Rumblings & Rants
Saving money, Cutting brands, and what General Motors SHOULD do to survive
Commentary by nadepalma
There has been an incredible amount of traffic on GMI regarding the future of GM and their product plans. No doubt these are tumultuous times at the General, where even the most concrete plans are being revisited.
And honestly, how can you blame them? Between an economy that they say is heading south, high gasoline prices, and uncertainly (and anxiety) over CAFE standards, GM is rethinking almost everything.
But one thing is for certain: GM simply CANNOT go back to the old playbook if its going to survive - and thrive - in this market.
There is a lot of opportunity here to right the ship as losses mount - and a colossal opportunity to also do further harm.
I'd like to discuss a few of these items - and more - in this piece.
WHAT WE KNOW, WHAT WE CAN PERDICT
This is a critical moment in GM's history - nearly as crucial as the turning point in the late-80s to mid-90s era that lead to the boardroom "coup" which put many of GM's current brass in place and reshuffled the company.
At that time, GM had become a bloated, arrogant, and rudderless organization that seemed to make money despite itself. It was an industrial monolith that lacked passion and was better at real estate deals than actually making cars. GM made moves to save the company and were forced to refocus operations in light of excess capacity (they were set up for close to 40% of the market, but only had around 30% of the market at that time).
Today, its not as bad of a scenario in most respects. GM does have plenty of passion with great product in the pipeline, but they no longer command a huge swath of the market as they once did. That size allowed them to almost dictate how the market was organized. Not so today. Even though they continue push to streamline the company into a "One GM" strategy, the General remains a "bloated" organization.
And just as things were back then, GM is in need of a major reshuffle as they have enormous excess capacity.
GM's historic losses are creating quite a bit of buzz in the industry, on Wall Street, and among enthusiasts like GMI members. GM reported a 26% drop in sales at the beginning of August. In an ironic twist, GM is producing the best, and arguably the most desirable, products its long and fabled history - yet is still facing mounting losses and a bleak financial outlook.
For awhile, it seemed that GM was on good footing thanks to a favorable labor agreement, promising product launches, and the hope of new products to come. These are all still great milestones for GM, but it isn't enough in the current market.
You almost have to feel bad for the RenCen crowd; the market changed almost overnight! Rising gasoline prices, shaky confidence on Wall Street, an increase in CAFE standards messing with the product mix, and a shrinking overall US auto-market are creating havoc for GM.
What should they do?
The simple answer is that there is NO proverbial Silver Bullet for GM. Their mounting losses and problems at home can't be solve just by making one or two changes. Every reporter has stated one way or another that there is No easy, cheap fix for GM woes - this is obvious.
It's going to take a series of drastic moves to put the General back on solid footing.
But with a $15.5 billion loss in Q2 (the 3rd worst quarter in its history), the pressure is on to right the ship. It is true that much of GM's losses came from one time charges and accounting adjustments; but any loss after last years $39 billion record shakes Wall Street's confidence and hurts the bottom line.
Not only that, but GM's market capitalization is only $6 Billion - roughly what Ford paid for Volvo just a few short years ago. That's staggering! GM has already said there is 'significant' interest in asset sales to help bring fresh capital to the coffers. But it's not enough - Changes MUST be made or GM may become a take-over target.
However, one indisputable fact remains though all of this: The largest anchor around GM's neck remains its core North American division!
Even as other portions of the Empire are either breaking even or claiming record profits and sales, GM's core North American operations are dragging down the rest of the company. That means that no sales record or profits made in Eastern Europe, Russia, or Asia can make up for losses right here at home.
The good news is that as GM expands into other markets, the North American market is counting less and less toward their total income. However, it is still enormously significant and is hampering the bottom line.
It simply cannot continue!
GM's Board of Directors is meeting continually to get a better sense of what they should do.
How should we advise them?
A LESSON FROM THE PAST
If there is one thing that the DISASTEROUS tenure of GM North America boss Ron Zarella should have taught GM is that product is king - but products don't mean a thing if no one notices.
Zarella was shortsighted and idiotic enough to think that you could treat a product as a brand within a brand - all you needed to do was continually market it - almost at the expense of the product itself. So for example, don’t update the Cavalier, but market the hell out the "Cavalier brand" and all would be okay.
This was the dumbest approach possible - and THANK GOD Zarella is gone from the halls of the RenCen - but there is a glimmer of truth to his madness.
Simply put, marketing/advertising matter. To which we can add "timely updates are needed to keep products viable in the market and product launches (especially new product luanches) can mean the difference between success or failure for a given vehicle."
However, can GM do either when it's stealing from Peter to pay Paul on another project? Or more appropriate, "Can we properly launch the Aura with a decent advertising budget when we're taking those marketing dollars to redesign the Malibu?"
The answer is NO - GM can't do everything for every division. Something has to give if it's to give it's products a decent shot in the market while also creating the best product possible.
Auto analysts and industry watchers such as Peter De Lorenzo at AutoExtremist.com, Daniel Howes at the Detroit News, and others have been wondering how many balls can GM keep juggling before one - or all of them - fall? And they are right! When will the madness end?!?
Communicating a "brand's values" is equally important. What is Pontiac's role at GM? Is Saturn an affordable, plastic sided car or a competitor to VW and Honda? What's Saab all about? Etc, Etc.
Some of these answers we obviously know, but does the public? Do they understand what all of GM's brands stand for?
But more than that, GM continues to suffers from a a perception problem. Historically in the 80s and 90s it was a image problem that dealt almost exclusively on quality and reliability. Low-end technology, boring design, horrible interiors were hallmarks of the General.
Today many of those past perceptions are fixed (but certainly not all of them). Instead, the perception is now focused on GM producing "lumbering vehicles, trucks, SUVs, etc with poor fuel economy" that the public accepts as true. Remember, PERCEPTION is REALITY to the public. It has nothing to do with what you are actually producing - just what they percieve you are offering them.
Just before I sat down to type this I read an article by Jamie Kitman from Automobile (as well as a few European publications) essentially blaming American automakers for not only producing un-economical products and pushing them on the car-buying public, but also for duping us on making those purchases. Its very much akin to what Friedman Thomas from the New York Times and others have stated (going so far as to say that the best thing that could happen to the US is for GM to fold and Toyota to take over). Obviously I think they are short sighted and wrong (only many levels) but the problem of Image and Perception remain.
If GM is to move away from this kind of image in the market and the horribly wrong perception by consumers, it needs very focused products and brands.
But AGAIN, none of that matters, if it doesn't have enough MONEY to project this on the public.
A CONSTANT PROBLEM: THE GM DEALERSHIP NETWORK
One ENOURMOUS obstacle working against GM in this regard is the dealership network.
When GM controlled 50% of the market, having 6,000 + dealerships in the nation made a whole lot of sense. When your market share is less than half that number, it becomes a hindrance.
