights to exclusivity. I seem to recall that Blockbuster had this problem when they bought some smaller video store chain and converted them to become blockbuster stores. Their franchisee in the city where the smaller chain existed sued because they had paid for the right to be the exclusive blockbuster franchisee in the city.
Damned if you do and damned if you don’t but GM either ch 11 or ponies up some money for the dealers either way.
I have a question on the “product starvation” approach.
Couldn’t this also open GM up for lawsuits from the dealers?
But I agree, Chevy and Caddy only. The SS badge can cover performance and the true competition is not “euro” in the mainstream market so don’t worry about that, it’s a distraction.
They will have to win toe-to-toe with the Camry and Accord. People quack about delivering a uniquely American alternative-a side attack if you will.
Sorry kids, Toyota and Honda were given the opportunity to redefine the “American sedan” and did. They are what the buyer sees as the “American Sedan”. IMHO.
Cheerio,
Bunter
Bunter
I’m not a lawyer but I think they can starve them of real product developement and still do the minor trim adjustments and proclaim that they are fullfilling their contractual obligations. New for 2010 sporty Indigo red paint. Lorenzo at AE thinks this is already in the works.
Cadillac is one of the few brands with any value. so why not sell it? A Cadillac/Pontiac deal with Saturn or GMC thrown in for free would give the general some funds to work with plus unload some of the dead weight.
selling Saab (can they even do that at this point?)
Hey, why not sell give away pay someone else to take brands off their hands? Put all of SAAB’s assets (brand rights, current platform designs, maybe a factory or two) and liabilities (dealer contracts) on the table, and see if anyone takes. No takers? Throw a hundred million on the table with it. Then $200M… $300M… eventually someone will bite.
Do the same with Buick and Pontiac. Tata will take on Saab to enter the Euro market. Toyota gets Buick to wage war in China. Honda converts Pontiac into a “youth brand” to compete with Scion. GM “right sizes” themselves, other manufacturers feast on existing brand equity, product development, and manufacturing capacity. Dealers still have something to sell.
Amen Ken.
I’ve been saying the same thing online for years now.
There isn’t anything any other GM brand does (except for HUMMER) that Chevrolet and Cadillac aren’t already doing or couldn’t do better. That was a fact back in GM’s heyday, and it’s a fact today.
The sooner GM rationalizes their North American business structure the sooner the company can be whittled down to be profitable and fast-movin gin today’s market, maybe even relevant again.
There is no possible excuse to stretch the company thin trying to prop up eight brands with 20% and falling marketshare in a contracting new car market. As we’ve known here at TTAC and seen coming it will not fly.
Convert ALL dealerships in NA to either Chevrolet or Cadillac (even offer them a few dollars for renovation costs) and hybridise the line ups (e.g instead of having the same pick up truck over 3 brands just have the Chevrolet Silverado under one brand, cut product overlap etc).
They already have too many dealerships. This would put more dealerships into direct competition with one another and probably create overlaps and redundancies among certain owners who have multiple dealerships. I doubt that this could work very easily, that it wouldn’t subject them to litigation, or that it would necessarily produce positive results.
I would leave:
Chevy: bread&butter cars. This would go straight against Toyota/Hyundai/Ford
Cadillac: Luxury cars. Sporty luxury
Buick: Luxury cars. It also shines itself in China, so it’s a keeper. Conservative luxury
The solution between Cadillac and Buick being not perfect =(
Saturn: Locate it straight against Honda/Mazda/Kia. And also could be what Olds used to be: engineering showcase.
Saab and Hummer, sold. Both have a market niche and are not so damaged, so they may be able to survive.
GMC… they could use this brand for SERIOUS commercial vehicles: Class 8 trucks for example, Sprinter like vans. Similar to what Iveco is for Fiat. Otherwise, it has to go.
Pontiac… poncho has no longer a place. The G8 and Solstice can go to Chevy, or just the G8 as Saturn already has the Sky. And the G8 can be a proper Impala/Caprice.
I doubt they can kill Holden in Australia. Same with Opel/Vauxhall in Europe. Daewoo in Korea, etc…
It’s a fairly simple equation:
GM have let their marques (and other problems) fester for so long that the amount of work they’ll need to fix it increases. And since they have little in the way of resources (i.e money, time and competent management) the amount of work needed to fix the problems will carry on increasing until the only option is go semi nuclear (chapter 11).
It’s like I’ve said all along, Sloan’s business model doesn’t work, is inefficient and is seriously flawed. Mind you, current GM management did help GM’s mighty fall from grace.
I still maintain that GM have good engineers and maybe (just maybe) they might benefit from finding a job at Hyundai or Honda where they can let their flair run about a bit. It might even spice up their cars a little!
As for my idea of converting dealers to Chevy or Caddy, I didn’t account for the laws being stacked firmly in the dealers’ favour. But again, I go back to my original statement of letting problems fester for so long that you need a similar amount of time (and resources) to fix these problems.
Another potential problem is, if GM DO cut down to Chevy and Caddy, how do you convert the GMC, Pontiac, Buick, SAAB, Saturn and Hummer customers over to the 2 brands? Statistically, some customers will go elsewhere (After all, there’s a reason why they didn’t pick a Caddy or a Chevy). Which means GM will haemorrage more customers at a time when they need all the customers they can throw incentives at get into showrooms.
It really isn’t a pretty picture for GM, but they may have a (last) trick up their sleeve. Oil prices seem to be steadily coming down. Maybe enough to spark an SUV interest…..? That’s assuming that the customers all have the memory of a goldfish……or a TV weathergirl.
just because CURRENT management has failed, and is failing, to properly market our brands is NO REASON to think about elimination (unless of course you’re talking about eliminating current management). find someone who can move the metal and most of today’s problems go away.
Axel Says:
July 21st, 2008 at 1:05 pm
Hey, why not sell give away pay someone else to take brands off their hands?
GM needs to make those other brands disappear, not just sell them off. If GMC, Buick, Pontiac, Hummer, Saturn and Saab still clutter the American landscape, to the casual observer nothing will have changed. GM’s efforts to “refocus” Cadillac and Chevy will be lost in the shuffle.
I strongly believe that only radical, highly visible surgery has a chance to save GM given its present dire circumstances. This means Chapter 11, ditching the franchise agreements and getting out from under existing UAW contracts. This would allow GM to reduce its brand portfolio to two brands that could be (for once) separate and clearly defined. Its scarce resources could be lavished on a small number of great models instead of 80-odd mediocre ones. Its dealer network for each brand could be reduced to the the biggest, best and the brightest. And GM could present itself to the world as a company that is truly revolutionizing itself — in company size, product portfolio and quality — to meet the challenges of the modern world.
If GM doesn’t do something radical now, potential customers have no reason to believe anything has changed. And nothing will have changed. GM will keep doing what its been doing until it’s out of cash and forced into BK in circumstances where it has no resources to carry out a plan.
If Rick Wagoner actually pulled this off, his legacy could be as “the guy who put GM back on track” instead of (more likely) “the guy who drove the last nail into the coffin that Roger Smith started.”
