GM Says It May Kill Off One of Its Brands

[Globalist]

Reuters
GM Says It May Kill Off One of Its Brands
Wednesday March 23, 3:20 pm ET

DETROIT (Reuters) - General Motors Corp. (NYSE:GM - News), which issued a shock profit warning last week and has been losing market share, may phase out one of its weaker car brands if sales fail to meet projections, company Vice Chairman Bob Lutz said on Wednesday.
GM's Buick and Pontiac are both "damaged brands" due to lack of investment over the years, and GM is working to correct that with an array of new vehicles coming to market, Lutz told a Morgan Stanley automotive conference in New York.

But if some of its brands fail to meet sales projections, "then we would have to take a look at a phase-out. I hope we don't have to do that. What we've got to do is keep the brands we've got."

Financial analysts have said for years that the world's largest automaker has too many brands to support, even with the gradual phase-out of the Oldsmobile brand a few years ago, particularly with its weaker U.S. sales.

Sales for both Pontiac and Buick have lagged in recent years. But GM is in the midst of a $3 billion investment in new vehicles for Buick, and Pontiac showrooms and they will have four new vehicles this year, including the Solstice roadster, Torrent SUV and the G6 mid-size coupe.

GM, which last week cut its earnings outlook for 2005 by as much as 80 percent, posted a 6 percent drop in U.S. sales for the first two months of the year. GM's U.S. market share fell to about 25 percent, far below its share of 27.5 percent for all of 2004.

Analysts said last week that GM's March sales could fall as much as 10 percent in March, while foreign automakers such as Toyota Motor Corp. (Tokyo:7203.T - News), Hyundai Motor Co. Ltd. (KSE:005380.KS - News) and Nissan Motor Co. Ltd. (Tokyo:7201.T - News) would continue to gain U.S. market share.

Lutz said GM will post relatively flat U.S. sales for March, however, performing much better than expected.

"I think we're going to be just about even, our best guess at this point. Either a percent over or a percent under," he said. "It is a substantially better month than January or February, and it looks like the whole industry is up."

"A HUGE ALBATROSS"

No details about an expected restructuring at GM, the largest private U.S. provider of health care, have emerged since it roiled markets with its warning last week.

But the company, which has about $300 billion in outstanding debt, said on Wednesday it was in talks to sell a stake in its GMAC Commercial Mortgage unit after potential investors expressed interest in the unit.

And Lutz and Gary Cowger, GM's president for North America, spoke of possible demands for a cut in mounting health care benefits for the company's hourly union employees in remarks on the sidelines of the New York auto show on Wednesday.

An elimination of any one of GM's brands would likely mean plant closings and a shrinking of GM's hourly work force.

"An across-the-board competitive health care plan for salaried and hourly employees could literally save us billions," Cowger said. Health care costs, added Lutz, are "a huge albatross hanging over American industry today."

Lutz particularly acknowledged that the automaker, which will struggle to make a profit this year, faces challenges. But he said GM was "taking the necessary step to right this ship."

"Sure, we face short-term challenges, and this is not going to be a banner year," he said. "It's a difficult period of adjustment. But we will get through it."

He said some of GM's new cars, such as its Chevrolet Cobalt small car and the Pontiac G6 mid-size car, will post their best sales to date in March, and told the Morgan Stanley conference "I don't know where all the gloom and doom is coming from."

He quoted one car reviewer who said, referring to GM's troubles, that the quality of the Cobalt convinced him that "the Titanic may yet turn fast enough to miss the iceberg."

[dav305z]

I don't get it. If you want to look at "damaged" brands, why not talk about Saab, or even Saturn instead of throwing the towel in on a brand that has a long established reptutation in America?

[mgescuro]

Hmmm
Kill the NA Buick but keep it in China.

[AdmiralViscen]

Pontiac's future is looking more and more ominous.

[SobeSVT]

Chevrolet and Cadillac are the only safe brands. Everything else should be for revision

[usa1]

I would vote to kill Saab, Saturn, GMC trucks, and Buick.

Saab is a useless brand. GM is watering down so much now with badge engineering that 5 years from now it will be worth nothing. Why wait? Kill it now.

Saturn has an entire portfolio of terrible products right now. The upcoming ones looks good, but why waste them on this brand? Give these the new Aura to Chevrolet and call it the new Malibu. Cancel the Sky or make it a low end Cadillac model like the Z4 is to BMW.

GMC Truck is a reduntant brand to Chevrolet. Nothing really differentiates them from Chevrolet anymore. Quadrasteer and the XUV are done. What is left? Ditch the alternative grills and focus on Chevrolet.

