[Butta]

Don't Build The Old With The New
Jerry Flint, 06.29.04, 6:00 AM ET

NEW YORK - Imagine if your favorite department store put last year's clothes in its big showcase window, or if your supermarket started pushing week-old vegetables. Yeah, it's a turn-off, but that's just what General Motors does.

General Motors (nyse: GM - news - people ) thinks it's smart to keep building old cars and trucks--models already replaced. I've been griping about this for years.

The most recent example is the Pontiac Grand Am, which will be replaced this fall by the Pontiac G6. (That's some name, G6. Sounds like a civil service rank for someone who types 45 words a minute.) But GM will keep building the old Grand Am. The idea is that it will be sold only to fleets, but who really knows?

While they can't stop building the old stuff, GM also has trouble building the new stuff. The Pontiac G6 four-door sedan will be on sale this fall, but the G6 coupe won't be ready until next year, maybe spring, and the G6 convertible will be ready later that fall, I hear.

I hate to tell you guys in Detroit this, but when I was a boy they didn't keep building the outdated cars when the new ones came out. And they managed to bring out all the new models--sedans, coupes, hardtops, station wagons and convertibles--on the same introduction day in the fall.

That Pontiac Grand Am stunt isn't unusual. Right now GM is selling a new Chevrolet Malibu while continuing to build the old one, which has been renamed the "Classic."

Maybe I shouldn't be that hard on GM. Ford Motor (nyse: F - news - people ) has done the same thing. A few years ago it introduced the Focus as Ford's new small car, but it kept building the old Escort for years. At least the Escort has finally passed away. And Ford has been building its old F-150 pickups along with the new ones. It calls the old ones "Heritage." Through mid-June, Ford built 52,000 of the old pickups and 260,000 new models.

With the big pickups, Ford has a better excuse for selling both new and old models at the same time: lots of plants to convert (GM did the same thing a few years earlier). With five plants building the F-150, there was some logic to shutting them down in sequence for retooling rather than trying an across-the-board conversion. You should know that years ago the industry had million-car runs and did the changeover at several plants all at the same time. To be fair, however, the vehicles back then were nowhere near as complex as they are today.

I think here are several reasons why companies simultaneously build the old and the new. But the major reason at GM is to keep a plant open, building the old vehicle rather than shuttering the plant and laying off workers. Either way, the workers get paid. This strategy has some logic, but I think it's come to the end of the line.

GM's $5,000 incentives are a symptom of this policy. So is the overdependence on fleet sales: 25% of GM's sales go to fleets (rental cars and the commercial/government market). The figure is lower for trucks and higher for cars. One-third of the Pontiac Grand Am's sales, for example, are to fleet buyers. Rental cars are dumped back onto the used car market en masse. So while those fleet sales keep the factories running, they destroy resale values and brand equity.

Many years ago, when Chrysler (nyse: DCX - news - people ) began building its then-new Grand Cherokee at a new Detroit plant, it kept the old Jeep Cherokee in production. Former Chrysler Chairman Lee Iacocca said he did that because he feared the new Jeep Grand Cherokee might flop. So he kept the old Cherokee going just in case. It turned out that the new Jeep was a success, but other consumers kept buying the old, lower-priced Cherokees.

Full Article Here

 

[Butta]

I've been writing about the auto business for half a century, and I know it is wrong to build the old with the new. Perhaps it is time to give in and shut more capacity, even if it means putting more workers on what amounts to lifetime pensions.

That quote tells you all you need to know. He could care less about people's jobs and the economy. Typical import snob.

 

[Ming]

I agree with Mr. Flint. Where I think it is unfortunate is that GM can't manage to use the same workers to build the new models.

 

[T-Type]

I've read a lot of his articles. I do believe he is a fan of the domestics. He does tend to come across negative sometimes, but I believe it is because he is trying to show tough love. In his own cantankerous way he is trying to keep the pressure on the domestics so they will continue to improve and be competitive with the likes of Toyota.

 

[jaorobot]

i dunno if its entirely that bad of an idea..

but i hope GM starts making Chevrolet/pontiac their lone fleet sales, and keep buick to strictly sales to the public.. this will help buicks image and resale value tremendously..

hell, i'd make the argument that GM should slow down on fleet sales across the board, as well as pricing their cars so that incentives arent so crazy, but i think they are in too deep.

 

[akumaknight]

I think they should make saturn the offical GM fleet cars. Chevy and Pontiac used mean somthing... now they dont... you cant brag about american cars any more.. I remember when Buicks were a noteworthy brand, poor mans luxary basicly, and they were luxuary. But now, their top of the line is as luxuarias as the competitions entry level stuff... (I've been a new 04 Civic and I gotta say, I see why people rag on the domestics interior... my nephew bought the civic I'm waiting the 04 GTO's price to drop once the 05 comes out.)

