By on October 22, 2009

Not so delightful, really. (courtesy 2.bp.blogspot.com)

OK, so, GM is a nationalized automaker. I know, I know: nationalization is for third world dictators. But there it is. Thanks to outgoing president George Bush, the feds used $50 billion from the Troubled Asset Relief Fund to bail out General Motors, in exchange for majority ownership. So no matter what W’s political successor says about his administration’s “hands off” non-management of Government Motors, he who owns the gold makes the rules. And when it comes to running a federal-funded organization, Uncle Sam plays by different rules than, say, any private enterprise extent. The bottom line is that there is no bottom line. Amtrak, the U.S. Postal Service, Medicaid—they’re all run at a tremendous, ongoing loss. Which means there’s zero sense of accountability. Which means they will never, ever be able to fully and fairly compete with privately held corporations. Why should GM by any different? Answer: it isn’t.

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By on October 18, 2009

Back in the day, GM really pissed me off. As the American automaker continued its inexorable slide into bankruptcy, executives, analysts, journalists, loyalists and camp followers scoffed at the prospect of disaster. Their scorn fueled my anger or, as Angus Mackenzie would have it, pompous indignation. When the feds bailed-out and then nationalized GM, the company’s refusal to overhaul (keelhaul?) its executive “talent” kept my ire alive. A few months and $50b-plus dollars later and I’m rapidly approaching the point where I couldn’t give a NSFW. How many times can you sing the chorus of “Where have all the flowers gone?” without saying FTS and cranking-up the MC5? Before I abandon this pursuit entirely, here’s a quick rant about GM’s inability to realize American’s favorite mantra: hope and change.

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By on September 11, 2009

General Motors is a nationalized automaker. But it can’t stay that way forever. Its federal taskmasters have decreed that GM must return to public ownership before the Congressional mid-term elections in 2010. Makes sense. If GM is still on welfare at election time, GM will be an enormous political liability. A symbol of Big Government gone bad. But GM can’t possibly achieve profitability within that time frame. Even if it had the brains, it doesn’t have the time or money to build what needs building, to fix what needs fixing. The new car market sucks and GM’s product planning, reputation and branding are in tatters. So New GM’s doing the only thing they can do: putting lipstick on the product pig and sending it off to market. This “May The Best Car Win” advertising strategy will backfire. Badly.

You can certainly understand the thought process involved. The campaign is, after all, Bob Lutz’s brainchild. For more than half a decade, the former Car Czar has been claiming there’s nothing wrong with GM’s products (especially the vehicles developed during his watch). Lutz has consistently blamed the so-called “perception gap” for GM’s epic fall from grace. Our products used to suck at some indeterminate point in the past, but they don’t anymore, starting . . . now! Wait . . . NOW! In other words, it’s not the product, stupid. It’s the perception of the product.

I have no idea how Lutz seized on the idea that perception and reality aren’t part of a feedback loop. For someone who never saw combat, he has an extremely cynical view of human nature. Less perplexing: why New GM is allowing Lutz to bet the entire company on Maximum Bob’s belief that carpet-bombing consumers with “enlightenment” will somehow save the day. Again, GM has no choice. They don’t have the time to create the incremental improvements they need to build, market and sell the genuinely competitive products which would generate a profit in the North American market.

Speaking of loops, Lutz would say that my assessment of GM’s competitiveness is just my [biased, GM-hating] opinion. But it’s also the opinion of millions of American consumers over the last three or four decades, who’ve been abandoning GM for other car companies. I mean, ipso facto, right?

In truth, GM’s comparison tests will offer little more than invidious distinctions. To wit: GM’s new ads will pit the Chevy Equinox against the Honda CR-V, and the Buick LaCrosse against the Lexus ES350. And so on. According to Automotive News, “Lutz said in the rare cases when both cars match each other feature for feature and warranty for warranty, the difference will be illustrated in sticker price.” So we’re talking about feature comparisons and price comparisons. What was that about the definition of insanity?

Lest we forget, GM’s been driving down this road for some time. Howie Long’s Chevy ads, focusing on relative mileage and manliness, have done exactly nothing to stem the Bow Tie brand’s sales slide. The ads were arrogant, condescending and, at the end of the proverbial English day, ineffective. So ineffective they always ended in a plug for “the deal.” What’s different this time?

Nothing. GM’s “May the Best Car Win” head-to-head ad campaign completely glosses over the fundamental question that a real bankruptcy forces a company to face: “Well, how did I get here?” With a few not-so-notable exceptions, the products that GM is about to present as class-leading are the same products that ushered the company into [its first] bankruptcy. Discount the idea that customers are to blame or the competitors suddenly got worse, and you’re left with an inescapable conclusion: same as it ever was.