To be fair, if I were a dealer, I would want to continue to "exist" and keep selling cars - but this will not fix what ails GM nor will it make dealerships more profitable.
Some could argue that it is GM's dealership network that has caused many of the problems the company now faces, especially with enthusiasts. While GM is ultimately responsible for many product mishaps over the years, how many times did GM introduce a half-baked product to the market just to keep divisions and dealerships happy? Or how many times did GM give into dealers, even when they knew money was needed to shore up another division?
To help alleviate this, GM recently implemented its four-channel strategy, which consolidated the dealership network down to Chevrolet, Saturn, Buick-Pontiac-GMC, and Cadillac-Saab-Hummer.
On the surface, this seems like the best course of action to streamline the company - but it STILL represents WAY too much overlap for the corporation as a whole.
Let's take a look at a few examples:
Does GM need to offer THREE Delta based, small cars in the compact segment: Cobalt, G5, Astra (with another one, the 9-3 replacement, on the way)?
Does GM need to offer FIVE Epsilon based, mid-sized products: the Malibu, G6, Aura, and forthcoming LaCrosse and 9-5 replacements?
Does GM really need to sell an Acadia and a Enclave on the same showroom? Or for that matter, will GM need to offer FIVE different versions of the Lambda crossover (assuming the Escalade switches from the GMT900 platform to Lambda when it is replaced)?
Does GM need a GMC Canyon when a Chevy Colorado is also produced? Originally there wasn't supposed to have been a GMC version of the Chevy Colorado. GMC was supposed to be a "Professional Grade" brand and more "upscale" from Chevrolet - what did GMC need a lowly entry-level pick-up for? But BPG dealerships complained since they'd lose volume after the Sonoma was discontinued, and GM capitulated and gave them a quick re-badge.
What about the G5? Its a decent product, but its sole purpose was to make BPG dealers happy since GM didn't have any intention of replacing the Sunfire once it was discontinued. They complained enough and a badge-engineered product appeared.
And the list goes on and on -- The same could be said about any other number of GM products.
Does GM need all this overlap? While many of these products serve different segments of the market (no one would argue that the next 9-5 has a very different clientele than the Malibu), the very straight forward and rhetorical answer is NO IT DOES NOT.
The reality is, GM has taken this approach so that it's four sales channels each have enough product between its various brands at a location to essentially let dealerships be a "full-line store". This was GM's fault since they allowed their dealership network to grow haphazardly rather than in an organized and consistent manner.
Making it even more complicated are high gasoline prices: What do you do bring fuel efficient products to all your four sales channels without stepping on too many toes and reinventing the wheel five times over?
In the process, GM has been forced to keep an over-extended dealership network happy and flush with high volume products. And what's worse is that many times, the product mix is flawed.
The additional demands dealers have placed on product planners has helped ensure that company is always short changing one brand/product in light of another brand/product. It has also muddied what "each brand stands for" in the GM pecking order. This means product cycles have been longer, vehicles go without refreshes for longer periods of time, and critical advertising dollars have been eliminated.
Need proof? Consider how long some brands' products have gone/will go without a proper refresh. Take a look at the Cobalt alone. Since it came out a new Civic was introduced AND will be freshened for next year. Yet we still have yet to see any updates to the Cobalt outside of a slightly revised interior a few years back. And the new Chevy Cruze won't be sold until 2010. Isn't that WAY too long to be truly competitive?
Or consider that the Colorado has been on the market now since 2004 without any refresh or improvement. Yes, they got revised engines and a new V8 model - but is that something that will visually draw customers into showrooms?
That is not only irresponsible and shortsighted, it's shameful.
But what's more, even IF the General DID update the vehicle, would it have the advertising dollars necessary to market those changes effectively? Probably not. Even in the most simplistic examples, GM has come up short on key product launches (i.e. Aura v. Malibu).
GM CAN DO BETTER!
No other automakers runs its dealership network like GM does. Honda, Toyota, and Nissan do not do this.
Moving forward Chrysler will not do this either as they are getting their product plans in order to eliminate overlap. I applaud them for it!
Even GM's biggest domestic rival, Ford, is taking drastic steps reduce the size of it's entire dealership network to make their retail operations more profitable. In an Automotive News piece, authors outline that Ford has begun crucial dealer meetings to explain future product plans and eliminate un-needed showrooms. Ford is even putting up as much as $700,000 per dealership to entice them to close. Already they've scuttled 500 dealerships. GM should learn lessons from this example!
Something is obviously wrong here - and something has GOT to give.
GM obviously cannot consolidate it's dealership network fast enough, but nor can GM slim down their brand lineup so far as to face endless law suits.
So what's to do?
THE CASE FOR CUTTING BRANDS
This is never an easy topic to discuss on enthusiast sites like GMI or elsewhere.
In an ironic twist, for much of the last century, GM has fought to remain BELOW 50% market share in order to prevent being hacked up for anti-trust violations. GM used it's multiple brands to adequately cover the entire market and essentially offer every type of car to everybody.
You could almost say that, in its heyday, GM's strength in the market was literally based on its brands.
But today, even with all those brands, the "Sloan system" is more of an anchor around GM's neck than a useful brand marketing tool.
GM's multiple brands are more a patchwork of products than real instrument of "forcing people up the GM ladder" as it would have been back in the day (Chevy to Pontiac to Oldsmobile to Buick, etc).
Instead today we have two very focused core brands (Chevrolet and Cadillac) and 6 "satellite" brands that are struggling one way or another in the market.
Oh sure, some have clearer brand value than others. For example, GMC is clearly an SUV/Truck brand while Saab's image is a bit hazy or Pontiac's recently has become a bit muddled.
But the fact remains - are these brands strong enough to survive without major capital infusions and millions in advertising? Do all these brands make sense in a market that rewards "simplicity" over complexity in brand development and awareness?
Not to mention that having so many brands leaves a bit of a problem for product "uniqueness". When the spyshots of the Cruze's interior hit GMI, more than one person said, "Doesn't it seem like a lot of GM's interiors are starting to look the same". one could also say the same thing when you consider the headlamps on the Invicta/LaCrosse and the Cruze or perhaps even the tail lamps on the G6 and those on the Cobalt.
How many times can you reinvent the wheel? How many times can similar interior pieces, exterior styling cues, etc be shifted from one brand to the next? Can't we just have a one or two versions instead of 10?
Or perhaps more pointedly - does GM truly need all these brands today to cover the entire market?
Let's see what GM's largest competitors are doing and how they manage their brands:
Toyota manages to sell nearly as many vehicles in the market as GM and they essentially have 2 major brands (Toyota and Lexus) and one "specialty" brand in Scion that sells roughly 180,000 units more a year. AND, to add insult to injury, Toyota does this with a significantly smaller dealer network and franchises to support. The Toyota brand has clear cut "brand values" and spends plenty of money communicating it to consumers.