 

[GotAWD]

Originally posted by akumaknight@Jun 29 2004, 04:57 PM
I remember when Buicks were a noteworthy brand, poor mans luxary basicly, and they were luxuary. But now, their top of the line is as luxuarias as the competitions entry level stuff...

buicks days was when hartley earl was running the general.

as for the luxury part you said it the line before its the poor man luxury vehicle...

 

[GotAWD]

p.s. Bob Lutz is to GM now as Heartly Earl was to GM then.

and to quote mings signature at the bottom of his message

2004 - For the second straight year, GM's Buick brand placed No. 2 behind Lexus and its Chevrolet, Cadillac, GMC, Saab and Saturn nameplates all scored above the industry average as well in the closely watched J.D. Power and Associates survey of long-term vehicle dependability.

 

[New_Mexico_Sunset_on_Rt66]

I guess GM figures there is still money whcih can be made by continuing the "old" models.

I agree, I think contunuing to build the Grand Am when the G6 is attempting to replace it, will tarnish the lustre of the G6. The G6 will impress many consumers, but with Grand Am's next to 'em on the lots, will tarnish it's lustre.

But what do I know...

<_<

 

[laserwizard]

Considering the tripe that gets passed here in praise of GM, this is surprisingly candid and honest. I'm still waiting for the design revolution that was said to be coming from GM after Bob Lutz took over. To date we've seen nothing truly beautiful aside from show cars and the production cars look like melted budda over lima beans. Cadillac has opted for ugly is better, Pontiac has stripped its cars and melted the old plastic over them, Chevrolet is offering boxes with the ugliest frontends on the planet, and Buick seems content on leaving well enough alone. Saturn has been killed by poor products and judgment and Oldsmobile has been allowed to die. I see nothing in any GM dealership window that would make me, like a kid of the 1960's, run to the showroom to say "wow". Let's face it, GM has been icing dog poopie for years and now even the icing is getting watered down.

Great article.

 

[GotAWD]

Originally posted by laserwizard@Jun 29 2004, 05:23 PM
Considering the tripe that gets passed here in praise of GM, this is surprisingly candid and honest. I'm still waiting for the design revolution that was said to be coming from GM after Bob Lutz took over. To date we've seen nothing truly beautiful aside from show cars and the production cars look like melted budda over lima beans. Cadillac has opted for ugly is better, Pontiac has stripped its cars and melted the old plastic over them, Chevrolet is offering boxes with the ugliest frontends on the planet, and Buick seems content on leaving well enough alone. Saturn has been killed by poor products and judgment and Oldsmobile has been allowed to die. I see nothing in any GM dealership window that would make me, like a kid of the 1960's, run to the showroom to say "wow". Let's face it, GM has been icing dog poopie for years and now even the icing is getting watered down.

Great article.

what are you looking at dude? caddy ugly? pontiac melting plastic? chevys boxes?
puff puff pass to the left dude, share the bud . caddy is the one brand that has changed its slef majorly as of 2 years ago. sales are up and the cars look alot bette than before. as for pontiac there slow to join the renaisance.

 

[oldsintrigue00]

no no no dont turn saturn into a fleet vehicle and dont turn on pontiac and chevy for fleet sales...fords fleet sales are only taurus and focus and a rare stang to the mix...you cant put a vette for fleet no way in hell..and definitely not a GTO either eventhough the sales SUCK lol but still i think GM is smarter than that..but i think pontiac should put some vibes for fleet instead of grand ams so we can rid the grand ams for the pasture and look forward towards the future of pontiac and maybe get some more sales out of them..but then again why build a car with Toyota (which is the #2 automaker now) just to make the vibe a litlle cheaper to build put it on the new platform with the 06 solstice or buick velite (if it comes out)...and yes buick is a great company but to fleet their cars out is just gonna worsen the brands image and stature to go up against lexus...STOP THE CENTURY AND REDESIGN THE REGAL AND GET RID OF THE ENTIRE IDEA OF THE LACROSSE NOT A REAL LOOKING BUICK KEEP THE TRADITION ALIVE NOT BY KILLING OFF THE REGAL...REGAL WAS THE MORE EXPENSIVE VERSION OF THE GP IN THE 80S if u dont remember..

 

[tgagneguam]

I'm just as frustrated as anyone else with GM's relatively high fleet sales and its dependency on older versions of its vehicles while introducing newer versions. It metacommunicates a lot to a lot of people, not least of which may be that it can't compete directly in the retail side of the car business or that it does not have faith in the newer versions of its vehicles.

That being said, I can understand why GM doesn't completely embrace the retirement of older vehicles when newer versions are introduced. And I can imagine why it's so difficult for GM to curb its dependency on slowly switching to newer vehicles. Gerry only pays small tribute to the financial and logistical difficulty of doing so.

Fleet sales and the simultaneous marketing of older and newer versions of vehicles(like incentives) seem to be GM's bad crack habit. And it will be an awfully difficult habit to kick.

