Back in ’05, the year that Bob Lutz turned 74 for the first time, GM’s Car Czar called Buick and Pontiac “damaged brands.” Even the Detroit-friendly media seized on Lutz’ remarks as a sign that someone in RenCen had woken-up to the fact that eight is more than enough. It’s too god damn many. But no. Bob was forced to backpedal. “Everyone always says that I was sort of implying we were going to cut Buick and Pontiac. I never said ‘irrevocably damaged’ or ‘irreparably damaged” or ‘terminally damaged.'” And now, Mr. “The threat of bankruptcy is absolutely out of the question” has been forced to backpedal on his backpedaling. Maximum Bob told Automotive News [AN, sub] that “It’s really much better to have fewer brands, do it well and then market the hell out of them.” [Note: you gotta love any article that begins “If General Motors survives its cash-flow crisis…”] Of course, the winner of TTAC’s Bob Lutz Award didn’t hit the heights without hints. To wit: “Lutz declined to indicate exactly what will happen to Saturn and Saab but said business as usual is not an option. ‘They’re under strategic review,’ he said. That’s the corporate code, Lutz said, for: ‘We realize they’re not working, and something needs to be done.'” HUMMER, Saturn and Saab are (nudge nudge) bye-bye but the original damaged brands (Buick and Pontiac) live on? Bob lives is a strange world. Let’s visit!
In Bob’s world, facts are simple and facts are straight and facts will do what he wants them to. “By eliminating nameplates, the automaker can cut the cost of product development and marketing. For example, GM spent about $500 million to develop the Chevrolet Malibu car. Marketing the Malibu cost $200 million or $300 million, Lutz said.”
Wow! That’s a $100m spread! Is it that easy to lose track of $100m at GM? [Hint: that’s a rhetorical question.] But wait! There’s more!
“The Saturn Aura car was developed from the same platform as the Malibu. Does GM need two versions of that same vehicle? [hint: no] ‘To do a unique version of a sedan that already exists, you’re talking about three quarters of a billion dollars,’ Lutz said. ‘Reducing the number of nameplates is a way to save money.'”
Bob so “gets it” these days. Well, as of Friday. And so does AN writer Jamie Lareau. I mean, who can resist taking shots at Maximum Bob’s fuzzy logic device (i.e. brain)? Not Jamie.
“The Malibu has been a commercial success, while the Aura ‘had a rough time getting started,’ Lutz noted. ‘Three years later, people are still saying ‘What’s an Aura?’ In the first 11 months of 2008, GM sold 160,898 Malibus in the United States, but only 56,194 Auras.”
Zing! And how about this?
“Nowadays,” Bob said, sounding a lot like someone who isn’t afraid to tell teenagers to stay off his lawn. “There’s so much stuff out there and so many brands that nobody can keep track of it anymore.”
Well, maybe someone can. But why should we expect such encyclopedic knowledge from the head of GM’s Product Development? What good would that do?
I worry about my 72 year-old Uncle too. Past 70 sometimes they just seem to check-out. Terribly ageist I know, but hey, you don’t have to visit him!
Bob is so cute when he’s drunk. At least he seems to be drunk all of the time. What an idiot. Just a complete, moronic idiot. He doesn’t care. Why would he? Obviously he is at the end of the GM rope and is just riding the wave until the end. He doesn’t care.
How does he fly his jets drunk?
And anyway, Lutz will get a nice fat golden parachute when GM goes bust. Or the day before GM goes bust, I am sure Bob will cash a $50 m cheque before it bounces.
Right from the time he was bribed away from Chrysler, he was to be the savior of GM (Wagner).
and now he has the gall to say what should have been done when he came to GM.
I think Lutz has been on holiday for about 8 years and just came back to the office in time to see his furniture tossed out.
A few weeks ago in Switzerland, he said all that talk of shedding brands was total bunk.
Didn’t the Aura come out long before the new Malibu?
I think “damaged brands” should be renamed “zombie brands”; they are dead already but just haven’t been buried yet.