Nissan holds a similar strategy in selling just Nissan and Infiniti - each through their own sales channel - with one being a "sporty, everyday brand" and the other being a luxury brand.
FoMoCo is only a few steps behind GM in total sales and makes use of just the Ford brand and Lincoln-Mercury (which itself is being revitalized). Yes, Ford does own one-third of Mazda and all of Volvo - but all five of these brands combined still don't present the logistical or overlapping challenges that GM faces.
Honda concentrates on just the Honda and Acura brands - but both are sold in different showrooms.
Even "wounded" Chrysler is consolidating their franchises to sell all three of its brands through a single Chrysler-Dodge-Jeep sales channel. But each brand will be tightly-focused since they will share the same showroom floor. More importantly, Chrysler's future product plans calls for the eliminations of all overlapping models - thereby reducing overhead and increasing the capital that can be used on engineering, advertising, and other projects (i.e. one minivan, not two; one mid-sized sedan, not two; etc).
But what is more telling is that GM seems to already know this! The General's strategy in other corners of the globe perhaps mimic what GM should possibly be doing for its North American operations. GM makes money just about everywhere else in the world, but North America. And in those markets there is typically less brands and more focused group of brands and product ranges. This isn't always the case, but certainly in most of these profitable markets, GM sells only a handful of its brands vs. the EIGHT BRANDS we currently have in North America.
Is there a lesson from GM's own playbook that can be learned here?
WHICH BRANDS SHOULD GO?
Put simply, GM has TOO MANY brands. We all recognize this and we all know it to be true.
With the market share down to about 20%-22% coverage, there are "too many mouths to feed" to remain focused and effective.
Back in the heyday, all these brands made sense - they controlled huge portions of the market and GM could afford to invest advertising, marketing, and development dollars between all the brands. But in a modern market where the Germans, Japanese, Koreans (and soon the arrival of Chinese and Indian) all have a substantial presence, this just isn't needed nor is it working.
GM has tried to make a case in the past that it could somehow "limit" each of their brands so no brand had to be killed. How many of us remember this marketing scheme to try and keep all their brands in play circa 2004?
Seemed like a good idea at the time - but it just DID NOT WORK. The problem is that even if GM could get its product cycle to lineup this way, its dealership network is so sporadic (one dealer sells just Chevy; one sells Pontiac, Chevy, and Cadillac together; etc) that eventually GM will once again give into their dealership network.
So now what?
GM SHOULD USE THE CURRENT CAFE/FUEL REGULATION CRISIS AS A COVER TO CLOSE DOWN REDUNDANT BRANDS.
If GM was too timid/cowardly/afraid (pick your adjective) before to do what was necessary and cut divisions, then current domestic and world events should be the perfect opportunity to do what was unthinkable for all these years - KILL UN-NEEDED BRANDS!
We can all safely surmise that two brands are "safe" at GM: Chevrolet and Cadillac. These are GM's foundational brands - they are the pillars upon which the rest of the corporate empire resides and should continue whole-heartedly.
But what of the rest?
The decision on which brands to cut is not easy nor should be taken lightly - but cuts MUST be made. At the point that GM cannot come up with enough money to update their products in a timely fashion - while other divisions suffer - it becomes a matter of survival and relevance in the market.
Many have thought that Buick was an "injured brand" and probably should be put out to pasture. And if we were to make our decision based on the North American market alone, I would agree.
But as Buick has become a staple brand in China (where it outsells both Chevrolet and Cadillac combined), chances are that Buick will be be a safe brand to retain in the empire. Why? If for any other reason than the fact that killing a "traditional American brand" like Buick in it's home market will make it much less palatable in China and elsewhere.
Part of what makes Buick an attractive brand in China is the fact that it is historical "Americana" to many Chinese - why mess with that image by killing it in North America? By this estimation, GM wouldn't throw away 100,000s of sales in China (and favorable market position) by deep-sixing one of it's oldest brands.
A new product infusion, new styling direction, and greater influence from China will make Buick a more "international" brand. I'd say this makes Buick's continued existence in the empire safe.
Admittedly, Saab has been a bit of a step child for GM. Long neglected, Saab is finally getting some attention from Detroit and the rest of the market. The updated 9-3 has been well received. And the Griffon Brand has great products coming out in the next few years that will make the brand far more compelling and attractive to most buyers.
But many will ask "is that enough to keep Saab at GM?" In my honest opinion, the short answer is Yes - but not for the same reasons as many think.
One thing that is often overlooked about Saab is that it is currently GM's ONLY truly international brand. Yes, GM is pushing Chevrolet and Caddy into more and more markets - but until they develop a global following, Saab is the only one that is sold worldwide. Period.
Additionally, Saabs are known for being economical, fun to drive cars. As the gas crisis grows and more people ditch SUVs and trucks for more frugal transportation, Saab's business case becomes that much more solid. There is much that GM can take from Saab (and vice versa) to expand to the rest of the lineup. Just as Saab now leans on GM for platforms and access to hardware, GM can take turbocharging and biofuel lessons from Saab and apply them across the board at GM. There is some merit to this as Saab has always been a technologically driven company.
Lastly, Saab is a premium brand - which means that GM could arguably end up making more money back on their investment in Saab per unit than many of its corporate cousins. Newer Saabs will all be based on corporate platforms with Saab applications baked in during development - that means better margins are almost guaranteed and a better business case exists for the brand.
In the United States (and perhaps elsewhere), Saab seems a "natural fit" when paired with Cadillac stores. As Saab's future product lineup seems destined to focus on small and mid-sized products, it would seem to compliment Cadillac's current lineup. For example, Cadillac is working on a smaller BLS replacement - but will not chase BMW, Audi, or Mercedes by producing a 1-Series, A2 or A3, or A-Class/B-Class competitors - at least not in the United States. Saab, however, will offer a premium 9-1, a sporty crossover, a new 9-3 and 9-5 that will be vastly different from what Cadillac will offer. Plus, who knows if Saab may see a dedicated halo product, like a return of the hallowed Sonnett, that could follow the formula established by other "near-luxury" FWD/AWD players like the Alfa Romeo Brera, Alfa Romeo GT, old Volvo C70, Audi TT, and others.
It all adds up to Saab offering a different kind of luxury experience to compliment Cadillac's traditional role (larger, RWD products vs. FWD/AWD vehicles) - and that means they can co-exist on the same showroom floor (at least in North America).
GM hasn't spent the money on Saab that it has on other ventures in which it lost significant money (the joint venture with Fiat, constant cash infusions into Isuzu, buying and selling stakes in Fuji Heavy Industires and Suzuki, etc). And GM has NOT poured billions into the company with little return as FoMoCo did with Jaguar over their near-20 year relationship.
To me this means there may be unexplored potential there yet to be tapped for the Griffon Brand.