The “May the Best Car Win” campaign also reveals Lutz’s ongoing and misplaced belief in symmetrical warfare. Ironically enough, the larger-than-life fly-by-the-seat-of-his-pants suit has convinced his bosses that rational comparisons will finally convince consumers of his paycheck provider’s product superiority. But, Bob, that’s not what sells cars. Brands sell cars.

This is no small point. GM’s fall from grace is not about its products, per se. It’s about the company’s ongoing and abject failure to create compelling brands that sell products (and services) that embody the brands’ promise. Never mind the LaCrosse vs. the ES350. Who would buy a Buick instead of a Lexus? Or a Chevrolet instead of a Honda? The people who would are, and the ones that don’t, won’t. No head-to-head model throwdown is going to change the overall dynamic, and/or the minds of people who vote with their wallet.

There’s only one way Lutz and Co. can win this “debate”: frame it in the context of a battle of the brands. But first they have to create four tightly-gathered, clearly expressed branding concepts (e.g., Cadillac as the “standard of the world”), then build products and services that realize that promise. Until and unless New GM grasps that nettle, potential customers will see “May the Best Car Win” as bilious bailout braggadocio, while existing customers will see it as an invitation to jump ship.

Never mind. Time’s up. While we await the inevitable, GM has placed the cart before the horse, and invited potential customers to tell them they’ve gone about it the wrong way. Only this time, when they make their choice, when the best car company wins, everyone loses.

By on September 8, 2009

Ron Bloom is a Harvard MBA grad, investment banker and former advisor to the U.S. Steel workers. He’s also the head of the Presidential Task Force on Automobiles, now that Steve Rattner is busy defending his investment firm against bribery charges. Over the weekend, the Obama administration added Manufacturing Czar to Car Czar in Ron Bloom’s portfolio of power. “Bloom is to work with government departments including Commerce, Treasury, Energy and Labor to develop new initiatives affecting the manufacturing sector. The White House said Obama is committed to partnering with the private sector to spur innovation, invest in the skills of American workers, and help manufacturers prosper in global markets by promoting exports.” In other words, after nationalizing GM, Obama’s mob are now looking to screw up all the other parts of America’s manufacturing base. A quick joke . . .

As GM headed for oblivion, the executives shielded themselves from responsibility by blaming everyone else. The contention that the American automaker was on the cusp of recovery (again, still)—only to be waylaid by the entirely-out-of-its-control global economic meltdown—was only the final excuse for their epic mismanagement. Before that, GM had an entire litany of alibis for their slide into Chapter 11. Number one on the “it wazzunt me” hit list: Washington.

The carmaker bitched and moaned that it was being strangled by Washington’s safety regulations, fuel economy mandates, health care policy (take our legacy costs, please!) and foreign policy (plagued as it wasn’t by Japanese currency manipulation and import restrictions). But when it was time to face the music, GM’s suits leaped into Uncle Sam’s loving embrace, glad to become America’s first nationalized automaker.

See, now that’s funny.

Only not really. In truth, companies like GM—and there are more than a few of them—love federal regulations. They happily pass the cost of meeting governmental diktat directly to the consumer. Or, better yet, they get the government to pay for the cost of meeting government regulations. Case in point: Section 136 of the Energy Independence and Security Act of 2007. This greenwashed piece of pork directs the Department of Energy (DOE) to hand out $25 billion worth of no- to low-interest 25-year loans to automakers to retool factories to build cars that satisfy new federal corporate average fuel economy (CAFE) regulations.

Note the hidden dynamic: the federal regs provide an enormous barrier of entry to smaller car companies, who can’t afford to pay for meeting the regs, pass on the costs to their customers or lobby Congress for their share of the pie.

What smaller car companies, you ask? Well, exactly. Electric sports car maker Tesla Motors is the exception that proves the rule: a Silicon Valley start-up that managed to secure itself a $465 million mega-suckle on Uncle Sam’s teat. Otherwise, brash automotive independents are a thing of the past. They’re consigned to the industry’s early history, when federal regulations (and related subsidies and tax credits) were notable by their absence.

The counter to the “Uncle Sam killed the creative cluster” contention: if the feds hadn’t stepped in, automobiles would still be gas-guzzling, toxin-belching, rickety baby killers. The government HAD to sort out the chaos of competition for the public good.

