As GM gets out its begging bowl and approaches the federal bailout buffet for seconds, it’s got to tell Congress something positive about its bloated brand portfolio. The scuttlebutt: GM will declare its intention to kill Saturn—despite the enormous expense and legal hassles (i.e., more expense). Oh, and let the taxpayer pick up the tab (gee, thanks). BUT, one day in the not too distant future, the artist once known as the world’s largest automaker will file for Chapter 11. And on that fateful day, it will be free to kill brands. So I asked branding guru Al Reis about the maybe decision to deep six Saturn, what GM brands should survive the automaker’s impending C11 and what dangers lie ahead in that regard. The answers may surprise you. Or they may not. But you’re going to have to make the jump to find out.
“GM shouldn’t kill Saturn,” Reis asserts. “Saturn was the perfect entry level brand. The cars were inexpensive, new and different. Plastic panels for low maintenance? Genius. The no-haggle price policy was ideal for unsophisticated first-time buyers . . . Then they made a classic GM mistake. ‘Sales are down so let’s put more cars in the showroom.'”
Of course, GM already has an entry level brand: Chevrolet (in case you got confused with all this branding going on). Reis (of all people) acknowledges the cannibalism and confusion, but still reckons Saturn could make a go of it in a post-C11 world.
“It’s not all about product. Sometimes it’s about brands. Take a badge off a Mercedes and hardly anyone would buy it. Put a Saturn badge on something dirt cheap and reliable and you’d have a decent shot of doing the deal.”
So who else lives? Not Saab. “They haven’t ever made money on that brand. Not once.” Not HUMMER, Pontiac or Buick. (“A guy at Buick once told me ‘We’re going to make the perfect entry-level Buick.’ I said, ‘XXXX, that’s a Chevy.'”)
GMC makes the cut. “Put all Chevy’s trucks into GMC; make it a truck brand. That would clarify the brands and help both GMC and Chevy . . . GMC is a great brand with a lousy name. You could take one of the product names and call it that. Silverado, maybe.”
Cadillac’s good. “A great brand takes a long time to create and even longer to kill. Cadillac’s not dead yet. Not by a long shot.”
And there you have it. In Al Reis’ world, GM = Chevrolet, Cadillac, GMC and Saturn. But here’s the thing: Reis says GM should NOT pare down to two brands. “As sure as I’m sitting here, the branding problem would get worse, not better. GM would dump all their products into two dealerships. Nothing would mean anything.”
At the end of our conversation, I asked Reis his opinion of former GM Car Czar Bob Lutz.
“I met Lutz several times. He’s a charming man. He was excellent from the product point-of-view. But GM doesn’t know how to build great brands. Lutz . . . didn’t add anything to that picture. It’s a shame.”
“Of course, GM already has a entry level brand: Chevrolet (in case you got confused with all this branding going on).”
Don’t forget that, at the time of Saturn’s birth, they also had Geo–a THIRD entry level brand.
Chevy and GMC seem outrageously redundant to me. Not even really badge engineered to differentiate, just the exact same vehicles with different badges. Cut GMC.
And along the same lines, why couldn’t GM (or any of the domestics) publicly make a brand cut, roll the ‘good’ vehicles in the brand that gets the axe to another brand, and just market it that way? “Hey America, the Chevy Silverado is the new GMC 1500. Same vehicle, different labeling. We’re saving your tax dollars, see?” Give the average consumer a little credit here. Or don’t, and have NASCAR lead the brand change, and assume Joe Sixpack will follow.
Wasn’t Ron Zarella GM’s brand guru?
Ignore the “which brands make sense from a theoretical marketing aspect”. What needs to be done is to look at “which brands make sense from a real-world profitability aspect, factoring in things like shut down costs”.
Pontiac and GMC are stupid from a marketing aspect. But, from a profitability standpoint, they are profitable, or at least lose less money being kept than killed (factoring in all aspects-dealer buy out costs, lost sales, lost productivity at factories that make both Chevys and GMC/Pontiacs, etc.). And if you are keeping Pontiac and GMC, Buick gets to stay as well.
Saturn makes sense from a marketing aspect. But it’s a gigantic hole in the ground where GM throws money into; always has been, always will be. So kill it.
Saab and Hummer are also big holes in the ground where GM throws money into-kill them as well.
““Hey America, the Chevy Silverado is the new GMC 1500. Same vehicle, different labeling. We’re saving your tax dollars, see?””
Chevy dealers would be pretty pissed about losing their truck sales, though.
No mention of the other patient on the gurney (Chrysler)?
Taxpayer money going to pay off dealers: jumpstart the economy by spending money to shut things down.
I’ve heard of “reverse psychology,” but is there such a thing as “reverse economics”?
BDB :
February 11th, 2009 at 1:55 pm
““Hey America, the Chevy Silverado is the new GMC 1500. Same vehicle, different labeling. We’re saving your tax dollars, see?””
Chevy dealers would be pretty pissed about losing their truck sales, though.
In this theory, Pontaic/GMC/Buick would be completely eliminated, so you have that backwards.
In practice, dealer buyouts would cost maybe $5 billion dollars or so and the competition would get 50% or more of Pontiac, Buick, and GMC sales (not Chevy), so plants that make versions of Chevy and Pontiac/GMC products (identical except different grills) would lose sales, which would result in losing a shift, which would make those plants go from making money to losing money, or from losing money to losing lots of money.
RNader:
That patient has died.
While Saturn as a brand is probably unsaleable with no seperate manufacturing and pretty much just badge engineereed vehicles, the dealers are unique in GM (with the possible exception of HUMMER).
They are stand alone one brand stores. The no haggle thing is very appealing to a decent percentage of potential buyers. They also have the best customer service rating of any GM store. So why can’t the distibution be sold with no product? Fiat, PSA, or any number of Chinese would have GM’s best dealers selling their brand for the cost of some signs. Wouldn’t this spare GM all the legal costs? Sell the name and distibution to satisfy the franchise laws. The new buyer could simply forgets he bought the name. The dealers probably end up in better shape product wise. GM would probably eagerly sell it and give change back from a dollar.
Some lawyer, please explain why this can’t happen?
1) Chevrolet – Cars and car based SUVs only (no trucks). Include high performance cars such as the Corvette, Camaro, G8, etc.
2) GMC – Trucks and truck based SUVs only. Can sell a Hummer looking vehicle as GMC.
3) Cadillac – Luxury / Luxury/Sport. Includes cars, car or truck based SUVs. NO rebadged Chevrolets but can share platforms / drivetrains / engines – just little else.
Pontiac / Buick / Saturn / Saab / Hummer – sell or close
Medium and Large Duty trucks – sell to Isuzu
As a guy who sold Chev and GMC trucks. That would be a very bad idea to take chev trucks and give them to gmc. Chevy has a much better name in the market place than GMC.
jaje :
February 11th, 2009 at 2:13 pm
1) Chevrolet – Cars and car based SUVs only (no trucks). Include high performance cars such as the Corvette, Camaro, G8, etc.
2) GMC – Trucks and truck based SUVs only. Can sell a Hummer looking vehicle as GMC.
