GM Marketing Chief Discusses Challenges, Plan Going Forward

[Ming]

How General Motors Plans to Muddle Through
Rick Newman
US News and World Report
August 1, 2008



I sat down recently with GM marketing chief Mark LaNeve and asked about the company's prospects.

Q:There's been a lot of bad news lately: plunging car sales, more restructurings, the huge dropoff in trucks and SUVs. Do you feel like GM has a handle on where it's going?

A: What we don't have a handle on is the industry, especially at the retail level. We're doing better than Ford or Chrysler in some segments, but the only manufacturer doing well year-over-year is Honda. So the whole question is where is the industry going? I'd like to think it's somewhere near the bottom.



What's your answer to all the armchair analysts who say GM has too many brands, that it needs to get rid of some of the weaker brands like Pontiac, Buick, and Saturn?

If we were to cut three or four brands, what would the benefit be? What would we really save? We actually run our business now like it's four brands, with Pontiac, GMC, and Buick as one brand. And we've filled the portfolio for all of our brands. So if we killed one of the brands, we'd lose a business. We'd save a little short-term marketing money, but not much. Plus, we know from Oldsmobile how much it costs to kill a brand.

We look at the brands as assets, with four channels globally. Saturn is our way of distributing Opels from Europe in the United States. And in the last year, Saturn has had one of the best increases in sales in the industry, if you compare year-over-year sales for the same products. In China, Buick is our major brand.

All the talk lately of bankruptcy, and GM possibly running out of cash in 2009: Do you think the talk itself is harming GM?

It's never helpful. The dealers tend to get very anxious when they hear it, and I've heard very little from dealers. It tends to be a very incendiary issue, but I don't think it's a big issue out there right now.

By the way, it's not just us. Look at the airlines, look at Starbucks closing hundreds of stores. Our industry has certainly been in a recession, but we're not the only ones.

With $4 gas, people are fleeing big vehicles for smaller ones. Do you think consumers are being rational?

The reaction to $4 gas has been more severe than I would have thought. We ran some numbers the other day, and the difference between driving a Silverado pickup with a V-8 engine and a Malibu or Camry with a 4-cylinder comes out to about $17 per week in extra fuel. That's not that much. What has scared people, I think, is that prices have gone higher as we're also having layoffs and the economy is getting worse. And you've got oil analysts saying oil is going to get to $200 per barrel. So suddenly fuel economy is top of mind.

How much strength is left in the SUV and truck segment?

We've got four really good truck brands: Chevrolet, GMC, Escalade, and Hummer. Hummer has the lowest share and the greatest chance to maximize its value outside of GM, which is why we've put it on the block. Other brands lack the brand image and the market position that we've got. Toyota introduced a much-improved Tundra last year, and we didn't lose one point of share on the Silverado. Now we have to do that with cars. Malibu sales are up 100 percent, but we still don't have the market position of Honda or Toyota. A customer can see every ad they want, but that's not as powerful as selling a car to their neighbors.

FULL INTERVIEW / SOURCE

[mgescuro]

Originally Posted by Ming

[b]
With $4 gas, people are fleeing big vehicles for smaller ones. Do you think consumers are being rational?

[color="blue"]The reaction to $4 gas has been more severe than I would have thought. We ran some numbers the other day, and the difference between driving a Silverado pickup with a V-8 engine and a Malibu or Camry with a 4-cylinder comes out to about $17 per week in extra fuel. That's not that much. What has scared people, I think, is that prices have gone higher as we're also having layoffs and the economy is getting worse. And you've got oil analysts saying oil is going to get to $200 per barrel. So suddenly fuel economy is top of mind.

WTF?? THe difference between a V8 Silverado and a 4-cyl Camry/Malibu is approximately 4 gallons every week??
You math has got to be off Mr. Marketing Dude.

In addition, this is a beancounter answer. There is nothing in there that shows the issue that customers have in their head that V8 = gas guzzling. There's no perception quotient in there.

And if that continues to be GM's answer, pointing at numbers and saying, "Nuuuh-uuhh," then there is no hope.

[sigma]

Originally Posted by Ming

With $4 gas, people are fleeing big vehicles for smaller ones. Do you think consumers are being rational?