In all seriousness, I think Buick is in a better position than Pontiac however. Nobody can remember the last time they drove a Buick but everyone can remember driving the cruddy Grand Prix that Avis or Enterprise inflicted on the public.
If GM survives, Buick could be remade into a new make and take some swings out of the park. I mean, for Buick, why not do something totally different? Better to be the first choice for 5% of buyers than to be the 14th choice for 100% of the market.
If it cost $500m to develop the Malibu why would it cost $750 million to develop the Aura, if the Aura and Malibu are basically the same car?
I could believe it would cost $500m to develop the Malibu and then $100m to develop the changes to make it an Aura, but why would it cost 1.25 times more to badge engineer?
D
I do like to take my shots at Lutz, but in all fairness it is possible that he has held this basic view all along but did not have the power to prune GM’s lineup. I would assume that he took a major spanking for his “damaged brands” comments — in no small part because the dealers went nuclear.
We in the automotive blogosphere spend too much time focusing on personalities and not enough time critiquing systems. Wagoner and Lutz are merely symptoms of GM’s malaise. They both would have been long gone if GM had a healthier corporate culture.
How ironic that GM’s big reformer turned out to be a guy in his twilight years who had some pretty backward-looking ideas about product.
so it cost USD$750 million for GM to develop the Aura from an existing platform, basically a new interior and exterior and yet GM Holden spent just over AUD$1 billion to develop the VE Commodore?
I think GM and Ford should look more closely to their Australian counterparts on how to develop cars on a budget.
I hope Saab survives, not under GM control but under new owners that allow Saab to actually be competitive. I think GM should get rid of Buick, Saturn, GMC, Hummer and sell Saab to someone nice. That’d leave Chevrolet as the main brand, Pontiac as the sports/niche brand and Cadillac as the luxury brand. i dont understand the point in a ‘near luxury’ brand like Buick.
Re David Dennis:
If it cost $500m to develop the Malibu why would it cost $750 million to develop the Aura, if the Aura and Malibu are basically the same car?
I could believe it would cost $500m to develop the Malibu and then $100m to develop the changes to make it an Aura, but why would it cost 1.25 times more to badge engineer?
But, regarding your confusion – the answer probably lies in semantics. Lutz points out it takes roughly $750M to “do” a brand clone. That $750M assumes all investment including marketing dollars (but excluding variable incentives per unit sold). So, Lutz is referring to his understanding that the FWD clones take about $750M each to bring to market. And yes, since he’s talking ballpark figures he’ll have a $100M spread.
$100M to do a brand clone would be a pipe dream. $100M might get you a refreshed IP, center console, armrest, fog surrounds, and grille.
However, bear in mind that if you were to take away any one of the clones then the amount necessary to execute the remaining vehicle(s) goes up since fewer vehicles would pick up what used to be common investment.
It is true that if you do not build the brand clone, then you will save money. But before your critical thinking skills get turned off – keep in mind that the absence of this brand clone also means you’re making less money. If there were no Auras, you can rest assured that the total number of Malibu sales would not be equal to 217,092 (assuming the cited numbers in the article).
Since GM has astronomical fixed costs, it needs to make lots of units. Assuming a normal SAAR for D-Segment cars (the SAAR for 2008 is just mind-boggling low), the Aura would pay off its investment during its development lifecycle while also helping pay Lutz’s salary and making sure future cars are able to be developed.
The problem is finding a proper balance with this approach while avoiding a deterioration of your brand and product positioning. Thus far, GM has not executed this well. It is obvious their attempts to make cheap bucks by offering 5 versions of the same vehicle end up destroying their ability to function as a company.
But it is rather myopic to say that the tactic is idiotic given any circumstance. Consider that even Toyota would attempt something similar with their Scion brand in the US and VW/Skoda/Seat play similar wacky games with clones in other markets.
Are all these brands strategy or are they necessity from GM legacy?
For example; do GM have to produce a Pontiac Torrent from the Chevrolet Equinox because they just have to have something to supply out via those contracted Pontiac dealers?
