As GM gets out its begging bowl and approaches the federal bailout buffet for seconds, it’s got to tell Congress something positive about its bloated brand portfolio. The scuttlebutt: GM will declare its intention to kill Saturn—despite the enormous expense and legal hassles (i.e., more expense). Oh, and let the taxpayer pick up the tab (gee, thanks). BUT, one day in the not too distant future, the artist once known as the world’s largest automaker will file for Chapter 11. And on that fateful day, it will be free to kill brands. So I asked branding guru Al Reis about the maybe decision to deep six Saturn, what GM brands should survive the automaker’s impending C11 and what dangers lie ahead in that regard. The answers may surprise you. Or they may not. But you’re going to have to make the jump to find out.
“GM shouldn’t kill Saturn,” Reis asserts. “Saturn was the perfect entry level brand. The cars were inexpensive, new and different. Plastic panels for low maintenance? Genius. The no-haggle price policy was ideal for unsophisticated first-time buyers . . . Then they made a classic GM mistake. ‘Sales are down so let’s put more cars in the showroom.’”
Of course, GM already has an entry level brand: Chevrolet (in case you got confused with all this branding going on). Reis (of all people) acknowledges the cannibalism and confusion, but still reckons Saturn could make a go of it in a post-C11 world.
“It’s not all about product. Sometimes it’s about brands. Take a badge off a Mercedes and hardly anyone would buy it. Put a Saturn badge on something dirt cheap and reliable and you’d have a decent shot of doing the deal.”
So who else lives? Not Saab. “They haven’t ever made money on that brand. Not once.” Not HUMMER, Pontiac or Buick. (”A guy at Buick once told me ‘We’re going to make the perfect entry-level Buick.’ I said, ‘XXXX, that’s a Chevy.’”)
GMC makes the cut. “Put all Chevy’s trucks into GMC; make it a truck brand. That would clarify the brands and help both GMC and Chevy . . . GMC is a great brand with a lousy name. You could take one of the product names and call it that. Silverado, maybe.”
Cadillac’s good. “A great brand takes a long time to create and even longer to kill. Cadillac’s not dead yet. Not by a long shot.”
And there you have it. In Al Reis’ world, GM = Chevrolet, Cadillac, GMC and Saturn. But here’s the thing: Reis says GM should NOT pare down to two brands. “As sure as I’m sitting here, the branding problem would get worse, not better. GM would dump all their products into two dealerships. Nothing would mean anything.”
At the end of our conversation, I asked Reis his opinion of former GM Car Czar Bob Lutz.
“I met Lutz several times. He’s a charming man. He was excellent from the product point-of-view. But GM doesn’t know how to build great brands. Lutz . . . didn’t add anything to that picture. It’s a shame.”
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“Of course, GM already has a entry level brand: Chevrolet (in case you got confused with all this branding going on).”
Don’t forget that, at the time of Saturn’s birth, they also had Geo–a THIRD entry level brand.
Chevy and GMC seem outrageously redundant to me. Not even really badge engineered to differentiate, just the exact same vehicles with different badges. Cut GMC.
And along the same lines, why couldn’t GM (or any of the domestics) publicly make a brand cut, roll the ‘good’ vehicles in the brand that gets the axe to another brand, and just market it that way? “Hey America, the Chevy Silverado is the new GMC 1500. Same vehicle, different labeling. We’re saving your tax dollars, see?” Give the average consumer a little credit here. Or don’t, and have NASCAR lead the brand change, and assume Joe Sixpack will follow.
Wasn’t Ron Zarella GM’s brand guru?
Ignore the “which brands make sense from a theoretical marketing aspect”. What needs to be done is to look at “which brands make sense from a real-world profitability aspect, factoring in things like shut down costs”.
Pontiac and GMC are stupid from a marketing aspect. But, from a profitability standpoint, they are profitable, or at least lose less money being kept than killed (factoring in all aspects-dealer buy out costs, lost sales, lost productivity at factories that make both Chevys and GMC/Pontiacs, etc.). And if you are keeping Pontiac and GMC, Buick gets to stay as well.
Saturn makes sense from a marketing aspect. But it’s a gigantic hole in the ground where GM throws money into; always has been, always will be. So kill it.
