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Good article, interesting points:

SOURCE: Auto Observer

Why No More General Motors Brands Are Likely to Follow Hummer
October 14, 2008
By Dale Buss

General Motors has been trying to peddle a suddenly outmoded Hummer brand for several months now, so far with no takers. But ask Mark LaNeve, GM's North American sales vice president, if the company would like to put any of its other ailing brands on the auction block, and get a bristling response.

"Why should one of mine go away?" he asked. "There are lots of brands that we out-sell. Why doesn't one of them go away?"

And while LaNeve's remark came before the recent buzz about GM-Chrysler merger talks, it's even more apropos in light of the possibility that two of the old Detroit Big Three could merge their brands as well as their operations. GM's brands would be largely likely to survive any such combination, while most of Chrysler's would likely disappear.

The consensus of industry pundits mulling the brand architecture of any potential GM-Chrysler combination is that Jeep would be the only surviving brand from the existing Chrysler stable, with GM attempting to bolster it into something that it once hoped for Hummer - but couldn't accomplish.

"Look at the volumes that the Jeep brand generates on an annual basis relative to Hummer, which has remained very narrow in its appeal," said Joseph Phillippi, president of Auto Trends Consulting, in Short Hills, N.J. Moreover, he and others said, Jeep has lots of unrealized potential to grow as an international brand.

It wouldn't be the first time that a competitor focused solely on the Jeep brand and chucked the rest of its parent company. In 1987, Chrysler acquired a majority share of American Motors Corp. from Renault mainly to access the Jeep brand, quickly junking AMC's Eagle car brand.

Now, it's widely assumed that the Dodge and Chrysler brands wouldn't comprise enough equity to make the cut at a combined GM and Chrysler.

Dodge's truck specialty could be subsumed by a GM brand (although it's possible that Dodge, rather than GMC, might survive as the lone all-truck brand).

And while the Chrysler Town & Country is a formidable premium entry in the minivan segment that Chrysler created, GM easily could excise the minivan platform and redeploy it - and then jettison a Chrysler brand that never really has had a distinct identity over the decades, at least in comparison with the company's other brands.

For the Defense

But while a GM-Chrysler marriage doesn't seem to be on the front burner for an industry that is lurching from one crisis to another this year, LaNeve and his colleagues do have to reckon with continuing questions over the brand lineup they have to work with now.

He brings up Pontiac, for example, as the remaining brand in the GM stable "that everyone questions," and then rolls out sales data. The Pontiac brand sold nearly 203,000 cars this year through August. True, that was down 17 percent from a year earlier.

But instead of conceding a thing to the critics of GM's brand strategy, LaNeve ticked off a handful of the many brands that Pontiac still outsells by far.

"It's twice as big as Scion," he noted. There's also Volkswagen, Mini, Mazda, Subaru, Suzuki and other brands, all still eating Pontiac's dust. "I'm a smart-ass when I say it, but I don't hear people questioning those brands. As far as I'm concerned, we don't need them.

"Spreading resources thin is a fair question," he continued. "But the issue isn't solely, 'Does GM have too many brands?' There are too many brands in the market, period."

Imperative to Slash?

Such is the passion that automotive brands arouse when their future is brought into question. For a variety of reasons going beyond today's marketplace exigencies - including historic loyalties, production strategies, internal politics and dealer investments - car brands possess a ton of inertia and are very difficult to kill even when there's a clear business-school case to be made against them.

But existential challenges to brands keep arising. They killed Plymouth and Oldsmobile years ago. Plymouth had outlived its usefulness as an entry-level marque for a parent company, Chrysler, that didn't sell enough cars to support both Plymouth and Dodge lineups. And GM snuffed out Oldsmobile after trying for decades to sort out its modern raison d'etre compared with Pontiac and Buick.

Today's vehicle marketplace presents a strong rationale for accelerated brand consolidation in the industry, including shifts in sales shares, the demands of developing new models more quickly, and the huge costs of supporting a brand with marketing. Any mega-merger, such as GM and Chrysler, obviously would magnify such logic.

"It's not just advertising the brands but also the cost of developing manuals and parts and training for all the brands," Phillippi said. "There are so many bits and pieces involved in putting a unique car on the showroom floor, it adds up to really serious money."