[color="blue"]The reaction to $4 gas has been more severe than I would have thought. We ran some numbers the other day, and the difference between driving a Silverado pickup with a V-8 engine and a Malibu or Camry with a 4-cylinder comes out to about $17 per week in extra fuel. That's not that much. What has scared people, I think, is that prices have gone higher as we're also having layoffs and the economy is getting worse. And you've got oil analysts saying oil is going to get to $200 per barrel. So suddenly fuel economy is top of mind.

FULL INTERVIEW / SOURCE

I doubt it's only $17 a week. Furthermore, has someone at GM actually broken out their calculators and figured out that is about $900 extra A YEAR? That's almost my cell phone bill per year.

So why would someone pay an additional $15,000-$25,000 upfront, combined with an extra $900 a year in fuel for capabilities that they don't NEED?! Especially with the economy in the tank?

Would someone please go wake up GM?!

[MikeB]

A difference of $17 a week??!!! Are you smoking crack Mark?

Good God, this man is out of touch. Fire him immediately!!

[mikesright]

Originally Posted by mgescuro

WTF?? THe difference between a V8 Silverado and a 4-cyl Camry/Malibu is approximately 4 gallons every week??
You math has got to be off Mr. Marketing Dude.

In addition, this is a beancounter answer. There is nothing in there that shows the issue that customers have in their head that V8 = gas guzzling. There's no perception quotient in there.

And if that continues to be GM's answer, pointing at numbers and saying, "Nuuuh-uuhh," then there is no hope.

Did you even pay attention to that paragraph, let alone the article? He pointed out later that with all of the economic uncertainty and with the price of oil going higher and higher, that fuel economy is top-of-mind. He also went on in the article to say that they have extensive plans to meet the consumer's needs with lots of hybrids and putting 4 cylinder engines in vehicles they wouldn't have dreamed about doing until now.

Also, he was absolutely correct to say that the consumer reaction isn't rational. You can get $10,000+ discount off a truck right now, but you'll have to pay sticker for that compact car, for one, and secondly, the savings in gasoline for the average person for a pickup vs a car is about $60/month. When people are doing this, or trading in their upside-down truck for a Cobalt, losing ten grand plus for a $60/week gain, it is irrational.

[01cavalier]

The math is actually about right if you take a two wheel drive Silverado with the 5.3 and compare it to a 4-cylinder Camry, base it on the average fuel economy and base it on 12,000 miles per year. Thinking about the actual cost is why we haven't gotten rid of our truck, it doesn't make sense given the extra cost. We save more by just driving less. When it's time to buy, sure, gas mileage will be more important, but only when compared to other costs.

[skylark68]

It's nice hearing something from an actual industry person rather than a bunch of armchair CEO's like we usually do on this site (I'm guilty of this too).

Thanks for the interview.

[neshapop]

Originally Posted by mikesright

Did you even pay attention to that paragraph, let alone the article? He pointed out later that with all of the economic uncertainty and with the price of oil going higher and higher, that fuel economy is top-of-mind. He also went on in the article to say that they have extensive plans to meet the consumer's needs with lots of hybrids and putting 4 cylinder engines in vehicles they wouldn't have dreamed about doing until now.

Also, he was absolutely correct to say that the consumer reaction isn't rational. You can get $10,000+ discount off a truck right now, but you'll have to pay sticker for that compact car, for one, and secondly, the savings in gasoline for the average person for a pickup vs a car is about $60/month. When people are doing this, or trading in their upside-down truck for a Cobalt, losing ten grand plus for a $60/week gain, it is irrational.

...and the panic monkeys went straight to Toyota/Honda dealership.