Saab and Hummer are also big holes in the ground where GM throws money into-kill them as well.
““Hey America, the Chevy Silverado is the new GMC 1500. Same vehicle, different labeling. We’re saving your tax dollars, see?””
Chevy dealers would be pretty pissed about losing their truck sales, though.
No mention of the other patient on the gurney (Chrysler)?
Taxpayer money going to pay off dealers: jumpstart the economy by spending money to shut things down.
I’ve heard of “reverse psychology,” but is there such a thing as “reverse economics”?
BDB :
February 11th, 2009 at 1:55 pm
““Hey America, the Chevy Silverado is the new GMC 1500. Same vehicle, different labeling. We’re saving your tax dollars, see?””
Chevy dealers would be pretty pissed about losing their truck sales, though.
In this theory, Pontaic/GMC/Buick would be completely eliminated, so you have that backwards.
In practice, dealer buyouts would cost maybe $5 billion dollars or so and the competition would get 50% or more of Pontiac, Buick, and GMC sales (not Chevy), so plants that make versions of Chevy and Pontiac/GMC products (identical except different grills) would lose sales, which would result in losing a shift, which would make those plants go from making money to losing money, or from losing money to losing lots of money.
RNader:
That patient has died.
While Saturn as a brand is probably unsaleable with no seperate manufacturing and pretty much just badge engineereed vehicles, the dealers are unique in GM (with the possible exception of HUMMER).
They are stand alone one brand stores. The no haggle thing is very appealing to a decent percentage of potential buyers. They also have the best customer service rating of any GM store. So why can’t the distibution be sold with no product? Fiat, PSA, or any number of Chinese would have GM’s best dealers selling their brand for the cost of some signs. Wouldn’t this spare GM all the legal costs? Sell the name and distibution to satisfy the franchise laws. The new buyer could simply forgets he bought the name. The dealers probably end up in better shape product wise. GM would probably eagerly sell it and give change back from a dollar.
Some lawyer, please explain why this can’t happen?
1) Chevrolet – Cars and car based SUVs only (no trucks). Include high performance cars such as the Corvette, Camaro, G8, etc.
2) GMC – Trucks and truck based SUVs only. Can sell a Hummer looking vehicle as GMC.
3) Cadillac – Luxury / Luxury/Sport. Includes cars, car or truck based SUVs. NO rebadged Chevrolets but can share platforms / drivetrains / engines – just little else.
Pontiac / Buick / Saturn / Saab / Hummer – sell or close
Medium and Large Duty trucks – sell to Isuzu
As a guy who sold Chev and GMC trucks. That would be a very bad idea to take chev trucks and give them to gmc. Chevy has a much better name in the market place than GMC.
jaje :
February 11th, 2009 at 2:13 pm
1) Chevrolet – Cars and car based SUVs only (no trucks). Include high performance cars such as the Corvette, Camaro, G8, etc.
2) GMC – Trucks and truck based SUVs only. Can sell a Hummer looking vehicle as GMC.
3) Cadillac – Luxury / Luxury/Sport. Includes cars, car or truck based SUVs. NO rebadged Chevrolets but can share platforms / drivetrains / engines – just little else.
Pontiac / Buick / Saturn / Saab / Hummer – sell or close
Medium and Large Duty trucks – sell to Isuzu
People keep making the same mistake.
Chevy dealers will all go out of business if they have no trucks to sell.
Pontaic/Buick/GMC dealers will all go out of business if they have no cars to sell.
Both dealer channels need full product lines to survive.
TRL has a good point… I like it.
Geotpf – what makes you think all the Pontiac/Buick/GMC buyers would flock to other non-GM brands? It makes no sense that a GMC truck buyer would buy a Toyota instead of the exact same truck with a bowtie on it. Likewise Pontiac. I think we need to give the consumer a little bit of credit here. I don’t care how rabid a Pontiac fan you are, if you like the vehicle and you can buy it as a Chevy, you will.
And the real problem GM has is the cost to maintain a brand, not shut it down. So they take a $5B, one-time hit to close GMC or whatever, as opposed to all the wasted money forever re-badging trucks for no reason? If you really wanted to soften the blow (and reduce the effectiveness) of the move, then in this case they could even give the GMC dealers the option to convert to “ChevyTruck” – only (note the branding there!) dealers if they’d lose their only truck business.
