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Fallacy of the niche car

Abandoning mass market approach may be a mistake
By Jerry Flint
Forbes.com

This is a pretty interesting article:

http://msnbc.msn.com/id/4353853/

Snippet:
"Mass-market vehicles were how GM created the company that dominated the auto world from the 1930s to the 1960s, developing a few base platforms that could be used for multiple products, like the mass-market Chevrolet and then smaller runs for Pontiac and Oldsmobile.

The market has splintered. The U.S. has become the target of opportunity for every automaker that can meet our safety and environmental rules. The variety of cars and trucks is enormous. But big profits still come from big production runs of vehicles for which the customers are willing to pay top dollar, not from niche marketing. Abandoning the mass market could be another serious mistake."
 

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Where does he get the idea about GM abandoning mass markets? I guess Epsilon and Delta are "niche" platforms then. Everthing Flint has written lately has this anti-Detroit slant to it.
 

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I have not even read the article....I dont think that I want to waste my time!

GM is attacking niche markets, that it used to ignore, but it is not abandoning the "billions served" market that buys Malibus, Silverados, Grand Ams and LeSabres Etc Etc.

Most automotive writers cant find their a$$es with 2 hands and a flashlight, so imagine what a finance egghead that knows little about cars can do!
 

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Flint, who also has a column in Wards Auto, used to infuriate me with what seemed like biased, anti-domestic rhetoric. Over time, having read dozens of his editorials, I gradually realized that he does have a clue about Detroit and its collective vision. I believe that anyone who has lived through or studied the pre-1970 era, when domestics ruled, can easily recognize how things got off track and whether today's corrective action is appropriate. I see alot of myself in Flint. Devoted to the U.S. auto industry, but now deeply cynical after years of seeing things go down the tubes, followed by two decades of empty promises that "next time we'll get it right." Some of the solutions are so perfectly obvious, yet top brass has often blazed a misguided path.

GM's ability to play in a niche market will be telling. It'll provide catchy products, but also an awareness that a new, lean culture has swept GM, one that will benefit mass-market and niche products alike.

The cynicism I sense in Flint's message, is that while GM's recent press has focused heavily on the need to cater to niche markets, there has been little talk about the revitalization of the mass-market sedan. We have good mass-market trucks, already well-received (if pricey) niche products like Corvette, SSR, and GTO. But what's becoming of the mainstream sedan? Malibu is too small and a yawn, so close in theme and appearance to the model it replaces that it's destined for the same mediocrity. G6 looks promising, but it's not at the heart of the segment. CTS is great, but well out of the mainstream, mass-market. Malibu and Impala are at the center.

As Flint noted, Chevy was always at the heart of the volume segment, and lower-volume derivatives were spun into Pontiacs and Buicks. Malibu is the latest volume effort from Chevy, and is way off the mark. Are any kudos deserved? Five exciting Kappas don't make the mass-market flops excusable. Mazda in the '90s was a great example of a brand with many exciting low-volume cars but no mass-market appeal. It was bad news from a business perspective. When the 6 finally arrived, Mazda already had one foot in the coffin.
 

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Originally posted by desmo9@Feb 25 2004, 05:46 PM
Malibu is the latest volume effort from Chevy, and is way off the mark. Are any kudos deserved? Five exciting Kappas don't make the mass-market flops excusable.
i can see why one might not like the styling (or lack thereof) of the new malibu, but i think it's actually a very solid contender in the sedan market. it's getting good reviews, and selling well, and caters not only to typical sedan consumers but also to those who are interested in something a little different (the maxx hatchback). it's already covering more market than the last malibu, all the way from relatively inexpensive to a well-equipped import fighter. looks aside, i'd say GM put lots into this mass-market machine.

i also think the G6 is poised to grow much further than the grand am ever did. again, it'll start down low with a 4-cylinder model, and climb all the way to 270+hp, 6-speed, hardtop convertible (and AWD?). that's an impressive span for one car, and i recall reading that pontiac aims to sell 200,000+ G6's once things get rolling. those are damn good mass-market numbers. there's also lacrosse, cobalt, the CSV's, equinox... all rather non-niche products.

i'd say GM has put plenty of energy into it's mass-market vehicles. time will tell how successful they'll be, but i expect big things. and yeah, the hype is with the cool kappas and the vette and SSR and other niche products, but i think that's what'll bring people into the showroom.
 