3) Cadillac – Luxury / Luxury/Sport. Includes cars, car or truck based SUVs. NO rebadged Chevrolets but can share platforms / drivetrains / engines – just little else.
Pontiac / Buick / Saturn / Saab / Hummer – sell or close
Medium and Large Duty trucks – sell to Isuzu
People keep making the same mistake.
Chevy dealers will all go out of business if they have no trucks to sell.
Pontaic/Buick/GMC dealers will all go out of business if they have no cars to sell.
Both dealer channels need full product lines to survive.
TRL has a good point… I like it.
Geotpf – what makes you think all the Pontiac/Buick/GMC buyers would flock to other non-GM brands? It makes no sense that a GMC truck buyer would buy a Toyota instead of the exact same truck with a bowtie on it. Likewise Pontiac. I think we need to give the consumer a little bit of credit here. I don’t care how rabid a Pontiac fan you are, if you like the vehicle and you can buy it as a Chevy, you will.
And the real problem GM has is the cost to maintain a brand, not shut it down. So they take a $5B, one-time hit to close GMC or whatever, as opposed to all the wasted money forever re-badging trucks for no reason? If you really wanted to soften the blow (and reduce the effectiveness) of the move, then in this case they could even give the GMC dealers the option to convert to “ChevyTruck” – only (note the branding there!) dealers if they’d lose their only truck business.
So what is Chevrolet? “Hi, we are the everything that is not a Cadillac, GMC or Saturn” brand? No entry level cars, no trucks. This leaves mid sized (Malibu) and large cars (G8 renamed Impala, in both regular and performance(SS)flavors. And the Corvette, of course. Sorry, not buying. Chevy wouldn’t stand for anything this way either.
Like it or not, Toyota sets the branding standard. Mass market brand (Toyota), funky niche brand (Scion) and High-end brand (Lexus).
To do it right, Chevrolet needs to be a full mass market line. Top quality, from entry level to near-luxury. If anything, make Saturn the Scion of GM – find some funky niche vehicles and give it a corner of the Chevrolet dealers. Chevy should get the trucks too, and GMC should go away. Finally, Cadillac needs to concentrate on genuine high end vehicles. No more Cimmarons or Cateras, ever.
I think that the branding mavens put too much stock in the value of brands. If GM builds crap cars, it doesn’t matter how great your brands are, your sales go into a downward spiral. But build top quality cars, and you will build a reputation. Look where Hyundai has come in 20 years. Hard work and a long time, but can be done.
Saturn still has some brand equity, but there is little to nothing GM can do with it right now. Selling Opels and Malibus is about the furthest thing from Saturn’s original mission. About the ONLY thing I can think of would be to take the Vibe away from Pontiac and make it the new entry-level Saturn, replacing the overpriced Astra. Then kill off the heavy, fuel-sucking Vue and Outlook and the Malibu-alike Aura. Put a hardtop on the Sky and call it the new SC. If a third car is absolutely needed, bring in a euro-MPV like the Zafira.
Chevy and Cadillac – fine, keep em. Hell.. why not go no-haggle across the line and make the experience simple on people. Stop the rebates and just offer a low, but reasonable price. It will also hamstring the scum dealers who have decided to make it as hard as possible to buy a car.
GMC- will anyone really care? I doubt it.
Buick- people already don’t care
Pontiac- just make performance versions of Chevies and give them some sort of random letter designation.
Saturn- I love the idea of getting Opels here, but frankly unless they commit to it wholeheartedly, there is no point.
@Geotpf- Nobody cares if the dealers go out of business. Let em. In fact I can only hope that they do.
Yeah, agreed littleautos, there are some amazingly bad ideas in this article.
The ongoing debate about what brand fits where and does what only further cements in my mind (and illustrates the reality) that GM has far too many brands and the market is far too small for them.
A successful GM is just Chevrolet and Cadillac.
There is nothing any of the other brands do that Chevrolet and Cadillac aren’t already doing or couldn’t do better.
End of story.
GM seems to have problems making Chevy cars good as long as there are trucks in the showroom. However, in the ideal non-GM-run world, Chevy would have both cars and trucks, and you could buy one of a handful of Cadillacs if you wanted to spend more.
RetardedSparks :
February 11th, 2009 at 2:24 pm
TRL has a good point… I like it.
Geotpf – what makes you think all the Pontiac/Buick/GMC buyers would flock to other non-GM brands? It makes no sense that a GMC truck buyer would buy a Toyota instead of the exact same truck with a bowtie on it.
Well, it makes no sense that all the ex-Oldsmobile buyers didn’t all buy Buicks when Oldsmobile was eliminated, but they didn’t.
A lot of new vehicle purchases, especially from the domestics, are due to personal relationships with dealers (either positive or negative). That is, there are plenty of GMC truck buyers who either love their GMC dealer or hate the Chevy dealer across the street. Either way, that GMC truck buyer might very well buy a Ford, Dodge, or Toyota if the GMC dealer closes.
akatsuki :
February 11th, 2009 at 2:29 pm
@Geotpf- Nobody cares if the dealers go out of business. Let em. In fact I can only hope that they do.
So where do you buy cars at if you don’t buy them at a dealer? If GM’s dealers all go out business, GM goes out of business.
TriShield :
February 11th, 2009 at 2:31 pm
Yeah, agreed littleautos, there are some amazingly bad ideas in this article.
The ongoing debate about what brand fits where and does what only further cements in my mind (and illustrates the reality) that GM has far too many brands and the market is far too small for them.
A successful GM is just Chevrolet and Cadillac.
There is nothing any of the other brands do that Chevrolet and Cadillac aren’t already doing or couldn’t do better.
End of story.
Chevy and Cadillac alone can’t keep the plants humming. Without Pontiac/GMC/Buick as another channel to sell Chevy clones at, GM is toast (well, more toast than now). Add in the billions of dealer bribes needed to shut PBG down, and the financial math just doesn’t work to close them, even though they are stupid.
I can see the reason for keeping GMC, they make trucks that are a step above Chevy’s line…whether it be light duty, medium duty, or heavy duty. However, just give the trucks to Chevy and you can keep the Cadillac variants for those that want a posh/luxurious urban-cowboy truck. You want the big engine and heated everything, get the Cadillac. Then you can market the Chevy with the 6 liter as having a Caddy motor. It used to be a selling point.
You can keep Saturn, sell the Opels, but lower the price and ADVERTISE! I drive a Mazda3 wagon but I think the Astra is a great little car…too bad not many people know about it. As a GM, it’s definitely worth the premium over a Cobalt.
@TRL: I’m guessing that GM’s asking foreign buyers for too much dough, same problem with Saab, Hummer, and Ford with Volvo. I agree that it sounds like a good opportunity.
Chevrolet-keep it
Cadillac-keep it
dump everything else.As I have always said, the only ones that don’t know what GM should do, work at GM.
I agree that Saturn dropped the ball over the past few years. While I really like the Opels, they’re not the entry-level cars that Saturn should be selling.