But is that true? If so, why did it take Tesla to finally spur GM’s [previous] Car Czar Bob Lutz into action on the EV front? More to the point, do we really believe that car makers would have failed to provide seat belts, crumple zones, air bags, clean-running engines, etc. if Uncle Sam hadn’t spent huge amounts of time and money twisting their arms?

I know the idea that the carmakers would have done the right thing anyway—simply to remain competitive—runs against the commonly held belief that big companies are fundamentally amoral (i.e. “Capitalism: A Love Story”). As a former GM Death Watcher, I’ll admit that there’s more than a little truth to that assertion. But how did these big companies get to have such a stranglehold on the marketplace in the first place?

Again, you have to look at the role of government regulation and oversight in creating the monolithic manufacturers—before Uncle Sam decided they had to be dragooned into saving lives and protecting the planet and other social goals.

Whether you’re talking about making things or providing health care, President Obama’s “public private partnership” is not new, nor will it do anything to help the American economy get back on its feet. American history is littered with examples of the negative effects of excessive government control of/interference with the private sector. In this I refer you to Jonas Goldberg’s rambling rant, Liberal Fascism. And point my finger at GM.

By promoting Bloom to “fix” America’s manufacturing base, the Obama administration would have us believe that his main man has already “fixed” GM. At best, you could say the jury is still out. At worst, you could mention the fact that GM is a headless, nationalized chicken, running around in a vain, mindless attempt to avoid an inexorable fate brought on by its taxpayer-provided protection from accountability. Or, if you will, it’s a zombie.

To let Ron Bloom loose on other parts of our industrial sector, to encourage him to impose the government’s will upon large companies, is madness; regardless of how willing these large companies are to accept government assistance. The intervention ignores Ronald Reagan’s warning that the most dangerous words in the English language are “We’re from the government and we’re here to help.” Or the message behind that message: that America’s true economic strength lies in its free markets, engendered, fostered and protected by a lack of government interference.

Meanwhile, the Germans are pressuring the Americans to convince GM to let the Russians (fronted by the Canadians) buy GM’s German-financed Opel division. Maybe Big Ron should go sort that shit out. Or not.

By on September 4, 2009

It’s been a while since I’ve written a General Motors Zombie Watch. Time keeps on slipping, slipping . . . into the future. Only when you’re dead, there is no future. You’re dead. Oh, I know: New GM’s got new plans for new cars with new advertising that will win new (old?) customers. And the new Board of Directors’ Chairman Ed Whitacre is busy threatening to fire New GM’s old (new?) execs if they don’t get their shit together. But they haven’t, as their farrago of product plans and the botched launch of the new Buick LaCrosse prove. In fact, the current crop of GM suits will be fired. And?

And nothing. As I’ve said before, Uncle Sam kept CEO Fritz Henderson and the GM Lifers on center stage for one reason: to throw them off when taxpayer tomatoes start hitting RenCen’s windows. Which will be soon after GM’s third quarter financials hit the press. When it becomes abundantly clear that GM will burn through ALL of its taxpayer loot within two years. Or less.

Politicians from both sides of the aisle (though one more than the other) will proclaim that something must be done! And something will: the management that should have been shit-canned when GM was nationalized—actually long before, but that’s another story—will be shit-canned. The feds will press an entirely theoretical reset button.

New suits will take over. The fact that the auto industry is on a three to five-year cycle, the fact that New GM’s new brooms face dust devils the size of Montana, the fact that any genuine GM turnaround would take a decade and over $100 billion in addition funds, will be lost in the shuffle.

Never mind. The corporate cull will achieve its intended goal: it will unleash the puppies of prognostication. The media will be abuzz with speculation about the new new new new new new new New GM, for another financial quarter. Maybe two. Possibly three. Meanwhile, the feds will continue readying the GM pig for its IPO, lipstick and all.

You want to talk about a perception gap? The Obama administration’s Presidential Task Force on Automobiles is trying to widen the gap between the perceived value of General Motors and the actual retail price of the government’s automotive showcase. Mark my words: the feds ain’t done propping-up the unproppable. They’ll shovel more and more money at GM, dressing-up the nationalized automaker for the Great Pre-Mid-Term Election Sale.

Lest we forget, GM is counting on—as in factoring into their current balance sheet—a $10.3 billion loan from the Department of Energy’s Advanced Technology Vehicles Manufacturing loan program. It’s the same money previously denied the American automaker. You may remember that GM was deemed non-viable by someone figured out that 1 minus 120 billion is something less than one. Guess what’s changed.

Nothing much. While GM has shed a mountain of debt, restructured its labor contracts, dumped dealers, paid lip service to cultural change, and found another sucker to foot the bills (thank you, America!), it’s still taking in less money than it spends. And we all know how that picture ends.

