GM doing things right? "At last, GM's strategy is making sense"

[wolverine]

Well, well, looks like hell may have frozen over. An auto "anal-ist" actually praises the way GM is starting to do things:

At last, GM's strategy is making sense
August 6, 2006
BY TOM WALSH

Hardly noticed amid the chaos of surging gas prices, the collapse of midsize SUV sales and massive buyouts of Detroit autoworkers is a startling development:

General Motors Corp., for perhaps the first time since scoffing at the invasion of America by tinny little Japanese cars in the early 1970s, now has a product development and marketing strategy that makes sense.

If it works, as even some longtime GM skeptics think it might, GM could finally stem its slide in U.S. market share and halt the painful cycle of plant closings and huge job cuts every few years.

It would also tighten Chief Executive Officer Rick Wagoner's hold on the leadership reins at GM after a trying period of heavy losses and stinging criticism.

Wagoner is now taking a more visible role in touting GM's new product and sales approach. He is expected to announce later this week that GM will build Chevrolet Camaro muscle cars again.

Here are more signs that the times are indeed a-changing:

• GM has some strong-selling passenger cars, after years of being clobbered in this segment by Toyota, Honda and other rivals. Sales of the Pontiac G6 are up 45% so far this year; the Chevrolet Impala is up 21% and the Cobalt up 10%.

• GM has reduced spending on rebates and other incentive gimmicks by $1,100 per car this year, the most in the industry.

• Residual value, the measure of how much a vehicle is worth after several years of use, has risen smartly for GM cars and trucks in recent years, enabling GM to narrow the substantial gaps that previously gave Japanese automakers a huge advantage in pricing vehicle leases.

• GM executives are resolved to stop throwing good money into failed products or shrinking vehicle segments. Therefore, even though the company has not yet killed these models, don't hold your breath waiting for new versions of GM minivans or even GM's stalwart midsize SUVs, the Chevrolet TrailBlazer and GMC Envoy.

Instead, GM will spin variations off its new midsize crossover architecture to create seven-passenger vehicles with car-like handling and 25-m.p.g. highway fuel economy.

GM's top brass have discarded the foolhardy notion that their company -- or any other -- can dominate the U.S. auto market as GM did in its heyday. As recently as 1980, GM sold 45% of all cars and trucks in the United States; so far this year, it's about 24%.

"We were skeptical," Sundaram said, when GM pledged in January to cut back on incentives after years of being the industry leader in fire-sale tactics. "But they are doing pretty well in sticking to it."

GM isn't stopping all sales promotions. But its incentive spending per vehicle sold dropped to $2,836 in June, $1,100 less than in June 2005.

By comparison, Ford's incentive spending rose $365 to $3,870 per vehicle in June; DaimlerChrysler's rose $444 to $3,964, and Nissan's jumped $734 to $2,556, according to a GM analysis of Power Information Network data.

Keeping actual transaction prices closer to suggested retail prices helps an auto company raise the residual values of its products, which are expressed as a percentage of original list price. This, in turn, makes lease payments more attractive and enhances a vehicle's reputation for durability.

All that translates into big dollars. "A 10% increase in residual value of our vehicles is worth $1 billion to us," said Mark LaNeve, GM's vice president for sales, service and marketing in North America.

Two years ago, according to ALG data, the average residual value of a GM passenger car was about 35%, while industry leader Honda's was more than 50%. By early 2006, residuals for GM cars had risen to nearly 45% while Honda was still in the low 50s.

"GM still has some challenges," said Michael Robinet, vice president of forecasting for Northville-based automotive research firm CSM Worldwide. "They've been a bit late in replacing midsized SUVs with their new crossovers, for example.

"But they definitely have a head of steam in some areas. The new HHR is a pleasant surprise, and the new large SUVs are segment leaders."

GM also is taking steps to more clearly define its brands.

Saturn, for example, was known for a friendly dealership experience, but its cars were nondescript. Lutz has pushed GM designers to give Saturn a more European feel, with the Sky roadster and Aura midsize cars launched to warm initial reviews.