The first new car I bought was a ’94 Saturn SC2, and it was really a great buying and ownership experience. There’s a lot to be said for that, but it’s been cost-optimized out of existence.
Recently, I’ve read a few articles about how the high-end food stores (Whole Foods, etc) are increasing sales by selling the “story” behind the food – putting up signs showing the farmer who grew the crop, talking about how the processes used make the food good without screwing the people who produce it, etc.
These are the same methods used to build the Saturn brand in the beginning. Remember the ads about the Spring Hill plant, the annual owners’ meet-ups, the new manufacturing methods used, etc? People felt good about buying a Saturn because (rightly or not) meant that they were supporting that business model. It really started out as “A Different Kind of Car Company.”
Here’s the thing: if I, as an American car shopper, had a choice between 2 similarly-equipped GM cars; one made by Chevy in Mexico or one made by mid-90’s Saturn in Spring Hill, I’d be willing to pay a bit extra to keep the folks in TN employed. I think a lot of people would, given the choice…just like they do when they buy locally-grown organic berries rather than the cheaper ones from Ecuador. This is especially true, given the state of our economy and manufacturing base.
Too bad GM pissed it all away. Jeez, if they combined that down-home image with a decent hybrid car – complete with plastic body panels and great dealer experience – the Prius would never have caught up.
Although we often say otherwise, we don’t just buy cars based on reliability statistics and build quality. There’s a huge amount of emotional involvement as well. The original Saturn brand was built around that emotion as much as it was around the cheap cars. They made the buyer feel like part of a family (or cult, depending on your perspective), which is really attractive to people.
It’s just too bad GM management never took the brand seriously. They had a really good thing until they screwed it up.
Chevy has a much better name in the market place than GMC.
I beg to differ. My brother’s construction company (starting in ’46) will buy nothing but GMC, even when the Chevy fleet price comes in hundreds less. Not that his company is the end-all, be-all, but there does seem to be a lot of GMCs at construction sites.
I believe they made their reputation with the heavy-duty crowd in the ’50s and ’60s. Weird.
+10 to TRL. Can’t GM include the famous Spring Hill plant with the Saturn brand and dealers for a low price?
I think I’d buy that. I’ll check my bank balance.
So the main issue is GM’s fear of law suits from any Buick/Pontiac/Saab/etc. dealership after they shut down a brand.
No problem. Keep building GMC trucks, Cadillac sedans, and build a full lineup of Chevy vehicles.
Then take that full lineup of Chevy vehicles and replace the bowtie with a Buick badge for the Buick dealer, a Pontiac badge for the Pontiac dealer, etc. Don’t even change the car’s name. Remember how we had a Dodge Neon and a Plymouth Neon in the 90’s? Do it like that. Every dealer gets cars, and GM won’t have to badge engineer a bunch of different cars that they’ll have to build and market.
You manufacturing will be much simpler. You won’t have a bunch of redundant vehicles, since it’s the same vehicle with a different badge on the trunk! You won’t have to pay to advertise for an Aura, then a Malibu, than a Saab.
Buick-Pontiac-GMC should stay and be relegated as “fleet brands” with a line-up as follows:
GMC: fleet trucks.
Buick: fleet large sedan
Pontiac: fleet small sedan and coupe.
Slap a Buick nameplate on the fleet Impalas (cop cars, gov’t cars, cabs, etc.).
No fleet sales ever with a Chevy or Cadillac nameplate and hopefully this (and better products) helps restore some brand equity.
Saturn gets the ax or continues selling Opels (if the numbers can work)
Saab/Hummer go bye-bye.
Farago: it’s Ries, not Reis.
Every time TTAC publishes a “What brands should GM kill” story, we get the same commenters sharing the same comments. It’s getting awfully pointless. It’s also irrelevant – I don’t think there are many people here who would buy any new GM vehicle, at any dealer, at any price. So quit.
GM doesn’t care what you think. They care what the CEO, E-Board, and lawyers think. They will never again foot the bill to close dealerships – they will let them wither on the vine.
Geotpf You said “Chevy and Cadillac alone can’t keep the plants humming”. But keeping all the plants humming is exactly what got GM into this mess in the first place. You can’t keep making more cars than you can sell. GM has to adjust itself to the new reality of its market share, and adjust its manufacturing capacity to suit. This is critical if it is to survive. They need fewer plants and and fewer cars, and they need to be able to sell all of the cars they produce at a profit. They make so many cars now that the only way they sell them is with huge incentives. That takes away most of their profit, in many cases all of their profit.
There is one way to save Saturn:
Make it the GM division which sells cheap imported cars from GM’s Chinese and Korean adventures. Take the Korean cars away from Chevy (Aveo) and Suzuki.
Slap everyday low prices and a 10 year/100k mile warranties on them. No hassle sales and ownership experience at a rock bottom price. No rebates. No toe tag sales. Never, ever, ever run a price promotion of any kind. If they have to do a promotion, do something like throwing in leather seating or GPS navigation for a limited time promotion. No hassles, no headaches, no surprises. Not great cars, but good enough cars sold at a bargain price with no BS.
Could put Kia out of the game all together and ward off the assault of other Chinese and Indian entrants into the US market.
Saturn would finally be getting ahead of the industry curve. Do it. Do it now. Don’t look back.
I was suprised. I didn’t think Saturn would make the cut.
… But here’s the thing: Reis says GM should NOT pare down to two brands. “As sure as I’m sitting here, the branding problem would get worse, not better. GM would dump all their products into two dealerships. Nothing would mean anything.”
I am pleased to have the branding guru say, almost verbatim, what I’ve said here many many times. If GM = Chevy/Caddy, there will be nothing but Chevillacs at both dealers.
GMC – trucks
Chevy – Cars from Corvette down to entry level
Cadillac – Luxury and big cars
Saturn: gone but not forgotten; take it’s best concepts and apply to the three that are left.
Pontiac/Buick: shutdown and keep the names for later revival, either as complete brands or special edition vehicles.
Saab: delete.
Hummer: a model at GMC
I agree for the most part. I would keep Saturn, Chevy, and Cadillac. I agree that GMC should be cut. Keep the Chevy badge on the trucks. I think that Saturn was a good idea ruined (surprise, surprise). If they went back to cheap entry level cars with good ergonomics and pratical design, they could be a good idea again. Cadillac still has some cache left in its name; they just need to erase 20+ years of crap and GM fanboys need to realize that it will take 20+ years of good products to do that. Cadillac is obviously the luxury division, but why not go back to selling cars and possibly the Escallade. Chevy of course will be populated with everything else including trucks. Want a heavy duty truck? Get the heavy duty Chevy. Want a luxury truck? Get the luxury trim level (Chevy Cameo in the 50’s).
I think a lot of people missed theis part of the hypothetical, “will file for Chapter 11. And on that fateful day, it will be free to kill brands.” So the cost of axeing Buick et al. can be ignored for our purposes.
jpcavanaugh had a good point about Chevy trucks, as the comparison is usually Chevy/Ford/Dodge, with GMC considered a trim level (just talking about casual, non-fleet buyers). I would keep the trucks in Chevy, but also badge engineer a set for GMC that can be sold as an intentionally rugged/heavy duty brand. If the time is right they can spin off a Jeep competitor from here, and they can maintain a somewhat seperate reputation from Chevy in order to sell the real monsters that you maybe wouldn’t want crowding out the sedans on a dealer lot (or interfering with your eco-glow).