For such reasons, concluded branding guru John Grace, "It's a right time to totally reinvent automotive brands, so you're going to see radical change. The auto companies have to be more willing to recognize the need for change and get to it more quickly," said the president of Brand Taxi, in Greenwich, Conn.

GM Under the Microscope

Ford's Mercury brand is the usual first target for such doubters. "This is the time," Grace said, "when brands like Mercury are going to go away."

But no manufacturer continues to be dogged by such questions as much as GM -- even after the company's decision earlier this year to shed a Hummer brand whose larger-than-everything persona no longer was suitable for an OEM that is scrambling to adjust to an era of expensive gasoline and heightened environmental awareness.

Everything about the big picture GM sees these days seems to urge its leadership to consider seriously the possibility of jettisoning or folding other U.S. brands. There's the market leader's drastic deterioration overall market share to modern historic lows - 21.7 percent of the domestic market through mid-year, though it's recovered somewhat in recent weeks.

There's the requirement for GM to overhaul its entire product line and manufacturing network to favor smaller, lighter vehicles for all of its brands. There's the need to slash billions in marketing expenditures as the economy reaches low ebb and traditional advertising media, especially television, no longer get the job done as they used to.

That's the set of facts that already led GM to bite the bullet on Hummer, LaNeve conceded.

"The part of the market that's been most severely impacted in 2008 - and that has been a three-year trend - is the truck market," he said. Four of our eight existing brands sell body-on-frame trucks. It's only logical to say in that kind of environment, where we believe much of the market shift we've seen is permanent: Do we need four of our brands selling trucks?"

Seven Times 'No'

GM's answer was "no," of course, and so Hummer remains resolutely for sale. But company leadership has decided to circle the wagons around its other brands despite the fact that GM's U.S. market share has dropped inexorably over the last 20 years and still shows no long-term signs of leveling off. In 1991, it stood at 36.2 percent; last year, it was 23.9 percent.

"It's reasonable that people would ask" whether GM plans to fold other brands too, LaNeve said. "It's never bothered me."

But here are seven reasons why, in the view of LaNeve and others, GM will hold on to its other remaining brands:

1. Hummer is unique: It is the only GM brand that "could be fairly easily separated both from a dealer point of view and manufacturing," said David Cole, chairman of the Center for Automotive Research, in Ann Arbor, Mich.

2. Two are too valuable: As today's linchpins of what remains of the overarching GM brand strategy first conceived by Alfred Sloan, Chevrolet and Cadillac are very secure. Chevy is the industry's biggest brand and carries GM to the mass market. Cadillac has re-established itself as the premier domestic luxury brand.

"All the big players in the world have a foundational brand, and a luxury / premium brand, and in our case we've made it clear that they are Chevrolet and Cadillac for us," LaNeve said. "It also helps that they're increasingly global brands."

3. Focus of new products and marketing: LaNeve asserted that the pipelines of most of GM's remaining brands are filled with exactly the kinds of higher-mileage vehicles that the market shift will demand in the near and medium-term future.

"Eighteen of our 19 upcoming new models are cars or crossovers," he said. "And if you look at our performance back a couple of years, our share in each one of those segments has grown marginally. We've lost a couple of share points because we're mixed in so heavily with trucks. It's very evident what kind of vehicles we needed to develop for all of our brands, and we've been doing that."

Similarly, LaNeve said, GM has to make sure it's allocating its marketing resources more wisely among all the brands that it wants to continue to support. And right now, there are at least two aspects of that necessity that are fairly easy to stick with: taking more advantage of digital marketing media compared with traditional outlets, and hammering home a fuel-economy message in every way possible.

4. Lessons from Oldsmobile: GM got rid of Oldsmobile several years ago because it had become superfluous for a sensible brand architecture that barely could accommodate both Pontiac and Buick. The brand had been relatively robust as recently as 1999, when GM sold 352,000 Oldsmobiles. But in 2000, GM announced it would phase out the brand. In 2003, its last high-volume year, only 126,000 Americans bought Olds vehicles. And GM produced its last Oldsmobile in spring 2004.

GM executives have learned two indelible lessons directly from their Oldsmobile experience.