Katie said:
“Another potential problem is, if GM DO cut down to Chevy and Caddy, how do you convert the GMC, Pontiac, Buick, SAAB, Saturn and Hummer customers over to the 2 brands? Statistically, some customers will go elsewhere (After all, there’s a reason why they didn’t pick a Caddy or a Chevy). Which means GM will haemorrage more customer at a time when they need all the customers they can throw incentives at get into showrooms.”
I initiated an informal thread at one of the Saab BBs recently, asking if they would consider another GM brand if the corporation basically killed Saab…my impression was that a few (including myself) might look at Cadillacs like the CTS….but most would just jettison GM and look elsewhere for their next new car, with other Euro brands being the most cited.
OTOH, some were openly hoping that GM would sell the brand off to someone who might be less schizophrenic in their management of it.
Nevertheless, I have doubts that GMNA would care one way or another, the brand’s demographics aside. The numbers may be too small, at least here in the US, to make any attempt to keep them.
I for one hope that Saab is given a second chance to succeed (either on its own or as part of a competent auto company). In a world where so many cars are just so plain as to be almost invisible, Saab really had a distinct, innovative approach that’s been (nearly) fatally diluted in the morass that is GM.
GM’s brands are long overdue for a restructuring in the U.S. But some should definitely live on elsewhere (i.e. Buick in China due to its perception there as a status symbol).
I for one hope that Saab is given a second chance to succeed (either on its own or as part of a competent auto company).
Saab is already dead, it has no chance of succeeding at all as an international company with a North American presence.
GM should either sell it or else plan a retreat back to the homeland ala Peugeot, Renault, etc. Saab might be able to work as a niche European brand within Europe, selling one or two different models, but it can’t afford to sell low volume world cars to Americans. Let GM Europe operate it and otherwise keep the Americans the hell away from it.
With such low sales volumes, the cost of US federalization alone probably ensures losses. Staying in the US should theoretically allow them to reduce their costs, but in practice, it most surely adds to them.
I would reduce the number of choices down to:
Chevy, mass market sedans and trucks; keep the Corvette, if it is selling.
Buick, Lucerne and luxury with blunted edges
Cadillac, Luxury with edge, ostentatious bling bling
Pontiac, Performance vehicles and Solstice type car
Saturn, Small high mpg cars. City cars.
Saab, gone, sell to Ta Ta.
GMC, gone or sell Chevy trucks at the dealerships.
Hummer, Euthanasia
Stop the overlapping and brand dilution. Keep brand identification simple. If they want to appeal to all consumers do it within the brand identification.
Convert each dealership to sell all brands and let market forces get rid of the poor performers. As it is GM is bloated and needs to lose a lot of the fat, ugly weight.
Why even bother? GM is dead. Let’s write the obit.
I’m going to agree with Ingvar on this one. Old money VS new always hit me with cars. WE wanted a Rover 2000 cause we always had one & it was understated. Today Caddy (it seems to me) is Bling Bling. I’m not sure of their demo for the sedans but the Escalade seems young. Unless old farts love sub wofers.
Forget “we build excitment” they build chevy’s. But Buick was advertised as (in the 70’s) The Doctor’s Car by Glenn Ford. In those days we all knew the doc had $$ but he/she didn’t want to be a show off. Thus the understated refinment. Keep Chevy, (Everyman’s car) Caddy & Buick.
SUVs? Chevy & Escalade.
When the obituary of General Motors is written, it will be concluded with: “in its final years, GM reduced its divisions to Chevrolet and Cadillac, which only exacerbated the steady market share losses the company experienced over several decades, accelerated in the early 21st century”.
What this editorial is really calling for is the death of General Motors. With only two divisions, it would have to rename itself Chevrolet Motor Company, hold Cadillac as its luxury division, and face the brave new world of the ubiquitous bowtie as the corporate face.
More focused with increased liquidity? Yes. Stronger? Debatable.
If we want to stretch the battlefield analogy, going in with your most powerful field pieces may seem impressive on paper, but it’s an intricate strategy with supporting players that wins the day. As with the shuttering of Olds in 2004, customers will be running for the exits if in one fell swoop six divisions were cut in North America. It would be the next worst thing to declaring bankruptcy.
I know that this editoral was written with the best intentions for the company’s survival in mind. However, I wonder if the cure would be worse than the disease in this instance.
What this editorial is really calling for is the death of General Motors. With only two divisions, it would have to rename itself Chevrolet Motor Company, hold Cadillac as its luxury division, and face the brave new world of the ubiquitous bowtie as the corporate face.
This business model essentially works for Toyota. I’m not sure why it would be so tragic for GM.
There simply isn’t any way for GM to maintain eight brands in North America and achieve profitability. It might be able to maintain two “real” brands and ignore the other six, but it can’t succeed if it tries to save all eight of them.
Really, two, three or possibly four would be more than enough. But those have to be very good, and not just designed for bleeding, as they are now.
pch101:
This business model essentially works for Toyota. I’m not sure why it would be so tragic for GM.
Let’s not be naive. Does Chevrolet have the same brand cachet as Toyota?
I’m certainly not calling for the status quo. One would have to be a moron to advocate as such. However, I am stating, with the precedent of 190 Deathwatches for examples behind us, that GM could be run smarter, and as an earlier poster said, many of the problems we’re seeing today would dissipate. Only then would an assessment of brand retention be worthwhile. Much is made of the “damaged” brands within GM; I am arguing they are all damaged and superior product will be the only way out of it.
Does Chevrolet have the same brand cachet as Toyota?
No, it doesn’t. But it’s not enough to stop there — you have to ask yourself why it doesn’t.
Toyota has brand equity because time, effort and money were invested to create it. It didn’t have any when it started it, it didn’t create it overnight, and it wasn’t easy to get. It’s much easier to create brand equity for a couple of brands, than it is for eight of them.
GM is fighting an eight-front war here. That’s a recipe for failure. The multiple brand system worked fine when the company was totally dominant and the competition was weak, but it can’t work now with so many tough rivals who have plenty of advantages.
Chevrolet is the strongest brand GM makes by far and it’s GM’s only mainstream brand that is actually somewhat competitive with Toyota.
Everything else is simply sapping resources from making vastly better Chevrolets and promoting them properly.
86er, with GM’s current array of brands the company will be forced into bankruptcy whether they like it or not.
And I really doubt anyone out there would care if those brands went away. Oldsmobile died, the car buying public didn’t even blink. It would be no different for Saturn or GMC or Buick or Pontiac. All of those brands are completely irrelevant, unlike Chevrolet and Cadillac.
pch101:
No, it doesn’t. But it’s not enough to stop there — you have to ask yourself why it doesn’t.
Toyota has brand equity because time, effort and money was invested to create it. It didn’t have any when it started it, it didn’t create it overnight, and it wasn’t easy to get. It’s much easier to create brand equity for a couple of brands, than it is for eight of them.
GM is fighting an eight-front war here. That’s a recipe for failure. The multiple brand system worked fine when the company was totally dominant and the competition was weak, but it can’t work now with so many tough rivals who have plenty of advantages.
I agree with all your points. As I said, the system is broken. No one is disputing that.
