Rumblings & Rants: Saving money, Cutting brands, and what GM SHOULD do to survive

[Archangel]

Originally Posted by KAD

You sir are a genius. Thank you for sharing your thoughts with us. I have been thinking about GM's situation a lot lately, and I think your solution seems best. I seriously hope GM considers all of what you have thought of.

Genius indeed. I've always being in favor of the Opel/Holden Pontiac approach. Awesome analysis

[arcticF7]

In my opinion, long term GM should do the following:

Saturn: Kill - the brand has lost its way, especially considering its original branding message.
Pontiac: Kill - Cheaply done sporty variants of other GM products, almost all automatics, no street cred.
GMC: Bundle this brand w/ Chevy - 3/4 and 1-ton trucks are GMCs, 1/2 ton are Chevys
Chevy: Keep (duh)
Cadillac: Keep (duh)
Hummer: Kill (duh)
Buick: Bundle this brand w/ Cadillac -- entry level luxury - dealers can upsell or downsell using this brand. Kill if the plan does not work in 5 years.
Saab: Leave it go for 5years beyond the major restructuring of other brands. If things cannot be improved, kill.

[vam29]

Interesting analysis of GM's options but it misses a crucial aspect of what it will take for GM to be successful in the marketplace. The emphasis here seems to be,as in several other similar reviews, on reducing GM's size to allow it to increase the capital it has available for R & D and advertizing. We are to believe that by reducing its Brands GM will become stronger. In reality the exact opposite would occur if GM were to drop a line. This is possible to estimate by calculating what it actually would take to be representative in the marketplace and be competitive with the imports. Each dealership, must build a new facility, as the imports are now requiring to adequately represent their image in a select area This can cost anywhere from approx 8-30 million dollars. GM, and Ford and Chrysler too for that matter, would have to require an average of at least somewhere in the neighborhood of $10 million just to be competitive. Interpolating this in reverse, the minimum new cars the store would have to sell to be profitable and attract the capital necessary for growth, instead of the stagnation that is occuring today at many sites. would be at least 100 cars/mo plus very successful service and used car operations. By eliminating Brands this can never be achieved and GM would not be successful.

[texassierradude]

Originally Posted by RB35SLT

Look like GM is doom.

If GM want to get rid of GMC, not sure if I will go for Chevrolet trucks.

When GMC goes, I'll be over at the Ford and Dodge stores for my next ride.

[Bravada]

I am not even reading all that, but I'll make sure the message is repeated in every page.

The problem @ GM is not the number of brands. The problem is TERRIBLE EXECUTION.

If GM actually built really good cars, marketed them well, updated them etc., they could have 8 brands or one. GM is still a paramount example of mismanagement and underperformance

[RedVee8]

IF GM was to kill Saturn, would they move Saab into the ex Saturn dealerships?
IF GM was to decide to increase the number of Saturn localities, could they not offer a Saturn franchise to Cadillac, Saab and Cadillac/Saab dealers rather than BPG dealers? Keep them in the 'nicer' end of town?
If GM move Saturn into BPG without any cuts, or at least immediate cuts, what would you choose between a G6, Aura & LaCrosse?
I think it is the models that need to be trimmed, rather than the brands per se.

[H3AlphaGuy]

So if you look at that "brand positioning" graphic, and guess their real competitors here's what you get:

Chevy === Ford, Toyota, Honda, Dodge, Nissan
Cadillac === BMW, Benz, Audi, Lexus, Infiniti, Acura
Saab === Volvo, BMW, Benz, Audi, Lexus, Infiniti, Acura on the lower end of the spectrum
Buick === Lincoln, maybe low end of above luxury autos.
GMC === Ford, Toyota, Dodge, Nissan, Honda, Chevy
Saturn === VW, Mazda, Scion/Toyota, Honda (based on green / performance marketing), Pontiac, Ford
Pontiac === VW, Mazda, Scion/Toyota, Honda, Saturn, Ford (based on "performance" marketing)
Hummer === Jeep, Land Rover, Toyota (FJ Cruiser, Four Runner), Nissan (Xterra/Pathfinder)


Based on that, competitor grid, the simple thing would be to axe GMC and make it commercial truck only (Box trucks, etc.), Dump one or the other of Saab / Buick. You could add some of that euro performance of Saab into the Caddy brand at the bottom end no problem, and keep the traditional muscle towards the top. I think the Catera disaster is scaring the execs away from this one. Buick has a different target segment so it would make sense to retain it (as much as it pains me to say it). Saturn or Pontiac would get the chop since they compete against the same brands and each other, just like Chevy / GMC. Hummer would stay, but add the HX / 4, keep the 3 and end production of the H2 for a few years then reevaluate.