Before the closing credits, we’ve got to sit through a chase scene between Chevy’s plug-in electric/gas hybrid Volt and the Toyota Prius.

There’s no way GM can catch ToMoCo’s four-wheeled planet cooler. Even if GM can get the Volt to work, they can’t sell it for anything even close to the Prius’ $22,000 price tag. Unless . . . Unless . . . Government Motors does it anyway and takes the hit.

Of course, a “hit” is not a good thing for a company that wants to offer shares to the general public. So . . . how about we subsidize the shit out of the car so that it appears as if the car is somewhat profitable-ish? Or, at the very least, take the costs off GM’s books?

The federal government has already cash-injected the battery makers developing the Volt’s power supply, to the tune of $100 million plus. Your elected representatives are going to use your taxes to subsidize the plant making the car [see: DOE loans above]. And the car itself (via a $7,500 tax credit). Not to mention signing over $62 billion to a company that can’t even set a timeline for the Volt’s potential profitability.

Before a hundred or so hand-built Volts hit Chevy showrooms, the feds will re-up the battery research grants and find some other eco-friendly way of “helping” the halo car that the Presidential Task Force on Automobiles rejected as delusional, pre-nationalization.

Yes, there is that. It can’t be said enough: the feds own GM. The GM zombie has no will of its own; it’s controlled by its political taskmasters. When the truth about its [most recent] parlous finances are revealed, GM will become far more than a failed automaker turned undead manufacturer. It will become a political liability. If you think GM shareholders were slow to abandon ship, you’re right. If you think the Obama administration will be slow about jettisoning its GM-shaped political baggage, you’re wrong.

But first, GM CEO Fritz Henderson and his motley crew will be packed off in their golden lifeboat, so that the illusion of change can be re-energized. Like any good magic trick, the “GM will pay back it federal loans” routine depends on a suspension of disbelief. As Tufts University supporter P.T. Barnum said, you can’t fool all of the people all of the time.

When the IPO time rolls around, real investors (as opposed to taxpayers dragooned into paying for GM’s nationalization) will not want to own GM stock. Why would they? So the government will have to subsidize THAT boondoggle as well. In other words, papers will be shuffled once again, the taxpayer will still be on the hook, and GM will continue wandering through the wilderness.

One way or another, sooner or later, what’s left of GM will fall into the hands of its rivals. A few names will be all that’s left of what was once the world’s largest automaker, and the world’s most profitable company. But make no mistake: this is less of a transition than it seems. GM is already dead.

By on August 12, 2009

General Motors has always been long on talk about the future. The company that invented concept cars and pioneered planned obsolescence has always kept consumers focused on the next big thing(s), and that tradition is ever more important now that GM is a publicly-owned entity. Future products are the justification for current investments and subsidies, and GM knows it. Though details are sparse and largely sifted out of the murk of PR leaks, teases and hearsay, a picture of post-IPO GM’s 2012 lineup is beginning to form. The success of these vehicles depends on a number of difficult-to-predict factors, but assuming fairly conservative projections (steady increases in US economic growth, auto sales and gas prices), it’s not too hard to tease out a few early conclusions on GM’s strategy. So let’s hop in the time machine and set the dial for the Fall of 2011.

City/Mini Class

The Chevrolet Spark will be all-new for the 2012 model year, hitting dealerships just as our time machine arrives two years into the future. Based on the basic-by-third-world-standards Daewoo Matiz, the Spark is Geo Metro redux with a Chevy badge and styling. With a 1.2 liter engine and a goal of 50 mpg on the highway, Spark is clearly GM’s insurance policy against another sharp spike in fuel prices.  US production of about 25k-30k units annually (about current Aveo sales levels) is reportedly planned. Most of GM’s competitors plan on bringing more premium offerings to this segment (e.g. VW Up!, Toyota iQ), making Spark a potentially unique value (though probably less profitable).

Subcompact Class

GM will replace its unloved Aveo as a 2011 model, a year before our time machine lands. Chinese/Korean engineered on the new GM-Daewoo “Gamma II” platform and styled by GM’s Brazilian studio, the new Aveo is supposed to be built at Orion Township. Strangely though, Automotive News [sub] reports that Aveo will “likely” be produced at San Luis Potosi, Mexico. Styling and space should be improved compared to the outgoing model, but the model will probably struggle under the Aveo name thanks to its predecessor’s weak reputation. Name continuity is a good thing, but Bob Lutz’s apparent decision to keep the Aveo name may not have been the example for GM to start the habit with.