And what of Pontiac and Buick, long viewed as the weakest brands in GM's stable? As GM pushes dealerships together into a combined Buick-Pontiac-GMC channel, each brand's product line will be smaller and more tightly focused.

Look for Pontiac to emerge as the home for performance-oriented rear-wheel-drive cars, Buick as the place for elegant near-luxury vehicles.

Full Article: http://www.freep.com/apps/pbcs.dll/a...=2006608060659

[bouda]

Wow! Hopefully this a sign of things to come.

[A Bum In A Bus]

Hopefully GM has learned that taking the short cut, often times gets you lost. This sound as though they have made the necessary course corrections, way to go GM.

[CrunkedRL]

Originally Posted by wolverine

Well, well, looks like hell may have frozen over. An auto "anal-ist" actually praises the way GM is starting to do things:

"A 10% increase in residual value of our vehicles is worth $1 billion to us," said Mark LaNeve, GM's vice president for sales, service and marketing in North America.

Two years ago, according to ALG data, the average residual value of a GM passenger car was about 35%, while industry leader Honda's was more than 50%. By early 2006, residuals for GM cars had risen to nearly 45% while Honda was still in the low 50s.

This is a pretty impressive jump. Could this be the end of poorer quality vehicles produced by GM? Only time will tell.

[chad4835]

Nice to hear some good news. It was getting pretty depressing a couple of months back with all the bankrupcy talk.

[DuSpinnst]

For all of you who don't get the Free Press, this and the Camaro article are on the front page of this Sunday's paper.

[Sphinx002]

Great article. It confirms what I have been feeling lately about GM products.

[coaster.n3rd]

Things are good.

[macphisto]

Great column that highlights what GM has doing. GM deserves great praise for sticking to their plan and coming up with it in the first place.

The product is better now and will continue to improve. The sales strategy has improved. As positive articles surface more and more, the image will improve. That will also help.

GM just needs to keep the ball rolling. They've got some great stuff in the pipeline.

[nadepalma]

Originally Posted by CrunkedRL

This is a pretty impressive jump. Could this be the end of poorer quality vehicles produced by GM? Only time will tell.

Let's hope so. But a 10% jump is might impressive. They just have to make sure that they WON'T dump excess in the fleet markets either (I know they cut back on this) since doing that will depress resale values just as much as perception and quality issues.

[nadepalma]

Originally Posted by macphisto

Great column that highlights what GM has doing. GM deserves great praise for sticking to their plan and coming up with it in the first place.

The product is better now and will continue to improve. The sales strategy has improved. As positive articles surface more and more, the image will improve. That will also help.

GM just needs to keep the ball rolling. They've got some great stuff in the pipeline.

Agreed. They need to stick to their guns despite the Renault situation, the negative press, etc. Fact is that the ONLY way to get ANY results is to stick to a plan long enough to see the fruit of their development. Ditching a plan before you actually start to see results is just wasted effort, money and time. Many have criticized Rick & Co. for not moving quickly enough, but the fact remains that things take time and when you're captain of the Titanic it takes awhiel for things to filter down and get the ship moving in another direction.

I hope that GM continues to make such inroads and have such successes. But like I've harped on before in the past -- they can NEVER get cocky again. They're putting out some of the best products they've ever designed/engineered and brought to market in the past 2 or 3 years --- and the best is yet to come. But if for a second they go back to the "We're the best of the world, all kneel before us"-mentality that they had years ago, it will further their demise. They must remain in crisis mode indefinitely to get more great products out there and not make stupid business decisions.

But I'm hopeful. They seemed to have learned their lessons from the past (at least some of them) and are continuing to build steam.

Wanna share what else they might have in that pipeline that we don't know about macphisto?

[mbukukanyau]

Originally Posted by TOM WALSH

• GM executives are resolved to stop throwing good money into failed products or shrinking vehicle segments. Therefore, even though the company has not yet killed these models, don't hold your breath waiting for new versions of GM minivans or even GM's stalwart midsize SUVs, the Chevrolet TrailBlazer and GMC Envoy.