Pontiac, Buick, Saab, Hummer…all need to die quickly. They all (minus Pontiac) have their own identities, but they’ve lost far too much respect.
I guess I don’t really understand what Ries thinks GM should do with GMC.
GMC makes the cut. “Put all Chevy’s trucks into GMC; make it a truck brand. That would clarify the brands and help both GMC and Chevy . . . GMC is a great brand with a lousy name. You could take one of the product names and call it that. Silverado, maybe.”
I interpret that to mean that Chevy would loose it’s trucks, and GMC would be renamed Silverado.
Did I get this wrong?
instead of killing saturn, they could just demote it to a Kuiper belt object. Heck, that worked for Pluto, why not Saturn?
Likewise Pontiac. I think we need to give the consumer a little bit of credit here. I don’t care how rabid a Pontiac fan you are, if you like the vehicle and you can buy it as a Chevy, you will.
You give rabid Pontiac fans way too much credit here. Once GM shuts down Pontiac, I’ll be driving a Mitsubishi, Nissan, or Dodge. Making the G8 into an Impala/Caprice would just be spitting on Pontiac’s grave. I’m not the only person that thinks this way either.
It’s hard to explain why I feel this way. The best analogy I can give is how when the Cleveland Browns moved to Baltimore, the old Cleveland fans hated the new team even though the players weren’t any different.
Closing Pontiac is like moving my team.
Dynamic88: no, that’s right. I too think GMC would be redundant in this case.
Dynamic88: no, that’s right. I too think GMC would be redundant in this case.
I thought it was Chevy trucks that were redundant. He wants to take all the Chevy trucks and put them in GMC. But he doesn’t like the name GMC (despite it being synonymous with Truck) so he wants to rename GMC as Silverado (did he mean Sierra?)
I’ve never agreed with killing the #2 selling brand at GM. No matter how redundant it seems, GMC does way better than #3 Pontiac, way way better than #4 Saturn, and roughly double the sales of #5 Caddy.
I fail to understand why GM can’t simply make a proclamation: From now on there will only be GM dealers, every dealer will be able to offer GM’s whole line up of vehicles.
This would automatically eliminate the need to stretch every brand in the GM catalog to offer a full line up; Chevy would be the bread and butter brand, Cadillac the luxury brand while Saturn/Pontiac/Saab/GMC even Hummer could offer a few excellent specialty models each. Brand selloffs or eliminations as well as dealer culling in oversaturated markets might be needed at this step.
The average dealership would have a line up of Chevy’s in the center, luxury wing with Cadillac’s and their selection of interesting specialty cars along the edges.
Larger dealers in mixed markets would offer the whole line up, while smaller dealers or dealers in markets with very specific needs could concentrate on their niche. Think Cadillac in Beverly Hills or farm trucks in rural Kansas.
This would reduce cannibalism and infighting between different models and all focus could be put on survival of the company as a whole instead of dividing the cake into too many two slices to count on their own.
I don’t think they have the chutzpah to kill GMC. They still sell lots of GMC pick ups, and I suspect they are terrified that if they close GM they will lose some owners to Ford and Dodge. So, fear rules the day.
Geotpf, the customer base to keep the factories running doesn’t exist. GM’s business has steadily declined for decades and finally evaporated this year.
GM has to drastically shrink down to just Chevrolet and Cadillac to be viable and fit it’s market to hope to turn a profit or go bust.
It’s really that simple. Too bad getting there outside of Chapter 11 is impossible.
John Horner: You get the gold. That idea is brilliant, something they should have done before they did that “upscale re-think” BS.
Of course anything that GM did with Saturn could have been done with GEO for a small percentage of the cost of what Roger Smith spent.
Chevy and GMC seem outrageously redundant to me. Not even really badge engineered to differentiate, just the exact same vehicles with different badges. Cut GMC.
The ONLY reason for GMC to exist is to give the Buick, Pontiac, and sometimes the Cadillac dealers, something to sell in the truck and SUV line. Ask any of these dealers if they could survive without GMC. Nor could a Chevy dealer survive without trucks and SUVs. So the time to kill GMC is when B and P are killed.
Assuming Wagoner will have some ‘plan’ about reducing brands, I wonder about the schedule for actually getting it done. As in when is the last day money stops going down a drain with that brand’s name on it. It’s getting a little late to keep saying he’s reviewing or shopping these brands. He needs to be pressed to come up with an if-not-sold-by date, and forced to pull the plug on or before that date when they’re not sold. If he’s vague on any aspect of his plan, I hope the elected pretenders get factual as to steadily downward trend of market share and profits to make him sweat; literally. He has to go for there to be any hope.
njdave :
February 11th, 2009 at 3:44 pm
Geotpf You said “Chevy and Cadillac alone can’t keep the plants humming”. But keeping all the plants humming is exactly what got GM into this mess in the first place. You can’t keep making more cars than you can sell. GM has to adjust itself to the new reality of its market share, and adjust its manufacturing capacity to suit. This is critical if it is to survive. They need fewer plants and and fewer cars, and they need to be able to sell all of the cars they produce at a profit. They make so many cars now that the only way they sell them is with huge incentives. That takes away most of their profit, in many cases all of their profit.
So Chevy shouldn’t have a compact car at all then?
That is, without Pontiac, there is no Pontiac G5. Without the Pontiac G5, about 10-15% of the volume at the Lordstown plant that makes both that and the Chevy Cobalt goes away. Without that 10-15%, they probably have to cut a shift. Without that shift, the plant goes from (say) breaking even to losing boatloads of money. So, they discontinue the Chevy Cobalt and no longer offer a compact car.
Economies of scale. Pontaic/GMC/Buick allows plants that would be dripping red ink due to fixed costs become profitable or at least break even.
Plus, there’s the huge one-time cost of the dealer bribes to shut down the thousands of PBG dealers throughout the country.
There has never been, in the history of capitalism, a case where a money-losing large company became a small, nimble profitable company, without a chapter 11 bankruptcy filing and massive reorganization first. Money-losing large companies become money-losing medium-sized companies which then become money-losing small companies which then become nothing.
Chapter 11 is not a choice for GM or any other car company, since people will avoid the company’s products due to the fear their warranties will be worthless and there will be no source for spare parts.
GM can not shrink to profitability. They need to figure out how to sell more cars. Period.
The cuts they should make are only to the brands that have no chance of becoming profitable in the future. Those would be Saab, Hummer, and Saturn. But Pontiac/Buick/GMC (which amounts to only one sales “channel”, kind of like how Toyota/Scion is one sales channel) has, historically, been profitable, and has a chance to continue to be so (at least as much chance as Chevy or Caddy).