Both the Spark and Aveo will struggle to hide their developing-market roots and will likely do little to change the perception small cars are an afterthought for GM. The Spark in particular should face some trouble, given that most economists see economic recovery and rising gas prices arriving hand-in-hand. In that scenario (and considering GM’s desperate need to improve its small-car rep), Toyota and VW’s premium city car approach seems to be the better choice. And with the Aveo upsizing to near-Cobalt size, GM will also be selling it as a hatchback only for fear of cannibalizing the Cruze. This will further limit its appeal in the American market.

Compact Class

The Cruze will debut alongside the new Aveo in 2011, and will be built on the global Delta II platform in Lordstown, OH. Early reviews from Europe and Australia where local versions have already debuted are . . . mixed. Reviewers praise the space, styling and interior quality, while criticizing the car’s weight, engines and dull handling. All in all, though, it’s hard to conclude that the Cruze won’t be a huge improvement on the Cobalt. This should go a long way towards building some kind of reputation for GM in a segment where it has never really been competitive. Unfortunately, for every positive step there’s at least one regression.

A Delta II-based Buick is planned for model year 2012, which has been conceived as a way of returning lost Pontiac volume to the Buick-GMC dealer network. “Unique sheetmetal” is promised, but the model (like all Buicks going forward) will essentially be a tweaked Chinese-market offering built alongside the Cruze at Lordstown. GM’s level of cynicism in executing this model will be a defining choice. With the Cruze already offering a relatively high quality interior for the segment, differentiating the Buick compact will be tough. Especially if Buick-GMC dealers are counting on it for real volume.

In addition to badge-engineering, GM is also saddling its compact portfolio with its other age-old sin, the fleet special. Though the weary Cobalt will no longer be offered at retail when our time machine lands, GM is considering a fleet-only version of the Cobalt to soldier through 2010 and possibly into 2011. Though fleet specials are understood to have a negative effect on brand image, old habits die hard. And as we will see later, the Cobalt “Fleet” won’t be the only image-dragging holdover model in GM’s portfolio come 2011.

EREV

The Volt should be available at dealers when we arrive to witness GM’s 2012 lineup. 10,000 units of production are planned for 2012, with an MSRP of $43K and GM will lose money on every one. A Cadillac Converj version could be available by 2012, but the chances are not good. If it is available by 2012, expect either a rebadge of shocking cynicism or a super-limited halo car. Neither of which will help GM. As reality sinks in and hype fades, the Volt could well be the cause of a few GM PR headaches by 2012.

Compact MPV/CUV

Entering the magical world of crossover utility vehicles, GM’s 2012 product planning begins to show signs of yet another classic GM sin: overlap. Chevrolet’s Delta II-based Orlando looks to be a relatively solid contender as a cheap seven-seater in the Kia Rondo mold. But will those two extra seats be useful enough to tempt Americans away from GM’s slew of five-passenger vehicles? Given the limitations of the platform, the answer is probably no. Unless, of course, a gas price shock creates more interest in the micro-van segment.

A Gamma-II based five-seat CUV is planned for Buick, in yet another attempt to bring more volume into the Buick-GMC sales channel. As with the Buick Cruze rebadge, this weak motivation could easily tempt GM into the old cynical rebadge trap. Though GM-Shanghai’s Business concept shows the possibility of an attractive small Buick CUV, putting concept into practice could prove difficult. The challenge: attracting a premium over the upsized, five-door Aveo, without cutting into GM’s four Theta CUVs. Or a possible 2012 GMC “Sub-Terrain” CUV based on either the Gamma II or Delta II platform.

Given GM’s history and limited resources, expect the Buick CUV to be tough to distinguish from the Aveo and the GMC to be similar to the Orlando. Execution is everything with this much potential for overlap, and GM has only so much time to create meaningful differentiation in this cluster-NSFW.  And as we move into the meat of GM’s planned lineup, that problem appears everywhere. No way can GM make sense of all of it.

Midsize CUV

Here in 2009 this is one of the hottest segments in the market, as Americans downsize from Detroit SUVs into CRVs, Rav4s and Foresters. And GM is only a little bit late to the party, banking on the 2010 Equinox and Terrain to fight for the remainder of the cute-ute boom. But GM is already having difficulty explaining how consumers should choose between these offerings. For 2011, Buick will add to the confusion by offering what appears to be an only mildly rebadged version of the Saturn Vue, which will bridge the already-narrow gap to the “Theta Premium” Cadillac SRX. Further complicating the Theta competition will be the Saturn Vue and the Saab 9-4X, which will likely both be sold by the former GM divisions in 2011.