I think GM giving up this market is a not a good business move. The trailblazer will be a victim of regional thinking. While 4Runner and Pathfinder are global products. Trailblazer was conceived as a North American product.

GM could easily take the next Generation trailblazer global. The current one is not competitive. They however need to address its shortcomings, especially its ground clearance, tire size, and interior.
Further a Ranier version should be able to go to all markets where Buick is sold. That GM North American does not think in an export oriented way is the final handle that they have to overcome.

Here is a list of Vehicles that should be conceived as global from the get go by Chevy

Trailblazer,
Cobalt,
Malibu
HHR
Corvette
Tahoe
Coronado
Aveo
Equinox

They also need a Trail blazer II. Think Prado II

That is Toyota Nissan strategy. Basically a stripdown hardcore offroad model with A/C for Africa, South America, India and Arab world, that is a basic truck model. Then it would have a Luxury version of the same for North America. On its own in North America, it would not sell 100K units, per year, but, if you are offering it in every single market.. 2000 in Europe, 2000 in India, a few in Australia.. you 2000 in the entire Africa, 5000 in russia (has to have Diesel) 10K in south America, you soon have a 100K global volume. And you have made your money, you will not need fire sales etc...
I believe that is what Toyonissan does to their slow moving platforms....
GM should not give up this segment.

What am I saying? Every single factory should be competitive enough to export its products. Be it the GM plant in South Africa or the GM plant in Kenya, or India or holden.

When you have over capacity in N/A you simply unload those products in other places, like Japan or India.. But to get there, all your plants have to have very competitve products

Its a shame that GM is the most Global of all auto companies, yet it suffers from Reagional thinking

[markusername]

GM seems to be starting to fire on all cylinders. Rick and company have done an outstanding job to turn around the Titanic. The only major stumbling block where they have a foot in the grave over is next years UAW contract.

Will GM finally have the balls to put the screws to the UAW? I would offer them no health coverage, no job banks, no pension, and $20 per hour. (Hey that's still 3 times minimum wage for doing monkey's work). Take it or leave it, I'm sure they can find a lot of unemployed people, or people making $6/hr at Burger King to come over and to the mindless monkey work the UAW does.

If GM can pass this last stumbling block, the sky's the limit.

[plane]

Originally Posted by markusername

...
Will GM finally have the balls to put the screws to the UAW? I would offer them no health coverage, no job banks, no pension, and $20 per hour. (Hey that's still 3 times minimum wage for doing monkey's work). Take it or leave it, I'm sure they can find a lot of unemployed people, or people making $6/hr at Burger King to come over and to the mindless monkey work the UAW does.
...

That's a bit inflammatory wouldn't you say?

I've worked in large plants - visitied one last week. It is not monkey work and it takes good people to make things run well. You might be surprised how often the line workers surprise management with great ideas and real innovation.

Yes, that's only part of the story, but UAW worker bashing is not going to get us where we need to be - firing well on all 8 cylinders.

[paul3230]

Originally Posted by markusername

GM seems to be starting to fire on all cylinders. Rick and company have done an outstanding job to turn around the Titanic. The only major stumbling block where they have a foot in the grave over is next years UAW contract.

Will GM finally have the balls to put the screws to the UAW? I would offer them no health coverage, no job banks, no pension, and $20 per hour. (Hey that's still 3 times minimum wage for doing monkey's work). Take it or leave it, I'm sure they can find a lot of unemployed people, or people making $6/hr at Burger King to come over and to the mindless monkey work the UAW does.

If GM can pass this last stumbling block, the sky's the limit.

Yep..and that I think that's the quickest way to get GM offtrack with a HUGE strike. They don't need that nor the negative publicity. Look, the UAW knows that GM isn't the cash cow it once was so they will be much easier to let go of certain things....not all things. I think the Elephant in the room will be the job banks. Look for GM to go after that one first. I think that one alone can help GM trim cost by like a billion or something like that.