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

[Bravada]

My only twist on it would be that any high end Opels would be ripe for Buick

What high-end Opels? Opel hasn't got a model over Insignia, and this car IS a Buick in China (for some reason, a separate Buick exists for the US), and is being argued to make a good Saturn or Pontiac. Opel is no premium brand, if anything, Buick would complement Opel nicely in Europe.

[C/K Man]

Great article, and some great posts, too. But, I can't help but think this is all just another round of rearranging the deck chairs on the Titanic. It is obvious that Pontiac, Buick (at least in the US), SAAB, Hummer, and GMC (maybe not the commercial trucks) need to be discontinued. Equally obvious there are far too many dealers as well. However, I think GM's real problems are cash burn, market share, and Delphi. So, let's talk about cash burn first. GM's cash on hand, money used to fund daily operations, will be about gone in late 2009. With GM's current credit ratings, it is doubtful that they will be able to borrow any more money. So, aside from some form of government loan (which I personally am dead set against) or selling assets, the party is over. Market share is equally scary. As the article pointed out, GM's business model at one time was based on a 40% market share. That has since been adjusted down, but with GM's market share falling like clockwork every quarter, how can anyone guess what a reasonable estimate for GM's share actually is? And, if you don't have a clear idea how many vehicles you can expect to sell, how can you configure your business to be profitable at that point? Frankly, I think GM should figure around 15%. Delphi. This is a killer. Delphi as you know was GM's internal parts making operation, spun off in 1999. Since GM sold them off, Delphi had not been profitable, and has survived by selling operations. There is not much of Delphi left, but what is left is vitally important to GM, as Delphi is still GM's #1 supplier. Delphi has been in backruptcy since late 2005, and the finance scheme to allow Delphi to exit backruptcy has fallen apart. About the only thing left to do is for Delphi to go into recievership, and for GM to pick up the operations it needs to continue operations. That of course represents a massive financial headache for GM at a time they can least afford it. But, the real question regarding Delphi is one no one wants to talk about: How did they get into this mess in the first place? To hear GM tell the story, Delphi was not able to grow their business outside of GM, and in order to keep Delphi going, GM actually pays a premium for the parts it buys from Delphi. Delphi's story is equally interesting, they got in this mess because GM isn't able to pay Delphi far market prices for the parts they buy, and Delphi looses money on GM business. I think I might be more willing to believe the latter, because Delphi supposedly makes a lot of money overseas selling parts to foreign automakers. In the face of all this doom and gloom, GM says they have a plan. A car called the Volt. Could be a real game changer, a 'real' car that for most people would function like a straight electric car, but can easily be driven long distances like a conventional car. While many people on these boards argue back and forth about Lutz, Zeta, Kappa, should Pontiac bring back the Firebird, diesel Suburbans, and Hummers, if you take a step back you can see that GM could care less about all of that, and is putting ALL their efforts into the Volt. It is GM's only hope. Or is it? Some are saying under their breath that the Volt is not going to be profitable for a number of years, and that even if it becomes the runaway success GM is counting on, GM may not be able to produce more than a couple of hundred thousand a year. If that is true, what is GM's real hope of survival? It is that gasoline will get very inexpensive again, and GM will be able to sell large numbers of somewhat outdated full size SUV's for long enough that they can get back to profitablility. If you feel like betting on this long shot, GM shares are trading around $10...... Good luck.

[kenman923]

Great article. Maybe you should be in charge of GM. I hate to see any brands go, but I think GM is going to have to do that to survive. It probably would be the most cost effective to eliminate the Saturn and GMC brands.

[Bravada]

OK, it's myyyyyyyyy tuuuuuuuuuuuurn now. I wonder when GMI will publish MY musings :p

Now, GM's real problem isn't the number of dealerships in North America, the UAW benefits, the number of brands, Saturn, Hummer, Saab or anything like that. GM's problem is the absolutely awful execution on all fronts and constant changing of plans.

As concerns execution, just think how many products GM has that are "quite OK, but..." I am speaking of:

1. Core market Epsilon products that still don't have rear armrests or navigation, even though those do not require the reengineering of the entire vehicle. How long is America supposed to do with "it's just this generation, the next is going to be better"?

2. Astra coming to the US 4 years late and totally unappealing.

3. The entire Kappa programme that was going nowhere from day one (very specific platform that is not easily adaptable to anything else, specific assembly process etc.) - who paid for all this hydroforming equipment, don't tell me Saturn L300 required hydroforming!

4. SEPARATE Buick LaCrosse in North America and Opel Insignia/Buick Regal for China

5. Chevrolet Volt being a thoroughly modern, yet LOW VOLUME vehicle, while the Chevrolet Cruze remains stuck in a decade that will end before it is launched globally

6. VUE/Antara being 200 kg HEAVIER than e.g. Mazda CX-7. This is an all-new vehicle on a new version of the platform!!!

[2002 Caddy]

Add me to the long list of Saturn Killers...