But we need to be realistic. Toyota does well because its products, and by extension it as a company, inspires confidence in its customers. Shuttering six divisions in one fell swoop does not inspire confidence in me to go out and purchase a GM product, does it for you? One’s mind inevitably leads to this thought: “how long before the rest falls?”
We could get into the minutiae of various reliablity studies, for example. Just because Chevrolet is the dominant division, does that mean that is the company that GM (or what would be left of it) wants to put its “best foot forward” with? Low customer retention, low conquest rates, higher than average repairs reported. Yes, sounds like the division I want to get behind going into battle, as it were.
Now, certainly in a 2-division GM universe these statistics would improve, almost certainly they would. But I say that getting from here to the there posited in this article is nigh impossible, for the litany of reasons already well documented in this space.
I’m as amenable to the armchair quarterbacking as the next, but let’s find a way for GM to emerge from this morass, not by playing favourites with one division over another. We can all agree that GM is a global company. Kill Buick? Oh wait, there’s China. Kill GMC? Oh wait, the Sierra sells in equal numbers to the Silverado in Canada. There are many more even stickier scenarios to contemplate.
Shuttering six divisions in one fell swoop does not inspire confidence in me to go out and purchase a GM product, does it for you? One’s mind inevitably leads to this thought: “how long before the rest falls?”
There is no easy solution. But it comes down to this: companies make money by producing revenue, not by cutting expenses. A company without revenue is going to fail, the expenses just determine how much time that they have left.
GM needs to take a brand or two and make it work. Really work. That inevitably requires that the others get back burnered while the favored son or two is made into something viable.
There seems to be absolutely no plan for doing this. Personally, I’m not so hung up on killing Pontiac as I am about making Chevy and Cadillac much better.
However, that focus will most likely lead to the inevitable death of those that didn’t get the attention. But I suppose that two or three strong brands would be much better than eight equally dead ones.
86er Says:
July 21st, 2008 at 3:24 pm
However, I am stating, with the precedent of 190 Deathwatches for examples behind us, that GM could be run smarter, and as an earlier poster said, many of the problems we’re seeing today would dissipate. Only then would an assessment of brand retention be worthwhile.
In a perfect world, GM would fix its broken brands before unloading them. But (1) has GM shown a talent for fixing broken brands so far, and if not, why would that change now?; and (2) GM doesn’t have the time or money to try to resuscitate all of its brands.
GM’s house is on fire. The time for contemplation, studies and white papers is long gone. GM needs to act quickly and decisively or its going to be left with ashes.
I think killing the brands would be a solution if it could be cleanly done. But since it cannot, then the brands need to be trimmed.
You should be able to house a staturn/pointac/buick dealership in one location
Chevy in another, and caddy somewhere else.
Saab – they barely exsit, but then again they aren’t competing against other GM brands so whats the harm.
the editiorial claims these brands ONLY make up 8.1% of the market. And to kill them off wouldn’t hurt.
IMHO, thats a huge blow, what car company wouldn’t want 8% higher sales?
Please remeber, that to replace 8% of lost sales you need to increase other sales by 8.7%
pch101, from my understanding speaking to GM employees the corporation has already done something similar to what you’re referring to.
Now, I may be misquoting the terminology, but my understanding is that Chevrolet, GMC, Saturn and Cadillac have been placed into “first priority”, while Pontiac, Buick, Hummer and Saab have been been placed into the secondary stream.
This strategy may be unique to Canada, where I reside. I can only speak anecdotally without supporting reference here. I would be pleased to hear from someone on the “inside” if what I’ve said is accurate.
Cicero:
In a perfect world, GM would fix its broken brands before unloading them.
But aren’t we also assuming a “perfect world” scenario in terms of unloading the “broken brands” as they sit now? State franchise laws and union obligations, for example, which has already been established cannot be magically expunged in bankruptcy protection?
To your other point: indeed this series is calling for a renewed GM (or Chevrolet Motors, in my estimation) to rise phoenix-like from the ashes. I believe Robert has stressed this from the start.
Now, I may be misquoting the terminology, but my understanding is that Chevrolet, GMC, Saturn and Cadillac have been placed into “first priority”, while Pontiac, Buick, Hummer and Saab have been been placed into the secondary stream.
On paper, that may be true. But there is no way that GM can brand the Aveo as a Chevrolet, and pretend that it is prioritizing Chevy as a brand.
Ultimately, it is products such as the Aveo that are killing Chevrolet. It tells the market that Chevy’s are cheap, second-rate compromises that are to be considered only by those who can’t do better.
Since the market for these cars skews young, this message is being sent to people who have decades of car purchases ahead of them. They are going to spend those decades shopping somewhere else, just as their parents did.
On paper, that may be true. But there is no way that GM can brand the Aveo as a Chevrolet, and pretend that it is prioritizing Chevy as a brand.
Ultimately, it is products such as the Aveo that are killing Chevrolet. It tells the market that Chevy’s are cheap, second-rate compromises that are to be considered only by those who can’t do better.
Since the market for these cars skews young, this message is being sent to people who have decades of car purchases ahead of them. They are going to spend those decades shopping somewhere else, just as their parents did.
Well yes, I know what you mean, but we’re getting really tangential here.
I never felt like I was compromising when I still had my Silverado. But I will desist here lest this thread go off into dangerous new territory.
You can`t just leave chevy and Caddy, there is a too huge price and perception gap. While chevy is mostly a korean cheap rebadge with a couple of exceptions, caddy is still perceived quiet American and expensive. But Cadillac in its luxury category is not better than any other US division in any other category whether Buick or Pontiac. cadillac is just the most valuable within Gm, but is still lagging behind germans and japanese as other gm divisions. Closing divisions just shows inability to build cars, and is not a solution, you already closed Oldsmobile, Geo, and it didn`t help anyway. leaving Caddy and Chevy will just drag time before one of them has to be shut and left alone- most likely with 100 percent korean rebadges. ASk yourself why people don`t want to buy domestic cars- and answers are always the same, like old gramaphone,low quality , low fit and finish, rebadges, poor diversity, obsolete technologies, long overhaul cycles,faked American origin.
Ok, let`s analyze who would buy American cars.
Patriot- likely not, because he will find out that most of domestics are foreign platformed.
Feinschmecker- probably not, will be disappointed in quality.
Individualist- probably not, will be afraid of clones from other dvisions.
A thrifty person- probably not, will go to koreans ,and save in long run.
a brand whore- probably not, will go to brands with names and reputation.
a student- probably not, if he can at least read, will go for a used japanese one.
The list goes on… and on, like Duracell bunny.
I never felt like I was compromising when I still had my Silverado. But I will desist here lest this thread go off into dangerous new territory.
Actually, that is very much on point.
We can talk all day long about what the branding should be, but here is what it actually is:
-Chevy: Corvettes, trucks and rental cars
-Cadillac: Trucks, cars for old folks and a bright spot or two
-Pontiac: Rental cars
-Buick: Cars for old folks, and rental cars
-GMC: Trucks
-Saturn: Supposed to be a Toyota, but isn’t
-Saab: Who knows, who cares
-Hummer: Trucks that piss people off
The only reasons that Chevy is the one that stands out as being worthy of saving is that it has the highest sales volumes, people really do like the trucks and the Corvette is there for exploiting as the natural halo.
