GM: Time to Consolidate

[nsap]

GM: Time to Consolidate
A Commentary By: NSAP
May 21, 2008



I have been on the record many times over here at GMI as one that has been against killing off any of the brands GM has here in North America. I have, for the longest time been very vocal about having a comprehensive strategy to keep all of GM's brands. All of GM's brands have meaning and killing any of them would be a big mistake. Well, call me a Democratic Super-delegate, but I have deflected to the other side. I can no longer justify that argument. There are too many forces working against it; market conditions, lack of funding, dealerships, and most of all...the competition. I am now a firm believer that GM needs to weed through its North American bands now or they will never be able to fully compete with their new big rivals.

The ideal solution to this problem would be to simply to a complete "hold" on a couple of GM's brands until the funding is there to supply everyone with what they need to fully play their role in the GM family. However, we all know that the ideal solution is one that simply cannot happen. You just can't kill off a brand for a couple years then bring it back to life. That brings me to the very big reason the multi-brand strategy needs to go at GM: finances. GM just does not have the money to give every division what it needs. Where GM only has hit and miss global brands, companies like Toyota have fully-global brands that can share product all over. While even Toyota does not have the same lineup of vehicles in every country, they can tailor their products to each market because they have far fewer to develop in the first place! GM needs to start focusing on the global aspect of their divisions...they need a Camry. They need that car that everyone in the world knows about because it is a strong seller globally.

My plan to reduce the amount of divisions in North America calls for the selling of the Saab and Hummer divisions and the killing of Pontiac. I'd say sell off Saab for the simple fact that it has not made GM any money since they bought it. On top of that, GM and Saab management has proved time and time again that they can't make the brand work under the GM umbrella. Saab has become infamous for being a brand of heavy incentives and poor residual values. Even with the heavy incentives, the brand has not taken off sales-wise either. By all accounts the current generation 9-3 "should" have been a decent seller without $4,000 on the hood. I'd sell Saab before killing it. I think a Chinese or Indian firm would pay a decent amount for it in no time. GM could use the extra cash. Plus, since Saab isn't lighting any fires in the U.S., by selling them to a foreign firm...GM would not be giving them big in-roads to the U.S. Market. For the longest time I personally did not like Saab, but the current 9-3 changed my mind; I really do like the brand and think it does have potential, but it is just not worth dealing with for GM at the moment.

The next selloff would be Hummer, the brand GM created. Back in the day Hummer was a good idea, but that was in the day of cheap gasoline and when everyone conveniently forgot that we do not have an endless supply of oil to fuel the world. Hummer, like Saab probably can survive in the future if taken in a direction that I know GM is not willing to take them; mainly because the direction Hummer is ultimately going to have to go will either be far too expensive or just way off of the original Hummer theme. GM will not want to do either with the brand. For the first time, I truly think that GM wants to gain a “green” image as a company; they are quickly proving that with the Volt actually. Selling off Hummer to a foreign firm would be an interesting stunt for them in the face of the environmentalists. I’ve always loved the Hummer brand, I think it was the first brand that GM did “right” in regards to the infrastructure the brand has. Unfortunately it just adds to the crowded GM umbrella a dying market segment and the [PROPER] fix for Hummer is too costly for GM at the moment. The proper fix, of course, being to build off-road vehicles that are really environmental.

My last division axing was the most difficult for me. I am a Pontiac owner. By no means would I get a thrill out of seeing GM kill Pontiac, but I’m almost to the point that it needs to happen sooner rather than later. Pontiac is causing more unnecessary overlap with Chevrolet and Saturn. The division NEEDS to be a true, hard-core performance niche brand, however there are two issues with that now. The first issue being that GM doesn’t have the funding to give Pontiac the unique performance it needs to be different, and the fact that strict CAFÉ legislation is going to kill off a lot of performance vehicles not only because companies will be paying more to develop alternative propulsion, but also because the end user isn’t going to want to buy them (not in the volumes needed to sustain a brand). The recently launched G8 sedan shows promise for Pontiac. I personally had it high on my list as a potential next vehicle (a loaded black G8 GT mind you), but with gas at $4.00 a gallon, forget it. I don’t want a vehicle that gets 15 MPG in the city. I’ve successfully marked the G8 off my buying list, and that pains me very much. However I know if I of all people, am writing the G8 off because of economical reasons…then there is no doubt others are as well. That just gives us a snapshot of what is going to hurt Pontiac. GM needs to kill Pontiac; the writing is on the wall. I say kill it rather than sell it, because a Chinese or Indian firm would buy them in a heartbeat to get in roads into the U.S. market, something that GM should not encourage by any means.