In my opinion, Saab would seem to be safe...for now. However, if the investment GM makes in the brand does not pan out, I would suspect GM could go shopping for a new owner. Companies like BMW, PSA Peugeot-Citroen, and Fiat have all been approached by FoMoCo in the past about possibly buying Volvo's operations from Dearborn. I suspect that if Saab does not deliver the needed results in the next few years, GM may shop the very same list to see if there is interest in Saab.
One last thought on IF a possible Saab sale could happen would depend on if Opel moves upscale enough in Europe. In the US, Saab is comfortably a "luxury/near-luxury brand", but in Europe it isn't necessarily in the same realm as the typical players. However, Opel has made huge strides in moving a bit upmarket in Europe and is succeeding in launching much more refined products. This is especially important as Chevrolet takes the bottom rung of ladder from Opel/Vauxhall. In the future, I could almost see Saabs position being "threatend" - and possibly even being sold - if Opel is successful in moving more and more upmarket. Afterall, if Saab and Opel eventually co-exist on the same level, in the same market segment, then would there be a place for the brand?
Of course, this may be a long way off.
Hummer we already know is being shopped around. We've heard the Chinese, Indians, Russians, and even the Arabs are interested - but nothing has come of these discussions as of yet.
If GM doesn't find a buyer, then it's very likely that Hummer may just be shut down.
As much as this may hurt, many believe that GM simply does not have the ability to support the brand long term.
As CAFE standards have thrown a monkey wrench in GM's product plans, its very possible that GM may be transitioning to more and more FWD-unibody platforms and less RWD-BOF products. That means larger BOF products may soldier on longer without a replacement and smaller BOF products will be cancelled for unibody products (we are already hearing how Lambda and Theta products may be used to replace many of the current BOF platforms to increase MPG ratings).
If that happens, then its possible that GM may NOT HAVE any future products (especially smaller, fuel efficient products) in the rest of the GM stable on which to develop future Hummers. Hummer sells roughly 70,000 units a year - that's too few to create unique platforms for just Hummer. In a real sense, logistics will have killed GM's hopes of carrying on the nameplate. We still have to see how this pans out - but with GM quietly buying out Hummer stores, it seems its fate is essentially sealed.
We all know that there is interest from others (one recent article speculated that Mahindra & Mahindra keen to purchase Hummer) but my best guess is that if GM cannot figure out a suitable buyer for Hummer by year's end, it's very possible GM will simply shut down the brand. Doing so would be costlier, but ultimately would not impact GM's bottom line the way closing Oldsmobile die years ago.
Furthermore, some planned Hummer products could be moved to another Division (most likely Chevrolet) to keep some customers interested. For example, the planned H4 is now on hold. But if the product could be moved from a BOF platform to a unibody setup, could it be moved to the Bow-Tie Division? A "Chevy H4" could present a unique way by which Chevy could try to steal a few sales away from Jeep (or left over original Bronco fans, pre 1978?) and bring them into the GM fold.
Either way, the writing appears to be on the wall for Hummer.
GMC's entire lineup is essentially all re-badges of Chevy trucks. Again, we need to ask, "where does this product already exist and do we need another one?"
One could argue that GMC is "different" in that it serves an ever-so-slightly different clientele. But for all intents and purposes, GMC is a division of all re-badged products with very little differentiation from their Chevy counterparts.
So why does it exist? To keep those dealerships that don't carry Chevy trucks/SUVs happy.
However, that argument will hold less and less water in the months and years ahead. As the gas "crisis" continues to unfold, CAFE standards become a further burden, and customer shift away from SUVs and Trucks - GMC's prominence in the pecking order will count for less and less.
Already we are seeing sales significantly down in the SUV/Truck market - and everyone knows it, including GM.
We already know that GM is making preparations to not only cut back on production but reshuffle GMC's lineup.
In the AutoWeek article, GM confirms new products, the article ultimately cites that GM is "cutting truck capacity by 300,000 units by the end of 2009 by accelerating the shuttering of its plants. Additionally, the automaker is freezing development of its next generation of trucks and sport/utility vehicles, as well as V8 engines."
More recently, Motor Authority posted the article GMC considering dropping the Acadia, Envoy or Canyon, and stated "General Motors’ truck-focused brand, GMC, has been hit hard by changing consumer preferences, which has led to several reports that certain scheduled GMC products could be scrapped altogether"
And its not just GM. Every other major car maker knows the shift away from trucks and SUVs is coming. We recently head that Tata will cut Land Rover production and shift some of their production over to Jaguar - and this is for world-wide sales, not just to make up for the US market.
The fact is that passenger cars and crossovers will eventually make up the lion's share of the market - and that is where GM's dollars must be concentrated.
Chevy Trucks far outsell GMC branded trucks. So why spend even more money marketing/advertising/developing/designing GMC trucks and SUVs when Chevy already produces these products?
What's more, since Cadillac has gotten into the "luxury SUV, luxury truck" game, GMC's place in the pecking order has become even more obsolete. Consider that the luxury oriented Yukon Denali was out a year before the Escalade. But since Caddy has now offered a line of full-sized and medium-sized SUVs, even hardcore GMC fans have to admit that there is very little that "luxury appointed" GMCs offer that Cadillac cannot match.
Some will argue that eventually the gas crunch will go away or GM will figure out a way to create truck/SUV products that will get better gas mileage. This may happen and it may not. However, if Indian and China's insatiable appetite for gasoline continues to grow, chances are that oil inventories will remain tight and gasoline prices will remain relatively high.
Others will say that that keeping GMC makes sense since it costs GM very little money to maintain the brand. On the outside that may appear to be true, but remember that it's about operational costs as well. To promote a product, you still have to deal with all those marketing/advertising/developing/design dollars we previously mentioned.
And those dollars DO ADD UP. What if those monies allocated to keep GMC running (not just ads, but the cost of the small tweaks necessary to transform a Chevy Truck into a GMC product, maintaining a brand image, etc) were reallocated to another division, product development, or simply used to pay down debt?
Perhaps we would have gotten a Cobalt refresh by now or maybe the Aura would have gotten more product launch money for commercials, or maybe GM could get the Volt's battery situation fixed sooner!
For all these reasons, GMC should cease to exist in its current form.
However, if GM pays enough attention, that doesn't mean that GMC couldn't continue on in some fashion.
GMI recently reported that GM-Navistar truck pact expired without final deal - which present GM with a very unique opportunity.
Recognizing that GMC is a redundant retail brand, what if the emphasis was shifted? Keeping their medium duty truck operations in house after the Navistar deal falls through, GM could almost kill two birds with one stone.
The General could stop selling GMC as a true retail, mass-market product - and simply use GMC as a professional, commercial grade operation.
That means, GM stops selling Chevy variants of the Kodiak, etc - and merely re-badge all their commercial and medium duty products as GMCs. It would also mean GMC would no longer sell re-badged Chevy Truck products for the masses and focus only on the industrial market.