Summary:
Keep:
Chevy
Caddy
Buick
Saturn or Pontiac (Toss up here)
Hummer

Kill:
GMC consumer vehicles

Sell:
Saab


This is all based on the fact that they can actually properly market those brands left, which in the case of Hummer they couldn't and it was the easiest segment marketing product they had.


I should also disclaimer this that if GM sells Hummer to an overseas company, I probably won't buy GM again. Just based on brand principle really.

[nadepalma]

Originally Posted by Archangel

Genius indeed. I've always being in favor of the Opel/Holden Pontiac approach. Awesome analysis

Thanks fellas. Much appreciated.

Who knows if GM is listening - but you can't say we didn't try...

[nadepalma]

Originally Posted by vam29

In reality the exact opposite would occur if GM were to drop a line. This is possible to estimate by calculating what it actually would take to be representative in the marketplace and be competitive with the imports. Each dealership, must build a new facility, as the imports are now requiring to adequately represent their image in a select area This can cost anywhere from approx 8-30 million dollars. GM, and Ford and Chrysler too for that matter, would have to require an average of at least somewhere in the neighborhood of $10 million just to be competitive. Interpolating this in reverse, the minimum new cars the store would have to sell to be profitable and attract the capital necessary for growth, instead of the stagnation that is occuring today at many sites. would be at least 100 cars/mo plus very successful service and used car operations. By eliminating Brands this can never be achieved and GM would not be successful.

Good points, but this also assumes the dealers will comply. Franchise laws are such that many dealerships cannot simply "force" locations to upgrade their locations. In many cases, Toyota, Honda, and Nissan have offered incentives and cash handouts to upgrade facilities. In other cases, those companies have led a group of investors or arranged for buyouts so the locations could get the TLC they needed. I know Acura/Honda has been VERY successful doing this - but it was also because they were willing to put up the money.

In there cases, it amounts to a smaller amount of money - simply because they have a smaller number of locations to give cash to.

However, in GM's case, even if they were to take the lowest numer you cite ($8 million) and give a quarter of that amount to each of their 6000 or so dealerships for upgrades and the total bill amounts to $12,000,000,000. Granted, they wouldn't give all their locations, but even if half of them needed it, it still amounts to $6 billion.

That's a hefty chunk of change. GM would be better served using those dollars elsewhere or in conjunction with a few different strategies (close a brand and revitalize a core number of dealers, etc).

Just playing Devil's advocate...

[Lichtronamo]

I see Honda has bumped Chrysler from the #4 spot in the US. Given the emerging new world order (based on the rate GM, Ford and Chrysler are bleeding market share, cash and sales volume), they're actually going to need to DO SOMETHING sooner or later.

[vam29]

The only option left for GM might be to sell Saab with Hummer if they want to realize any equity from the Hummer brand. Together they might bring in $5-6 billion or more in badly needed capital and help improve GM's business model.

[Citation84]

ACBarnett & nadeplama : My post wasn't to denigrate Saab in any way and I hope that no one took it in that fashion.

I realize Saab fans are loyal. GMC fans are too and there are simply a greater pool of them over a period of generations and decades that would simply make their target audience a more profitable endeavor than to continue the sham of taking Opels and tweaking them, then calling them Saabs.

Simply a view of going with your strengths. And GMC doesn't need to be rebuilt or "revitalized" as brand.It makes money for GM.

Saab has been ill served by GM for all these years. In my mind that alone is enough to end the charade and sell it to someone who can actually exploit the brand and the product for all it's worth.

In GM's current state it can't revitalize : Buick, Saab and Pontiac all at once and drastic measures need to be taken. There's no money. Sticking an ignition switch on the floor of an Opel doesn't make it a Saab, really.

As for Saturn, if it folded,Chevrolet would be my choice [and would have been when the Cavalier was destroyed but very few Cobalts were available in plain vanilla in Jan 05. There were plenty of IONs. Oddly over the years my local dealer still doesn't carry more than 1 or 2 Cobalts at a time and NEVER includes them in it's ads].

I have found that the 2.2 Eco and GM Hydramatic are a great combination, the Delta platform provides a great ride and I think it's drive train and running gear are probably bullet proof.