The problem with GM’s Compact CUV offerings isn’t that GM misunderstands the market; this segment should continue to sell well through 2012. The problem is that GM is set on flooding the segment with models that, while distinguishable to buffs and designers, will only serve to confuse consumers. The Buick Vue rebadge seems to be a particularly senseless and cynical decision, justified only by the 2012 option of a plug-in drivetrain that should really be an option on the SRX. Retaining the Equinox name could also keep one of GM’s most important products in the shadow of its (ironically) forgettable predecessor, while the Terrain will share lot space with the Buick Vue. For such a crucial segment, GM has some major (and sadly familiar) issues to sort out. Fast.

Fullsize CUV

Though one of its more-recent platforms, the Lambda is already one of GM’s most egregious examples of latter-day brand engineering. Pre-bankruptcy, GM had four poorly-differentiated versions of the platform. In 2011, GM will likely have four poorly-differentiated versions of the platform. Traverse will be soldier on unchanged, while the Buick Enclave and GMC Acadia are scheduled for a 2012 refresh. Though the Saturn Outlook will probably still be on sale at Penske’s Saturn dealers (just to keep things fun), the fourth GM model is likely a 2012 Cadillac Escalade replacement. Though there’s talk of stretching the platform for ‘sclade duty, don’t expect it. GM will either do a quick-and-dirty Lambdasclade or allow the old GMT 900 beast to live on (truck/SUV strategy, as we will see later, is in chaos).

Either way, the Lambda glut caps a potential eleven-model swath of CUVs in GM’s lineup, not counting the five-door Aveo or the CTS Wagon. Four-brand GM dealer lots will be a maze of the rounded-off wagon-utes, with salesfolks guiding bewildered shoppers through a seemingly infinite palette of family vehicles. The CUV segment is a melting-pot of automotive styles anyway, where lines are already blur into unfamiliar form (and bland looks). And despite the huge number of models, nowhere in this mix is a credible compact off-roader or a modern family/commercial van (ala Ford’s Transit Connect). In model year 2012, it seems, variety in the heart of GM’s lineup will still only be skin-deep.

Midsize Sedans

Chevy’s “perception-shifting” 2008 Malibu will not be updated until after the 2012 model year, and for 2013 it will actually be downsized (except for the trunk). Which is hard to understand, considering that the aging Impala has hung close to the ‘bu in sales, seemingly on the strength of its interior size alone. But that’s a concern for 2013; for the purposes of our time-traveling, the Malibu will remain unchanged. But will its sales still be consistent?

By Fall 2011, the Opel Insignia-based Buick Regal will have been on sale for about a year. By then it should be fairly clear if the new model drives the kind of volume that Buick dealers need to make up for the loss of Pontiac. GM expects the four-cylinder-only Regal to cost “a few thousand dollars” less than its platform-mate, the LaCrosse, and become Buick’s best-selling model. Though the Insignia has been well-received in Europe, it shows less promise for the US market. It will have to be positioned as “more sporty” than the LaCrosse while only offering a four-banger to avoid overlap. Stuffing the Regal between LaCrosse and Impala/Malibu means limiting options, a compromise that hurts its chances as a volume model. And it may be the motivating factor in the ill-advised 2013 Malibu downsize.

Fullsize/Premium Sedans

GM’s decision to allow the W-body 2006 Impala to soldier on until 2014 is perhaps one of GM’s greatest sins. Though the Impala currently sells at about the same levels as the Malibu, one can’t help but feel that by 2012 the Impala will be bought only by curious students of 20th century automotive technology. It seems that GM has almost completely given up on large FWD sedans as a competitive volume product, perhaps assuming that the segment will be abandoned for the CUVs that it has bet the farm on. This assumption is by no means a sure thing. Meanwhile, the Impala will be an inescapable reminder of the old, bad GM.

Worse still, anyone who wants a remotely competitive fullsize GM sedan will have to look at one of its luxury brands. Specifically, they will have to look at Buick or Cadillac’s flagships, the LaCrosse or the XTS. The 2010 LaCrosse is seven inches longer than its Regal stablemate will be, and offers V6 and AWD options. Does that make the LaCrosse a “flagship” as GM claims, or does it make the Regal a hamstrung, would-be cannibal?

Cadillac’s “flagship” similarly fails to generate any unique appeal. Though Cadillac is supposed to fight BMW as a high-tech, dynamically-driven line of vehicles, the XTS will be a bloated “Super Epsilon,” possibly with standard AWD. This compromise (born of the inability to develop a true Cadillac flagship) places pressure on the entire GM sedan range by dint of its placement so close to the LaCrosse (itself to close to the Regal, Impala and Malibu). Somewhat larger than the CTS, there’s little chance it will better embody the brand’s world-class dynamic ambitions. That would be the job of the Alpha-platformed ATS sedan, a long-rumored BMW 3 Series fighter. Which will be expensive to develop, and difficult to justify considering the CTS is due to be downsized for 2013 or 2014.