So what is Chevrolet? “Hi, we are the everything that is not a Cadillac, GMC or Saturn” brand? No entry level cars, no trucks. This leaves mid sized (Malibu) and large cars (G8 renamed Impala, in both regular and performance(SS)flavors. And the Corvette, of course. Sorry, not buying. Chevy wouldn’t stand for anything this way either.
Like it or not, Toyota sets the branding standard. Mass market brand (Toyota), funky niche brand (Scion) and High-end brand (Lexus).
To do it right, Chevrolet needs to be a full mass market line. Top quality, from entry level to near-luxury. If anything, make Saturn the Scion of GM – find some funky niche vehicles and give it a corner of the Chevrolet dealers. Chevy should get the trucks too, and GMC should go away. Finally, Cadillac needs to concentrate on genuine high end vehicles. No more Cimmarons or Cateras, ever.
I think that the branding mavens put too much stock in the value of brands. If GM builds crap cars, it doesn’t matter how great your brands are, your sales go into a downward spiral. But build top quality cars, and you will build a reputation. Look where Hyundai has come in 20 years. Hard work and a long time, but can be done.
Saturn still has some brand equity, but there is little to nothing GM can do with it right now. Selling Opels and Malibus is about the furthest thing from Saturn’s original mission. About the ONLY thing I can think of would be to take the Vibe away from Pontiac and make it the new entry-level Saturn, replacing the overpriced Astra. Then kill off the heavy, fuel-sucking Vue and Outlook and the Malibu-alike Aura. Put a hardtop on the Sky and call it the new SC. If a third car is absolutely needed, bring in a euro-MPV like the Zafira.
Chevy and Cadillac – fine, keep em. Hell.. why not go no-haggle across the line and make the experience simple on people. Stop the rebates and just offer a low, but reasonable price. It will also hamstring the scum dealers who have decided to make it as hard as possible to buy a car.
GMC- will anyone really care? I doubt it.
Buick- people already don’t care
Pontiac- just make performance versions of Chevies and give them some sort of random letter designation.
Saturn- I love the idea of getting Opels here, but frankly unless they commit to it wholeheartedly, there is no point.
@Geotpf- Nobody cares if the dealers go out of business. Let em. In fact I can only hope that they do.
Yeah, agreed littleautos, there are some amazingly bad ideas in this article.
The ongoing debate about what brand fits where and does what only further cements in my mind (and illustrates the reality) that GM has far too many brands and the market is far too small for them.
A successful GM is just Chevrolet and Cadillac.
There is nothing any of the other brands do that Chevrolet and Cadillac aren’t already doing or couldn’t do better.
End of story.
GM seems to have problems making Chevy cars good as long as there are trucks in the showroom. However, in the ideal non-GM-run world, Chevy would have both cars and trucks, and you could buy one of a handful of Cadillacs if you wanted to spend more.
RetardedSparks :
February 11th, 2009 at 2:24 pm
TRL has a good point… I like it.
Geotpf – what makes you think all the Pontiac/Buick/GMC buyers would flock to other non-GM brands? It makes no sense that a GMC truck buyer would buy a Toyota instead of the exact same truck with a bowtie on it.
Well, it makes no sense that all the ex-Oldsmobile buyers didn’t all buy Buicks when Oldsmobile was eliminated, but they didn’t.
A lot of new vehicle purchases, especially from the domestics, are due to personal relationships with dealers (either positive or negative). That is, there are plenty of GMC truck buyers who either love their GMC dealer or hate the Chevy dealer across the street. Either way, that GMC truck buyer might very well buy a Ford, Dodge, or Toyota if the GMC dealer closes.
akatsuki :
February 11th, 2009 at 2:29 pm
@Geotpf- Nobody cares if the dealers go out of business. Let em. In fact I can only hope that they do.
So where do you buy cars at if you don’t buy them at a dealer? If GM’s dealers all go out business, GM goes out of business.
TriShield :
February 11th, 2009 at 2:31 pm
Yeah, agreed littleautos, there are some amazingly bad ideas in this article.
The ongoing debate about what brand fits where and does what only further cements in my mind (and illustrates the reality) that GM has far too many brands and the market is far too small for them.