The fundamental flaw at GM, and one that is repeated all over this discussion, is that you need a different brand for every single subset of consumer you can think of. This one is too young – give them a brand. “Real” construction workers need a brand different from all the other people who buy pickups. God forbid you created a Chevillac -maybe you’d have a lineup of good vehicles from $12k – $60k!!!
Look, some of best brands in the business are that way because of focus that has nothing to do with price point. BMW sells a huge variety of vehicles from $29k – $129k and has no need for seven brands to do it. Add MINI and with just two brands they start at $18k. Toyota – 2 brands (I’m only counting Toyota and Lexus. Scion is a joke), both cars and (OMG…the scandal!) trucks too: $12k – $75k.
Detroit’s PROBLEM is that they have created a market where a tiny slice of the demographic buys Chevy, Pontiac, Saturn, Buick, GMC etc and they are paralyzed at the thought of alienating any one of those little niches they’ve built. They need to start re-educating the consumer that an Aveo, a CTS-V, a Silverado and a Corvette can all just be freaking Chevrolets and the world won’t end!!
t-truck :
February 11th, 2009 at 4:32 pm
I fail to understand why GM can’t simply make a proclamation: From now on there will only be GM dealers, every dealer will be able to offer GM’s whole line up of vehicles.
In my city, the Chevy dealer is across the street from the Pontiac/GMC/Buick/Cadillac dealer, which are both down the street from the Saturn dealer.
So there would be three GM dealers within a quarter mile of each other under your plan. And a lot of well compensated lawyers.
Chevy dealers would be pretty pissed about losing their truck sales, though.
Then they can either buy a GMC franchise, or GM can give them one gratis. Problem solved.
I understand that there’s laws about this, but wouldn’t it be nice if we could have “GM” dealers instead of this artificial structure in place today? Other than the front clip, the only difference between some of these vehicles is a deliberately different feature set that exists only to keep consumers from making direct comparisons between GM brands.
ETA: comment rendered pointless because other people made the same point more astutely.
TriShield :
February 11th, 2009 at 4:34 pm
Geotpf, the customer base to keep the factories running doesn’t exist. GM’s business has steadily declined for decades and finally evaporated this year.
GM has to drastically shrink down to just Chevrolet and Cadillac to be viable and fit it’s market to hope to turn a profit or go bust.
It’s really that simple. Too bad getting there outside of Chapter 11 is impossible.
It’s not possible to shrink fixed costs fast enough to match the lower sales.
Let’s imagine a company with only one factory. It’s a big factory. At one point in time, they ran three shifts at the factory. But demand for their product went down. Now they are barely running one shift. But their property taxes are the same. Their insurance costs are the same. Their mortgage on the factory and equipment are the same. They still have to pay for the receptionist and the accountant and the lawyer and the marketing guy. When they ran three shifts, they could cover all those fixed costs easily. But with one shift, those costs bleed them dry. If they don’t get back up to three shifts, they go out of business.
Same with GM. It needs to grow, or at least stop the fall in sales, or it loses more and more money until they go out of business (or merge with Chrysler to become the car making division of the Federal government). Cutting brands does the opposite, especially major brands. Now, cutting completely hopeless brands (Saab, Hummer, Saturn) makes sense-they are cancers that need removing. But Pontiac and GMC aren’t (Buick is, but it’s attached to Pontiac and GMC, so it lives).
Geotpf: Your cost argument is sound, but I still don’t buy your sales argument: “Well, it makes no sense that all the ex-Oldsmobile buyers didn’t all buy Buicks when Oldsmobile was eliminated, but they didn’t.” Actually, you don’t know that they would have bought Oldsmobiles again either, so the argument doesn’t hold.
“A lot of new vehicle purchases, especially from the domestics, are due to personal relationships with dealers”
Although this is a very tenuous argument for keeping zombie brands, I actually like this argument, because it means that no matter what brand that guy sells, he has customers. If he had GMC but now has ChevyTruck, (or maybe Fiat?) he’s good.
Geotpf :
February 11th, 2009 at 4:53 pm
In my city, the Chevy dealer is across the street from the Pontiac/GMC/Buick/Cadillac dealer, which are both down the street from the Saturn dealer.
So there would be three GM dealers within a quarter mile of each other under your plan. And a lot of well compensated lawyers.
Would there be a drastic difference in having the dealers sell the same cars with the same labels rather than selling the same car with different labels?
Recently rented a Pontiac G5, not a bad little car, the only thing I could not understand was why the key didn’t work one day, until I discovered I was trying to open the same color Cobalt that was parked next to it!
In your case where you have three dealers next to one another it seems likely that at least one of them is in sad shape and would accept a buyout at relatively low cost to GM.. The other two could try to find their own niche where one might for example offer good options in luxury and sports cars, while the other might specialize in trucks and work vehicles in addition to the Chevy lineup they would share.
@ Geotpf
Not sure your logic on fixed cost works here. Cus a brand (assuming C11 here and no franchise / dealer costs) and you can also cut whole factories, marketing staff, execs, (badge) engineers, accountants, etc. If I have 2 factories running at 1-2 shifts per day, and I dump one of the factories and run the other at capacity, I have cut fixed cost.
Of course, that assumes that someone would want to buy the buildings and land….
t-truck :
February 11th, 2009 at 5:20 pm
Would there be a drastic difference in having the dealers sell the same cars with the same labels rather than selling the same car with different labels?
From a legal point of view, yes, there is a big difference. Plus, the PBG-Caddy dealer has things the Chevy dealer doesn’t have (and vice versa) and the Saturn dealer has things the other two don’t have (and vice versa). It’s possible to pretend they are seperate. It’s not if they really are exactly the same.
The problem with the brand prolifereation is not the brand’s existance but the overlapping products between the brands which dilute brand identity and just cost money without delivering new or better products. All products should be unique to their brand – i.e. no more Acadia/Relay/Enclave/Traverse nonsense. If they want to continue with Buick as a two model brand, that’s fine as long as the product is unique and sold through existing GM dealers. Same for Pontiac – reduce it to the G8 and Solstice and the brand would be viable.
However, no brand rationalization will save them if their products aren’t competitive.
carguy: The existing of the brand is a problem if you have to fill four five or six product lines with unique non-competing vehicles! At the same time, you get the fixed cost duplication problems others have mentioned in marketing, advertising etc.
As many have said before me, it might be fine to have 6 brands when you are splitting up 70% of a 15M car market, but if you now have 20% of a 9M market, why go to the trouble?
In the end, the brands, the dilution of effort, equity, money and market are hurting Detroit, not helping.
Just to be really simple about it, what other company in a comparable business wins with this strategy? (This is an honest, not sarcastic question. Any examples?)
They shouldn’t kill any brands and they should open Opal, Vauxhall, and Holden dealerships in the US.
just kidding.
I think it’s kinda funny that the make that they did kill, Oldsmobile was the one of the original five that is least like Chevrolet and Cadillac. Pontiac’s are like sporty Chevrolets, and Buicks are cheap Cadillacs.
I’ve never bought an American car or truck but I’d agree with Ries’ suggestions for brands to keep.