This would allow GM to "cut an extra division" without while retaining the GMC name for what it claims to already be - "Professional Grade"
Perhaps GM could sell a few heavy-duty variants of the Silverado for commerical operations as well - very much akin to the Sterling Bullet and Dodge Ram arrangement left over from the DaimlerChrysler days - but again, it would be in limited form and for commerical applications only.
It would also allow GM to continue to consolidate and shift their brand strategy - We've already read rumors that Saturn showrooms may be consolidated with BPG showrooms.
But if GMC will moved in a new direction - and the total number of locations selling GMC were reduced - then GM could end up ahead of the game and shift their retail strategy.
The idea makes sense, but either way, GMC assuredly CANNOT continue existing as it is without taking away from other parts of the GM Empire that desperately need attention.
SATURN & PONTIAC
So what of the remaining domestic brands? We've already established that Chevrolet and Cadillac are "safe brands", Buick should continue in light of the Chinese market and an infusion of new products, Saab is probably safe for the time being thanks to its coming offerings, Hummer should be sold off or closed, and GMC should either be eliminated or have its focused shifted to all commercial/industrial offerings.
But what of Saturn and Pontiac? This is where the conversation gets even more complicated.
In a very real sense, both Pontiac and Saturn overlap and cover much of the same territory.
Yes, Saturn styles itself (at least today) as a more upscale brand while Pontiac is a "cut or two" above Chevrolet and claimed it was "GM's poor man's BMW/excitement division" - but in reality all of this is a ruse.
Saturn's origins were in economy cars and as an "experiment" to go after the Japanese. And even though we have rosy images of the "rebel Poncho brand" from the 1960s, Pontiac started out replacing another GM division (Oakland) and was viewed by many to be an "old man's car" until the early 60s.
Funny how marketing and product placement can change a few things over time, but in today's market (a few products aside) one could argue that each brand covers the same exact segment.
This is nearly akin to how Oldsmobile and Buick nearly covered the same territory for much of their history. Or for that matter, it's almost identical to how Saturn and Chevrolet once were aligned at the bottom end of the GM's lineup.
Many journalists, such as Jerry Flynt at Forbes and others, have argued that Saturn's existence actually robbed Chevrolet of opportunities to do better in the market during the 90's and early 00's. Still others have said that the billions spent on creating Saturn in the early 1980s (Saturn was the brainchild of former GM Chairman Roger Smith) could have been spent on shoring up Oldsmobile, Buick, or merely making sound R&D investments.
There may be some truth to this. Now Saturn has moved upscale to kinda/sorta take Oldsmobile's former position in the lineup - which means that it splits the difference between Pontiac and Buick. In it's new role Saturn is targeting VW as a type of "German-American alternative" and also fancies itself as a competitor to Honda/Acura among others.
In all of this GM has spent big money to launch Saturn as a corporate subsidiary, then to reinvent the brand with a more upscale image, and flush it out with attractive products and solid design.
In fact, an article in 2004 stated that GM had spent $15 Billion dollars on Saturn - a considerable amount of money. At the time the article was written, GM had also approved an additional $3 Billion that brought the current crop of Saturn products to the market. The article praised Saturn's values, but not it sales. Lutz and others predicted that Saturn's sales would be in the 400,000 range come 2007 --- which has not happend.
Has all of this investment paid off?
For all the new fanfare, GM has very little to show on its return. Saturn sales are slowly creaking upward, but not in proportion to their investment. The Outlook isn't selling well and neither is the Astra. The Aura has sold horribly, but has seen an up tick recently as gas prices have soared. The Sky sells in small enough numbers that it doesn't contribute a whole lot to the brand's bottom line. The only Saturn branded product that has done remarkably well is the Vue.
Remember, these are new products that are vastly superior to their predecessors. GM has some quality cars here, but when only ONE product is selling reliably well after all the frantic investment, it has to worry someone at the RenCen.
One could surmise that part of the problem is that there are too few advertising/marketing dollars allocated to Saturn. Or perhaps GM has boggled the shift from "entry-level/value brand" to it's new perch as a "more upscale, above Pontiac-Below Buick" position?
Regardless GM has spent a TON on Saturn with little result - Wouldn't those dollars have been better spent at Chevrolet, Cadillac, Pontiac or Buick?
Even journalists as recently as July have questioned if Saturn will survive. As recently as July the Wall Street Journal have reported that GM is looking at closing Saturn in order to stay afloat and cut losses. Why? Because many investors believe that the brand has only made money once or twice during its 20 year existence, while foundational brands have suffered.
Auto website Left Lane News also quoted the article stating, "Most auto journalists would agree Saturn’s new models are vastly improved, but for reasons possibly related to a poor brand perception, sales have not improved proportionally" and that "Since most of Saturn’s new cars are re-badged Opels, it’s conceivable that GM could attempt to sell certain imported Opel models under the Chevrolet name if Saturn was closed. GM recently froze development of the next-generation Saturn Aura, an ominous sign for the brand. The new Aura is simply a re-badged version of the new Opel Insignia, so putting a relatively simple project like this on hiatus certainly raises eyebrows."
Sounds very much like what was said about Oldsmobile before it was dumped - the best products the brand has ever sold, and certainly deserve attention from the public, but a muddled (or possibly even damaged) image have done little to help sales.
And that is just the most recent news. General Motors has had calls from journalists to investors to dump the Saturn brand for years.
In light of all of this, do they have a point?
Even now, we recent found out that GM will be putting off re-freshening Saturn's lineup until early next decade because the money just isn't there (Source: Motor Authority). Obviously there just enough money to go around - even for a brand that has gained so very much attention from the General the past few years.
That doesn't mean that Pontiac gets off the hook. But in Pontiac's case, our present situation has been a bit of a reverse from what we find at Saturn.
While Saturn has benefited from timely investment, newer showroom, an incredible infusion of product and attention - which was lavishly spent on the brand - GM has spent little time and close to no investment on Pontiac.
The Solstice and the G8 aside (both of which are niche products), the heart of the Pontiac lineup has hardly been touched.
Today, the best selling Pontiac model is the G6, which GM has given almost NO significant investment since it was launched in Fall 2004.
Furthermore, the G5 coupe is a warmed over product that sells very poorly (though according to one GMI dealer, a sedan is needed to move more units). The Vibe really doesn't sell well, and the Torrent and Grand Prix are no more.
How is Pontiac expected to survive on a ONE core product and no other attention?
This fact alone has frustrated many GM and Pontiac fans in the past few years. As wonderful as the G8 and Solstice are, they cannot sustain an entire division. And with the disappointing (and ever so slight refresh) of the G6 coming for '10, GM's investment in Pontiac has been a joke.
However, despite GM's mismanagement of one of it's most hallowed brands, perhaps what is most telling is simply looking at the raw data.