If Saturn dies, it will be the Cruze for certain as a replacement [if not a Cobalt] for the ION.

I just won't go backward on the fuel economy as I would with an Astra [ the ION gets 25-27 in my particular LA commute and 35-37 on my vacation trips.Covers 700 miles in a day with no effort. A better car than is given credit ].

Another GM car with that engine and trans in a small size would be an attractive proposition when the time comes.

And as far as I can tell, the handwriting is already on the wall for Saturn: No Outlook replacement planned when the next Gen comes out, Insignia is not the new Aura, the current one will continue till.....?????, Sky discontinued and losing $10,000 a unit, Astra planned as a stop gap, imported at a loss for 2 years, then what ? That leaves the VUE as Saturn's only real volume product. And it has never outsold the ION, except perhaps in 07. The Aura has been a sales disappointment regardless how one wants to parse the #s between fleet and retail. So has the Astra. It's simply over for Saturn.

GM squandered the potential of Saturn and Saab. But if the S Series was the best GM could do with a clean sheet of paper and it's best and brightest with a brand new plant.... well that's pretty scary. The money would have been better spent on it's core brands in the first place. For all the energy and good intentions poured into the experiment, all that they could come up with once again was "competitive" in it's class for a couple of years. What was the bloody point ?

GM has not got the luxury of sentiment at this point, sadly. Yes new product would revitalize all 8 brands, but where will the money come from ? And it's been proven time and again that GM will not get off it's 4-5 versions of everything kick so, let's not fool ourselves that the new "revitalization" product for all 8 divisions will be anything more than badge engineered models spread too thin. I have watched this since the 70s and the automotive world has changed since then. The NOVA business model is no longer the way to do things [Nova, Omega, Ventura, Apollo], nor is the H body : Skyhawk, Firenza, Monza and Sunbird. Yet GM continues to operate as if they have close to 50% of the market. They have got to cut the dead weight.

Enough cash reserves to take them through 09 as I have read? Then all this talk of rebuilding brands is simply fantasy.GM does not have the luxury of time any longer to wait till 2010 or we'll really show you next time. That show was old in the 80s.

Survival mode will be what we're witnessing, sadly.

You made a good case to keep Pontiac, but the G3 is a perfect example of what's going to kill it. They won't learn.

[CadiEldo67]

OK, so here is my new idea that would allow GM to not cut any brand.
Hummer: Sold
GMC: Commercial Grade Only

Saturn: merges with Buick and Pontiac. -This would actually work because Saturn could go back to its roots and have only smaller, cars with good fuel economy. Astra/smaller Aura/Zafira
Buick: Handles the semi-luxury end of the spectrum. Has a LaCrosse, Lucerne, Rendezvous(Vue with Enclave styling) and Enclave.
Pontiac: Performance tuned brand, as they've said all along. Includes a G4/Solstice on SWB Alpha, G6/Firebird on LWB Alpha, and a G8/GTO on Zeta.

Saab: with excellent product and drawing on heritage, FWD/AWD luxury
Cadillac: As is, with improvements along the way, RWD Luxury

[philr]

GM needs to stop forging an image to each of it's divisions. When buyers want a product, they might want a car that is luxurious, performant, reliable and stylish...

Let each division be competitive and let them make what people is asking for. If that means making a Buick SportWagon 400, a Buick GSX Stage1, a Pontiac Executive a Cadillac Fleetwood 75 or a FWD Eldorado convertible, well, lets make them!


I have never met someone who wants to buy a near luxury, almost expensive, and clearly boring car...

This shouldn't represent any GM brand....

[cire_1wb]

Quote copied from post by Citation84:

"And as far as I can tell, the handwriting is already on the wall for Saturn: No Outlook replacement planned when the next Gen comes out, Insignia is not the new Aura, the current one will continue till.....?????, Sky discontinued and losing $10,000 a unit, Astra planned as a stop gap, imported at a loss for 2 years, then what ? That leaves the VUE as Saturn's only real volume product. And it has never outsold the ION, except perhaps in 07. The Aura has been a sales disappointment regardless how one wants to parse the #s between fleet and retail. So has the Astra. It's simply over for Saturn."

"GM squandered the potential of Saturn and Saab. But if the S Series was the best GM could do with a clean sheet of paper and it's best and brightest with a brand new plant.... well that's pretty scary. The money would have been better spent on it's core brands in the first place. For all the energy and good intentions poured into the experiment, all that they could come up with once again was "competitive" in it's class for a couple of years. What was the bloody point ?"