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Originally posted by DCL+Feb 25 2004, 04:44 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (DCL @ Feb 25 2004, 04:44 PM)</td></tr><tr><td id='QUOTE'>Where does he get the idea about GM abandoning mass markets?  I guess Epsilon and Delta are "niche" platforms then.  Everthing Flint has written lately has this anti-Detroit slant to it.[/b]

Agreed. The article as a whole stinks except for one statement:

<!--QuoteBegin- Jerry Flint from forbes.com

The case for niche selling is this: The manufacturer can shorten product life cycles to the point where it can keep a model going for only 18 to 30 months and still make money. If GM can make Kappa work, the optimistic talk goes, it will have a breakthrough car-building process that could stand the industry on its ear.
[/quote]

GM's never been able to make niche cars profitably, until now. Expect to see
the math based design system used initially for KAPPA applied to volume cars as well. GM isn't abandoning the mass market. GM is rethinking how to get vehicles to market (Niche or Volume) the quickest way possible.

Hydroforming the sheet metal for really nice curves is great except for one thing. IT'S SLOW. Good for only niche products.

GM's goal as far back as '99 was to stamp interior and exterior pieces in 4 hits on
a contiguous transfer press. Whether GM has reached that goal, I don't know.....(BTW, it took 8 hits to stamp the interior door pan for the 80's F-Car). Four hits does not allow very much for smooth curve designs.

IMHO, I think GM has something up its sleeve to produce cool designs for mass market cars fabricated by conventional stamping presses. That process will be the standard in the future...........


GM is fundamentally changing the way it designs and builds cars. All for the better!!!!

Ken
 

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Originally posted by DCL@Feb 25 2004, 04:44 PM
Where does he get the idea about GM abandoning mass markets? I guess Epsilon and Delta are "niche" platforms then. Everthing Flint has written lately has this anti-Detroit slant to it.
I agree. Flint ignores GM's mass market products, except for the full size truck platform. If GM can make money with Kappa good for GM. Further Kappa is capturing some of the best press for being bold and creating great cars. BMW recreates the Mini and is praised. I believe the media has grown used to picking on GM. As are many middle aged buyers who grew up with the GM of the 50s/60s. GM is taking great strides and is rapidily improving. Yes, Honda and Toyota enjoy great success with the Accord and Camry. But the article ignores the new Malibu, upcoming G6, LaCrosse.
Flint's article also discounts whatever success and profits that GM is enjoying. Instead focus on he thinks is wrong. Ignore what doesn't support your idea and exploit whatever does.
 

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(quote from Flint) speaking about camry/accord
And the underpinnings of each car served as the base for other models. Camry's is used for the Avalon sedan and Lexus ES 330, another 120,000 units, and the Sierra minivan evolved from the Camry. The Accord is also the base of the Acura TL and the Honda minivan, and a couple crossover SUVs also evolved out of that base.
isn't that called platform sharing? and isn't he basicly praising the practice when honda and toyota do it, but bash it when GM plans to use an improved version of the same practice to make some niche vehicles?

(quote from flint)
If GM can make Kappa work, the optimistic talk goes, it will have a breakthrough car-building process that could stand the industry on its ear.
he even puts something so that he wont look foolish in restrospect when this product is a huge success.

i have a feeling that GM is starting to rattle some cages at the competition.
 

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Originally posted by Canuck@Feb 25 2004, 06:29 PM
But the article ignores the new Malibu, upcoming G6, LaCrosse.
Epsilon can support great cars. 9-3, Vectra, and G6 are very nice. So why is the Chevy, which should be GM's volume leader, a dumbed-down runt of the Epsilon litter? If you take the wagon out of the picture, it's "been there done that." The sedan is mediocre, and when leading a volume effort against the likes of Honda, a reasonable conclusion is that GM's mass-market car portfolio still leaves alot to be desired.

Again, Flint is merely reading a Mazda case study. The division almost went under in the last decade, despite having an array of low-volume driver delights. I'm no Jerry Flint fan, but I understand his point and concur with it. If the market turns away from trucks, niche cars won't float the books. If the automaker with the highest (overall) market share is highly underrepresented in the top-10 sales race, as GM is, then something's wrong... and niche cars won't help. Yeah, but they'll bring people into the showrooms, you say? Sure... but that only works when the mainstream stuff is desirable. On that basis, I can see Solstice helping G6... but I see neither Nomad nor SSR doing much to help Malibu sales.
 