After ridding themselves of Saab, Hummer and Pontiac, GM should then work on the infrastructure of the rest of the divisions. Saturn is the poster child of dealership infrastructures at GM and they need to enforce that idea on the rest of the brands. GM should make all Chevrolet stores standalone. In addition, Cadillac stores in metro areas should be standalone and have all-new showrooms that match the brand’s new identity. GMC and Buick stores can be combined and Saturn can stay off by themselves as well. GM is eventually going to have to mandate that their dealerships build new showrooms (like they did with Hummer and Saturn). Some of the stores are getting so drab that it is ridiculous. The dealership is the front line to the customer and should be topnotch to reflect a “changed” GM. I would go so far as to design the new showrooms with environmentally-friendly materials; bamboo floors, skylights for lighting, solar-panels. Oh, and be sure to have plug-in stations (powered by the Sun!!!) in the customer parking for those future E-Flex vehicles.

[KretzJ]

I think I pretty much agree with the summary as you have presented it. Pontiac, despite having many fans, simply no longer fits in a downsized GM.

Of course, this is the GM that touts Chevy as the value brand (don't notice the $100,000 Corvette on the showroom though...), and let's face it... GMC has quite a bit more overlap than even Pontiac. I'd probably toss a coin on whether I'd chop Pontiac or GMC, but Saab and Hummer probably need to go first.

-John
Scottsdale, AZ

[bleuler]

While I agree with killing pontiac and definitely Hummer, I disagree with Saab.

First, they provide a great deal of engineering expertise to GM as a whole. With engines downsizing and headed towards smaller displacement and turbocharging, GM needs the Swedes. Saab codeveloped the ecotec with Opel and Detroit. I'm guessing since GM's 4 cyls pretty much blew before, the europeans helped a great deal with this.

Secondly, GM europe is making money, and Saab is very close to making money as well ( i've read). Why kill it now? GM North America is the problem child. Saab's about to roll out several new models as well

[Lichtronamo]

A world-wide GM line up of Chevrolet and Cadillac, with Saturn (NA), Opel (EU/GB), Holden (AUS) and Buick (PRC) in between makes the most sense. (Chevys outside of the US would be the entry level brand and a full range in the US)

[jkr2106]

I, too, have always considered all the brands as assets. Now, I'm a bit on the fence after I wrote my sophomore thesis for my economics tutorial comparing GM and Toyota. I mostly concentrated on cost structure differences, but I did a short section on branding. The more I think about the numbers, the harder it is to justify for me. Still, I don't think it's time to close/sell brands, I think these top-notch MBAs need to come up with some innovative solutions since traditional practices are obviously not working.

[Stewie007]

Yeah, lets toss Pontiac just as it starts to revive a bit. Brilliant plan. Meanwhile, we'll keep the less than stellar Saab around, GMC trucks, tanks, and SUVs and call it a day

[Sinner]

Originally Posted by bleuler

While I agree with killing pontiac and definitely Hummer, I disagree with Saab.

First, they provide a great deal of engineering expertise to GM as a whole. With engines downsizing and headed towards smaller displacement and turbocharging, GM needs the Swedes. Saab codeveloped the ecotec with Opel and Detroit. I'm guessing since GM's 4 cyls pretty much blew before, the europeans helped a great deal with this.

Secondly, GM europe is making money, and Saab is very close to making money as well ( i've read). Why kill it now? GM North America is the problem child. Saab's about to roll out several new models as well

Saab needs to go because as much as I like the exterior styling of the new 9-3, no one in their right mind would ever pay $60,000CDN for what could easily be a $35,000 Malibu SS or Aura Redline.

I agree with NSAP, GM doesn't have the cash to make Hummer into the green version of Land Rover. With Land Rover recently being sold, Hummer's sale would bring in some nice cash from Asia.

[nsap]

Originally Posted by Stewie007

Yeah, lets toss Pontiac just as it starts to revive a bit. Brilliant plan. Meanwhile, we'll keep the less than stellar Saab around, GMC trucks, tanks, and SUVs and call it a day

Did you just read the parts you wanted to? I called for Saab's death as well.

Say what you wish, but GMC actually makes money. This coming from a Pontiac fan and owner that doesn't particularly care for GMC.

[Butz]

No! Not Pontiac!

I don't mind Hummer and SAAB go though..