Trucks And SUVs

Once GM’s bread-and-butter, truck and SUV development is in chaos as GM grapples with upcoming CAFE standards, the fear of gas price shocks and a buying public that appears to be “over” the body-on-frame craze. Expect Tahoe, Yukon, Suburban and Yukon XL to soldier on until at least 2013, unless GM rushes out more Lambda clones in the meantime.

Long term, the only apparent plan is to remake the Avalanche in the mold of the Ridgeline, also on the Lambda platform (Acadia SUT anyone?). Silverado and Sierra are in a holding pattern until at least 2013. Colorado and Canyon will be discontinued in 2012, possibly to be replaced by a global small pickup developed by GM of Brazil. The fact that GM is seriously considering abandoning the compact pickup market speaks volumes about GM’s jaundiced view of the future of body-on-frame.

Conclusion

By 2012, GM’s offerings will have become more narrow in positioning, with the exception of the Spark at the low end and the Volt at the high end. Between the upsized five-door Aveo and the premium brand “flagships,” GM’s products will be more tightly positioned than they have been in years. Overlap and brand dilution are likely to be the result, as many of the planned models serve only to make up for lost Pontiac volume at Buick-GMC dealers. Ironically, this flood of Buick product is both starving and cannibalizing Cadillac, which no longer has the resources to properly differentiate itself from Buick (in terms of aspiration, if not dynamics and styling).

Reviving Buick also means that one of GM’s least competitive products, the Impala, will stick around long past its best-by date. This will be corrosive to the Chevrolet brand, which won’t be able to compete with Ford’s Taurus without threatening the Buick/Cadillac balancing act. How many Epsilons can you fit on the head of a pin anyway? And if the Impala is going to slouch towards ignominy, why not a post-Cruze fleet special Cobalt too? Or maybe squeezing a few more bucks out of the HHR wouldn’t hurt too much?

One bad habit leads inexorably to others, especially for institutions so steeped in bad habit-as-tradition. GM’s executive never miss an opportunity to insist that change is here, telling us that they’re not fans of rebadging, and that every product must be class-leading. But the tight positioning, slumming holdovers and acknowledged volume-chasing to support dealers for model year 2012 show that these executive statements are either misleading or just crazy. Unless we are about to see one of the greatest achievements in the history of product differentiation, GM’s bright dawn will remain just out of reach. Same as it ever was.

By on August 11, 2009

While General Motors has downsized physically and financially, the nationalized American automaker still suffers from a monumental mental disorder. Today’s F5 PR tornado made that point pellucid. In fact, it’s hard to know where to begin the diagnosis. We might as well start with the “big news” on the vehicle destined to become GM’s Edsel. The General would have you believe that the Chevrolet Volt will achieve 230 miles per gallon in city driving. Yes, well, the Volt is supposed to surmount the first forty-miles on battery power alone. So I make that . . . zero miles per gallon; you know; as it’s not using any liquid fuel. Hey! Anyone remember [former] Car Czar Bob Lutz’s hand-wringing re: the Volt’s gas supply fouling because owners would never use the internal combustion engine? Like that. Quick question: what drugs are these guys on? More accurately, why aren’t they taking their meds?

News flash: General Motors is bi-polar. The company’s currently in the midst of a prolonged manic episode. To wit: on this very day, GM trumpeted the Volt’s [literally] incredible mileage claims AND unveiled a two-year product plan involving twenty-five models AND promised a new Cadillac to best BMW’s 3-Series AND revealed plans for a new internet microsite for its Advanced Design studio (“The Lab”) AND told taxpayers it would increase its $1.81 billion ad spend AND unveiled two new concept cars. That’s after yesterday’s announcement that GM is launching four websites to sell new cars via eBay, albeit in California and not Cadillac. It’s a wonder GM CEO Fritz Henderson didn’t promise to change GM’s constipated corporate culture while he was at it. Oh, wait. He did.