The domestic automakers have become known for selling Corvettes, trucks, rental cars, and cars for old people. That sort of branding is a problem.
Fixing eight of these at once is just impossible. The GM fans may think that they are all different, but in the eyes of the public, they all look pretty much the same.
ajurisb, you are saying all the right things but the conclusion you draw is the one from GM managment, that they have the time and capital to fix all of their divisions. They have neither and the Elias editorial says that. If you wasted and squandered 20 years or more doing the wrong things, to even think there will be a payback by hangong on for all of that wrongheaded decision making is ludicrous. Your point that GM might not make it with only two brands is well taken. But they certainly won’t make it with eight.
I’ve been saying this for years, too!
I notice a lot of commenters are still trying to find a reason to keep multiple brands around – “performance” “Conservative luxury”, “big trucks” – but this is EXACTLY the thinking that got GM in trouble to start with! Benz and BMW don’t need multiple brands to differentiate different micro-slices of luxury (Maybach and RR don’t count, being absurdly low volume halo exercises), Mercedes and Volvo have (had) no problem selling serious trucks under the same brand.
Pontiac as a performance brand? The only performance car of any sort GM sells is the Corvette – the, ehem, CHEVY Corvette! Pontiac, GMC and Buick are total dead weight, and they are completely un-sellable as brands. Same with Saturn (keep the product, dump the brand). Hummer and Saab can both be sold – for about $50M each in my opinion – to either TATA or the Chinese.
Finally, about the concern that all these brand loyal customers will defect: 1) They already are, in droves; 2) How about GM fesses-up and tells them they’ve been buying re-badged Chevys and Cadillacs all along? 3) It’s the product, stupid. Make a good vehicle and, once the customer has forgotten the last 40 years of bad vehicles you made, they will beat a path to your door. Pandering to label-myopic customers has been GM’s game plan for the last 50 years. Game over.
Convert ALL dealerships in NA to either Chevrolet or Cadillac (even offer them a few dollars for renovation costs) and hybridise the line ups (e.g instead of having the same pick up truck over 3 brands just have the Chevrolet Silverado under one brand, cut product overlap etc). Then, let economics do the rest.
State level franchise laws in the US would prevent this. That’s why it cost GM a billion dollars to shutter Oldsmobile. Also, one problem GM faces is the number of dealers is way too high. Toyota and Honda have a much smaller dealer base, sell a lot more cars per dealer, and don’t have dealers competing with each other on price so much. Toyota has about 1200 Toyota stores in the US, Honda about 1000. Chevy has 4100. Pontiac and Buick have about 2700 each. If you make the Pontiac and Buick dealers into Chevy dealers, you’re going to end up with 9000 Chevy dealers.
Toyota has about 1200 Toyota stores in the US, Honda about 1000. Chevy has 4100. Pontiac and Buick have about 2700 each. If you make the Pontiac and Buick dealers into Chevy dealers, you’re going to end up with 9000 Chevy dealers.
This is, at least partially, helped by the fact that Toyota and Honda have yet to really get into rural areas. If you get outside the big cities, pretty much every town of 10,000 or more will have at least one of each of Ford, Chevy, PBG, and Dodge/Chrysler. Not too many have a Honda/Toyota dealer. Though if they ever do expand into rural areas, that could really hurt the Big 2.5.
Ah, my mantra returns:
“Chevrolet and Cadillac, everything else is noise.”
The only part of the article that is incorrect is the headline, 20 years ago was the time to kill everything but Chevrolet and Cadillac.
There’s no question it’s very late now, but it absolutely has to be done one way or another if GM is to every become a stable, profitable company again.
GM cannot at this point afford to cut the brands. Need to buyout dealers, etc. and they don’t have the money.
There’s no easy solution to this without the information only people inside GM knows. An d by this I mean: dealers, employees, managers…
You can discuss forever.
This problem doesn’t have a “simple” or “single” solution.
Honda Lover: Totally agree. GM is dead, all they are doing now is throwing what is remaining on the balloon overboard (except the rich executives)to avoid the electrical power lines staring them in the face. All the talk anymore is about severe reductions, this is a company on its final gasp leaving a long line of tears behind.
I disagree with two points;
1)That GM management isn’t stupid. They know the brands are damaged but they either don’t know what to do about it, or worse, they do know and still don’t do anything. Either way, they’re stupid.
2) Chevy and Caddy.
Caddy is just noise. Yeah, here’s a plan we’ll keep our #1 division in sales volume, and also our # 5 division. WTH? Last year Chevy accounted for 58% of GM’s NA sales. Caddy accounted for about 5.5%
Talk about wasting precious resources and splitting attention to deal with things that don’t matter.
Lot’s of people like the idea of keeping Caddy because it supposedly occupies the opposite end of the spectrum from Chevrolet. But it doesn’t. The CTS is priced down almost in G8 territory. Hell and Impala SS is 30K.
What’s the chances GM can keep Chevy and Caddy separate? The chance is zero, as we already see from MSRP evidence. A GM consisting of Chevy/Caddy would end up with Aveo, Escalade, and a bunch of indistinct Chevillacs in between.
Caddy is already a seriously damaged brand. Sports cars, trucks, SUVs, hip young persons car, old persons cars, – they’ve lost the thread.
Buick actually makes more sense to keep (not that keeping anything but Chevy makes any sense) because it’s image is still reasonably well defined – understated luxury for old people.
To keep Caddy along with Chevy is to say that one isn’t really serious about this focusing business to begin with. Yeah, we’ll pour resources into Chevy and at the same time we’ll screw around with the 5% solution too.
If GM has the time, talent and money for Caddy, (they don’t) then they have the t/t/m for at least one and maybe two other brands as well. How can you claim they don’t if you advocate keeping Caddy? Why not keep GMC which last year accounted for 13% of GM’s sales?
and who would ever pay full price (sticker price) for a Caddy or Chevy. The public has been trained by GM (and F and C) to expect rebates, discounts, gas cards etc. Like the $10K rebates now being offered by GM on Yukons and Escalades. Now that will do wonders for resale values.
Lot’s of people like the idea of keeping Caddy because it supposedly occupies the opposite end of the spectrum from Chevrolet. But it doesn’t. The CTS is priced down almost in G8 territory.
If Caddy was on its game, it could sell loads of sedans between $30,000 and 50,000 without substantial discounting. They hit this price point with SUV’s, but have been less successful with cars. They are stuck in the bind of having to offer for the money in order to get there, but with the right products, they should be able to get there.
Luxury cars are about margins, not numbers. By sharing platforms but avoiding badge engineering, they can squeeze more out of their R&D on the regular cars and give more affluent customers a place to go.
Buick as a brand is destined to die. It isn’t a brand for old folks per se, but for a specific generation of old folks who are dying off. When they pass on, they are not being replaced by another crop of old folks who share their tastes — the aging boomers like imports, too. Without major surgery, it’s a matter of time before it has virtually no customers left.