I think GM realized that the Insignia wouldn't be successful as a replacement for the current Aura in Saturn's lineup. The Insignia is much more upscale and its "4-door coupe" profile limits passenger/cargo volume. The Insignia's focus on style over utility and affordability makes it ineligible to become the next gen Aura. The current Aura is a nice car, but it is clearly designed to meet the expectation of Saturn's clientele who are primarily looking for maximum space at a minimum price. This is why I believe Saturn is miscast as a North American version of Opel. Opel's products are more focused on being edgy, sporty, and aspirational which conflicts with Saturn's established mainstream/affordable image. Combine this info with the fact that Saturn has a limited dealership base and you basically have a recipe for failure. I think Pontiac would be a much better match for Opel. Pontiac's traditional role was to be a sportier and moderately premium division positioned above Chevy in GM's brand hierarchy. Pontiac's demographic is similar to Opel's demographic: people who want something edgier, sportier, and aspirational. These customers are more concerned with driving something stylish and a bit different from the norm than they are with ultimate utility/affordability. When you add the fact that Pontiac has a larger dealership base to the similarities in overall brand character between Pontiac and Opel, it seems as though aligning these 2 brands would be a lucrative and successful venture for GM. GM has now made the same mistake twice with Opel in the North American market by teaming it with the wrong division. The first time was with Buick (which I respect, but it is the last place I would have expected to find a small and sporty import vehicle). Now GM has teamed Opel with Saturn, a brand that is the antithesis of what Opel represents. I hope they wake up and realize what a good match Opel would be for Pontiac before it's too late and Pontiac is gone. GM has way too many missed opportunities in their past to let another one occur again.

I agree with you that Saturn was a pointless venture. If GM found themselves to be uncompetitive with the Asian import brands in the '80s, it should have focused on fixing the problems within the scope of its existing brand structure. They could have committed themselves to building better products and improving customer relations without launching another brand to do it. What's even worse was that GM didn't stop with their misguided attempt to launch Saturn. They went on to purchase a financially troubled European company (Saab) and an off-road vehicle company (Hummer). If GM was struggling with building competitive products and retaining their customer base with their 6 core brands (Chevy, Pontiac, GMC, Olds, Buick, and Cadillac), then exactly how did they plan to do it by adding 3 more divisions? It's unfortunate that GM squandered the potential of Saab and Saturn, but it's even more pathetic that they squandered the potential of their 6 core brands prior to launching Saturn or acquiring Saab. If they would have properly taken care of their core brands in the first place, then launching Saturn or acquiring Saab wouldn't have been viewed as necessary by the corporation in the first place. GM definitely needs to do now what they have failed to do in the past: streamline/downsize their North American operations. Once they do this, then they need to focus on clearly defining the brands that remain after downsizing, creating coherent product strategies for these brands that reinforce their position and purpose in the market, ensuring that the products are competitive and exceed the customers' expectations, and improving customer relations and providing market leading customer service.

After rereading the original article, my original response, and some of the other responses, I have concluded that GM could effectively cover the North American market with the following divisions:
* Chevrolet: Mainstream, affordable division. Chevy's lineup would consist of FWD affordable cars, FWD/AWD affordable crossovers, trucks & SUVs (which would be a Chevy exclusive), the Camaro, and the Corvette.
* Pontiac: Sporty, moderately premium division. Pontiac's lineup would consist of Opel based FWD cars and MPVs (MPVs would be a Pontiac exclusive). I would add an Epsilon based midsize MPV (a product not currently available from Opel) and a RWD flagship sedan (also not currently available from Opel) to Pontiac's lineup.
* Buick/Cadillac: Luxury division. Buick's lineup would consist of FWD luxury cars and FWD/AWD luxury crossovers. Cadillac would have a smaller lineup that consisted solely of well executed, world class RWD luxury cars.

Saab and Hummer can be sold. GMC can be transformed into a commercial/industrial vehicle outlet (as many of you have suggested). Saturn could possibly be sold if GM sold the division name, the Aura design (which I believe is a North American exclusive; it only shares headlight/taillight/grille design cues with Opel; GM could negotiate what alterations would be necessary if it sold the overall Aura design), and some U.S. factory capacity as a package deal to a foreign auto company looking to expand in the U.S. If this is not possible, then Saturn needs to be discontinued.