GM: 2006 Review, 2007 Preview
January 1, 2007
2006 will likely be a year that makes it’s way into non-fiction books about General Motors. It has been a year of do or die for a company that took a $10 Billion loss the previous year. Assets have been sold off, plant closures have been announced, and employee buyouts were taken. However, through all of the bad PR that has taken place in 2006, more good has came out of it than bad.
Last year my review was rather gloomy, and the future of GM was uncertain at best. Fortunately that bad PR I referred to above has made things slightly improved in 2006. Quarterly results, while not great, have not been too bad in 2006 and have actually beat Wall Street analysts predictions, along with record revenue. That can be accredited to two things; Wagoner’s cost-cutting, and the GMT-900 vehicles.
To me, this past year has been a good one. GM has improved greatly, from a business and product standpoint. One can say they have FINALLY woke up and realized the world is not revolving around them, and half-baked products.
The Big Deal in 2006
Saturn. That is ALL I have to say. Saturn’s revitalization started in 2006, something that will be remember by any GM die-hard. They launched the Sky, followed by the Aura and now the Outlook. All three products are getting reviews that only every automaker wishes they could have. Saturn is GM’s savior, no doubt about it. Their revitalization started late in the year, so just how successful the brand will be is yet to be determined. I will say this though; Saturn’s buying experience, combined with the stellar product they have now…can only equal success.
As I said, the sales numbers have yet to reflect the new product (although Saturn is in the black for the year), but give it time….they will. The division that launched GM’s first competitive midsize sedan has plenty of room to be something wonderful.
Something interesting, the Sky roadster has a turnover rate of about 13 days, same with the new Vue Green Line hybrid SUV. The Sky is no surprise, but the Vue GL’s turn rate is sort of shocking. It has gotten mixed reviews from the media, but maybe, just maybe, the public likes simple hybrids that are cheap. Long term sales will further tell the story. Nonetheless, it’s safe to say that Saturn is the new trendy brand at GM that has potential to garner much success monetarily and emotionally for GM.
GM accomplished one thing in 2006 that I feel they never received enough credit for. In December 2005 they announced the GM Total Value Promise for all 2006 model vehicles. The new pricing strategy lowered the sticker price of nearly all GM products; some by as much as $3,000. Contrary to what some will say, the pricing has worked. GM has had the lowest incentive cost of all the Detroit Big Three companies all year. Granted, the incentive spending is still high, but when you factor in the fact that the Big Three have a huge perception problem in the U.S., a decent amount of incentives are to be expected.
Part of the new Total Value Promise is GM’s new 100,000 mile powertrain warranty. This was a huge step forward in changing the perceptions of those who will no longer even consider a GM product. However, the day GM implements AT LEAST a four year/50,000 mile bumper-to-bumper warranty on ever vehicle they sale, I don’t feel they have taken enough steps.
Possibly the moment in 2006 that I remember reading the most in regards to GM is when I read the article quoting Lutz saying that the Cobalt is now a profitable product. Mind you, that is the FIRST time a small car at GM has ever been profitable. That alone should tell you that 2006 has been a milestone year for GM, a good milestone. Getting all of their vehicles to a level of profitability is key to the turnaround, so they no longer have to rely on large SUV’s and trucks to remain in the black.
There really isn’t much to say about our old friend Buick. The Lucerne launched with, to my surprise, decent reviews and sales. It’s done good in the market thus far, with fleet sales at a minimum. Don’t confuse “good” with “stellar” though, because the Lucerne is not the reviving product Buick needs. There is, however, a product that may just do that. It’s called Enclave. Sadly it will not make it’s way to anxious Buick dealers in 2006, but it was revealed. It is staying very, very true to the original concept, and should bring some much needed life back into Buick. Overall sales are still down at Buick, but expect them to be. Buick is officially part of the B-P-G channel, and will never sell at the volumes it did when it had seven models.
2006 has really not been a big year for Cadillac; I would call it just another step in the stairs to being “The Standard of the World.” Possibly the biggest news from Caddy in 2006 was that they dropped advertising agency Leo Burnett for the new comer on the block, Modernista. Likewise, they dropped the Breakthrough tagline in favor for Life. Liberty. And the Pursuit. An interesting new tagline that, I personally, think is a great one. The former campaign was very in-your-face and bold; one could say it fit Cadillac…breaking through and making their initial comeback to the luxury market. Now they are more mature, and this new ad campaign is way more mature, and really shows Cadillac is becoming a competitor in the big leagues. Along with the new ad campaign came the new Escalade (of COURSE!). Response has been as good as one could expect. Oh, and it won’t be loosing it’s “King of Bling” title anytime soon.
