Is Pontiac Really The Best Partner For Holden?
A MonaroSS Commentary
2 February 2008
The recent reveal of the Holden Coupe 60 at the Melbourne International Motor Show
raises some interesting questions about the future of Holden manufacturing and
design and where in the GM Universe they are best to make alliances.
This is especially important given the continuing decline of the Greenback and the inevitable
rise of China as a world economic power and now one of GM’s best market places.
Personally, I'm not so sure Holden should be linked with Pontiac into the future.
While Pontiac has traditionally been in the distant past a Performance Division,
especially after they introduced the ‘Wide Track’ vehicles, that performance was
always more working class in nature. It was affordable performance. If Holden is to
be the manufacturing base for Pontiac vehicles then the affordable is going to be
increasingly harder to achieve. This is a simple fact of the current global economy,
and yet GMNA seems to have little interest in producing large RWD platforms in
North America now due to negative impacts on CAFÉ.
So who would make a better partner for Holden? I have done some Buick versions of the
Coupe60 as Buick's can sell for more money in America than any Pontiac (easier to
make a profit even with the high A$) and certainly they can extract a premium in China.
I think Holden can do a deal with GM China for a top of the line Premium
Coupe/Convertible with the Chinese Park Avenue Interior a ready fit, and which will
sit well above the more economical FWD V6 Riviera Coupe. Furthermore this would
allow Holden’s HSV (Buick Special Vehicles in China/US) to make super hot V8
Buick Gran Sport's, Grand National's and GSX's. And quite a few of those could be
sold through US Buick dealerships.
Just a Premium Buick Coupe/Convertible in China is all that Holden would need for
25K – 30K sales or more a year out of the 1 million GM vehicles sold in China
annually. This partnership would allow Holden to forget the US as anything more
than a niche market that it can service like the UK with premium priced niche vehicles.
The US doesn't need a heap of Buick Coupes as they will have Camaro and the
Cadillac Coupe, but a small number of Buick coupes priced high for profit (something
GM needs to do more of) done as GS - LS3, GNX - TT3.6 and GSX - LS9 will not
step on Camaro as they will be way too expensive and will not step on Cadillac as
they will be too Large, Brutish and Muscular, even if comfortable and well equipped.
So what is the best option to secure Holden's export future. With the premium Buick
brand or the performance focus of Pontiac?
The possibilities are endless.... Buick Coupe GS (top), performance GSX (middle) and converible (bottom)
BTW. Just for comparison I stripped the big wheels and go-fast kit off the Coupe60 Concept to see what the basic Holden Coupe would look like:
As an Addendum to my above article here is more clarification of my position:
Most people on here are stating which tie-ups with Holden they want based upon their
personal likes and dislikes in vehicles and where they want the selling brand to head
in terms of type of vehicle sold.
My concept of a Holden tie-up with Buick China, and the offspring being some
Holden/China Buick’s being sold in the US as niche models, is based on what is good
business for both Holden and GM.
One of the factors is the fact that Holden is at the limit of it's production in what may
be GM's most modern 95% robot factory in the world. This ensures good consistent
build but is very costly to enlarge capacity. So Holden can't supply successful
mainstream models to either US Pontiac or US Buick.
So what does any business do to improve shareholder value when they have a finite
number of units they can produce each year. - They make more money per unit.
Holden cannot make more money per unit making a Pontiac G8 which is so cut price
compared to Holden prices that it likely makes less than $1,500 profit per unit. To GM
that may seem good as GM has for decades lost money on every car it sold and only
made profit from the finance through GMAC, which it has now sold off control of.
So what Holden needs to do for it's long-term success, and to finance the next Zeta
replacement with something even better, and to build shareholder value and to pay
dividends to GMNA is to find a way to make more profit per unit. That is why it
should look to China where new millionaires are being made every day. A place
where an unsaturated market the size of the US will be made every few decades this
century. In China the Buick brand is not seen as "near Luxury" it is perceived as real
luxury. And therein is the opportunity for GM and Holden to push the Buick brand
there up and up to reach near Bentley levels. That is where I would target a
Holden/China Buick alliance.
Look at the Buick’s. Now imagine them through the eyes of Chinese buyers and
with sticker prices 3/4 that of Bentley meaning the GS sells for US$110,000, the
Convertible GS sells for US$125,000 and the GSX has a sticker of US$135,000.
Now before you start saying "nobody, not even Chinese would pay that for a Buick"
let me tell you why and then what they get.
While many people assume Chinese to be conservative as Chinese businessmen in the
West and Party Officials in China tend towards black limo’s, that is not a widespread
cultural truism. In the West Chinese like low profiles, in China officials have to toe
the party austerity line. But the new money in China are young educated and fully on-
line people eager to learn of the world out-side. Just look at the colors of a Chinese
festival to realise that unfettered the Chinese people like extravagance.
So there is definitely a place to market an over the top car representative of the glory
muscle car days of the US and create a Buick cult following of those cars like the
GSX. Especially because they are rare but with a storied history. When you live in
such a highly populated country there will be many who want to stand out, and that
will increasing include not owning a boring silver Benz or BMW Coupe like all their
colleagues.
The Coupe bodies would be produce by Holden who would fit them with all the HSV
goodies like Magna ride, super premium, perhaps even ceramic brakes, and special
engines sent over from North America such as a base LS3 fitted with LS7 titanium
valve trains etc and the very powerful LS9 etc. These bodies are painted in prima and
fitted only with a recycle drivers seat (they get shipped back to OZ for re-use) so they
can be driven onto the ship sans an interior. So Holden provides the best most
consistent robot build quality GM can provide and fits the best mechanical bits GM
makes or can source and these leave for China.
When they arrive in China they get lavished with the labour intensive stuff, which the
low Chinese wages can provide lots of, such as a very thorough QC on the arriving
product. Then the Chinese make the most premium hand made interiors (many
custom ordered by the client in any color or material they want) using premium leather,
brushed alloys, hand finished and soft touch painted plastics, real wood etc. At the
same time the cars are given show car quality custom paint jobs with hand color
sanding and hand polishing of a dozen coats of color and clear-coat.
The resulting brutally powerful massively equipped and perfectly finished vehicles
are Bentley quality at 3/4 the price. But in there is a profit for Holden and GM of
US$30,000 per unit instead of the US$1,500 per unit they get selling bargain G8's in
the US.
So that means selling one of these Buick’s is the same as selling 20 Pontiac G8's.
With this scenario Holden’s limited production capacity is not an issue. Instead of
selling 30,000 G8's Holden would only have to sell 1,500 of these high end Buick’s.
They could send 300 to the US, like they send 300 of their cars to the UK and sell them
through special high-end Buick dealers in major locations such as New York, LA,
Miami. And the very existence of these "Bankers Hot Rods" from Buick would up
Buick's public image over time in the US too, as the halo effect spread from them due
to rap videos etc.
That is the sort of business case I am thinking of when I suggest a Holden/China
Buick tie-up.