A successful GM is just Chevrolet and Cadillac.
There is nothing any of the other brands do that Chevrolet and Cadillac aren’t already doing or couldn’t do better.
End of story.
Chevy and Cadillac alone can’t keep the plants humming. Without Pontiac/GMC/Buick as another channel to sell Chevy clones at, GM is toast (well, more toast than now). Add in the billions of dealer bribes needed to shut PBG down, and the financial math just doesn’t work to close them, even though they are stupid.
I can see the reason for keeping GMC, they make trucks that are a step above Chevy’s line…whether it be light duty, medium duty, or heavy duty. However, just give the trucks to Chevy and you can keep the Cadillac variants for those that want a posh/luxurious urban-cowboy truck. You want the big engine and heated everything, get the Cadillac. Then you can market the Chevy with the 6 liter as having a Caddy motor. It used to be a selling point.
You can keep Saturn, sell the Opels, but lower the price and ADVERTISE! I drive a Mazda3 wagon but I think the Astra is a great little car…too bad not many people know about it. As a GM, it’s definitely worth the premium over a Cobalt.
@TRL: I’m guessing that GM’s asking foreign buyers for too much dough, same problem with Saab, Hummer, and Ford with Volvo. I agree that it sounds like a good opportunity.
Chevrolet-keep it
Cadillac-keep it
dump everything else.As I have always said, the only ones that don’t know what GM should do, work at GM.
I agree that Saturn dropped the ball over the past few years. While I really like the Opels, they’re not the entry-level cars that Saturn should be selling.
The first new car I bought was a ‘94 Saturn SC2, and it was really a great buying and ownership experience. There’s a lot to be said for that, but it’s been cost-optimized out of existence.
Recently, I’ve read a few articles about how the high-end food stores (Whole Foods, etc) are increasing sales by selling the “story” behind the food – putting up signs showing the farmer who grew the crop, talking about how the processes used make the food good without screwing the people who produce it, etc.
These are the same methods used to build the Saturn brand in the beginning. Remember the ads about the Spring Hill plant, the annual owners’ meet-ups, the new manufacturing methods used, etc? People felt good about buying a Saturn because (rightly or not) meant that they were supporting that business model. It really started out as “A Different Kind of Car Company.”
Here’s the thing: if I, as an American car shopper, had a choice between 2 similarly-equipped GM cars; one made by Chevy in Mexico or one made by mid-90’s Saturn in Spring Hill, I’d be willing to pay a bit extra to keep the folks in TN employed. I think a lot of people would, given the choice…just like they do when they buy locally-grown organic berries rather than the cheaper ones from Ecuador. This is especially true, given the state of our economy and manufacturing base.
Too bad GM pissed it all away. Jeez, if they combined that down-home image with a decent hybrid car – complete with plastic body panels and great dealer experience – the Prius would never have caught up.
Although we often say otherwise, we don’t just buy cars based on reliability statistics and build quality. There’s a huge amount of emotional involvement as well. The original Saturn brand was built around that emotion as much as it was around the cheap cars. They made the buyer feel like part of a family (or cult, depending on your perspective), which is really attractive to people.
It’s just too bad GM management never took the brand seriously. They had a really good thing until they screwed it up.
Chevy has a much better name in the market place than GMC.
I beg to differ. My brother’s construction company (starting in ‘46) will buy nothing but GMC, even when the Chevy fleet price comes in hundreds less. Not that his company is the end-all, be-all, but there does seem to be a lot of GMCs at construction sites.
I believe they made their reputation with the heavy-duty crowd in the ’50s and ’60s. Weird.
+10 to TRL. Can’t GM include the famous Spring Hill plant with the Saturn brand and dealers for a low price?
I think I’d buy that. I’ll check my bank balance.
So the main issue is GM’s fear of law suits from any Buick/Pontiac/Saab/etc. dealership after they shut down a brand.
No problem. Keep building GMC trucks, Cadillac sedans, and build a full lineup of Chevy vehicles.