Chevy should try to promote an image of good small and medium-sized cars with the Corvette as their halo product instead of the Corvette + light-duty trucks and SUVs.
Sure, Chevy and GMC trucks are the same thing but GMC is more ‘luxurious’ with more conservative styling. Chevy trucks and SUVs have had some of the goofiest styling elements over the past few years whereas the GMC equivilant always looked cleaner and more refined.
If you put all your trucks/SUVs into the GMC brand, it won’t hurt Chevy’s image as much if sales tank when gas prices start creeping up again. They can share the same showroom floor, it’s just brand differentiation.
Most people seem to agree that Cadillac makes sense, especially with some of the cars they’ve created in the past few years.
Saturn, if anything, is “different”. Different can be good when your past criminal record includes product recycling. I agree with a previous comment that platform sharing makes sense, but emphasize a difference somehow (my vote would be for radical styling). Your namesake is a planet so why not go intergalactic? The original Saturns were pretty funky.
Wait a second. Reis determined that Saab needs to go because “They haven’t ever made money on that brand. Not once.” Yet he approves of Saturn?
Since its inception, Saturn hasn’t turned a profit. Any brand equity Saturn built with its original buyers has long been exhausted. And its highly unlikely that GM will ever see Saturn recoup its own startup cost. Saturn was a good idea but it’s well past time to abort Roger Smith’s baby.
If GM wants, I’ll supply the coat hanger…
You’d think GM would have learned it’s lesson from the companion make program in the twenties and thirties.
Thank you DweezilSFV, I think I have presented the only defensible way forward for Saturn. It is bold and gets ahead of the curve. GM will never in a million years do it.
Saturn does not have completely separate dealers. Here in the south, Saturn stores were given to decent non-Chevy, non-Cadillac operations and while a technically separate sales floor was built, it was built literally in the parking lot of said existing dealership. “Saturn of Birmingham” is just a building thrown up on Royal Olds-GMC’s property back before Olds got killed. Royal branched out over the years and now has Volvo, VW, and Audi on the same lot with GMC and Saturn. I see this same thing all over the south. The sales desks are in their own hut, but the service, parts, etc. are all in one huge building out back. The “stand alone store” is a mirage.
The problem with multiple brands is they will end up trying to compete with each other, to the detriment of the company as whole. In the 50s, Buick, Olds, and Pontiac went to war with each other. Late in the decade, Chevy joined in. Ford went after Mercury. Dodge relentlessly cannibalized Plymouth, and let’s not start on DeSoto.
The reason is simple: the success of each division head was (and is) measured by sales and market share. If you’re graded (and your bonus is based) on those metrics, do you care if your sales come at the expense of another division? Probably not.
Brock Yates once told a story (apocryphal, but revealing) about the origins of the Chevy Caprice. One day in the mid-sixties, GM upper management ordered that the heads of the division had to drive their own products — before that, they’d tended to have Cadillacs, or, if they were rakish sorts, a Corvette or foreign sports car. For the heads of Chevy, the thought of having to drive an Impala — the same car their plant managers might own — was intolerable, so they created the Caprice as a kind of pseudo-Cadillac. Again, probably apocryphal (the real motivator was probably that Ford was doing great business with the LTD), but it says something about the mentality involved.
Even companies with two or three brands end up having that problem. It seems to be the nature of the beast.
Legal and financial issues aside, Mr. Reis has a good point: GM’s current brand dilution is a complete mess.
The cardinal rule in building a consumer brand is to develop a clear and consistent image so that consumers know what you represent when they are ready to buy. I think that GMC and Cadillac do that well, and you know what you’re getting. To me Chevrolet is all about cheap sedans at “red tag sale” prices. I couldn’t tell you what I am supposed to expect from Saab. Hummer is a dead man walking. Pontiac and Buick are just footnotes at this point, with nothing to differentiate them one way or the other. Saturn started out with promise and managed to hold on to that entry-level brand for a while, but they’ve lost that image.
Chrysler, ironically enough, has the same kind of problem. Jeep stands on it’s own and has a powerful brand, but is there really a distinction in the consumer’s mind between Chrysler and Dodge?
I would point to Toyota as a good example of how to differentiate brands. Love them or hate them, the consumer clearly knows the difference between what to expect from Toyota vs. Scion vs. Lexus when they wake up in the morning. Each brand establishes it’s position well.
You know who else does a decent job of this? Ford. Mazda and Volvo may be living off of their legacy, but they clearly maintain their differentiation under the Ford umbrella. Ford also does a decent job of creating distinct, recognizeable personalities between their own product lines, even though they are all under the same badge.
All that said, Mercury and Lincoln have lost their identity in the past few years (I don’t know that Mercury ever had one).
One way or the other, GM can’t continue to float all of these badges in the marketplace. The confusion they cause only does more damage to their own sales.
I agree with John Horner though I do prefer the Opel Corsa over the Aveo, perhaps built in Tennesee or wherever. I would also reduce Pontiac to a niche brand and propose shutting down the Hummer line and moving the remaining assets into GMC to appease the political apparatchik.
Saturn Aveo, anyone?
The main thing I get from the interview with Al Ries is that it takes some knowledge of the American auto industry to understand the nuances of branding. Some of Ries’s ideas sound decidedly half-baked:
— I’d agree that the Saturn franchise has more value than many at TTAC give it, but I still don’t see the justification for GM having two low-end brands with separate dealer networks.
— Integrating Chevy and GMC trucks under a new brand name such as Silverado seems fraught with peril for a host of reasons (some mentioned above).
One of the most interesting ideas among the commentators was John Horner’s scenario for saving Saturn. That does sound like a brilliant move, particularly if done quickly, while the economy is still in the tank. Indeed, this illustrates how Saturn could be a particularly valuable means by which the Chinese could enter the US market. I wouldn’t even ditch the Saturn name.
However, if GM kept Saturn and took Horner’s advice it would still have a potentially nonviable dealer network without adding to its stable of products. I don’t understand why GM didn’t pair Saab with Saturn in the US. That would have been a much better combination than with Cadillac.
I don’t agree with t-truck that GM should allow all dealers to offer a complete line up. That’s throwing the baby out with the bath water. But there is a possible compromise here that psarhjinian hints at: Make them all GM dealers but allow individual dealers the chance to specialize in certain market niches.
Under this scenario the traditional idea of a brand could be eliminated in favor of a focus on clusters of compatible nameplates. For example, the Corvette would no longer need to be offered under the Chevrolet umbrella and could instead be sold by whatever dealers made the most sense in a given territory.
By the same token, GM need not eliminate a single brand – all it would need to do is downsize them to the level with which strong brand equity could be maintained. For example, Pontiac could be relegated to a single model (e.g., the GTO).
My main point: Once bankruptcy occurs GM has the ability to leapfrog ahead of the competition by turning the branding game on its head. You can’t get there by copying Toyota with a two- or three-brand structure (e.g., Chevy-Cadillac).
Winners don’t copy — they change the rules to their advantage.