Buick as a brand is destined to die. It isn’t a brand for old folks per se, but for a specific generation of old folks who are dying off. When they pass on, they are not being replaced by another crop of old folks who share their tastes — the aging boomers like imports, too. Without major surgery, it’s a matter of time before it has virtually no customers left.
That is definitely true of Buick in the US, but the Buick name does have a lot of value in China. I don’t see why GM couldn’t dissolve the Buick name in the US, but keep it in China. The Chinese aren’t going to know or care that Buick is dead in the US.
I don’t see why GM couldn’t dissolve the Buick name in the US, but keep it in China.
I don’t either. The positioning in China is totally different and there is little product overlap.
A few comments:
First, this is a North American strategy only, not for killing off brands anywhere else. GM’s problems stem from its lack of profitability here, not in GME (fixed once, but may turn to a loss soon), GMLAAM, or GMAP.
Second, this does not require GM to kill the five dead brands today, just simply stop spending money on product development (even rebadging) and most marketing. GM doesn’t have the dollars to resurrect these brands. Let them die from starvation. Sure, some dealers (and their lawyers) may find a way to sue under “constructive termination” but it’s better to be a profitable company fighting lawsuits than one that is certainly going to bankruptcy on its current trajectory. And profitable multi-line GM dealers may think twice about a lawsuit anyways, especially if their Chevy/Caddy stores are minting coin.
Third, Chevrolet and Cadillac serve two distinct markets. Almost all major OEMs selling in the US have two brands – a mainstream brand (Toyota, Honda, Nissan, Ford) and a luxury market brand (Lexus, Acura, Infiniti, Lincoln). While the luxury market is considerably smaller than the mainstream market, it can also be highly profitable with higher contribution margins per vehicle (Porsche for example). While there may be some price point overlap with Chevrolet, it’s among different classes of cars. Chevrolet will have the highest priced GM vehicle with the new Corvette ZR1 at $100 grand.
I would not say that GM management suffers from stupidity. Rather, GM suffers from a pattern of organizational behavior which manages by committee, relies on matrix decision-making, and rewards managers seeking career safety. GM needs to take some risks – like mentioned in the editorial – without knowing whether it will really work or not. But trying to stay the course with seven brands in North America is sheer suicide.
Great editorial and fantastic posts from the usual suspects. Thanks!
Looking at the GM brands, I think only Saab and Hummer would have any value in a sale. I’m assuming that Chevy and Caddy would stay.
Buick only has value in China and it would be suicidal to sell the worldwide Buick nameplate. Toyota and Honda would be salivating at such a prospect. For someone to purchase the name in the US, it would too closely related to GM to generate any great offer. GM loyalists wouldn’t buy Buick’s after somone else buys them because it it isn’t GM anymore and import buyers wouldn’t buy them because it would be thought of as a GM still. So the only people who would a Buick would be those who are extremely loyal to Buick. And, as someone else said, that group is slowly dying.
Pontiac and GMC would be the as Buick in the US. You wouldn’t get much, if anything.
Saturn could have had some value if the Spring Hill plant was a part of the deal, if only because it is relatively new. But since GM is assembling all sorts of GM cars there, it wouldn’t be a part of the deal.
Hummer might have some value in the same way that the Land Rover name had some value. But if Land Rover was really a “throw in” to the Jaguar to Tata deal, then Hummer’s value isn’t much more than that.
Saab has some value to an Asian manufacturer, like a Tata or Proton, that is looking to enter Europe and the US. I don’t think Saab has as much value as Jaguar, which went for $2.3B. It might be closer to a $1B or $1.5B, even if Hummer were thrown in as well.
So the options are, to me, to either try to build up the brands, except for Hummer and Saab which could be sold, or slowly let them wilt away.
A shame that they all can’t just become GM dealers…but as noted, there’d be something like 9000 GM dealers…but there already are–just divided between Chev, Pontiac, etc. What a mess. Maybe they could try the “make ’em all GM dealers” in say, Canada, first, where franchise laws are less antiquated or none-existent.
Are the brands that well defined in franchise laws? Isn’t there any weaseling-room here? GM should hire some lobbyists to just change the franchise laws…
My first GM vehicle is one of those “second rate” imports from Daewoo…a Chev Epica–never sold in the US; discontinued here in Canada, but still sold overseas. It could have been badged as a Chevy, Pontiac, Buick or even Saturn…what difference would it have made? Great car “for the price”…oh that makes it a Chevy!
Cadillac and Chevy have huge brand identities globally…others less so, except maybe Buick in China. GM could certainly keep some brands for some countries, as they already do. But in NA…time to nuke the fridge and consolidate.
I’d like to buy another GM vehicle when it comes time to replace my Epica…but I couldn’t care less if it is badged/branded as a Chevy, Pontiac, Buick or whatever…as long as it’s A GOOD CAR!
Kill (or, if you can find somebody functionally retarded, sell) Saab (ASAP), Saturn (when their newish line up is due for a refresh; IE, in about three years), and Hummer (ASAP). Keep Pontaic/Buick/GMC, with them remaining status quo (IE, mostly rebadges of Chevys). Pontiac/Buick/GMC allows GM to sell vehicles to people who don’t want a Chevy (GMC/Pontiac) or a Caddy (Buick) or who hate their local Chevy or Caddy dealer, and allows the factories to continue to function at something sorta kinda resembling full speed.
Closing down PBG would be a sign that GM is about to go tits up very, very soon; it’s a last gasp of a dying corporation. They won’t do it until the smell of death is in the air. And it isn’t; not yet.
“I would not say that GM management suffers from stupidity. Rather, GM suffers from a pattern of organizational behavior which manages by committee, relies on matrix decision-making, and rewards managers seeking career safety.”
Uh, in my book what you just described is management being stupid. Not simple minded in the sub 70 IQ sense, but doing the wrong things for the wrong reasons. Smart executives do the right things for the right reasons!
The consensus of bloggers seems to be that it is so late in the game that GM willfinally be making the decision as to which lines to keep. The cash will drive the decision and it will come out like Ford will have to do with Mercury. If you have very little money, you cannot retool 8 lines of cars. GM will have to pick the lines that get the upgrades. Because of low volumes and non-existant profits the ones that go will announce themselves. As for who will buy them? Who bought Oldsmobile? These lines will just die, you will see the names at classic car shows after they disappear from use on the street. If that can stop 1 billion a month (the same number someone said it cost to close Olds once and for all) loss, it’s not a matter of being worth it, it’s survival.
Olds was selling a quarter-million cars a year when GM gave up on it. Pontiac still beats that, but both Buick and Cadillac are sicker than Olds was when it got the death sentence. So the nut of the question remains: how to kill comatose brands without either Chapter 11 or enormous payoffs to dealers?
Well, here’s a shot in the dark: how about keeping Buick and Pontiac as import brands? That is, GM’s Chinese operations might assume complete responsibility for designing, manufacturing and marketing those brands. Some components might still come from the US if cost-effective. Pontiac would be sporty coupes. China’s Buick “Roadmaster” would probably sell better here than our version; they understand luxury trim.