 

[AMcA]

Originally posted by Butta@Jun 29 2004, 08:50 PM

I've been writing about the auto business for half a century, and I know it is wrong to build the old with the new. Perhaps it is time to give in and shut more capacity, even if it means putting more workers on what amounts to lifetime pensions.

That quote tells you all you need to know. He could care less about people's jobs and the economy. Typical import snob.

Butta: keeping plants running to build cars that (1) overload the market and drive down prices and (2) kill demand for current models and (3) make current models look bad and destroy the value of the brand etc, etc, etc, is not a long term strategy to employ people.

In the end, following this road, GM will remain financially weak, and its cars will continue to be saddled with bad-old-GM mojo. Toyota's loving this, no doubt. But anyone who cares about GM shouldn't.

The choice is this, Butta: keep employing the same folks in a shriking, weakening company, and wind up 20 years down the road with a shrivelled enterprise, OR, shrink now, build up GM's strength, and have a reasonable prospect of being a vigorous employer in the future.

 

[banzai79]

If GM didn't make these cars, then Japan would just take the fleet sales. Then you would all be complaining about a market that GM abandoned. :lol:

I've never heard anybody crow about an '04 Civic's interior before. That also warrants an LOL---> :lol:

 

[awalbert88]

Originally posted by Butta@Jun 29 2004, 03:50 PM

I've been writing about the auto business for half a century, and I know it is wrong to build the old with the new. Perhaps it is time to give in and shut more capacity, even if it means putting more workers on what amounts to lifetime pensions.

That quote tells you all you need to know. He could care less about people's jobs and the economy. Typical import snob.

Uh, are you dense? Those people producing cars that won't sell would still be getting paid. Thus, GM would have less product sitting on dealer lots not being sold, saving them money. Those workers would still be getting paid (for doing nothing). How does this hurt the economy?

 

[Titanic]

I think that the auto industry as a whole lost its one greatest tactic: the element of surprise. Back in the 1950s and 1960s, the cars changed every year. You can argue the merits of the "planned obsolesence" era, but one thing can't be disputed: people got excited about the new models. People would go down to the dealerships for unveilings. The new styles would be the topic of conversation among friends.

For the most part, car companies would release the diserable models at the same time as the work-a-day sedans. A customer enamoured with the new look can walk out that day with a flashy convertible or hardtop coupe. If that style wasn't going to be available for a half-year, the customer will either lose the excitement by the time the car is released and not buy it, buy the cheaper sedan style, or look to what the competition is offering--none of which is good for that automaker.

The problem today is that by the time the coupe/convertible/high-performance version of the new model comes out, the car is already old news--people don't get as excited over the car-line.

When people are shocked or delightfully surprised by a car, then sales will follow.

Of course, as the popularity of test-mule spy-shots can attest, we are living in an "on-demand," "I don't want to wait for it" world: people are too impatient to wait until mid-fall for the new automotive offerings. And the automakers, hungry for sales, pander to the public's impatience. They release 2005 models in January of 2004--far before the line is ready. Engines, body styles, possibly quality levels, and production capacity aren't ready in time for such early introductions--frustrating potential buyers.

To help offset deminshed production ablitity and lack of body style choices, some automakers are forced to keep the old body styles in production. And by the time the new car's more desireable models/engines are available, it's too late. Consumers have already moved on to the competition's newest models, starting the cycle all over again.

Some may argue that releasing new styles throughout a model's market run would help keep up interest. That's what Chrysler and VW were hoping on when releasing convertible versions of the PT Cruiser and New Beetle. However, what it comes down to is that it's a new body-style on a 1,2,3, or 4+ year old design. It's technically and asthetically dated.

Losing the ability to excite and surprise people makes an automaker miss out on the opportunity to capitalize on that initial visceral rush.

 

[ViKing]

Overhauling plants one at a time like they did for the Silverado which is built at numerous plants makes sense.
But can anyone explain to me why GM is still making S-10s/Sonomas along with the Colorado/Canyons when all of them are made at only one plant?

 

[monkeylizard]

Originally posted by ChevyHoosier@Jun 30 2004, 06:10 AM
Overhauling plants one at a time like they did for the Silverado which is built at numerous plants makes sense.
But can anyone explain to me why GM is still making S-10s/Sonomas along with the Colorado/Canyons when all of them are made at only one plant?

The Colorado and Canyon are not made in the same plant as the current S10 and Sonomas. The S10s and Sonomas being made today are made at the Linden, NJ facility and they only make the Crew Cab model.

 

[ponchoman49]

As I understood it the Grand Am was only to continue in coupe form and the G6 was covering the sedan field. If GM is gonna continue the Grand Am sedan like it is doing with the Classic, Venture, Montana etc I think that that will stop when the new G6 sedan is fully ramped up. I just wish GM would quit this silly alphabet soup naming convention. It is way to confusing for consumers , extinguishes once past glorious names, and is just plain souless. I can already recall several people trying to describe a new caddy that they saw but can't quite remember what it was called.
And X something or a UV or other. This is just ludicrous!