What people don’t understand is that everyone involved — the dealers, the corporate heads, pretty much everyone in the organization — wants to cling to the status quo, all the way to the bitter end. No one wants to do anything that will open them up to liabilities or compromise whatever positions they have, so they’ll sit back, do the same things they’ve been doing and pray that some external force or stroke of luck comes their way and lift up their fortunes. That’s not gonna happen anytime soon. The only thing that is going to happen is another 2 to 7 years of prolonged misery until a court somewhere finally says “enough is enough. Time to pack it up and pack it in.”
As much as I would love to see GM pared down to Chevy, Cadillac and either GMC (for commercial-grade trucks and fleets) or Saturn (GM’s Scion reborn), it’s simply not going to happen. Too many people on all sides have their own fiefdoms to protect and would rather see the entire table collapse under its own weight than have one of their rice bowls taken away.
If I recall, Saturn was GM’s red-headed stepchild and Roger Smith’s baby. As soon as Roger was out of the picture, GM corporate began to mismanage it with gay abandon. Nearly everything that made Saturn attractive was taken away while saddling it with a schizophrenic lineup of doppelgangers and desperate “power-hitters” that are currently batting 0.000. I knew the Astra was going to land flat on its face — it was like selling a VW Rabbit to people who weren’t gonna pay VW money for a Saturn. If you want to save Saturn, then it’s probably time to cut the prices, bleed a little now and increase sales. If not, place Saturn’s head over the blade and watch it fall.
@rodster205: AFAIK, “Saturn of Huntsville” is….or was, it’s own standalone store. It’s a bit odd that it’s somewhat out of the way of the main drag in that part of town, especially with nearly every other dealer (including the now long-gone Bill Heard dealership) having prominent storefronts right on the street.
“In my city, the Chevy dealer is across the street from the Pontiac/GMC/Buick/Cadillac dealer, which are both down the street from the Saturn dealer.
So there would be three GM dealers within a quarter mile of each other under your plan. And a lot of well compensated lawyers.”
That it one of the key problems with GM at this moment. Within a quarter of a mile, there isn’t one Chevy dealer, one Pontiac/GMC/Buick/Cadillac dealer and one Saturn dealer. Within a quarter of a mile, there is three dealerships shipping GM cars, competing with each other. At this moment. one dealer could easily sell all of them.
The point here about branding is that all of of GM brands doesn’t necessarily need a complete line up of cars of its own. And if they don’t, they won’t need a separate dealership for those cars. Pontiac could scrap everything but the G8 and Solstice, and noone would notice. I have said this before, GM doesn’t have to kill brands, just make those niche brands make niche vehicles once again.
Make all dealerships as GM dealerships, and label those dealers with the brands they are selling. When all dealers are branded as GM dealerships selling GM brand X, then kill all the redundant dealers. But don’t kill the brands or the nameplates. Who wouldn’t like a Buick Wildcat Convertible in the future? GM could easily make one, and sell that through their dealers. There’s no need for a complete Buick line-up.
The GM management seems hell-bent that all brands need a complete line-up. That’s wrong. If the GM Volt had been a Saab as originally planned, GM could have sold that Saab at all their dealers. The thought of an ultra high-tech greenwashed quirky european would have far more halo status than any Corvette. Saab could have been GM:s high-tech program, always in the forefront of evolution.
The point is, this is not so much a question of what GM brand is selling most cars at the moment. It is a question of brand cachet, brand recognition, customer loyalty, history, nostalgia, allure. Core values. It is not a question of what brand is most bankable at the moment. It is a question of what brand could a better management make bankable once again, and how? Buick does have a cachet. What it doesn’t is selling products. The cachet is stronger than the current line-up. From a branding standpoint, GM is a complete mess. Utter chaos. They have completely misunderstood what branding is about. They may have invented the game once, but that was many many decades ago. Time passed that model on in the 50’s, and GM hasn’t catched up yet.
What GM needs is not only a complete restructuring of all the brands, but most important, they need a strategy for the future. Brands, nameplates, dealers, all of that is secondary. All of that can be sorted out later, when the strategy is set. And GM needs a plan for the next five, ten, fifteen, thirty, fifty years. Not to forget that they actually need a strategy to survive only the next few weeks. The point is that a strategy is more important than anything else, it should be the number one focus point of Rick Wagoners agenda. It is intrinsic for a leader to lead. But leading where? A strategy is just that, a plan to know where to go. Without a strategy, a leader is just a funny looking person in a tin foil hat.
Maybe it’s not too late to fix GM, but it’ll take a lot of common sense and GM lacks this big-time.
Look at Europe; Chevrolet badged GMDaewoo cars are sold as the entry-level vehicles in competition with Hyundai-Kia’s Kia brand, Volkswagen Group’s Skoda brand, etc. etc. while Opel and the badged Vauxhall versions of Opels sold in the UK, are “one step up” in price, and Saab one step up further in “prestige”, with Cadillac supposedly one step further up…. (Ha).
In the USA and Canada, with the preponderance of pickups, is Chevrolet’s brand in the position of “Opel” in Europe; one step up? Or is it in the “lowest cost” category? I say it is “one step up.”
Perhaps a rethink is needed; Chevrolet might well be better served to try to retain the mainstream car lines and trucks and a few crossovers, plus Corvette, while Saturn could sell re-badged GMDaewoo products.
The Chevrolet Aveo (GMDaewoo) is produced in Mexico tariff free under NAFTA, South Korean cars are soon to be tariff free under a free trade agreement, and GMDaewoo re-badges Daewoo cars as Chevrolet for much of the world, as Holden for Australia, as Pontiac for Mexico and Canada and soon the US (foolishly).
So a potential GM line-up could be:
Saturn Matiz (4 seat microcar with 1.1 litres, should sell for about $8000 new), Aveo (1.6 litres), Epica (2.5 litre transverse inline six), and Captiva (3.6 litre V6 crossover/SUV on the Theta platform).
Build as many as possible in – guess where? – Spring Hill Tennesee or Mexico, and import the slower selling lines directly from South Korea.
Also, sell the Vibe as a Saturn (mfd. by Toyota, 1.8 and 2.4 litres, tall station wagon, available AWD).
Chevrolet would start at the Cruze (below the size of the Epica, but larger than Aveo), so there is no overlap; then up to Malibu and a Malibu based all-new Impala, for cars.
Buick would be rear wheel drive semi-luxury, all hybrid drive V6 or V8 (variable displacement) cars. No SUV’s or crossovers; GMC has those.
Cadillac would be similar to what it is now.
Then GM should price the cars in the Saturn manner across the board, and ADVERTISE THE HELL OUT OF THAT FACT. “You’ll get the same great deal today as tomorrow, and so will your friends, family, neighbors and co-workers. All cars are priced to sell, no “sales”, “special pricing” or “temporary rebates” are part of the game any more.” And price the cars accordingly. If it comes down to only manufacturing a car once someone actually orders it, so be it. Obviously, dealers would want a small stock of vehicles ready to go, too. But not thousands. That dog won’t hunt any more. Will it?
“Look at Europe; Chevrolet badged GMDaewoo cars are sold as the entry-level vehicles in competition with Hyundai-Kia’s Kia brand, Volkswagen Group’s Skoda brand, etc. etc.”