Buick is catering to a dying clientel. I don't see it ever being popular again. With Zeta delayed for years, Buick will offer nothing worth mentioning for years. Offer Cadillac models that cater to old Buick customers. The DTS fits this bill.

Now for the remaining brands:

Leave Chevrolet for entry level.

Move Pontiac upmarket, away from Chevrolet (20 to 30% premium like Acura is to Honda), and become a true performance brand clearly between Chevrolet and Cadillac. This requires good hardware that Pontiac does not offer today.

Keep Cadillac at the top. Keep moving it upmarket to avoid Pontiac.

Think what GM could do if it could focus on making all its brands great and not have to worry about overlap like they do today.

Under my scenario, I guess you could swap Buick for Pontiac here, but I've never liked Buick.

Mark

[camaro chris]

Originally Posted by SobeSVT

Chevrolet and Cadillac are the only safe brands. Everything else should be for revision

yeah its scary but they are the only safe ones.

[AdmiralViscen]

WHY AXE GMC, THE SECOND HIGHEST SELLING GM DIVISION, WHICH COSTS PRACTICALLY NOTHING TO MAKE VEHICLES FOR, AS THEY SIMPLY CHANGE THE FRONT CLIPS OF CHEVYS?

I'm sick of hearing that ****************ing statement in every topic.

[genjy]

I think Pontiac would be the one to go if a decision had to be made. Pontiac is sort of irrelevant like Mercury now. I think Chevrolet could handle both mainstream and "performance" branches quite well by itself. Saturn can be the Opel importer, Buick has the semi-lux and China market, Saab is there to fight Volvo, and Caddy can stay where it is.

[nsap]

I would be willing to bet that Pontiac dies. Maybe not, but GM has been cutting off Pontiac's air in the past few years.

You just can't give your "Excitement Division" the same mechanical items as high-end Chevrolet products (i.e G6 GTP and Malibu SS).

[saabman]

My knowledge of auto. distribution channels is limited, but it seems to me that GM doesn't need to kill off brands, it needs to limit the amount of overlap. Four minivans? Please, two good minivans (one mainstream, one premium) would be more than enough. Why does the performance division have a minivan? Just because they used to have one. please.

It's the dealers that are the problem. They all want to be full-line outlets, but that doesn't make sense for GM. All of their brands (including Saab) have value, but it is diluted when a product that make no sense shows up in the wrong showroom. Only Chevy and (maybe) Saturn need extensive product lines, the others should be more focused.

[Dead Dude]

Pontiac isn't as valuble as Buick is. They need Buick to cater to the more conservative and traditional luxury and near luxury buyers. Cadillac is going upmarket, and when the DTS gets its full restyle to match the rest of the brand, they need to be able to get those guys to Buick.

I have a feeling Pontiac is going to be doing pretty well once they get the rest of the G6 line and the Solstice in the market place. The Solstice is a winner, as is the G6 droptop.

At least they're not doing more damage to Buick and Pontiac, they're repairing them

Saab is the division they need to worry about. Saturn, too, especially without those no dent panels.

[Globalist]

GM is like a polygam man living with many housewifes under the same roof. They all need his attention, and time. And, he needs to be rich, healthy and fair to satisfy all of them.

When he is weak, then he must let go some of them, otherwise they will send him to the graveyard.

[GM_Fanatic]

I was right! Pontiacs theme song is a call out to the consumers. (see here) Its up to us, the consumer, to decide the fate of Pontiac.

Originally Posted by usa1

I would vote to kill Saab, Saturn, GMC trucks, and Buick.

I don't see how people can say "get rid of GMC" when that is one of GMs stronger brands. (their sales have been consistently up the last few years) Yes they are all clones of chevys but when you just kill a brand you are going to loose a lot of cusomers. Hopefully GM will put more differentiation into GMC when the new trucks and SUVs come out, but we'll see. It also depends on the future of the market with gas prices and all. If eventually fullsize trucks and suvs take a hardcore nose dive then I would start to consider getting rid of GMC.

*GMI NEEDS FOR SERVER CAPACITY!, this "the server is to busy" message is bugging the heck out of...GMI is growing fast!*

[Infiniti Z350]

Originally Posted by Globalist

GM is like a polygam man living with many housewifes under the same roof. They all need his attention, and time. And, he needs to be rich, healthy and fair to satisfy all of them.

When he is weak, then he must let go some of them, otherwise they will send him to the graveyard.

Great analogy.