First, caveat dealers. While GM knew it would have some issues to work out with dealers who had individually invested millions of dollars in their Oldsmobile dealerships, most of them over decades, it wasn't prepared for the legal firestorm that hit when GM deep-sixed Oldsmobile. Some have estimated the lode at a total of more than $2 billion in writeoffs and settlements; GM never has provided a figure. "They were spooked by what it cost them to eliminate Olds," Phillippi said.

The huge difficulty of dealing with legacy dealership networks, of course, would be one of the biggest detriments to any GM-Chrysler combination - although such a combination could give the surviving company reason to provide more impetus behind the Big Three's efforts to pare poorly performing dealers over the last several years.

Second, in eliminating Oldsmobile, GM voluntarily sacrificed volume in the hundreds of thousands of units, partly in the expectation that its other brands would recover much of those. Buick, for example, had the most overlap with Olds, so the expectation was that many former loyal Olds buyers simply would switch to Buick.

The problem: "they gave up all that volume," Phillippi said, "and it never went anywhere else inside the GM organization. That got them scared." Buick sales, for example, most recently peaked at 432,000 units in 2002, but then declined to 337,000 in 2003 (Oldsmobile's last full-volume year), to 241,000 in 2006, and to 187,000 last year.

5. Three are too intertwined: GM has learned how to inoculate three of it remaining brands - Buick, Pontiac and GMC -- against irrelevance by using a new marketing and manufacturing strategy. It has reorganized the three into one highly interrelated cluster of three brands.

They share more manufacturing capacity with one another than do any other GM brands; for example, both Buick Enclave and GMC Acadia, the popular crossovers, are built on the so-called Lambda platform at GM's assembly complex in Lansing, Mich.

Similarly, GM has marshaled dealers into outlets for all three, instead of individual, brands. They can draw from Buick's lineup that focuses on midsize sedans, Pontiac's sportier and smaller cars and crossovers, and GMC's larger SUVs and pickup trucks.

"They're really a single brand with three different names," Cole said. "With flexible manufacturing, they can do stuff that they couldn't have dreamed of before. And while GM still has too many dealers overall, they don't necessarily have too many dealers of any one brand. So taking out any one brand doesn't necessarily make any sense now."

LaNeve agreed. "We run it as a single portfolio of three very narrow lineups. You put the three together, and the product line is about the breadth of a Nissan."

6. Globalism has changed things: Each of the brands in GM's current U.S. portfolio is coming in increasingly handy because of the accelerating globalization of the auto business, LaNeve said.

Buick, for example, has proven popular in China, where GM's expansion is thriving; and Chinese designers are starting to influence the styling of future Buick models for the U.S. market.

While it began a generation ago as the all-American "import fighter," Saturn has evolved over the years into GM's European-style brand of fuel-efficient vehicles - and remains GM's flagship when it comes to distribution-system structure and dealer-customer relations. And though many critics have said Chevrolet can accomplish in the U.S. market everything that Saturn purports to, the ongoing integration of Saturn's lineup with that of Opel, the company's leading brand in Europe, will help GM continue to build a case for preserving Saturn.

"Over time," LaNeve explained, "the Saturn lineup will very closely mirror Opel and will have much more of a European-premium type of pricing and go-to-market strategy compared with Chevrolet - which will be much more expressive and American in nature."

Even Saab, the Sweden-based GM brand that sold only 33,000 vehicles to Americans last year, makes more sense for the U.S. market when viewed through a global lens.

"Saab is home-rooted in Europe, and we're basically a sales arm for Saab in the United States, so it's a bonus having it," LaNeve said. "It's not taking away resources from any of the other brands in the way I run my business here in North America."
MUCH MORE HERE
 

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i dunno, maybe one reason is that ive never heard of a jeep that costs 80 large to purchase? just throwin that out there.
 

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Discussion Starter · #3 · (Edited)
I'm not sure how I feel about all of the points made:
Today's vehicle marketplace presents a strong rationale for accelerated brand consolidation in the industry, including shifts in sales shares, the demands of developing new models more quickly, and the huge costs of supporting a brand with marketing. Any mega-merger, such as GM and Chrysler, obviously would magnify such logic.

"It's not just advertising the brands but also the cost of developing manuals and parts and training for all the brands," Phillippi said. "There are so many bits and pieces involved in putting a unique car on the showroom floor, it adds up to really serious money."