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Originally posted by desmo9+Feb 25 2004, 07:12 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (desmo9 @ Feb 25 2004, 07:12 PM)</td></tr><tr><td id='QUOTE'> <!--QuoteBegin-Canuck@Feb 25 2004, 06:29 PM
But the article ignores the new Malibu, upcoming G6, LaCrosse.
Epsilon can support great cars. 9-3, Vectra, and G6 are very nice. So why is the Chevy, which should be GM's volume leader, a dumbed-down runt of the Epsilon litter? If you take the wagon out of the picture, it's "been there done that." The sedan is mediocre, and when leading a volume effort against the likes of Honda, a reasonable conclusion is that GM's mass-market car portfolio still leaves alot to be desired.

Again, Flint is merely reading a Mazda case study. The division almost went under in the last decade, despite having an array of low-volume driver delights. I'm no Jerry Flint fan, but I understand his point and concur with it. If the market turns away from trucks, niche cars won't float the books. If the automaker with the highest (overall) market share is highly underrepresented in the top-10 sales race, as GM is, then something's wrong... and niche cars won't help. Yeah, but they'll bring people into the showrooms, you say? Sure... but that only works when the mainstream stuff is desirable. On that basis, I can see Solstice helping G6... but I see neither Nomad nor SSR doing much to help Malibu sales. [/b][/quote]
Malibus are acually selling very well, and that's why they are adding people at the plant.
 

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GM's approach with Chevy can be compared to Nissan with the Altima and Maxima. The Malibu is the smaller and more affordable option while the Impala takes the larger side of the market. For GM's sake I hope they are more successful than Nissan was in the 90s with this approach.

Desmo9 have you driven a new Malibu?

Intially I was disappointed with the exterior of the new Malibu. I thought it shared to much of the previous models look. When I saw the car in person. I was surprised how much better the car looks than it does in pictures. The interior is a huge step forward. Offering a tilt, telescope steering wheel on low end model is a great move by GM, it is about time actually.
The Epsilon is a great midsize small car platform. GM is achieving volume, as has been mentioned Malibu, 9-3, Vectra, and soon the G6. If GM can have global platforms selling at good levels, then incentives will not continue to cost GM profit.

If Kappa spawns the Solstice, Curve, Nomad, and other models then GM will have a platform that will be the envy of the industry. Futher there is no reason more cars can not be created from this platform.
Flint's thesis runs contary to an article I read in Automobile regarding the same topic. The article basically stated old mass sales on a single model is no longer the way car companies are going to be profitable rather platforms that have dozens of models are the future. Niche products are the future. Flint needs to get with the times.
 

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Originally posted by paul8488@Feb 25 2004, 11:58 AM
i can see why one might not like the styling (or lack thereof) of the new malibu, but i think it's actually a very solid contender in the sedan market. it's getting good reviews, and selling well ...
Well, so was the last Malibu when it was released - in 1997. How much money did GM spend (on improving the car, not incentives) to keep the Malibu competitive in the following six model years? That's the problem - GM releases a brand new car that is competitive, if not the benchmark in its class. By year two or three, competitors have introduced or update their cars, moving the benchmark higher. GM continues to sell basically the same car.

As this point, the financing and rebate deals usually start to kick in.

At the point where said GM car should be completely updated (year four or five), they keep selling the same car, now with entrenched rebates and other financial incentives.

So, now as we enter model year number seven, GM introduces a new Malibu. If GM wants to improve its image and ability to charge, it needs to stay on the product offensive. The Malibu is reasonably competitive today, but the company has to keep improving the car during its lifecycle and schedule reasonable updates to remain in the game.

We'll see if they are prepared to do that.
 

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Originally posted by Canuck@Feb 25 2004, 07:48 PM

Desmo9 have you driven a new Malibu?

Yes. But the trouble is, I've also driven a 9-3 and Vectra. I think the Chevy was dumbed down, despite Lutz's orders not to do so. The styling profile is about the same, it's the same basic wheezy V6, the one I drove had H-rated tires made of Bakelite, etc. Improved? Sure. The interior especially so. But the car seems to be a mild evolution of the past Malibu instead of a big leap forward (which was necessary). The 9-3 and Vectra (and maybe G6) show what Epsilon is capable of, they raised the bar, and it confuses me that the Chevy isn't right up there. That's how you whittle away at Camry.
 