Then take that full lineup of Chevy vehicles and replace the bowtie with a Buick badge for the Buick dealer, a Pontiac badge for the Pontiac dealer, etc. Don’t even change the car’s name. Remember how we had a Dodge Neon and a Plymouth Neon in the 90’s? Do it like that. Every dealer gets cars, and GM won’t have to badge engineer a bunch of different cars that they’ll have to build and market.
You manufacturing will be much simpler. You won’t have a bunch of redundant vehicles, since it’s the same vehicle with a different badge on the trunk! You won’t have to pay to advertise for an Aura, then a Malibu, than a Saab.
Buick-Pontiac-GMC should stay and be relegated as “fleet brands” with a line-up as follows:
GMC: fleet trucks.
Buick: fleet large sedan
Pontiac: fleet small sedan and coupe.
Slap a Buick nameplate on the fleet Impalas (cop cars, gov’t cars, cabs, etc.).
No fleet sales ever with a Chevy or Cadillac nameplate and hopefully this (and better products) helps restore some brand equity.
Saturn gets the ax or continues selling Opels (if the numbers can work)
Saab/Hummer go bye-bye.
Farago: it’s Ries, not Reis.
Every time TTAC publishes a “What brands should GM kill” story, we get the same commenters sharing the same comments. It’s getting awfully pointless. It’s also irrelevant – I don’t think there are many people here who would buy any new GM vehicle, at any dealer, at any price. So quit.
GM doesn’t care what you think. They care what the CEO, E-Board, and lawyers think. They will never again foot the bill to close dealerships – they will let them wither on the vine.
Geotpf You said “Chevy and Cadillac alone can’t keep the plants humming”. But keeping all the plants humming is exactly what got GM into this mess in the first place. You can’t keep making more cars than you can sell. GM has to adjust itself to the new reality of its market share, and adjust its manufacturing capacity to suit. This is critical if it is to survive. They need fewer plants and and fewer cars, and they need to be able to sell all of the cars they produce at a profit. They make so many cars now that the only way they sell them is with huge incentives. That takes away most of their profit, in many cases all of their profit.
There is one way to save Saturn:
Make it the GM division which sells cheap imported cars from GM’s Chinese and Korean adventures. Take the Korean cars away from Chevy (Aveo) and Suzuki.
Slap everyday low prices and a 10 year/100k mile warranties on them. No hassle sales and ownership experience at a rock bottom price. No rebates. No toe tag sales. Never, ever, ever run a price promotion of any kind. If they have to do a promotion, do something like throwing in leather seating or GPS navigation for a limited time promotion. No hassles, no headaches, no surprises. Not great cars, but good enough cars sold at a bargain price with no BS.
Could put Kia out of the game all together and ward off the assault of other Chinese and Indian entrants into the US market.
Saturn would finally be getting ahead of the industry curve. Do it. Do it now. Don’t look back.
I was suprised. I didn’t think Saturn would make the cut.
… But here’s the thing: Reis says GM should NOT pare down to two brands. “As sure as I’m sitting here, the branding problem would get worse, not better. GM would dump all their products into two dealerships. Nothing would mean anything.”
I am pleased to have the branding guru say, almost verbatim, what I’ve said here many many times. If GM = Chevy/Caddy, there will be nothing but Chevillacs at both dealers.
GMC – trucks
Chevy – Cars from Corvette down to entry level
Cadillac – Luxury and big cars
Saturn: gone but not forgotten; take it’s best concepts and apply to the three that are left.
Pontiac/Buick: shutdown and keep the names for later revival, either as complete brands or special edition vehicles.
Saab: delete.
Hummer: a model at GMC
I agree for the most part. I would keep Saturn, Chevy, and Cadillac. I agree that GMC should be cut. Keep the Chevy badge on the trucks. I think that Saturn was a good idea ruined (surprise, surprise). If they went back to cheap entry level cars with good ergonomics and pratical design, they could be a good idea again. Cadillac still has some cache left in its name; they just need to erase 20+ years of crap and GM fanboys need to realize that it will take 20+ years of good products to do that. Cadillac is obviously the luxury division, but why not go back to selling cars and possibly the Escallade. Chevy of course will be populated with everything else including trucks. Want a heavy duty truck? Get the heavy duty Chevy. Want a luxury truck? Get the luxury trim level (Chevy Cameo in the 50’s).