For such reasons, concluded branding guru John Grace, "It's a right time to totally reinvent automotive brands, so you're going to see radical change. The auto companies have to be more willing to recognize the need for change and get to it more quickly," said the president of Brand Taxi, in Greenwich, Conn.
This is very true - the hidden costs DO add up.
In any event, LaNeve concluded that GM watchers "could debate it one way or another. But Toyota has three; Ford has four or five [brands]. Chrysler has three. How do you choose to go to market? I don't believe it's how many brands you've got - it's how you manage them."
Yes, it IS about how you manage them - and some would argue that GM hasn't done a good job of managing what they've got.
 

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But instead of conceding a thing to the critics of GM's brand strategy, LaNeve ticked off a handful of the many brands that Pontiac still outsells by far.

"It's twice as big as Scion," he noted. There's also Volkswagen, Mini, Mazda, Subaru, Suzuki and other brands, all still eating Pontiac's dust. "I'm a smart-ass when I say it, but I don't hear people questioning those brands. As far as I'm concerned, we don't need them.
that's the attitude I like.

and personally, i would be fine if some of those brands went away.
 

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Overall I have to agree with him, no reason to get rid of Pontiac, and as far as Oldsmobile, it was the perfect cross between sport and luxury for me. I had 3 new old's and loved all of them, im not likley to buy up to Buick, but rather down to Pontiac and Chevy. In all three cases where I bought Olds, I was actually looking at Pontiac first, Then I went and looked at Olds and liked what I saw there, for value, 77 Cutlass S vs Lemans, 90 Silhouette vs Transport, and 99 Alero GLS vs Grand AM.

JMO
 

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This isn't talking with fire......this is talking out of your ass. In 5 years, I'd like Mark to remember this moment when his brands have shrunk to nothing. GM management's idea of long term vision and planning seems to be next month.

Oh yeah, and while he's calling out brands like Mini and Mazda, he may want to remember that Mazda alone has a market cap bigger than all of GM combined. Yeah, there's that little thing called profit. Maybe one of these days someone in GM upper management will look the word up in the dictionary.
 

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Oh yeah, and while he's calling out brands like Mini and Mazda, he may want to remember that Mazda alone has a market cap bigger than all of GM combined. Yeah, there's that little thing called profit. Maybe one of these days someone in GM upper management will look the word up in the dictionary.
Believe me when I say I despise what has happened to GM's profit, but his point is that they have more customers who are willing to put up the $$$ and have their cars in the driveway.
 

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They won't be able to sell Hummer. They better figure out how to sell those cars. There's plenty people around the world who want them. And how about the importance of product, product, product? How about some Hummer-looking cute ute. Wouldn't that sell?

There's no way to get rid of any brand given that they all share platforms and/or powertrains and/or assembly plants and/or dealers. So there's nothing to sell. And just letting a brand die as they are trying to do their best with Pontiac is just letting sales go away and is braindead.
 

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The consolidation of GMC, Pontiac and Buick in one sales chanel may be good thing, but it's not the same as it were a full line brand like Toyota.
Having a model build by a more powerfull brand can have more advertising benefits than having it build by a smaller brand. If it's bigger it means more people appreciate the brand, more road presence, one brand in all ads, a good model can help alot the others - Prius, Volt or even Malibu.
If there were Suzuki Camry, Mitsubishi Corolla and Hyunday Prius, combined would sell less than Toyota Camry, Toyota Corolla and Toyota Prius.

How about merging GMC and G8 into Buick? Buick Sierra, Buick Yukon, Terrain - a luxury small crossover badged Buick, no Acadia, only Enclave, G8 gets to be a Buick.
Sierra Denali and Yukon would make instant kickass Buicks. Regular Sierras should be made a little more upscale and voila.
And sell them in China too.
Something like this would give Buick much more market recognition. It would pass Lexus.
 

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This isn't talking with fire......this is talking out of your ass. In 5 years, I'd like Mark to remember this moment when his brands have shrunk to nothing. GM management's idea of long term vision and planning seems to be next month.

Oh yeah, and while he's calling out brands like Mini and Mazda, he may want to remember that Mazda alone has a market cap bigger than all of GM combined. Yeah, there's that little thing called profit. Maybe one of these days someone in GM upper management will look the word up in the dictionary.
Mazda doesn't have the legacy or fixed costs GM has, either. Also, Mazda isn't worth much either, only about $5 Billion market cap.