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The current Camry does not have any great styling improvement either.
I do wish the Malibu had a better standard powertrain. A lot of buyers are not overly concerned about the powertrain or H rated tires. Maybe a Malibu SS would meet the niche buyers needs.
 

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I didn't read the article, and I didn't real everyones responses, but in my opinion, if GM breaks even on niche automobiles, it is a success. How many people stop at the local Chevrolet dealership because they see a bright yellow SSR out front - not because they can afford one, but just to look. Then they notice a malibu or impala or cavalier and start looking at those. It is definately a way to get customers in the showroom (their giving away 1000 cars and trucks is doing a pretty good job of this also)
 

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Originally posted by Canuck@Feb 25 2004, 08:15 PM
The current Camry does not have any great styling improvement either.
I do wish the Malibu had a better standard powertrain. A lot of buyers are not overly concerned about the powertrain or H rated tires. Maybe a Malibu SS would meet the niche buyers needs.
Camry doesn't need to take risks, it has the following now. (Taurus made a big mistake there, but that's another story). To unseat the leader, Chevy must find a hole in Toyota's armor, as Honda has done. The Accord seems to satisfy everyone, from appliance-lover to enthusiast, thus has been successful at challenging the appliance-only Camry in recent years. So maybe you'd expect the enthusiast to go for the G6 and others go to Chevy? Fine, but if that's the case, it takes the combined sales of Chevy and Pontiac to challenge the leaders. Malibu plus G6 equals Camry. That's not ideal. Sales are not appreciably higher than one solid offering would provide, but tooling, distribution, and marketing costs are nearly double. I think the Malibu ought to be more well-rounded, catering to a wider group like Accord. Let Pontiac take on a sportier focus, plucking buyers considering the Mazda 6 and such.
 

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GM offers more variety in the most competitive part of the market for cars.
Not to restate the obvious but Pontiac offers the Grand Prix and soon the G6
Chev Malibu and Impala, Monte Carlo not to mention what futher platform sharing occurs now and will expand in the future.
GM offers variety to the market and as long as Lutz is around that variety will be more defined and refined. The result will be a sales boom for GM.
If you add in Camry, Camry Solara (which I believe Toyota does right now) vs. Accord Sedan and Coupe then you will be looking at the correct picture. Has GM arrived yet? No but there product continues to improve whereas the Camry gets bigger and more boring with each model. Honda seems to have a better grasp of what they offer than Toyota. Limiting your view to only the present is dangerous, remember once upon a time Oldsmobile produced huge volumes and enjoyed great loyalty.
 

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Originally posted by desmo9@Feb 25 2004, 12:46 PM
GM's ability to play in a niche market will be telling. It'll provide catchy products, but also an awareness that a new, lean culture has swept GM, one that will benefit mass-market and niche products alike.

The cynicism I sense in Flint's message, is that while GM's recent press has focused heavily on the need to cater to niche markets, there has been little talk about the revitalization of the mass-market sedan. We have good mass-market trucks, already well-received (if pricey) niche products like Corvette, SSR, and GTO. But what's becoming of the mainstream sedan? Malibu is too small and a yawn, so close in theme and appearance to the model it replaces that it's destined for the same mediocrity. G6 looks promising, but it's not at the heart of the segment. CTS is great, but well out of the mainstream, mass-market. Malibu and Impala are at the center.

As Flint noted, Chevy was always at the heart of the volume segment, and lower-volume derivatives were spun into Pontiacs and Buicks. Malibu is the latest volume effort from Chevy, and is way off the mark. Are any kudos deserved? Five exciting Kappas don't make the mass-market flops excusable. Mazda in the '90s was a great example of a brand with many exciting low-volume cars but no mass-market appeal. It was bad news from a business perspective. When the 6 finally arrived, Mazda already had one foot in the coffin.
Let me put this in another context here.
You have General Motors -- still by far the larget automaker in the world. It's entire product portfolio, from the lowly Saturn to the highest Cadillac is in flux and will be so for the next 5-6 years.