Consider that in the thread Tight Budgets slow Saturn Refreshning thread, GMI member Lichtronamo posted the following after being asked how many units the Saturn division sells in comparison to Pontiac:
And what about in a key product comparison? When prompted about G6 v. Aura sales, Lichtronamo again supplies the needed data:Pontiac's YTD sales are 178,127 units vs. 119,808 for Saturn. Pontiac's YTD numbers include 7,505 Grand Prix's (which has been cut) and 13,641 Torrents (which will be rebranded a GMC). 98,943 units or 55.5% of the Pontiac's total sales are from the G6, of which over 40% are fleet sales (mostly to rental companies) according to Automotive Fleet - a number consistent with the overall percentage of fleet sales for the brand.
This not only surprising - its almost sad. Even taking away the "old Torrent and Grand Prix products" and Pontiac STILL sells more units than Saturn.G6 = 98,943 through July (up 20% over 2007)(44% fleet according to Automotive Fleet)
Aura = 40,140 through July (up 21.4% over 2007)(22% fleet according to Automotive Fleet)
And in the G6 v. Aura faceoff - its fantastic that both products sales are up roughly 20% over last year, but even when factoring out fleet sales, Pontiac still sells more retail (non-fleet) G6s at roughly 55,403 units than the Aura at around 31,309 retail Aura units.
That means that once you factor out the "G6 fleet sales", Pontiac has sold roughly 113,441 units YTD - nearly the SAME AMOUNT as Saturn's total sales. And that's BEFORE you factor in what Saturn's fleet sales are.
Lets look at this another way: Saturn's sales for the first 6 or 7 months of the year is roughly 120,000 units, while Pontiac's total sales for the same period is 180,000. So for the sake of argument, let's double these numbers so that their end-year total will be 240,000 for Saturn and 360,000 units for Pontiac. Now, let's compare those numbers to the chart above circa 2004. Looking at those totals, Saturn sold 212,000 and Pontiac's total was the 474,000. That basically means that GM spent BILLIONS to get roughly an 28,000 unit increase in 2008 - is that a good return for the money? And while those billions were being spent revising and updating Saturn, Pontiac LOST product even as Saturn's lineup expanded - Pontiac's lineup circa 2004 included the Boneville, the Sunfire, the Montana, and other products. In light of that - Is Pontiac's 360,000 total sales all that surprising? Does that mean that Pontiac is "truly damaged" or just neglected?
But the bigger point here is that Pontiac did put up these numbers with very little investment from GM, peddling warmed over products, and hardly any advertising. Obviously this means that Pontiac continues to appeal to a sizable number of customers - even if GM has mismanaged the brand.
The rhetorical statement in all of this is obviously: Imagine what Pontiac could do with some actual muscle behind it and the kind of attention the Saturn has enjoyed?
Some would say that having a higher percentage of fleet heavy sales for some Pontiac products (specifically the G6) would be a kind of liability. However, Automotive-Fleet.com also points out that other vehicles in the class also sell in high fleet numbers. Consider that the Mazda6 sells at 59.5% fleet, the Mitsubishi Galant at 45.3% fleet, the Chevy Malibu at 33.3% fleet, and the Dodge Avenger at 65.5% fleet. And yet no one is advocating canceling brands or nameplates over these numbers.
So which one is more viable as a brand? Who should go?
RECENT EVENTS: WHAT IS GM THINKING?!
If a handful of us can pull much of this analysis together, its certainly possible that GM may be thinking along similar lines. The numbers don’t lie.
Could they be hinting at something?
We've recently read reports that GM was seeking to possibly consolidate it's brand channel strategy even further by consolidating BPG and Saturn showrooms together. It has been widely reported on GMI.
But what will happen? Will GM really sell FOUR brands under one roof?
Will putting Saturn in PBG showrooms will essentially "kill the perception" that Saturn is a "separate" division from GM in the eyes of the public. How will this affect the touchy, feely Saturn loyalists? Would Saturn have to lose it's no-haggle angle pricing or PBG would have to adopt it. And if Saturn were to lose it when combined with BPG stores, would that automatically piss off the Saturn loyalists and they'd leave Saturn for another brand?
How will it affect the rest of the dealership experience? Sales aside, Saturn has typically had great servicing -- will PBG follow suit?
How would the tremendous overlap be sortd out? The G6/LaCrosse/Aura share similar places in the market. Does the Aura step on the LaCrosse's toes? Does the G6 step on the Aura's? What do you do with the Solstice/Sky? What do you do about the Outlook/Acadia/Enclave? The Outlook and Acadia were rumored to be killed for the next generation, but is it official? What about having an Astra sold alongside the G5's replacement and the rumored Excelle/Skylark for Buick?
Obviously there are a lot of questions that must be answered, but if this is all true, this points to the fact that GM would almost have to kill one or two brands in a BPG/Saturn pairing.
Is this GM's way of hinting that the axe is coming?
GM is in a rough spot here: One brand has tons of great products, but a 'damaged' or perhaps 'irrelevant' image to combat. The other brand is arguably better perceived, but has virtually no investment to keep customers interested.
Much of the success of GM in North America will almost entirely fall on eliminating one of these two "mid-level" brands as there is FAR too much overlap.
Considering all of the above, in my opinion, the third brand that must be cut from GM's lineup should be Saturn.
No doubt there will be many who disagree with me, but at the end of the day, GM shouldn't be throwing more good money after bad.
Saturn is a great experiment and there is much that GM has learned from the experience that should be applied to other GM brands (maybe one or two brands should be no-haggle, the customer satisfaction at Saturn showrooms are second to none, etc). However, when is enough, enough? Even after BILLIONS in new monies, Saturn has only had one profitable year and has consumed resources that could have been used to strengthen GM's other brands.
The problem, again, comes down to resources and money. If GM had a limitless amount of money to spend on an expanded dealer network, ample advertising, and a marketing campaign that can convince people that Saturn is more upscale after years of selling economy cars, then Saturn would be a truly viable brand.
But reality shows us this is NOT possible. GM has way too many bases to cover - how many times can you split hairs? Would it not be better for GM to produce the least number of models and spend the remaining dollars to effectively design, market, and develop these products?
Not to mention that reducing the different number of models overall will help you save money in manufacturing and overly complicated logistics. There is a savings there as well.
I for one would rather have one or two incredibly well designed products than 4 or 5 mediocre ones with confusing brand images.
But perhaps GMI members know better than anyone about which brands should stay and which should go. As of 8/27/2008, according to a GMI poll taken in the Which GM Brand(s) Do You Think Should Get The Chop? thread, the top three brands that GM should consider killing were in fact: Hummer, GMC, and Saturn:
Coincidence? Perhaps other GMI members see what I have outlined here?
PONTIAC MOVING FORWARD
To cover the "middle of the market", Pontiac should essentially take the best of it's current lineup and merge it with Saturn’s best.