And that’s where GM went wrong for the umptieth time in history. GM is selling Daewoos in Europe badged as Chevrolets. And they are not even in the Hyundai league. They are competitors to the low end of the low-end scale. Kia, Dacia Logan etc. It’s a joke. And what does that make of Chevrolets brand cachet for the europeans? GM management doesn’t have a clue…
GM could easily have kept the Daewoo moniker, or invented a new one, than try to convince the european sophisticates that the heap of korean crap they are whipping out have something to do with american iron. Not to mention that it is brand diluding Chevrolet to the extreme. It’s far worse than a farce, it’s an insult to intelligent people…
Geotpf,
“So Chevy shouldn’t have a compact car at all then?
That is, without Pontiac, there is no Pontiac G5. Without the Pontiac G5, about 10-15% of the volume at the Lordstown plant that makes both that and the Chevy Cobalt goes away. Without that 10-15%, they probably have to cut a shift. Without that shift, the plant goes from (say) breaking even to losing boatloads of money. So, they discontinue the Chevy Cobalt and no longer offer a compact car.”
They should build the small Chevy at a plant that is underutilized building something else. Move the tooling and run 2 different lines there. Saving a brand that isn’t selling just to get 10-15% more traffic at a plant makes no business sense. The one-time payout to end dealer contracts is just that, a one-time cost, not an ongoing drain on the corporation.
“There has never been, in the history of capitalism, a case where a money-losing large company became a small, nimble profitable company, without a chapter 11 bankruptcy filing and massive reorganization first. Money-losing large companies become money-losing medium-sized companies which then become money-losing small companies which then become nothing.”
Exactly my point. GM HAS to do a C11 and reduce waste, overlap and redundant factories to survive. Otherwise it stays on its downward death spiral. You say that to survive GM has to grow its market share. But the only time it had market share to support its present structure was when they had no EFFECTIVE foreign competition. That is never going to be the case again. They can’t continue to run the company planning for that to happen. It’s only going to get worse. Hyundai was a bad joke when they first came to the US market. Now they make very reliable, good cars that people really like. I know, my wife drives one. It’s not what I want, it’s bland and boring to drive, but she just wants a car that starts every day and gets her to work and back home again. It does that, and she loves the warranty. The Chinese cars are going to be next. They are pretty awful right now, but sooner or later they will probably get those right, too.
“Pontiac/Buick/GMC (which amounts to only one sales “channel”, kind of like how Toyota/Scion is one sales channel) has, historically, been profitable, and has a chance to continue to be so (at least as much chance as Chevy or Caddy)”
I commute 40 miles each way every day on a very busy highway (287). The last 2 days I saw one Pontiac (G6) and no Buicks. Tell me again how these brands are successful?
Without the Pontiac G5, about 10-15% of the volume at the Lordstown plant that makes both that and the Chevy Cobalt goes away. Without that 10-15%, they probably have to cut a shift.
Pursuing this capacity-utilization-first strategy is precisely the problem. That is brand destruction at its worst, resulting in lower total sales over the long run.
Building two similar cars reduces the sales of both cars over the long run. Their identities blur together, and the average consumer will simply go to the competition. (Sound familiar, GM?)
GM’s stronger competitors use a superior strategy: Build a better vehicle, and sell more of them by building and maintaining the vehicle’s reputation. Channel the marketing effort into one vehicle, so that the consumer understands what it is about, why they should buy one and why they should replace it with another vehicle made by the same manufacturer when that time comes. Increased sales will come from the product being improved and the reputation gaining credibility.
If GM can’t sell more Cobalts, then the problem is with the Cobalt and the parent company, not with a lack of brands. The solution entails addressing what is lacking with both. Adding more brands just disguises the problem temporarily, while destroying all of the brands in the process.
My question is why do they even need American brands? There’s no question that GM and Ford have made strides in the right direction, but many buyers won’t even consider them, because they grew up in the back of an American branded car that gave their parents nothing but problems. Most consumers who maintain a sense of loyalty to American nameplates also think of the Golden Girls as their contemporaries, and think nothing of wearing plaid golf pants to any occasion. That’s not a great market for growth. Instead of selling off Volvo, Saab and Jaguar, I would have had GM and Ford retain those brands, and kill off the American name plates. Those brands still have what American name plates lack – the perception of value among young buyers.
“My question is why do they even need American brands?”
And it is a good question. What is intrinsically american about the american brands? What do the US makers do better than anybody else? In my opinion, big cars and trucks. What do the europeans and japanese do better than the americans? Refinement, quality, and small to midsize cars. The Golf and the Camry are two good examples. Instead of having the american brands making me-too efforts in the Camry/Accord league, perhaps it is better to leave that sector altogether to their european, korean and japanese branches? It would be nothing wrong with both GM and Ford making trucks only for the american market, and let Ford Europe and Opel/Holden develop everything else, with transplant factories in US. For GM, everything from the Malibu and up would be american, anything smaller would be european. The Epsilon could be the watershed, shared by both markets. There, a strategy as good as any…
@Geotpf- it is not like they don’t have overlapping territories. And the dealers that don’t can convert over to whatever brands are left standing.
Then again, I wish Congress would repeal the ridiculous dealer protection laws all over the country and let the manufacturers sell direct. If GM could own its dealerships and showrooms I suspect they would have a lot more invested in the experience.
GM ought to sell every GM product on every GM dealer lot. Let the good dealers flourish and the bad ones rot. Of course there will be lawyers involved but then this is the reason I think they are intentionally going broke – very slowly, very carefully. It’ll give them a chance to turn the wheel back to profitability later – if they are careful after they have shed alot of business costs. Anyhow going broke lets them starve the dealer network so it shrinks or if they go CH11 then GM can prob shed them at will.
Let every dealer sell every GM product – Saturns beside Chevies next to Pontiacs and let the good products survive. The bad products will wilt and fade away.
I suspect that it is not this easy though. Despite slow sells it prob lowers their cost to build both Pontiac and Chevy versions of the same product even if there is only marginally more sales because of this. More units, lower cost per unit.
I think it is time for GM to face up to the new reality that they have a much small sliver of the market and they will not be able to do as they have done for so long.
GM ought to learn to either build multiple products on the same line or do several months of a certain product. Batches… Yes I recognize that it often takes GM weeks to change over a line but maybe it is time to learn to do this faster. Maybe it is time for the line workers to learn to get out of the way.
In case you are wondering I worked for a company that built assembly equipment and there were plenty of stories from everyone at our company of the union guys literally finding a “hidy-hole” where they could take a nap or watch a movie on a gadget rather than getting their work done while our guys were trying to get a project installed. We were very limited to what we were allowed to do and wasted huge amounts of time waiting on someone to come connect and air line or plug something into the factory power or what-have-you.
In manufacturing there is something called stacked-tolerances. Each little part that is outside of specs adds to the out of tolerance finished assembly.
This applies to manpower too. Efficiency might be the right word.
GM needs to get it together. Heck America needs to get it together again – starting at the top.