Saturn was a goofy idea and a HUGE mistake from day one...
Put a fork in it... its done.

People who say that Cadillac is "on the right track" You need to head down to a Cadillac dealer or talk to someone who sells these cars... They are NOT on the right track... They have only one car that sells... They are in probably in the BIGGEST world of hurt of ALL GM divisions.

[gmlifer]

I agree with a lot of the points made in this post but I can't help but think of this in another way. You could make the same argument that either Honda or Toyota needs to go because there are too many like products. I know they are two different companies but they spend much more total $ on R&D and marketing than if they were both owned by one company.

The key is having focused brands and products that customers want to buy instead of giving up market share to the competitors by cutting brands.

Just another way to look at it.

[Orbit Orange]

The problem with Pontiac is that it has many brand loyalists who would say screw the general if they axed it. I'm sure closing down Saturn would alienate some buyers but probably not as many as killing a long established brand like Pontiac. I know a few people who would turn to Toyota/Honda/Ford if Pontiac were closed

Add me to your list as well. I'd probably go Dodge/Chrysler first then Ford. Charger/300 or Challenger or Mustang or next gen AWD Fusion with the Ecoboost engine. If GM kills Pontiac I won't be back.

[sigma]

This post is absolutely enlightening, even if I disagree with your end conclusions. For instance, how much could GM save by actually making Saturn Opel's NA division? Why is there this insistence from various factions at RenCen to "North Americanize" everything from Opel? Why isn't the new Insignia here now? Furthermore, combining Saturn and SAAB into a single distribution channel would provide SAAB, finally, with the distribution network it needs to remain viable while reducing the costs of maintaining two separate sales channels. See VW/Audi for a comparable situation. This is further combined by the fact there is very little cross shopping between VW or other near premium brands and GM's core domestic brands (Buick, Chevrolet, Pontiac).

I'll post more thoughts later when I have some more time.

[GTOken]

Originally Posted by chickenkicker

The problem with Pontiac is that it has many brand loyalists who would say screw the general if they axed it. I'm sure closing down Saturn would alienate some buyers but probably not as many as killing a long established brand like Pontiac. I know a few people who would turn to Toyota/Honda/Ford if Pontiac were closed, I can't say that about any other Gm brand.

Ditto. If Pontiac and/or GMC goes, its Ford or Dodge for me.

This site seems to be extremely pro-chevy sub-compact. I say cut out all the brands except chevy and see how that turns out and lets get this agony overwith. No more General Motors, just Chevy.

[Shotgun]

Originally Posted by GTOken

Ditto. If Pontiac and/or GMC goes, its Ford or Dodge for me.

This site seems to be extremely pro-chevy sub-compact. I say cut out all the brands except chevy and see how that turns out and lets get this agony overwith. No more General Motors, just Chevy.

GM would crumble faster than wet toilet paper.

Wait a minute...they're close already.

[YSSMAN]

Hurm, I'm not sure if all of the ideas are quite "right."

===

BUICK

The case for Buick is a fairly easy one given that we've seen a resurgence of sales and attention with their newer, better cars after GM began to finally fund things. The problem for Buick is that the brand identity has yet to be fully realized here in the US, one minute its a Lexus-fighter, the next its trying to strike low at Lincoln and Chrysler. Someone at GM needs to make a commitment, and to that extent, I'd vote to go after Lexus... Albeit "Hyundai Style," in a manner similar to the way they're running the Genesis and the Azera.

SAAB

Keep it. Its a fairly critical brand that still brings in a good number of sales and has a fairly hardcore and otherwise untapped fan base. The cars need to be injected with a bit more "enthusiasm" to be a really reasonable alternative to Acura and whenever it shows up, Alfa Romeo as well. Bring over the diesel options, and I think they could find a very special niche.

GMC

Kill it. I think that's unanimous.

HUMMER

Redundant, pointless, fans backfiring. Kill it.

SATURN

While the brand certainly is floundering in the market, we have to make a decision between giving Saturn or Pontiac the European models. On the one hand, I'd love to keep Saturn around as something that could bring an interesting fight to Scion and Nissan, or possibly be a more "upscale" small car company like MINI. The problem is, there are far too many negative associations with the brand to make it completely successful in every market. At this point in time, they end up loosing market share to in-house models that are better, and to that end, I think its time we let Saturn pass. Unless GM has a better plan for the brand, there isn't any reason to keep it.

PONTIAC

My vision for Pontiac is simple, make it the American arm of Opel/Holden, and that is that. Keep the cars small, sporty, and otherwise "completely different" than the Chevrolet offerings. Drive the sales home with the G3 (Astra), G4 (Zafira), G6 (Torana), G8 (Commodore), GT ST (Ute) and keep the Solstice around for a while longer.