Chevrolet has had a milestone year. Why? Because of the GMT-900 launch of course! Let’s see, we have a new Avalanche, Tahoe, Suburban, and Silverado. All of which were in DIRE need of replacement. Reviews of all the vehicles have been nothing short of great, and the market has taken notice (however reluctantly). Unfortunately the new Silverado is just arriving now, so it will not make much impact on Chevrolet’s sales race against the Ford brand. Last year Chevrolet became the best-selling brand in America, we will see if they do so again. Other than the GMT-900 launch (the largest launch in GM history, by the way), we had the launch of the new Aveo. It’s a good little car, but is in serious need of a new powertrain that can get better gas mileage.
GMT-900. That is all I have to say about GMC for 2006. I decent percentage of their lineup consist of 900-based vehicles, so they are a rather fresh brand. Not to mention the new Acadia, which is arriving at dealership as I type this. Sales have been down for the year, but they haven’t been too bad considering GMC is a lineup of nothing but SUV’s and trucks.
Some call them posers, some praise them as the best SUV’s on the planet. Call it what you wish, but Hummer has had a good year in 2006. Almost 100% of that greatness has came from the new H3. Hummer is one of only two GM divisions to have sales numbers that are in the black; up just over 32% for the year. They have sold nearly 49,000 H3’s (as of the end of November), which far exceeds all GM and third-party expectations. Not bad for a truck that was hugely underpowered.
Although many will disagree with me, but Pontiac has had a decent year. Yes, their sales are down, but there is something people need to understand. Pontiac isn’t going to be a high-volume brand. It’s now a niche brand, that will have a mid-range sales level once the sales actually level off. We did just get the new, rebadged G5 this year, taking Pontiac back a step in it’s pursuit to be a performance brand. I can’t stress enough how much of a mistake it was to sell the G5 in the U.S. Pontiac needs better, otherwise they are a pointless division. On a much lighter note, the G6 line has done relatively well in 2006, having just over a 60% conquest rate during the summer. That is very good for a car that has been on the market over a year.
I had read that Saab was on track to break a world-wide sales record. I haven’t heard if that is actually going to happen or not, but they could do better nonetheless. Saab and Volvo probably have the hardest time of any brands in North America at finding their place in the market and capitalizing on it. They are good with safety and generally make some interesting products, but its hard for many to justify buying one when now just about every product has to be extremely safe. I firmly believe Saab has a lot of potential, but until GM gives them the ability to make their own products, that just isn’t going to happen.
Every year in this article I come up with one word that describes GM for the last year. I had a hard time coming up with one at first, but then I realized the best word to use has been used at least a thousand times this year. Turnaround. 2006 will go down in history as the year that GM started, and actually made a decent amount of headway in their turnaround. Their stock is back in the $30.00 range, most of the new products are doing very well and getting excellent reviews and quarterly reports haven’t been so deep in the red.
We can only hope that 2007 will bring what 2006 did, but multiplied by about 100 (sans the small quarterly looses). With the new products that are launching now; such as the Saturn Aura and Lambda crossovers, plus the products coming soon; like the Saturn Astra, 2008 Chevrolet Malibu and 2008 Cadillac CTS…things should continue to progress for GM. It all comes back to that word, turnaround. Just keep the momentum going GM.
- 7.9% Stake of Isuzu Motors to Toyota
- 17.4% Stake of Suzuki
- 51% of GMAC to Cerberus Led Consortium
TOTAL of ANNOUNCED Recalled Vehicles: 1,492,861*
- 123,719 Holden products for side impact air bags.
- 38,349 GM trucks in North America because of a potential fuel leak.
- 30,793 2005-2006 Corvette’s due to roofs flying off.
- 400,000 trucks for faulty brake lights.
- 900,000 GM trucks due to tailgate cable.
For comparison sake, TOTAL Toyota Vehicles Recalled: 1,828,659*
*According to my count