GM's best chance is to make do with the brands they have, it's going to cost more to eliminate them than to supply them with good product and try to thrive with them. In addition, as we all found out with Olds, lots of customers, no matter how irrational they are, will never return to GM if their brand gets eliminated.
 

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Doesn't matter how logical Mr. LaNeve's position is, no one cares unless GM turns a profit. Pick some winners among the whole line- up, consolidate into 3 brands (Chevy, Buick, and Caddy IMO) and let the losers die. If Toyota wants to keep throwing money down the Scion hole, let them. I figure they'll wise up pretty quick and roll those models back into the Toyota stable soon enough.

The idea that Oldsmobile customers were going to move up into Buicks or down into Pontiacs was stupid in 1999. Brand loyalty was long dead by that time. Using the fact that a stupid idea didn't work as an excuse to avoid cutting out some deadwood in 2008 is an even stupider idea. The idea that you could win a customer for life by moving him from a Chevy to a Pontiac to a Buick to a Caddy hasn't existed since the Asian invasion of the 70's and 80's when Honda and Toyota proved that low price and high quality aren't mutually exclusive.

Brand loyalty isn't a consideration for millions of Americans, particularly Gen Xer's and Millenials. You gotta figure that we learned this behavior from our worthless baby- boomer parents, so what do you expect? Your first car could be a Chevrolet or it could be a Hyundai. Your second car as your family and career prospects grow could be another (higher priced) Chevy or it could just as easily be a Toyota Camry. As you climb the greasy poll, GM wishes you would consider a SAAB, but you're probably looking for an entry level Lexus or a BMW. When we reach the top and get ready to retire, as our Boomer parents are today, maybe we'll look at Caddy or Buick, but we're probably looking across the line at another Lexus or a Jag.

We can weep and wail and tell everybody to "Buy Uh- merrikin" until the cows come home, but brand loyalty is dead. It is deceased. It has ceased to be. Keeping a brand structure alive wishing it would come back is a waste of resources, no matter how you spin it. Forget having customers for life. Develop products that are capable of winning over each returning customer on their own merits, not the merits of the car they are trading in. Plan each model line as if there are no returning customers because as a practical matter, there aren't. Each customer today is a new customer, ready to take his money across town to get a better deal.
 

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Well I suppose there could be one benefit to have Chrysler...

Chrysler & Dodge can become the rental brands and then you can not sell any of the current GM brand products to the rental companies, only the fleet buyers such as companies. Keep the production lines rolling and maybe kill off a lot of Toyota sales to the rental companies so they can keep chanting "we're #2.. we're #2" which is an appropriate number all around for them.
 

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It kills me that they want to sell Hummer. What the hell is that going to do? It's not like they are losing money on it. And it's one of GM's only brands with cachet.
GM is trying like hell to get some respect from the greens and that is also the reason for the Volt.
 

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i dunno, maybe one reason is that ive never heard of a jeep that costs 80 large to purchase? just throwin that out there.
You're absolutely right. Take the H3 for example, the base H3 is about $30-32K fully optioned but simply adding the 5.3L V8 for the H3 Alpha pushes the pricetag over $40K. How can they even sleep at night?
 

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But ask Mark LaNeve, GM's North American sales vice president, if the company would like to put any of its other ailing brands on the auction block, and get a bristling response.

"Why should one of mine go away?" he asked. "There are lots of brands that we out-sell. Why doesn't one of them go away?"
Actually, I would like to see Mark LaNeve go away.

Volume and market share?

What is this... GM of the '80s? What about profit?
 

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I honestly feel that GM should keep HUMMER and kill the GMC name plate.
I agree. (probably gave 99% of GMI a heartattack)

GM's primary problem is not focusing on the brand. What is the point of GMC's existence? Don't even mention the word sales. I want to know why the brand exists. Lets get the fundamentals right and fix the company from the bottom up.

As for BPG channels - stupid. What is the point of selling 3 brands as one and then advertising them separately?? Why not make it one brand? GM's whole NA strategy does not make sense at a fundamental level. And that's why the company is in trouble.
 
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