To my knowledge, Saturn is sold in only 2 markets (Canada and the US), while Pontiac is sold in three (Canada, the US, and Mexico).
In effect this would allow Pontiac to become the North American outlet for Opel/Holden products. They could retouch the front end of the established products with the traditional Pontiac twin-kidney grille for continuity. This wouldn't be a big deal and is much like what they do in switching the Chevy front fascia to the Daewoo front end without destroying the overall "look" of the cars. Yes, they do sell Opels in Mexico, but as we've seen GM does not keep a consistent brand image or consistent lineup between what each brand sells in Canada, Mexico or America. Something can be figured out, but the core Canadian/American markets would be addressed - which means a true brand image could be crafted.
Could this be possible?
When you think about it, Pontiac was traditionally associated with sporty vehicles. Back in its rebel heyday in the 1960s, Pontiac prided themselves on attacking the Europeans directly with their “GTO” and “euro-styling”. In the 1980s to day, Pontiac has even styled itself as being a “cheap BMW-esque” product. The new Saturns, in many instances, fit this mold. Could GM simply be looking for a "better outlet" for these products than Saturn showrooms?
In the last few months we have read headlines such as "Full RWD Lineup Ruled Out for Pontiac", "Plans for an all-RWD Pontiac shelved?", or "Pontiac’s future lineup to focus small, front-wheel drive models" - to name a few.
Many GMI members are upset at this possible change, but as GM moves more and more toward a European vehicle landscape in the coming few years, could Pontiac play a role in this Renaissance?
Just as the definition of "Performance" has shifted from generation to generation, today we are again experiencing a new shift. While years ago we believed that the only way to get performance was huge cubic inches and RWD, today there is any number of FWD/AWD products with I4s or V6s that put stalwart products from yester-year to shame.
Contemporary products like the Mitsubishi Evo, MazdaSpeed3, Dodge Caliber SRT4, GM's own Cobalt SS Turbo, and others reinforce this.
Pontiac could play in the segment too as GM’s “mid-level/sporty” brand. This doesn’t mean every version has to be a tarted up turbo version – certainly they could get away will selling higher volume version of these products just as Mitsubishi and Mazda do. But certainly an "upscale/sporty/aggressive" looking product from Pontiac could gain popularity in the market - just as the G8 and Solstice have.
And moving in this direction will allow GM to continue to use Pontiac's "sporty image" and "upscale position" from Chevrolet without a huge shift in perception by the public. Already we've seen how difficult it has been for GM to re-establish Saturn as a more upscale brand in the eyes of consumers. It hasn't really worked and the amount of money they will need to accomplish this will take up valuable time and resources. It is a lesson they didn't learn years ago when they attempted to refocus Oldsmobile into an import fighting brand. But with Pontiac, they DO NOT need to "redefine" what the brand is – it’s already an “sporty” brand – they just sharp it to tackle competitors from Nissan, Scion, VW, and Mazda.
Wouldn't GM actually save money by doing this rather than trying to ram a new vision/marketing position for Saturn down everyone's throats.
Of course this will take good product as well. Having Pontiac take on more of an Opel - and even Saab-like - Euro direction with a dose of bold, American attitude would be exactly what GM needs for a mainstream brand. So for a top-spec G6 imagine one coming with AWD, aggressive looks, a turbo I4, and stick? Its a formula you could steal from the Vectra OPC or Saab 9-3 but in a more affordable wrapper and a familiar name. I would certainly want one.
Or what about a version of the Corsa, 9-3 or Astra OPC with a high pressure turbo and great handling? Could you imagine folks ditching their VW Golfs, Mazda3s, Scion tCs, and the like for such a product? I certainly would be tempted.
And the best part? ALL OF THIS IS ALREADY ON THE SHELF --- GM just needs to apply it to Pontiac.
But again, GM doesn't have to reinvent Pontiac - it just as to apply the "modern interpretation" of contemporary performance and add a few hotted up products to achive it. And it doesn't have to spend BILLIONS like it already has on relaunching a brand with fresh products or redefining it's image from an "econobox car company" to something "upscale" as it has Saturn.
Doesn't that make more sense?
I know that others will disagree with me, but there are a few nuggets of truth there.
[SIDE NOTE: I've read from our friends up north that in Canada, Pontiac is regarded higher than Chevrolet in some instances - even if the entire lineup is essentially re-badged products. For example, even though we don’t get the Pontiac Montana any longer in the US market, it is still sold north of the border. I've also read that part of reason for this was that years ago there were "holes" in GM's dealership network - that is Pontiac existed in a particular geographic region, Chevrolet in others. Because of that (and franchise laws) GM simply decided to re-badge many Chevrolet products as Pontiacs to fill those holes in a geographic region. GM even went so far as to create a Pontiac version of the Chevy-Geo pairing for Canada - at first it was called "Passport", and after a few years hiatus, the "Asüna" name was adopted. As you can see, in Canada, the power of the dealership network is even more demanding in its own way, but the point remains that Pontiac can exist as a more "traditional" division. (If I am incorrect in my analysis of the origins of GM's approach to the Canadian market, please forgive me - I'm repeating what I can remember from fellow GMIers who hail from Canada. I've tried to put together my recollections from past posts and messages with our Canadian members)]
PULLING IT ALL TOGETHER
Eliminating Saturn, GMC, and Hummer will leave GM with five domestic brands - more than ample enough to cover the entire market. As previously mentioned, GM's biggest competitors cover the market fine with just two or three brands and 2 sales channels.
The sales channel strategy could be further consolidated: Chevrolet, Pontiac/Buick, and Cadillac/Saab – Which GM desperately needs to do and quickly.
Each brand would be a "full-line" franchise.
Chevrolet is the bread n' butter brand - from soup to nuts. It should continue to comfortably compete against other full line brands like Ford, Dodge, Toyota, Nissan, etc. And Caddy/Saab together would essentially be a "full-line" luxury car maker - Saab handling the lower end with the forthcoming 9-1 to the midsized 9-5; and Cadillac starting with the coming BLS replacement and topping off with the eventual DTS/STS replacement.
In the case of Pontiac and Buick, there could be a similar pairing to what we will see moving forward at Lincoln-Mercury.
Pontiac could handle small and midsized products - from the G3 to the G6 - with a number of other products in between (Solstice, Vibe, G5, convertibles, coupes, crossovers, etc). Buick could handle the mid-sized vehicles on up. That could mean, for example, that the planned GMC Terrain could revert back to being the Torrent or name it G7 or some other name crossover SUV (but would look unique from the Equinox), while Buick continued with larger vehicles, a high end coupe/convertible, and the Enclave. The only real overlapping models would be the LaCrosse and the G6 (thought they could arguably possibly share a C-segment product if the Skylark becomes a reality).
Still that is much better brand/product strategy than we see today between the EIGHT divisions at GM.