Now all of a sudden, GM comes up with Kappa. A supposedly low volume car that will be manufactured at a plant that used to crank out the high volume Saturn L (at least I think it's the Saturn L). The plant doesn't matter for this case. The first car to roll out of the plant will be the Pontiac Solstice -- with a maximum production of 25,000 or so. Not necessarily. Chevrolet has the Nomad on standby. Saturn has Curve on standby. Saab is developing a new Kappa. And Buick has a concept. And the Vauxhaull. All of a sudden, assuming 25K per vehicle, we've got a 150,000 car production.
YES... GM may be targetting niche markets, but they are HARDLY giving up volume production. Fact of the matter is, Kappa is extremely reconfigurable. Nomad has a wheelbase of 12 inches longer than the Solstice and isn't a convertible.
So, what we have here, is in fact volume production, except specifically targeted. If GM can make this work, this will be great.

And then there's Epsilon. The 9-3, Malibu, G6. So far, we've got sedans, convertibles, coupes, and wagons. Each Epsilon has different characteristics, different looks, different interiors, etc etc etc. 9-3 and Malibu and G6 are targetting different niches of the car market, but they have higher volumes than Kappa.

So, in short, I think GM is just getting a lot more effecitve at offering specific cars for specific markets, for different people. These architectures/platforms are key for this. Hopefully, they can succeed.
 

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Originally posted by desmo9@Feb 25 2004, 03:56 PM
Camry doesn't need to take risks, it has the following now. (Taurus made a big mistake there, but that's another story). To unseat the leader, Chevy must find a hole in Toyota's armor, as Honda has done. The Accord seems to satisfy everyone, from appliance-lover to enthusiast, thus has been successful at challenging the appliance-only Camry in recent years. So maybe you'd expect the enthusiast to go for the G6 and others go to Chevy? Fine, but if that's the case, it takes the combined sales of Chevy and Pontiac to challenge the leaders. Malibu plus G6 equals Camry. That's not ideal. Sales are not appreciably higher than one solid offering would provide, but tooling, distribution, and marketing costs are nearly double. I think the Malibu ought to be more well-rounded, catering to a wider group like Accord. Let Pontiac take on a sportier focus, plucking buyers considering the Mazda 6 and such.
You're right. Camry doesn't take risks. It's a utilitarian auto. No passion. Boring. But it gets the job done in a very high quality product.

Malibu + G6 = Camry. That's true. Malibu might never attain the sales of Camry. G6 alone might never attain the sales of Camry. But combined they may equal or exceed Camry sales. If you are looking for a family car. You look at Camry and Malibu. But if you want a sportier car, but with the capabilities of a family car you look at the Camry and the G6.... make that the G6 only.
Would you like to be extremely good at doing 1 thing. Or would you like to be very good at doing 2 things.

I'm pretty sure that GM wouldn't be doing this without some sort of efficiencies and economies of scale. Perhaps they've discovered a way to streamline operations further. They have implemented new TOC-based systems that assist in GM factories in managing and controlling under/over production. And these new TOC-systems are just now rolling out in GM's European plants. We just don't know yet as there haven't been major press on GM... like Toyota.
I don't know the underlying cost structure for GM. But individual marketing will cost. However, retooling and engineering costs might be less than we assume, especially since these new cars are easily reconfigurable and are built to minimize costs.
 

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Originally posted by mgescuro@Feb 26 2004, 10:39 AM
I don't know the underlying cost structure for GM. But individual marketing will cost. However, retooling and engineering costs might be less than we assume, especially since these new cars are easily reconfigurable and are built to minimize costs.
It's not cheap. Platform sharing does yield economies of scale, no doubt about it. But creating two or three variants on the same platform is still expensive, whether done on Epsilon a more easily-configurable platform like Kappa. I applaud that approach, don't get me wrong (I've ranted about shallow rebadging how many times now?) My point is, position Malibu so Malibu plus G6 exceeds Camry. Malibu might not achieve 100% of Camry sales, but it could get, say, 80%, and with G6 yielding half-again that amount we'd have a winner.

The Malibu, as is, won't do it. Doing the wagon was smart...that's the type of thing that Camry doesn't offer... a wagon hatch is more in demand right now than a Solara-type coupe. Honda and Toyota tried wagons a couple model cycles ago, but for one, they had the "old school" wagon look about them, and rather ugly at that...and two, the market wasn't ripe for wagons at the time. So the Maxx is good. But the sedan it's based on needs to be better. Particularly style-wise.

You seem to have the picture thing down, so do me a favor (which I think will be telling)... paste the side-profile shots of the previous ('97) Malibu next to the new one. I really think my problem with the new one is it's excessive similarity to the previous one...particularly in the glass. It looks like a mid-cycle refreshening, when in fact it's all new. Maybe seeing them side by side will disspell that.
 
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