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Can This Brand Be Saved?
Thursday March 11, 6:32 pm ET
By Jonathan Fahey
GM is spending $3 billion to make you rather have a Buick. That's one tough turnaround.
For much of the last two decades Buick has been entombed--forgotten by General Motors and remembered only by a dwindling band of loyalists. Twenty years ago Buick sold 845,000 vehicles. Last year it sold 337,000. The average age of a Buick buyer, 62, is the oldest in the industry (AARP members sometimes get a $500 rebate). Buick is retaining less than half of its customers, according to J.D. Power and Associates. These days the likely buyers are flocking instead to Lexus and Mercedes-Benz.
"The buyers who are about to be Buick buyers hate Buick," says Rebecca Lindland, an analyst at forecasting firm Global Insight.
All of which leaves GM (NYSE:GM - News) executives with the ultimate marketing assignment. Can this brand come back from the crypt? GM is about to spend $3 billion over the next five years to find out. The idea is to reinvent the charisma Buick once displayed with its big, beautiful cars of the 1940s and 1950s. That vision will be shown off in April, at the New York Auto Show, in the form of a long, elegant rear-wheel-drive convertible prototype called Vélite. With cars like Vélite, and a new sport utility, a minivan and a pair of redesigned sedans, GM hopes Buick will compete with imports like Volvo, Infiniti and the lower-price offerings from Lexus and Mercedes-Benz.
The goal: a sales revival to 500,000 vehicles a year by the end of the decade.
It could be a fool's errand, but GM thinks it has little choice. Buick still occupies the sweetest part of the market: high-end vehicles that are pricey enough to make a profit--they sell from $20,000 to $40,000--but affordable enough to attract buyers in volume. Even while slumping, Buick sells as many vehicles as competitors Mercury and Volvo combined. There could be some nostalgic motive for keeping this brand, which debuted in 1903 and evolved under William Durant into the vertically integrated powerhouse called General Motors.
Problem is, Buick will be waking up to a changed world. Japanese carmakers have been steadily improving their luxury brands. And older brands like Mercedes-Benz and BMW now offer many vehicles in Buick's lower price range, while mass-market brands have been offering pricier versions. A customer with $28,000 can buy a Honda--or a Mercedes-Benz. And no matter how good the new Buicks are, they still lack the intangible prestige of a luxury import.
"There used to be room between mass-market cars and luxury cars, but luxury cars are lower priced and mass-market cars are much more luxurious," says Merrill Lynch analyst John Casesa. "Buick is fighting its way back in to a part of the market that it created but is unrecognizable to them."
To the doubters, GM points to Cadillac's recent resurgence and says Buick will follow the same path. GM spent $4 billion developing new vehicles for Cadillac, and sales are encouraging, if less than torrid (216,000 last year, up from 179,000 in 1999). C.J. Fraleigh, a former PepsiCo executive steering Buick's turnaround, says Buick will aim to offer quieter, more powerful vehicles with nicer interiors, more graceful looks and a smoother ride than its competition.
Buick does have at least two things in its favor: Its quality and reliability are among the best in the industry. And Buick dealers, who have subsisted on scraps for years, are well respected and savvy. "We don't have any choice in that matter," says an embittered Dennis Doerge, who has been selling Buicks for 28 years in Glenview, Ill. "The only thing we can do is take care of our customers. We don't have one new car in our showroom."
General Motors let Buick go to seed because it could. Buyers were loyal, and Buick's turf, large cars, was not under direct assault from foreign competition in the early 1990s. GM, like the rest of Detroit, poured its development money into trucks and SUVs. For much of the last decade Buick offered four different four-door, front-wheel-drive sedans with V6 engines. Coupes and convertibles were rare, there were no V8s, and the first Buick SUV arrived in 2002, long after the market turned that way. The cars themselves were rarely updated. The $38,000 Park Avenue and the $24,000 Century were last redesigned in 1997, and the Century is based on underpinnings developed in 1988.
When Robert A. Lutz joined GM as vice chairman in September 2001 he put the brakes on only two projects--both Buicks. "One had a huge, snoopy nose, and it was completely undramatic," Lutz says. "The whole thing was like a parody. The research was devastating. And it had a big brother that was even worse."
This fall the car Lutz changed, now called LaCrosse, will arrive in showrooms and replace the aging Century and the $27,000 Regal. Next year that "big brother" will arrive to replace the other two sedans, the $29,000 LeSabre and the Park Avenue. And Buick just started offering a powerful SUV, the Rainier, that will sell for as much as $40,000. In the fall Buick will get its first minivan, called the Terraza. A car like the Vélite prototype won't arrive until 2006.