This would also solve the problem of "what to do with the G8" once the product life cycle ends. GM is currently struggling to make a decent profit on the G8 in light of the falling dollar (as evidenced the fact that base price for the G8 will rise next year). In addition to that, GM has to contend with CAFE standards and if the G8 will remain "viable in light of the penalties" they must pay to sell the car in the US. But if the G8 dies - and is replaced by a Buick branded product like the Park Avenue - then GM could raise the price, make more of a profit, and eat the "CAFE charge" it could possibly have to pay if it doesn't come in under the average.
Could this be a possible solution?
If dealers complained of not having some of the GMC products to sell any longer (even if two core products soldier on as the Enclave and the "Torrent") it is certainly possible that a version of the Canyon could be sold as a Pontiac. This would resemble what Mazda does selling the B-Series pickup (based on the Ranger), or how Honda sells the Ridgeline, Nissan sells the Frontier or how VW is planning on selling their own pickup, the Robust, in the future. This hasn't harmed their images and are still able to offer a "sporty truck" to consumers.
Either way, the Pontiac/Buick pairing would essentially have a "full lineup" - thus saving GM from more overlap and cutting down on brands.
No doubt some will disagree with this plan – and ANY plan would bring with it some measure of problems.
Closing Saturn would not come without their own challenges. The dealership network will undoubtedly be annoyed and GM could face a huge number of law suits. Will killing Saturn cost GM a ton of money? Yes. But would killing Pontiac instead and forcefully merging Saturn and BPG stores to consolidate and annoying current franchisees too? Absolutely.
GM may lose sales overall if it cut a division - no doubt this may happen. It's also true that some of those customers may not move to another division's lineup once the brand is eliminated.
However, that being said, what does it cost GM to retain/develop/market those brands (or a particular product) in relation to its actual profit?
Sure, if they cancel Saturn, it may lose all Aura sales - all those customers may not look at the G6 or Malibu for a repeat-GM sale. Fair enough - No doubt the volume would be off. But if they aren't spending an extra $500 million to make a distinct Saturn version of the Aura or Vue or whatever, couldn't their overall costs not be lower overall and they still net more money? Wouldn't this mean that while the total volume is down, GM is making more profit per sale because it's reinventing the wheel 2 or 3 times rather than 4 or 5?
There is no "win-win" in this scenario - ANY ACTION GM takes to kill a brand will cost it money.
However, with GM loosing BILLIONS year after year due to operational losses, I would rather see GM spend a few billion to close down a division to improve its future balance sheets than continue on in its current form.
After all, would it be better for GM to lose hundreds of millions of dollars yearly directly and indirectly because of their brand strategy (and hurt other divisions in the process) or would it be better for GM to take a single, massive hit and be over and done with it? At the very least, the latter example allows it their continuing brand/dealership problems to have an “end” rather than go on indefinitely. This is important.
But what if GM could possibly offer something to dealerships in exchange to close?
Consider that other manufacturers are looking to either expand their dealership presence, or in the case of foreign manufacturers, looking to enter the (re)American marketplace. In the case of current brands sold in the US, Suzuki, Subaru, Kia and Hyundai are looking to expand their foot prints. Among brands not sold in the US, Fiat Auto is looking to launch the Alfa Romeo and Peugeot, Mahindra & Mahindra, MG/Roewe and other nameplates are looking at coming in the next few years.
What if GM would help broker a deal where a franchise would give up their dealership, and switch to selling one of these other foreign brands? To sweeten the pot, GM could offer a small financial incentive to get them to drop their franchise agreements. It could work and save GM a MASSIVE amount of money in the process.
Some would say this is like giving GM’s competition a leg up – but if it gets GM in “fighting form” more quickly, who cares? They can always try to regrow sales organically - but better to get rid of the dead weight now than possibly face a larger problem down the road.
I dont really want to see brands cut. But if cutting them (or products) will mean a stronger, leaner, more adaptable GM with better products, then so be it. It may also mean GM shrinks a bit as well, but better to shrink and still be in fighting form than slowly whither and die altogether.
And even if GM must spend $2 Billion to close down Saturn franchises - of which there are under 600 at last count - so be it. If GM could spend $2 Billion to rid itself of Fiat or Billions more to bail out Isuzu, why not spend equal dollars to get rid of an un-needed dealership franchise? GM could recoup the monies in only a few short years by not having to advertise, market, or build the Saturn lineup in the United States. I would rather this happen than continue the "brand madness" further.
If GM is to survive in this market, it must look to its competitors and steal a page from their books.
We all know that GM must cut divisions in order to remain profitable long term - and become more manageable as a company. I suspect that many at the RenCen have also come to this conclusion, but do not know how to do this without pissing off the public, dealerships, and costing the company considerable money.
But GM must KNOW that whether they bleed money because of a brand year after year - or take one large hit and have it over and done with - it is STILL a loss.
The General should use the current 'crisis' in the market, on Wall Street, and in light of gas prices as the necessary cover to get this done once and for all instead of the half-hearted efforts they have been making over the last 20 years. No one on Wall Street will think GM's making a poor move by killing off three excess brands. In fact they will applaud it. Even from a purely "political" perspective, killing off the brands would be the right move stockholders would welcome.
When Rick Wagoner came into the driver's seat at GM and ended up killing Oldsmobile, the enthusiasts hated him - but the money gurus loved him for it. Why? It proved that Wagoner had what it takes to make the tough decisions, to go outside the norm, and make the right choice to better the company long term.
Some will say that GM was foolish for killing Olds, and they have a right to complain.
But even if GM spent $1 Billion in scuttling Oldsmobile, how much did it save in the long run? Not having to reinvent the wheel a SIXTH time saves advertising dollars, marketing muscle, development and design costs that can all be funneled into other brands. They probably made up the $1 billion in operating expenses in three years. Isn't that worth considering? Doesn't that have long-term value? I think so.
What's more, the argument of "well killing it will cost them more than keeping it around" has no bite now either. If you are GM, and you've lost BILLIONS of dollars in the past three years, wouldn't you rather have those "loss" dollars go to a structural move that will help the company long term rather than end up being squandered on more operational losses?
GM may take a hit up front, true, but in the long run it will help the company.
And as GM's competitors are continuing to squeeze the company, as they are able to react to market conditions much more quickly. GM has very little room in their product cycles for "repetitive performances".
Look at Chrysler. Everyone one thinks they are a basket case. They've had many set backs and a reduction in sales but they just did something FoMoCo and GM couldn't -they made a profit of 1.1 Billion in H1. Being small isn't always a bad thing. And while I don’t suggest that GM shrink to the size of Chrysler, the General can STILL learn from this.
After all is GM's management saying that Chrysler can get their long term brand and product strategy in working order - but they can't?
Of course, this is all just my opinion - I could be wrong.
(AND SORRY FOR THE LONG POST )