[ChevroletRevived]

Very good article! Really, there's no question in my mind whatsoever that Hummer should go. It's served it's purpose and it's not in keeping with the overall brand image GM is now trying to cultivate. Hummer is assosciated with being a gas guzzler and with the military. It's the poster child for excessive gas use! It's time to really take a hard look at what's needed and what isn't for GM's success going forward. Chevrolet, Cadillac, Saturn, Buick all have a very important role in the future at GM, both here and around the world. Certainly Hummer and even Pontiac don't, espessially with CAFE now coming along. Saab I must admit is debatable because of what it brings on the engineering side of things. Bottom line is though: how can GM be the most focused and successful company? Where will the money do the most good? They're questions that need to be asked.

[YupYupYup]

Hummer can fit in the long-term plans...A key part of implementing hydrogen might just come through Hummer. Hydrogen technology must first be applied ot large vehicles that enable them to fit the tech in...Buses, anyone? Then Hummers...Then other, smaller vehicles...Could be a transition brand for the tech. Not to mention developing a 100% green Hummer to fly in the face of what someone else described as those eco-nazis. Just imagine the ummms as they search for words when a huge Hummer rolls in only emittiing water. They will have nothing to protest anymore. To boot, Hummers are some of the most recyclable vehicles on the road today.

[YupYupYup]

Originally Posted by ChevroletRevived

Very good article! Really there's no question in my mind whatsoever that Hummer should go. It's served it's purpose and it's not in keeping with the overall brand image GM is trying to cultivate. Hummer has a gas guzzler image and to help maintain it's different, rugged military type style it will require a lot of product investment, marketing, dealers etc that could be put to so much better use. It's time to really take a hard look at what's needed and what isn't for GM's success going forward. Chevrolet, Cadillac, Saturn, Buick all have a very important role in the future at GM, both here and around the world. Hummer and Pontiac certainly don't, espessially with CAFE. Saab I must admit is debatable because of what it brings on the engineering side of things. Bottom line, how can GM be the most focused and successful company. Where will the money do the most good?

That rugged military style has raked in a crap load of money for GM. Helped them survice...

While I don't feel it ia perfect brand just yet, read my comments above. Also, Hummer has very good brand loyalty, recognition (better than Pontiac with the younger crowd it seems...), and can still rake in profits, unlike many other smaller GM vehicles. They also have some great dealerships. It is not so much what Hummer is today, but what it could be in the near future with new technology.

[CJ Thunder]

Originally Posted by Butz

No! Not Pontiac!

I don't mind Hummer and SAAB go though..

And that's the problem people.


People will say "No Not SAAB!" or "No not my favorite Buick" For all of GM brands. Even Saturn and Hummer have loyalists...First you have to merge stores then product, hopefully many people wont abandon ship.

[BGH]

I think Saab needs to go, it just hasn't made money and isn't gaining market share. Even Land Rover is getting killed in sales, so I don't think there is much hope for Hummer in N.A. at least.

Pontiac should stay but it should be very different. Instead of having a full lineup it should only have 3 or 4 models. Buick, Pontiac, and GMC should be built based on the idea they are one brand. Pontiac will be the performance oriented products, Buick will have your sedans, and GMC will have trucks and SUVs. It's like GM would recreate chevy but slightly upscale, and under 3 different names.

[mgescuro]

Saab has had no backing from GM -- a company notoriously so inept and so incompetent and so blind about brand identity. GM is incapable of giving Saab what it needs. And no, the 9-3 is complete trash. Fans of the car as it is now are fools, believing that is a Swedish design. Put these people in EPCOT Center, and they'd believe they're in Europe. The 9-3 is a poor substitute for good and classy design -- the way only Americans can do it -- generic, cheesy, and fake. Sell the brand to BMW.

HUMMER was a good idea. Close the brand or sell it. However, despite all the negatives about HUMMER or perceived negatives, HUMMER was the only "cool" car GM had in its global lineup.

Pontiac needs to be killed, unless GM is willing to dedicate the resources to truly distinguish the brand from Chevrolet.

Cadillac is really borderline as it is. I don't believe GM is committed to making Cadillac a true global competitor. Nor do I believe GM has the resources and the desire to do what it takes to get Cadillac to that point. Cadillac has taken several steps backwards. They have completely lost focus as to who and what they are. And this point, Infiniti has a better product direction than Cadillac. I would suggest GM spin off Cadillac into a separate entity, much the same way Saturn was originally. I think that's the only way Cadillac can truly spread its wings. Make it accountable for itself and put in place true, visionary leadership. Otherwise, Cadillac will remain a has been and a brand for people with a belief that Cadillac is a true luxury car.