Full Article Here
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Thursday March 11, 6:32 pm ET
By Jonathan Fahey
GM is spending $3 billion to make you rather have a Buick. That's one tough turnaround.
For much of the last two decades Buick has been entombed--forgotten by General Motors and remembered only by a dwindling band of loyalists. Twenty years ago Buick sold 845,000 vehicles. Last year it sold 337,000. The average age of a Buick buyer, 62, is the oldest in the industry (AARP members sometimes get a $500 rebate). Buick is retaining less than half of its customers, according to J.D. Power and Associates. These days the likely buyers are flocking instead to Lexus and Mercedes-Benz.
"The buyers who are about to be Buick buyers hate Buick," says Rebecca Lindland, an analyst at forecasting firm Global Insight.
All of which leaves GM (NYSE:GM - News) executives with the ultimate marketing assignment. Can this brand come back from the crypt? GM is about to spend $3 billion over the next five years to find out. The idea is to reinvent the charisma Buick once displayed with its big, beautiful cars of the 1940s and 1950s. That vision will be shown off in April, at the New York Auto Show, in the form of a long, elegant rear-wheel-drive convertible prototype called Vélite. With cars like Vélite, and a new sport utility, a minivan and a pair of redesigned sedans, GM hopes Buick will compete with imports like Volvo, Infiniti and the lower-price offerings from Lexus and Mercedes-Benz.
The goal: a sales revival to 500,000 vehicles a year by the end of the decade.
It could be a fool's errand, but GM thinks it has little choice. Buick still occupies the sweetest part of the market: high-end vehicles that are pricey enough to make a profit--they sell from $20,000 to $40,000--but affordable enough to attract buyers in volume. Even while slumping, Buick sells as many vehicles as competitors Mercury and Volvo combined. There could be some nostalgic motive for keeping this brand, which debuted in 1903 and evolved under William Durant into the vertically integrated powerhouse called General Motors.
Problem is, Buick will be waking up to a changed world. Japanese carmakers have been steadily improving their luxury brands. And older brands like Mercedes-Benz and BMW now offer many vehicles in Buick's lower price range, while mass-market brands have been offering pricier versions. A customer with $28,000 can buy a Honda--or a Mercedes-Benz. And no matter how good the new Buicks are, they still lack the intangible prestige of a luxury import.
"There used to be room between mass-market cars and luxury cars, but luxury cars are lower priced and mass-market cars are much more luxurious," says Merrill Lynch analyst John Casesa. "Buick is fighting its way back in to a part of the market that it created but is unrecognizable to them."
To the doubters, GM points to Cadillac's recent resurgence and says Buick will follow the same path. GM spent $4 billion developing new vehicles for Cadillac, and sales are encouraging, if less than torrid (216,000 last year, up from 179,000 in 1999). C.J. Fraleigh, a former PepsiCo executive steering Buick's turnaround, says Buick will aim to offer quieter, more powerful vehicles with nicer interiors, more graceful looks and a smoother ride than its competition.
Buick does have at least two things in its favor: Its quality and reliability are among the best in the industry. And Buick dealers, who have subsisted on scraps for years, are well respected and savvy. "We don't have any choice in that matter," says an embittered Dennis Doerge, who has been selling Buicks for 28 years in Glenview, Ill. "The only thing we can do is take care of our customers. We don't have one new car in our showroom."
General Motors let Buick go to seed because it could. Buyers were loyal, and Buick's turf, large cars, was not under direct assault from foreign competition in the early 1990s. GM, like the rest of Detroit, poured its development money into trucks and SUVs. For much of the last decade Buick offered four different four-door, front-wheel-drive sedans with V6 engines. Coupes and convertibles were rare, there were no V8s, and the first Buick SUV arrived in 2002, long after the market turned that way. The cars themselves were rarely updated. The $38,000 Park Avenue and the $24,000 Century were last redesigned in 1997, and the Century is based on underpinnings developed in 1988.
When Robert A. Lutz joined GM as vice chairman in September 2001 he put the brakes on only two projects--both Buicks. "One had a huge, snoopy nose, and it was completely undramatic," Lutz says. "The whole thing was like a parody. The research was devastating. And it had a big brother that was even worse."
This fall the car Lutz changed, now called LaCrosse, will arrive in showrooms and replace the aging Century and the $27,000 Regal. Next year that "big brother" will arrive to replace the other two sedans, the $29,000 LeSabre and the Park Avenue. And Buick just started offering a powerful SUV, the Rainier, that will sell for as much as $40,000. In the fall Buick will get its first minivan, called the Terraza. A car like the Vélite prototype won't arrive until 2006.
Full Article Here