The result would be P/B/GMC dealers would still have three brands to sell, in three distinct categories: sporty, near-luxury, and truck. But GM would have offloaded the care and feeding of two struggling brands onto the Chinese affiliate.
I vote for killing Pontiac, GMC, and Buikc at the very least.
Pontiac has only the G8 and the Solstice going for it, and the Saturn Sky is the better car. GMC trucks are no different from Chevy trucks, and what few different trucks there are (commercial grade) can be folded into a regular Chevy dealer.
While the G8 could be folded into Saturn (based on decent looks and handling), that brand doesn’t have much in the way of product either. You could probably move the G8 to Chevy and the Sky to Cadillac (as a baby luxo convertible) and kill off Saturn. The Outlook could go to Chevy (or at least its styling since Chevy will get a version) and the Aura and Astra can be axed.
Buick has three cars. Two of them are twins (Lacrosse and Lucern) and the other is the crossover that Chevy will get. There is no need to keep it. If people want a big car with a soft suspension, GM can offer a “Comfort” package for a Chevy G8.
I am somewhat perplexed by the European market. After all, Peugeout, Citroen, Fiat, Opel and, to a lesser extent, the Volkswagen group offer mediocre reliability at best. And yet, they seem to greatly outnumber Japanese cars on European roads. Yes, Japanese cars are more expensive but the differences can’t be that much greater than they are in North America, particularly when incentives are factored in.
So, could American domestics benefit by employing their European counterparts’ strategies to overcome the (real or perceived) quality gap? Eg. Alfa = passion/flare, Citroen = quirky/cute, etc.
I am a GM fan and know many other GM fans, and I have never seen any evidence that buyers are loyal to a specific GM brand in significant numbers.
There is some brand loyalty at car shows and racing events, but that is all about rooting for old cars, not buying new cars. All the GM enthusiasts I know look at the entire GM product line and choose their favorite. Non-enthusiasts seem to have a strong relationship with their hometown dealership, which has very little to do with the product sold there.
So I think the idea of GM brand loyalists is irrelevant. The days of a “Pontiac man” that will only buy Pontiacs and no other GM brand is over. The hardcore GM fans know the nameplates are meaningless and ignore them; no one else cares. Might as well be one, two, or three brands.
I have to say that this editorial is the best one I have read in awhile. Though I hate for it to happen, I would say that starving the dealers will save the company. It is rotten but it might just work.
Your suggestions are valid too. But is GM listening? Nope.
GM must replicate their HUMMER strategy and stop all corporate support for Buick, GMC, Pontiac, Saab and Saturn dealers.
In Saturn’s case, I thought this had already happened. In, like, 1994.
Just checking!
Contrary to much of this website’s commentary, GM’s management is not stupid. They know that Buick, GMC, Pontiac, Saab and Saturn are “damaged brands” in North America.
How did they get damaged, if not for stupidity?
I realize this doesn’t address the “what would a non-stupid management do now” question, but it does address the question of stupidity.
if Gm must amputate brands, let it firstly be Saab, because it is not American car anyway, and has almost zero US engineering input. The next should go saturn as its cancer has reached main arteries, meaning, there are no US engineered or/ just Saturn branded cars that wouldn`t be copycats.
Actually I have already lost any hopes for US manufacturing. looking at this MTV generation in sagging jeans and 50cent rapper as their God, who would dodge real work better than some spawn in cash box triumph blockbuster, I wipe of the table last morsels of hope.Obese little rolling pancakes from all of the world except home, swarm this once great country.
Sometimes I think, how many times Hammonds and Clarksons have to knock on those interior plastics shouting out loud that they cry cheap, smell cheap and fit cheap. And this HIV of engineering is in any division, and you wonder why sales plummet.Of course there is today huge progress, but this progress is only relevant to competition. If Infiniti makes them better, people go there, and it doesn`t matter that caddy today has better interior than all infinis of mid 90ies combined. today is today.
If Caddy was on its game, it could sell loads of sedans between $30,000 and 50,000 without substantial discounting. They hit this price point with SUVâÂÂs, but have been less successful with cars. They are stuck in the bind of having to offer for the money in order to get there, but with the right products, they should be able to get there.
But Caddy isn’t on it’s game and hasn’t been in decades. GM management will have all it can do to get Chevy on it’s game w/o also fooling with Caddy.
Third, Chevrolet and Cadillac serve two distinct markets. Almost all major OEMs selling in the US have two brands – a mainstream brand (Toyota, Honda, Nissan, Ford) and a luxury market brand (Lexus, Acura, Infiniti, Lincoln). While the luxury market is considerably smaller than the mainstream market, it can also be highly profitable with higher contribution margins per vehicle (Porsche for example). While there may be some price point overlap with Chevrolet, itâs among different classes of cars. Chevrolet will have the highest priced GM vehicle with the new Corvette ZR1 at $100 grand.
Let’s take Corvette first. IMO, it’s a brand unto itself. It happens to be sold at Chevy dealers for historical reasons.
There is always some way to rationalize keeping something. Caddy serves a different market. So would a “tweener” brand, and that would allow Caddy to go up market, making higher margins, while the tweener makes good margins. Then of course there’s a place in the world for a performance brand, so now we have an excuse to keep Pontiac. The demographic for the Enclave shows that Buick’s customers aren’t necessarily dying and never coming back. GMC last year was responsible for 13% of total GM sales so we can’t sacrifice the revenue. There is no end to this. I’ve now justified keeping 6 out of the 8. If we can rationalize a place for Hummer and Saab we’re right back to square one. The line needs to be drawn at Chevrolet. Keeping anything else just shows a lack of seriousness. Let’s focus, but not too much. Let’s try to keep Chevy from dying but at the same time we’ll continue fooling with a dying and badly damaged luxury brand that sells fewer cars than Olds did in it’s last year of life.
Ford and Chrysler aren’t in much better shape than GM, so it doesn’t help the “keep Caddy” argument to point out that Ford is saddled with a dying Lincoln brand (and useless Mercury brand) while Chrysler has gone down market so much that it’s no longer a luxury brand. Toyota and Honda can both afford to put time, money, talent, and their attention into a luxury brand, because their base brands are making money hand over fist. Hell, Honda is making business jets now – you can branch out like that when you’re making money. GM’s base brand – Chevy- isn’t making much (if any) money, and it’s continuing to loose market share.
GM Death Watch 200 is approaching…
I don’t undrstand why everyone buy the hype about Honda and Toyota? GM is by far the industry leader with the best brands. I mean look at what they’ve done! No one else has done this.
First production EV with the volt
Most Hybrid models in production
Largest Hybrid vehicles
Most distand per tank on pickups
Hydrogen fuel cell cars
JD powers top ratings
It’s time to stop believing the pro-japanese hype and come back to realty!
First production EV with the volt
Have I been asleep for two years? Is the Volt out now?
Most Hybrid models in production
More or less the same model replicated over eight brands.
Largest Hybrid vehicles
This is something to be proud of?
Hydrogen fuel cell cars
Most manufacturers have hydrogen cars in development.