[damurf]

The current GM leadership team has done just a wonderful job of managing the downward spiral. There have been few, if any, bold moves on GM's part to address their shrinking market share in the US or any attempt to recreate the organization to face the new realities of the US market. I had high hopes when they killed Oldsmobile that GMC, Pontiac or Buick, and maybe Saturn would not be far behind. Long gone are the days that GM can command 25%+ of the automotive market. There are simply far too many auto manufacturers with comparable or superior products available to the US consumer. To wit, we have lowly Hyundai challenging Toyota/Lexus with a luxury car in the US and with a SUV that is being compared to the best from Japan. GM has for too long peddled a mediocre product to the US consumer. And because of that they have lost a generation of potential buyers who were either dissappointed with a previous GM product or grew up on Japanese and European vehicles. A classic example is the Malibu - by all rights a very nice ride. But, the previous two generations of Malibus were turds. I had the misfortune of renting a number of Malibus over the years and I simply wouldn't put one on my shopping list because of previous expereinces.

Mark LaNeve is a bit delusional. The problem GM has is quite clear. Simply go to the GM.com site and do a search for their sedans. Approximately sixteen distinct models come up. Not one has a sophisticated hybrid system. There are no diesels. Many are saddled with 4 speed automatics and OHV engines that should have been retired years ago. At most, maybe the CTS, Aura, G8 and Malibu are competitive sedans. There are no Honda Civic killers, Prius fighters or high end autobahn cruisers? How can any company suffering the losses that GM has suffered possibly support the marketing and continued improvement of sixteen freakin' sedans!! Answer - they can't and they aren't. What would have happened if GM had killed Saturn and invested all the money and engineering into Chevy? Instead of having just one bright spot - the Malibu (I'm not counting the Corvette because thank God GM seems to actually care about that brand) we could have the huge Chevy sales channel pushing an Astra (intead of the crappy Cobalt), the Sky (Corvette's little brother), the Vue (instead of the Equinox) and the Outlook (kill the outdated Trailblazer).

Despite Mr. LaNeve's comments market dynamics is dictating that GM must downsize. They can continue the downward spiral of peddling maybe 4 -5 decent sedans and 12 sub-par ones OR they can develop a handful of class leading, category defining vehicles that the US consumer will purchase.

[eb110americana]

It's hard to predict where gas prices will go, but you still need to make assumptions for planning purposes. What assumptions is GM making about gas prices?
We need to get our mix conservative. So we've said, "Let's just plan on $4-per-gallon gas being here for good." There's no upside to planning for an optimistic viewpoint that gas prices are going to come down.

GM needs to be planning for $5/gal. gas and up before it gets here. Failing to do so is how they got into this mess in the first place. Gas went from $1 to $2 per gallon over a year or two and they decided that a 100% gain was as high as things could go. Then it went to $3 and they ignored the %50 rise even as it was cutting sharply into their bottom line and people were warning them to prepare for the worst. Now it's $4 and they are feeling the hurt while patting themselves on the back for assuming this is the worst it can get because they avoided assuming gas prices would go down. Get a clue. They are going up. Here comes the flood, wall off the store fronts with subcompact Chevrolets and climb aboard the good ship MPG. Otherwise you'll be doing the same speech in a year or two pleading GM's case that, "No one could have predicted $5 per gallon gas."

As far as efforts go, good job on the 4 cylinder proliferation. The 1.4 turbo is much needed. The Volt will help once it's mainstream. Quit worrying about castrating Cadillacs, Pontiacs, and other luxury or performance cars, and instead chuck the truck and SUV dead weight overboard. Keep pickups up to date with efficient engines when you can, but trying to fix that hole will only hemorrhage more money down a bottomless pit. The 6 speeds are helping and the class leading economy of the XFE models and LTZ Malibu 4 are good starts. Think about the smaller, more efficient vehicles people are going to keep moving to as their SUVs, crossovers, large cars, and commuter pickup trucks come due for replacement (hint, it's not optimized versions of the same with a couple more MPGs).

[ghughes]

mark is an ex-jock with a minimal education, I hope he is not the CHIEF marketer at GM, maybe (hopefully) just a spokesmouse?

[mgescuro]

Originally Posted by mikesright

Did you even pay attention to that paragraph, let alone the article? He pointed out later that with all of the economic uncertainty and with the price of oil going higher and higher, that fuel economy is top-of-mind. He also went on in the article to say that they have extensive plans to meet the consumer's needs with lots of hybrids and putting 4 cylinder engines in vehicles they wouldn't have dreamed about doing until now.