I think a lot of people missed theis part of the hypothetical, “will file for Chapter 11. And on that fateful day, it will be free to kill brands.” So the cost of axeing Buick et al. can be ignored for our purposes.
jpcavanaugh had a good point about Chevy trucks, as the comparison is usually Chevy/Ford/Dodge, with GMC considered a trim level (just talking about casual, non-fleet buyers). I would keep the trucks in Chevy, but also badge engineer a set for GMC that can be sold as an intentionally rugged/heavy duty brand. If the time is right they can spin off a Jeep competitor from here, and they can maintain a somewhat seperate reputation from Chevy in order to sell the real monsters that you maybe wouldn’t want crowding out the sedans on a dealer lot (or interfering with your eco-glow).
Pontiac, Buick, Saab, Hummer…all need to die quickly. They all (minus Pontiac) have their own identities, but they’ve lost far too much respect.
I guess I don’t really understand what Ries thinks GM should do with GMC.
GMC makes the cut. “Put all Chevy’s trucks into GMC; make it a truck brand. That would clarify the brands and help both GMC and Chevy . . . GMC is a great brand with a lousy name. You could take one of the product names and call it that. Silverado, maybe.”
I interpret that to mean that Chevy would loose it’s trucks, and GMC would be renamed Silverado.
Did I get this wrong?
instead of killing saturn, they could just demote it to a Kuiper belt object. Heck, that worked for Pluto, why not Saturn?
Likewise Pontiac. I think we need to give the consumer a little bit of credit here. I don’t care how rabid a Pontiac fan you are, if you like the vehicle and you can buy it as a Chevy, you will.
You give rabid Pontiac fans way too much credit here. Once GM shuts down Pontiac, I’ll be driving a Mitsubishi, Nissan, or Dodge. Making the G8 into an Impala/Caprice would just be spitting on Pontiac’s grave. I’m not the only person that thinks this way either.
It’s hard to explain why I feel this way. The best analogy I can give is how when the Cleveland Browns moved to Baltimore, the old Cleveland fans hated the new team even though the players weren’t any different.
Closing Pontiac is like moving my team.
Dynamic88: no, that’s right. I too think GMC would be redundant in this case.
Dynamic88: no, that’s right. I too think GMC would be redundant in this case.
I thought it was Chevy trucks that were redundant. He wants to take all the Chevy trucks and put them in GMC. But he doesn’t like the name GMC (despite it being synonymous with Truck) so he wants to rename GMC as Silverado (did he mean Sierra?)
I’ve never agreed with killing the #2 selling brand at GM. No matter how redundant it seems, GMC does way better than #3 Pontiac, way way better than #4 Saturn, and roughly double the sales of #5 Caddy.
I fail to understand why GM can’t simply make a proclamation: From now on there will only be GM dealers, every dealer will be able to offer GM’s whole line up of vehicles.
This would automatically eliminate the need to stretch every brand in the GM catalog to offer a full line up; Chevy would be the bread and butter brand, Cadillac the luxury brand while Saturn/Pontiac/Saab/GMC even Hummer could offer a few excellent specialty models each. Brand selloffs or eliminations as well as dealer culling in oversaturated markets might be needed at this step.
The average dealership would have a line up of Chevy’s in the center, luxury wing with Cadillac’s and their selection of interesting specialty cars along the edges.
Larger dealers in mixed markets would offer the whole line up, while smaller dealers or dealers in markets with very specific needs could concentrate on their niche. Think Cadillac in Beverly Hills or farm trucks in rural Kansas.
This would reduce cannibalism and infighting between different models and all focus could be put on survival of the company as a whole instead of dividing the cake into too many two slices to count on their own.
I don’t think they have the chutzpah to kill GMC. They still sell lots of GMC pick ups, and I suspect they are terrified that if they close GM they will lose some owners to Ford and Dodge. So, fear rules the day.
Geotpf, the customer base to keep the factories running doesn’t exist. GM’s business has steadily declined for decades and finally evaporated this year.
GM has to drastically shrink down to just Chevrolet and Cadillac to be viable and fit it’s market to hope to turn a profit or go bust.
It’s really that simple. Too bad getting there outside of Chapter 11 is impossible.
John Horner: You get the gold. That idea is brilliant, something they should have done before they did that “upscale re-think” BS.