===

In the end, I'd prefer that we keep Chevrolet as a brand that offers just about everything (like Toyota), keep Pontiac in as a European-style performance brand, Saab to continue being a quirky test-bed (see Acura), and obviously Buick and Cadillac to cater to luxury fans with clearly different objectives. Kill the SUVs, limit the crossovers, and finally start funding the small-car programs.

[Firebird00]

I agree with the notion of selling Hummer, converting GMC to be their big heavy truck brand, and most importantly killing Saturn. Saturn has been a complete failure, massive money pit, and robbed Pontiac of billions of dollars which has brought the brand to its knees (yet as you point out still outsells Saturn).

However I differ on Saabs future. I think they should outright sell Saab to any willing buyer. The brand does nothing for North America. It too was a mistake. They thought it'd catch on in being "different and cool" but it was just different....in a bad way. Outside of enthusiasts and yuppies, nobody cares. It doesn't have the rep that Buick has in China so its not like it would do good there.

In regards to Buick, if China wasn't set to become the worlds largest car market I'd say axe it. China is Buicks saviour....who woulda thunk it?

Chevrolet just needs to stop halfassing stuff. Once they put a Civic/Corolla beater on the street they will be fine.

Cadillac is doing great. Once they get the drama around the STS, DTS, and that stuff sorted out (and they will) they'll be fine.

Pontiac has the most potential. They need to look at Nissan and how what they have. Nissan is what Pontiac should be. Sporty, attractive, priced appropriately etc... Pontiac could very well be the division that could make the general public stop and look at GM. Styling and passion attract people. Nobody likes to buy ugly junk.

The GM chain of brands should be:
Chevrolet > Pontiac/Buick > Cadillac

Chevrolet: Corvette, Camaro, Volt, Impala, Cobalt, Aveo, Silverado, Suburban, Tahoe, and that new crossover (can't remember its name)

Pontiac: G8 coupe (GTO), Firebird T/A, G6 (along w/ its coupe and vert versions), Solstice, and a G5 if its a hardcore turbo only version (rally car badass street racer wrapped into 1), and a Volt cousin.

Buick: G8 sedan, Enclave, and maybe some crazy "mature" performance car for old guys who think the GTO and Firebird are too "boy racer" (never understood what was wrong with that but anyways....)

Cadillac: just figure out the STS replacement and the DTS and call it a day. XLR is a crap shoot. Make it worth the ridiculous price tag or don't do it.

[theloosemoose89]

KEEP Chevy and Cadillac, merge Hummer with GMC , merge Saab with Buick and either merge Saturn with Pontiac or cut one of them .... theres your 5 brands



if you cut GMC that would be a HUGE MISTAKE !!!!!!!!!!!!!

[bkskatersd]

Moving Saturn products to Pontiac and eliminating the division would be a catastrophic mistake, and GM knows this hence the reason Saturn is not on the chopping block. Saturn customers are not going to switch to Pontiac or Chevrolet, but instead will go back to Toyota, Honda and Nissan. Surveys of the customer base of Saturn has shown that the vast majority customers previously purchased Japanese brand cars and would not consider another GM brand. The brand has done what it was intended to do, win customers to GM who would never consider buying a GM car. This despite GM's neglect of the brand and the small dealer network.

The fact is the Pontiac/Buick/GMC network is immense yet is not producing results. The Saturn dealer network while smaller is selling more cars per dealer than most other GM dealerships. This smaller network has managed to sell more cars than Buick, Cadillac, Hummer and Saab. From a total sales standpoint, it is the number 4 selling brand of GM's 8 divisions. Interestingly, according to a Wall Street Journal article several months ago, Saturn sells more cars into the retail market than Pontiac. Also in that same article it stated that are Buick dealers that sells only 15 cars per month and have to make there money off of service and used cars. The problem for Saturn is that it's dealer network is not large enough to really grow the brand from it's number 4 spot. The only way to aggressively grow the brand is to enlarge its dealer network, something GM has yet to do.

Maybe it is time for GM to look at converting underperforming Buick dealers in areas where Saturn has little sales penetration to Saturn dealers to help grow the Saturn brand. Of course, they could do as the author suggest and eliminate Saturn altogether thereby sending 240,000 customers per year to Toyota, Nissan and Honda.

[mjd1001]

Originally Posted by Xenon

Long post, and sorry in advance for picking on Pontiac. Here goes:

When you look at that chart, Saturn isn't doing all that bad. It's selling half as much cars as Pontiac....and it only has 1/6 of the dealerships that Pontiac has, and it has fewer cars as well.

I think that is the biggest thing that the "get rid of Saturn" crowd is missing. To me, Saturn is a MUCH stronger brand than Pontiac (and some other GM divisions also)..just it has a too few dealerships. In a perfect world, Most of the other brands would lose a large number of its dealers, while saturn would gain a few.