Which part is the chicken and which part is the egg?
Pete – there’s definitely a combination of your notions since there is no good simple answer to complex problems.
I’m sure it would be convenient to trace events back to a single day when some person thought “Let me screw over GM in 80 years by launching the Pontiac Brand.” And, we cannot pin-point a date in 1970 when someone thought “I can kill Pontiac today, but I’d rather read about GM’s problems on the Internet in 2008 so let’s keep it around.”
These companies have massive amounts of inertia from prior business decisions. You have to consider that for the entire time that GM will exist – it will be a money pump. Money goes in, and hopefully money pops out. It takes a good strategy and a lot of management accountability to actually create a good pump, and similar challenge exists to change how that pump works.
It is clear to most people that the amount of investment dollars (money going into the money pump) for a clone is smaller than what it takes to pull off a unique car. So, companies love clones. These clones could be brand clones for a single market (what the Big 3 chose to do), or they can be clones that span other markets (the Asians).
For the Asian firms, the clones require homologation to be accepted by those markets and to meet local regulations. As a result, the Japanese made business models that were supported with the development of low-margin small cars that could be sold in high volume once you add together their many international regions. This is a contrast to the American business model where they sunk money into saturating the USA with more vehicle types. Unfortunately, the Big 3 were rewarded for years with their attempt to have high-margin and high-volume sales concentrated in North America.
It’s not just laws that make it expensive for an automaker to nix a clone. Yes, $Millions are required to halt business operations from a legal perspective. But, keep in mind making fewer vehicles results in fewer dollars coming into the pump – so it costs you in the short run as well on the operating side. But, for GM the goal should have been identified that the company should shrink from its inefficient and large brand overlap. This would allow them to focus efforts on more profitable business decisions. But this is a long-term proposition and Americans rarely think in the long term. Shareholders definitely hate thinking of many quarters of poor earnings in order to have a better company 2 years later.
It would be very expensive for Toyota to suddenly abandon selling in one of their international markets – just as it would be expensive for GM to stop selling its cars to one of its US brands. The benefit for Toyota is that their strategy is good and it doesn’t benefit them to kill their clones. Unfortunately, GM kept up its clone games since their business leaders lacked the ability to impose necessary changes to their business model.
A corporation grows slowly, and the business planning also assumes a certain rate of acceptable change. But if your change is consistently short-sighted and executed with extreme greed (Detroit and Wall Street), a sudden shock to the business sends it into chaos. The Pontiac, Buick, and Oldsmobile Brands made sense for GM decades ago, but it started to make less sense as time progressed. The gradual decay made it hard for them to justify further cutting after they rid themselves of Oldsmobile.
I don’t even want to know how Saturn and Hummer came into existence…
@holydonut
Since GM has astronomical fixed costs, it needs to make lots of units.
And there lies the problem. Sorry, but I don’t get your ardent defense of “cloning brands.” It is precisely why GM is in trouble.
Look at your sentence again. The part before the comma? That’s what GM should be fixing, reducing those costs until the company begins making sense — then make cars to fit the size. Cloning brands to support the mammoth size has to be about the stupidest thing ever.
GM hubris wouldn’t let them accept that they weren’t going to be the world’s top manufacturer, measured in volume, and that was the main criterium for company decisions: “How do we remain #1 in volume?”
For my money, #1 in Profitability would have done just fine, thank you.
@ holydonut
Not sure I follow, but thanks.
What are the Toyota “clones” you speak of? You’re not meaning the vehicles that are Toyota Previa in the US but Tarago in Australia, or Tacoma in the US but Hilux everywhere else, as examples?
@ holydonut
Scion are clones? Of what? Not a single model is a clone of a model sold as a Toyota in the U.S. Now if you meant Lexus you have a decent example, but not Scion. Scions are sold as Toyotas in foreign markets, but they are not here so they are not badge clones. Even though Lexus uses some of the same platforms the cars are different enough that people can tell it’s not just some trim and options that they are paying extra for.