Also, he was absolutely correct to say that the consumer reaction isn't rational. You can get $10,000+ discount off a truck right now, but you'll have to pay sticker for that compact car, for one, and secondly, the savings in gasoline for the average person for a pickup vs a car is about $60/month. When people are doing this, or trading in their upside-down truck for a Cobalt, losing ten grand plus for a $60/week gain, it is irrational.

Yes. I read the paragraph and article.
Did you even bother reading what I wrote?
Not only is their math overly optimistic, but the "worry" of people that fuel is going to cost more is hurting trucks. Notice, this runs COUNTER to what GM has been preaching for the past 35 years, "Americans want trucks. Nothing will stop Americans from buying trucks. So, we will continue to build trucks. Forget about all the small cars because we can't make money on them anyways. And no one wants to buy them."

How long did it take for GM to realize that what they were the only ones doing this? Everyone else hedged their bets with competent small cars, mid-sizers, AND trucks. You realize the first competent mid-sizer from GM came out last year? LAST YEAR! And the Aura doesn't sell well.

The market has been completely rational. It is GM that has been unable to read the market trends. Compact cars have been a significant trend since the 1960's. They have NOT gone away. Every year, compact cars have gained in acceptance. And compact cars are also becoming more and more feature filled. But GM has not kept pace.

Let's do the math!!

A Silverado 4.8L is 14/19. Let's call it 16 mpg. 26 gallon fuel tank. $4/gal. $104 fillup. Range = 416 miles.
A Malibu 4-cyl is 22/32. Let's call it 27 mpg. 16.4 gallon fuel tank. $4/gal. $65.60 fillup. Range = 442.8 miles.

In 10,000 miles, the Silverado, assuming these numbers, will cost $2,500.
In 10,000 miles, the Malibu, assuming there numbers, will cost $1,481.48.
The difference is $1,018.52.

In 35,000 miles, the Silverado, will cost $8,750 in gas.
In 35,000 miles, the Malibu, will cost $5,185.19.
The difference is $3,564.81.

The average miles driven by an American is 15,000 miles per year.
In 15,000 miles, the Silverado will cost $3,750 in gas.
In 15,000 miles, the Malibu will cost $2,222.22.
The difference is $1,527.78.
Spread out weekly.... That's $29.38 per week!!

That's $12.38 MORE than estimated by GM!!!!!

GM's math is bass ackwards!!!

[Ming]

It's not the math that bothers me. It's the way that LaNeve almost seems to be saying that people shouldn't be buying their own 4-cylinder Malibu (!), but should be smart enough to see that what they really need is a Silverado (to commute to a desk job in).

I know that's not how he meant it, but it does gel with the general idea you get from listening to management that GM is patiently waiting for us all to "wise up" and start buying their most profitable (and most thirsty) vehicles again. Meanwhile they grimace and drag their feet, "surprised" at the sales of vehicles like the Cobalt XFE, as they grudgingly comply with what we really want, which isn't $40,000 8-passenger crossovers and SUV's and trucks with thousands of dollars of 'built-in profit', but more sensible and stylish cars like the 4-cyl. Malibu he says isn't all that different, fuel economy-wise from their trucks.

What GM wants to sell us and what the public wants to buy from them are not always the same. GM needs to make a visibly enthusiastic effort to bridge that gap, and quick.

The Malibu is a great car. Now I want to see GM make an all out advertising effort that convinces me that they aren't still trying to get me into a truck or SUV, but into their great new cars instead. I want to see and feel a GM that is confident that the profits from cars can sustain them --- that they aren't hopelessly addicted to SUV and truck profits - or their replacement, the super-sized, super-priced crossover. The "GM is only trying to clear out old SUV/Truck inventory, so that's why you haven't seen those kind of ads yet" excuse will only last a few months longer.

[Rocket 88]

This guy pointed out only Honda is up year over year and doesn't seem to want to think about WHY that is the case. Shouldn't that be the $10,000 question instead of trying to talk people into spending just $17/week extra in fuel cost to drive a Silverado?

[Rocket 88]

Originally Posted by Ming

What GM wants to sell us and what the public wants to buy from them are not always the same. GM needs to make a visibly enthusiastic effort to bridge that gap, and quick.

AMEN!