Of course anything that GM did with Saturn could have been done with GEO for a small percentage of the cost of what Roger Smith spent.
Chevy and GMC seem outrageously redundant to me. Not even really badge engineered to differentiate, just the exact same vehicles with different badges. Cut GMC.
The ONLY reason for GMC to exist is to give the Buick, Pontiac, and sometimes the Cadillac dealers, something to sell in the truck and SUV line. Ask any of these dealers if they could survive without GMC. Nor could a Chevy dealer survive without trucks and SUVs. So the time to kill GMC is when B and P are killed.
Assuming Wagoner will have some ‘plan’ about reducing brands, I wonder about the schedule for actually getting it done. As in when is the last day money stops going down a drain with that brand’s name on it. It’s getting a little late to keep saying he’s reviewing or shopping these brands. He needs to be pressed to come up with an if-not-sold-by date, and forced to pull the plug on or before that date when they’re not sold. If he’s vague on any aspect of his plan, I hope the elected pretenders get factual as to steadily downward trend of market share and profits to make him sweat; literally. He has to go for there to be any hope.
njdave :
February 11th, 2009 at 3:44 pm
Geotpf You said “Chevy and Cadillac alone can’t keep the plants humming”. But keeping all the plants humming is exactly what got GM into this mess in the first place. You can’t keep making more cars than you can sell. GM has to adjust itself to the new reality of its market share, and adjust its manufacturing capacity to suit. This is critical if it is to survive. They need fewer plants and and fewer cars, and they need to be able to sell all of the cars they produce at a profit. They make so many cars now that the only way they sell them is with huge incentives. That takes away most of their profit, in many cases all of their profit.
So Chevy shouldn’t have a compact car at all then?
That is, without Pontiac, there is no Pontiac G5. Without the Pontiac G5, about 10-15% of the volume at the Lordstown plant that makes both that and the Chevy Cobalt goes away. Without that 10-15%, they probably have to cut a shift. Without that shift, the plant goes from (say) breaking even to losing boatloads of money. So, they discontinue the Chevy Cobalt and no longer offer a compact car.
Economies of scale. Pontaic/GMC/Buick allows plants that would be dripping red ink due to fixed costs become profitable or at least break even.
Plus, there’s the huge one-time cost of the dealer bribes to shut down the thousands of PBG dealers throughout the country.
There has never been, in the history of capitalism, a case where a money-losing large company became a small, nimble profitable company, without a chapter 11 bankruptcy filing and massive reorganization first. Money-losing large companies become money-losing medium-sized companies which then become money-losing small companies which then become nothing.
Chapter 11 is not a choice for GM or any other car company, since people will avoid the company’s products due to the fear their warranties will be worthless and there will be no source for spare parts.
GM can not shrink to profitability. They need to figure out how to sell more cars. Period.
The cuts they should make are only to the brands that have no chance of becoming profitable in the future. Those would be Saab, Hummer, and Saturn. But Pontiac/Buick/GMC (which amounts to only one sales “channel”, kind of like how Toyota/Scion is one sales channel) has, historically, been profitable, and has a chance to continue to be so (at least as much chance as Chevy or Caddy).
The fundamental flaw at GM, and one that is repeated all over this discussion, is that you need a different brand for every single subset of consumer you can think of. This one is too young – give them a brand. “Real” construction workers need a brand different from all the other people who buy pickups. God forbid you created a Chevillac -maybe you’d have a lineup of good vehicles from $12k – $60k!!!
Look, some of best brands in the business are that way because of focus that has nothing to do with price point. BMW sells a huge variety of vehicles from $29k – $129k and has no need for seven brands to do it. Add MINI and with just two brands they start at $18k. Toyota – 2 brands (I’m only counting Toyota and Lexus. Scion is a joke), both cars and (OMG…the scandal!) trucks too: $12k – $75k.
Detroit’s PROBLEM is that they have created a market where a tiny slice of the demographic buys Chevy, Pontiac, Saturn, Buick, GMC etc and they are paralyzed at the thought of alienating any one of those little niches they’ve built. They need to start re-educating the consumer that an Aveo, a CTS-V, a Silverado and a Corvette can all just be freaking Chevrolets and the world won’t end!!