By the way, holydonut, are you the REAL Bob Lutz? I wouldn’t blame him for posting anonymously just to vent. I must be tough to be such an outspoken guy and have to force yourself to say the GM B.S. everyday.
Pontiac and Buick (at least in the US) are too damaged to keep around. Pontiac is the “Chevy with a fake hood scoop” brand and Buick is known as the ride of choice for octogenarians.
Having a separate full brand for niche/excitement/performance is a bad idea from a marketing perspective since it says that the other brands don’t have excitement or performance. You want to be able to say that you can get performance and excitement from Chevy and Cadillac. Don’t detract from the SS and V sub-brands within those divisions. Besides, unless Pontiac gets the Firebird and Corvette, it has no claim to being a performance brand.
Buick has such a strong association with elderly drivers at this point, it would be too difficult to change that perception. Besides, you really want to be focusing the luxury buyers on Cadillac.
Make it simple for buyers. Chevrolet is the value brand and Cadillac is the luxury brand. Both brands will give you performance and excitement. If you want even more performance, then go to SS and V versions of those brands. Simple stuff.
The only case I would see for a third brand is to bring in a brand like Opel that hopefully doesn’t have as much baggage as the other brands. They need something to try to bring back the disaffected drivers that want nothing to do with the existing brands.
Well, mcs, you have good points here. I am unsure how Opel would play in Peoria, of course…
especially since (at least minimally) Opel = Saturn in the North American market. GM may as well not bother with a brand to try to bring back disaffected drivers, since they simply cannot manage to keep their stupid paws off things (like Saturn and Saab). Witness putting “GM” logos on Saabs.
How stupid was that?! Your primary market is leftist profs who loath GM and then you shove a GM logo on the car?! Notsobright. (And while I’m being somewhat tongue in cheek here, there is a grain of truth to my comment, as well).
As for Saturn, the buying experience should have been matched by the engineering of the car, without any US market carry over. In other words, GM could have saved themselves a ton of work and simply made Saturn a “Vauxhall” for North America in much the same way as Opels are rebadged as Vauxhalls for the UK.
Think of how Saturn might have done well with smart assembly lines at their ONE factory, churning out Astras, Vectras, Zafiras and Corsas. The buying public in the USA is largely ignorant of what goes on in Canada, never mind Europe; 99% would have never known that these “Saturns” were Opels in the rest of the world.
But GM simply can’t do “smart”. Hence, they are at death’s doorstep even while supposedly being the #1 volume auto manufacturer in the world.
Nothing lasts forever.
Thanks for believing me to be Bob Lutz. I almost take that as a compliment.
The Yaris in the US shares lots of common components with the Scion xB and xD. The vehicles also occupy many of the same market needs and are often cross-shopped. And what’s this Toyota Matrix thing that is sitting on their website?
I thought it was pretty obvious that Honda/Toyota/Nissan has “cloned” cars in order to enter various markets. A Euro-Honda-Legend is a USA-Acura-RL. This is a clone… it just spans into two markets to avoid excessive overlap within a single market. This is still the automaker’s attempt at splitting fixed costs by bumping up the volume of units sold.
When a company has high fixed costs, it needs a way to cover those fixed costs. Volume automakers have insane amounts of fixed costs. Saying “slash the fixed costs” is novel, but is rather difficult to execute in a short time period. When you slash volume before you slash your fixed costs, you go bankrupt as we witness in recent times. The Big 3 have been gradually reducing its fixed costs over time, but their volume is dropping faster than their fixed costs.
Bottom-line… if you don’t find a way to spread out your investment into lots of units, you cannot make money in the volume-auto industry. GM is getting crushed because they failed to manage both their fixed costs and their market strategies outside of the USA. But don’t confuse the issue by believing that all clones are bad.
I hope they freeze Bob next to Walt Disney when he goes so he can entertain future generations.
Bunter
I dont know why Cadillac exists anymore? They manage to somehow fool people that each of their cars are special and different when they are essentially not. The rebadging crap needs to stop especially with the European and Japanese cars with american branding.