JD powers top ratings
Looking at http://www.jdpower.com/autos/ratings/quality-ratings-by-brand/sortcolumn-1/ascending/page-#page-anchor this, it seems Toyota, Honda, Infiniti, and Lexus are all ranked ahead of the top ranked GM brand, Cadillac.
What the UAW article shows is the window dressing that all three domestic mfg. have engaged in. They have put up a facade that they have and are continuing to develop high mpg cars.
The facts are far different. Not one of those vehicles described in the blog sells in volume and some the volt aren’t for sale. Ford also has a hybrid suv but you can’t find it at the local dealer. Why is it that the less than perfect Prius has sold 1 million copies world wide (and will be built here soon) and these other “show cars” are still being trotted out for the auto press?
It comes down to execution and the hidden fact that the domestics don’t have the resources anymore to compete one up with the foreign brands. Let’s take the next GM breakthrough the “volt”. When it finally appears at north of $40,000, Toyota and Honda will have the second generation of high production hybrids out, both south of $30,000. If the volt is better (still hypothetical) how many will care?
Honda and Toyota will take 80-90% of a growing market. Also, they will be developing the third generation of hybrid, all battery, or whatever the technology allows while GM and Ford wonder what happened. Isn’t that what happened with the conventional sedan market the last 20 years?
definitely some good points…as usual, a discussion par excellence on TTAC.
I wish we could get a good investigative journalist on this, who could infiltrate GMs boardroom and get some dirt and thoughts about how they feel and what they think needs to happen. Anonymously, of course.
Pch101: If Caddy was on its game, it could sell loads of sedans between $30,000 and 50,000 without substantial discounting. They hit this price point with SUV’s, but have been less successful with cars. They are stuck in the bind of having to offer for the money in order to get there, but with the right products, they should be able to get there.
There’s a home run right there. Caddy has been off it’s game for about 15 years at this point. The CTS was really about 6 years too late. They definitely let the DeVille, Seville, and Eldorado (before killing it…) languish too long, with mere sheetmetal upgrades and increasing prices. It took GM until 2003 basically to fight the C300 and 3-Series with a mid-size lux sedan? I mean really, the Catera? Cadillac could be right there in the same breath with Lexus, but GM has almost hopelessly screwed them. Hell, if it wasn’t for the Escalade and it’s street cred, would Caddy even be at the pitiful market share it’s at now?
As for Ford, it doesn’t look like they are letting go of Mercury:
http://www.nytimes.com/2008/07/22/business/22ford.html?th&emc=th
But Caddy isn’t on it’s game and hasn’t been in decades.
Hence the need for brand building, but selectively.
Let’s face it — ALL of the GM brands in the US suck, save for Hummer which is well defined but plays to a shrinking market. Nobody would want to begin with brands like this, this is a nightmare for any executive.
But this brand destruction is GM’s true legacy cost, and the company has to live with it. As bad as the brands are, they are arguably better than nothing, so it makes more sense to fix them than to kill them and start over.
The question becomes one of which ones to fix, and which ones to neglect or kill off. I think that Toyota provides a decent model for the US market — a mainstream brand and a luxury brand slotted above it.
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A General Motors consisting of Chevrolet and Cadillac would bring it into line with the two-channel model pioneered by Honda, Nissan and Toyota. Disregarding quality and customer care issues, there are enough decent GM models on offer or in development to fill out two lines. Current franchisees could sell both.
I don’t know if GM franchisees would still have cause for legal action. In my area the GM dealerships are all owned by the same cartel. There is no real price competition. A 30-mile drive up the highway can result in significant savings.
BMW doesn’t need to advertise their “ultimate driving machines.”
Then why do they?
Simple Marketing – keep it fresh in the minds of consumers by reminding them of your presence.
jurisb: “I have already lost any hopes for US manufacturing. looking at this MTV generation in sagging jeans and 50cent rapper as their God, who would dodge real work better than some spawn in cash box triumph blockbuster, I wipe of the table last morsels of hope.Obese little rolling pancakes from all of the world except home, swarm this once great country.”
I hear you! Uh, I think.
DetroitIronUAW: “It’s time to stop believing the pro-japanese hype and come back to realty!
Well, house prices are getting more affordable.
Ronin317 Says:
Simple Marketing – keep it fresh in the minds of consumers by reminding them of your presence.
So they DO need to advertise. Thought so.
Well, yeah, but there’s a difference between branding as such, or advertising in a reactionary manner about 30mpg highway miles. The ‘Ultimate Driving Machine’ piece is the branding, and just fine. But the current “we’re used to high gas prices in europe” ads are foolish, as I’m not sure anyone is purchasing a BMW for fuel efficiency…
By the way, if fuel efficiency is in their blood…where the hell are the Bavarian Diesels in the US?? They’ve missed the boat on that big time. How about a newly developed BMW Turbo-4 in the 1 series? If they could put that car out there with an average of say, 28mpg combined, I’d be all over it.
I agree with most of this. However (and I’m no expert) I could see the point of a few of these brands, though heavily restructured, rather than just kill em.
Saturn is dead. Pontiac is dead (despite my feeling that they could be to GM what Mazda is to Ford….those days are gone thanks to the current market situation…CAFE and high fuel prices severely limit Pontiac’s potential to resurge). SAAB is dead/sold.
Here’s what I’d suggest beyond Chevy and Cadillac, should you not wanna throw everything out.
1) Keep Hummer. Seriously. Don’t expect sales through the roof, but this brand has a serious image. Focus only on the best off-road vehicles on the planet. Do em right and there is money to be made. However, I don’t see potential beyond 1 or 2 models (say a Jeep Wrangler type thing and something a little larger). Hard to justify a whole brand and dealer network for 1 or 2 models. So I can this thing going.
2) Buick. I seriously believe there can be a market for Buick if done just right. Yes, Cadillac is their luxury brand. However, Cadillac’s image is one of bold, in-your-face styling, with European driving dynamics. Cadillac drivers want to stand out among the luxury crowd at every level. Something like a Cadillac Enclave really just doesn’t fit. Cadillac is really a sedan/coupe/ maybe sporty SUV brand. Where I see buick is as a Lexus-like brand. Buicks are classy, quiet, soft, and super comfortable. They don’t stand out and make everyone look at you, but they do coddle you in luxury inside. My opinion this could be a real winner. American styling done to the best world standards with a focus on extreme comfort and quality. Not the latest gadgets. The kinda luxury car people can only get from Lexus today. But a Buick buyer would want American style. Like the Buicks sold in China :)
GMC. No consumer trucks (all Chevy’s). But this brand should stick around for commercial and heavy duty truck sales.
Anyway, that’s my idea. Though again, if you can’t get volumes up enough, the Buick idea would never fly. It would need to be its own dealer network too. So again, extremely difficult but if done right I think could work. Drop dead classy/curvy styling and nothing but top notch interior treatments would be the only way to go. If not, don’t bother.
But sometimes you don’t have those options. Chevy Cadillac does make sense to me. I guess I just have some reservation that cars like the Enclave, if badged as Cadillacs, would really taint the bold style and attitude Cadillac’s have today. Diluting Cadillac’s image would be just as big a mistake as having too many brands.
