Link:
http://www.portfolio.com/interactive...hat-Should-Die
Source:
Portfolio Magazine, June 2008; Page 86.
Article quote:
G.M.’s biggest problem, however, is its unwieldy collection of eight brands—Cadillac, Chevrolet, Pontiac, Buick, Saturn, Saab, G.M.C., and Hummer. Each product line has its own dealers, its own development costs, and its own marketing budget, meaning that all those resources are diluted to the point of impotence. If you’re shopping for a midpriced sedan, for example, G.M. has six. Buick by itself has two. Toyota, by comparison, has just one—the Camry, which sells nearly as many vehicles each year as all six of G.M.’s offerings combined.
To reduce some of the overlap, Wagoner is trying to merge all the brands into four sales channels. Such consolidation is a tedious process, but cheaper than killing brands outright. When G.M. dropped Oldsmobile a few years ago, the bill totaled more than $500 million. The company still has about 6,700 dealers, a number that is down about 14 percent since 2005, and it’s now helping stronger dealers buy out weaker ones. Some executives privately concede that G.M. needs only three or four U.S. brands: Cadillac, Chevrolet, G.M.C., and perhaps Saturn.
The sad part is that these problems have overshadowed the real progress that G.M. has made. The company has cut billions from its overhead and promises to cut billions more. It has launched well-received new products like the Cadillac CTS sedan, which competes with the BMW 3 series, and the Chevy Malibu, G.M.’s first credible competitor to the Camry and Honda Accord in decades. And G.M.’s overseas operations are growing fast. Last year, it sold more cars internationally than in North America, a first for the firm. The Buick brand, stunningly unsexy in the U.S., actually has cachet in China. Book a limousine from the Shanghai airport into town, and you’ll likely get a Buick.
As with Chrysler and Ford, G.M. is now faced with an unusual business goal: not to grow but rather to shrink its U.S. operations intelligently until costs are in line with revenue.
To that end, here are some prescriptions: Kill Saab and Pontiac today. Merge Saturn with Chevy (the cars aren’t that different anyway). Sell Hummer. Move Buick to China.
Given that G.M. once sold one out of every two cars in the U.S., such steps might seem like radical surgery, but that’s what’s needed. The stock is at a 33-year low, and the company’s market share is 23 percent and dropping, a reality that industry insiders are slowly coming to accept.
“Can G.M. be okay at 20 percent market share?” asks one former G.M. executive. “With the right size and structure, the answer is yes.”
Those aren’t the grand visions that propelled G.M. during its 77-year stint as the No. 1 seller of cars in the world. But given the other, scarier scenarios it now faces, a more modest definition of success might have to be good enough.
Full article here:
http://www.portfolio.com/news-market...tomakers#page1