However, Cadillac’s image is one of bold, in-your-face styling, with European driving dynamics.
Huh? GM could only wish that was true. They’re trying to force bold styling after looking like an also-ran land yacht for most of the 90s. European driving dynamics? I mean, the new CTS is a step in that direction, but it’s far from the image.
The image is more like “rich old white guy soft cruiser” and “bling bling”. Much like the rest of it’s portfolio, GM sat on convention for far too long with Caddy (which is easy to say in hindsight…I guess). You could get in a 2002 DeVille and not differentiate much from a 1996 DeVille…and I’m probably being conservative on that. They’re attempting to change, but it’s painfully slow.
@p00ch
I am somewhat perplexed by the European market. After all, Peugeout, Citroen, Fiat, Opel and, to a lesser extent, the Volkswagen group offer mediocre reliability at best. And yet, they seem to greatly outnumber Japanese cars on European roads. Yes, Japanese cars are more expensive but the differences can’t be that much greater than they are in North America, particularly when incentives are factored in.
First of all, most Japanese cars are less expensive than teir Euro counterparts in Europe. The reason why they don’t dominate the market are:
1) high cost for replacement parts, compared to Euro cars
2) prejudices (“they only do small cars well”)
3) zero interest in higher-priced offerings, like Lexus
4) lack of the models people want (for example Nissan had a successful mid-size car until the mid-90s, the Primera. The last iteration of it was ugly and less agile. They solved the problem by killing the Primera completely)
5) nationalism
6) fuel economy
7) level of equipment: One alternative to my current car (BMW 1-series diesel) would have been a Mazda 3. Rear parking sensors are only available as a dealer-installed option. The available iPod connection sucks.
Generally I like Japanese cars. My first car was a ’89 Nissan Sunny hatchback. Nissan doesn’t make a single car I would consider now though.
Chevrolet, domestic cars, trucks, & SUVs for the masses.
Cadillac, domestic luxury.
Saturn, the best imports of the GM family (from Opels to Holdens to even GM Daewoos).
That’s all a slimmer, trimmer GM needs. I’m not going to mourn the death of Pontiac, Buick, GMC, SAAB or Hummer. They just aren’t needed. ‘Loyal’ customers will get used to something new. The frequent customers of Plymouth, Zayre, and Pan Am did. There will be parts and service to honor those expiring warranties, and steals for whoever wants buy the last of them new or used.
Excellent discussion as usual.
Some ideas:
Chevrolet: Focus in the smart, low cost economical car segment. Merge Saturn into Chevrolet-dump the Aveo and let Saturn make the small car import fighter. Dump the Impala and improve on the Malibu. Move the trucks to the GMC division. Put the Volt and/or two stage hybird technology into a small car. Eliminate all other models (Yes, no Camaro).
Cadillac: Focus in the luxury/sports four door car segment.
Move the SUV segment into GMC. Dump any two door variations of their models to avoid confusion with the Corvette.
Corvette: Focus as the perennial American two seater sports car. Separate Corvette from Chevrolet into its own brand.
Buick: Kill the brand, move the profitable SUV models to GMC. (What does “understated” luxury mean anyway? That seems to be an oxymoron to me.)
Pontiac: Kill the brand. Any potential market for this brand could be filled by the Chevy or Cadillac brands.
GMC: Focus in the light/heavy duty truck segment. Offer the Buick SUV as an Escalade Lite.
SAAB: Gone. No replacement.
Hummer: Move any profitable models to GMC. Kill any other models in Hummer.
Other commentators have noted that GM cannot “Kill a brand” w/o billions in fees. My question is while GM cannot kill a brand can it “suspend” it instead? Thanks for any information.
One last thing: Ensure engineering and build quality are the same from the Chevy to Cadillac to the Corvette to (yes, even that) their trucks. If GM could do that, I believe they would get rid of their reputation for not so good quality in record time.
I hate to admit it – Buick has always had a soft spot in my heart and I have always wished that Saturn would succeed – but you are absolutely correct. When the plane/ship is going down, and LORD KNOWS GM IS GOING DOWN IN FLAMES, you have to jetison any dead weight if you have any chance to survive.
If Honda can do a great job with just two brands (which actually share more than they’re willing to let on), why can’t an American car company? Why isn’t Ford just Ford and Lincoln? [Chrysler has parred down to two brands, but – really – is there any difference between the two?]
What the hell, I’ll buy SAAB. I know they arn’t American but there still is no need for them to go to the Indians or Chinese. I’ll make them rwd so they suck in the snow but make lots of fun with their already turbo-d engines.
Id have to say it would be a horrible idea for GM to even think of dropping any more brands and they know that to. If anyone remembers, GM took a massive hit after dropping Olds and it cost more to drop a brand than to keep it going.
On the good side, GM is planning on selling Hummer and selling brands makes alot more sense compared to dropping them and getting hurt alot more. Although, GMC/Buick/Pontiac are all one brand now, so that elimates two brands already. Then Saturn and Saab in one makes alot of sense to. Although the Idea of the Corvette as a brand, is rather horrible, since the Vette has always been a Chevy model and always should be.
The good thing to is that the brands are getting more and more of an identity with certain models to, and should keep it up. But to get GM down to two brands of just Caddy and Chevy is just plain stupid and would ruin GM more than what they got going for them now.
The biggest difference in the American Cars today and yesterday is character and soul. General Motors had what BMW has now and lost it – recognition of the brand without the emphasis of advertising, and telling folks whom they are. But something changed. Without regard to future needs, GM kept building what they told us we wanted, and it has them circling the drain. Eliminating brands won’t save the company. The same badge engineering continues when everything is labeled a Chevrolet or Cadillac. Chevrolet and Cadillac don’t have the reputation of quality anymore.
In the past, American cars had souls, stories and unique recognition. All of this is gone for GM. GM needs a moniker that gives recognition similar to what Chrysler has barely managed to keep with their four letter world – HEMI. A simple word representing a part – or engine – can go a long way in creating a soul, and it’s not something you can invent and shove at people.
I can’t imagine myself buying any of the current offerings from GM. There should be no need to cut brands. GM just have to find out what those brands were in the sixties when GM was the healthiest manufacturer in the world and make them like that again. That means:
-Saturn could be renamed “Opel”,
-Saab could produce cars powered with 3 cylinder two stroke engines (ok maybe not!), then how about 4 cylinder FWD compact car like the Saab 99,
– Cadillac should make luxury barges, stretched limos, other speciality cars like funeral cars, flower cars and a FWD luxury flagship coupe like the ’67-69 Eldorado.
-Buick should be making only RWD cars mid-size luxury cars, Sportwagons, Fullsize cars with a sportier image like the Wildcat and Riviera.
-Pontiac should make more afordable cars with performance image too.
-Chevrolet should make the fleet cars, from small rental cars to the large RWD cars with small engines for taxis and with big engines for police officers and also the Corvette!
-And maybe Oldsmobile, the FWD king that reintroduced FWD cars to North America in 1966 should come back with an all FWD lineup for FWD lovers who can’t afford buying a Cadillac Eldorado!