Extreme manic episodes can lead to psychotic symptoms, such as delusions and hallucinations. As it has in this case. The necktie-challenged CEO—Good God, man! I don’t have time to tie a Windsor knot!—clearly believes that he’s going to “do” the cultural transformation thing. And he’s going to do it via . . . committee! Yes, Fritz has appointed an executive committee to wean GM from its reliance on executive committees. A committee that includes the aforementioned aspiring octogenarian, GM lifer and CFO Ray Young, and former Caddy killer and current dealer eliminator Mark LaNeve. Expecting this carefully selected cast of recently elevated (at least in GM time) careerists to reform the automaker is like asking an orthodox Jew to run a Louisiana rib shack.

A person in a manic state has a short attention span. GM may be new (as if), but this symptom is not. How many nameplates is it now, Fritz? Anyone want to dig out Rick Wagoner’s protege’s promise on that score? And while you’re rooting around in GM’s fevered imagination, how about sourcing the press release for the “new” Cadillac STS? HUMMER H3 SUT? Saab anything? How far back do you want to go? Chevy Vega? X-Cars? Always with the promises. Never with the results. Do we really need to analyze the inherent inanity of today’s roll call of make-believe hits to prove the point? OK, then . . .

GM says it’s going to position the new Chevrolet Spark below the Chevrolet Aveo. Is that even possible? What are the chances that Buick will find sales with a car based on the same platform as the Chevrolet Cruze, only more beautiful and slightly longer? Who in their right mind thinks Buick has a future as a full-line automaker, sporting six models (à la Lexus)? Cadillac’s “flagship” XTS is going to be the same size as a Mercedes E-Class? I see fish. They’re swimming in a barrel. My finger grows weary.

I used to believe that GM would end with a whimper. They’d downsize, and downsize some more, and then a bit more, and then, eventually, after a few more mega-suckles on the taxpayer teat, after their market share faded into gray, they’d disappear into some other automaker’s portfolio and die. Now, I’m not so sure. While today’s product announcements are either complete bullshit or the same old bullshit in a new wrapper, and we can discount reports of an increased advertising spend as JALCOS (Just Another Lutzian Crock of Shit), GM seems to be heading for a massive crash.

As always, cash burn is the key. Come September’s financials, we’ll have a rough idea how long GM’s $50 billion federal infusion will last. Obviously, as long GM takes in less money than it spends, the only way is down. Expanding the number of models within the remaining four GM brands will do nothing to delay the company’s next face plant, and much to hasten it. But don’t tell New GM’s executives that. They’re in the midst of a hypomanic episode, joyfully creating plans for reinvention, oblivious to the fact that they’re recycling previous patterns. On the other hand, GM is already living within the confines of institutional care. How great is that?

By on July 24, 2009

When columnist Daniel Howes at the Detroit News gets pissed off enough at GM to write anything other than “we shall see what we shall see,” you know the former bankrupt is doing something very, very wrong. The object of Danny’s ire: the lack of fresh faces at The New GM. “To read the announcement of GM’s new nine-person executive committee, the promotions and the retirements, as I did minutes after it was made public, is to hear the faint strains of Talking Heads singing ‘same as it ever was, same as it ever was’ and to hear more wailing about the chronically clueless GM.” Mind you, Howes isn’t calling GM chronically clueless (that’s our job). He’s angry that “the feds’ pay-and-bonus restrictions essentially make it impossible for CEO Fritz Henderson to woo outside talent for inside jobs.” Woo-hoo! Howes is on the money; out in the real world, $500K doesn’t buy you a reasonable Human Resources manager. But hey, did someone forget the GM stands for Government Motors?

In many ways, GM was born to be nationalized. Over a hundred years or so, the American automaker has gradually evolved to resemble nothing so much as the federal government. Same farrago of competing fiefdoms. Same lack of accountability. Same stifling bureaucracy. Same budgetary constraints (i.e., both too many and none at all). Same global aspirations. Same lack of strategic focus. Same inability to appreciate conditions on the ground. Same inability to make decisions in a timely fashion.

“Reinventing” GM would require massive and sustained root and branch reform; from the top down and the bottom up. Howes [rightly] seizes on Uncle Sam’s pay cap as the central impediment to GM hiring the kind of management that could even begin to refashion its dysfunctional corporate culture. But the curmudgeon fails to connect the dots. The automaker doesn’t want a shake-up.

More specifically, the idea that GM CEO Fritz Henderson’s hands are tied by the Troubled Asset Relief Program’s pay and bonus restrictions is ridiculous. Henderson is a GM lifer. The former Chief Financial Officer. Fellow GM lifer, fellow former Chief Financial Officer, and Ex-CEO Rick Wagoner’s hand-picked successor. Henderson owes his livelihood to the GM status quo. In other words, if Henderson was dedicated to upending the GM’s ossified apple cart, he’d start by firing himself. Since he hasn’t, we must assume that reshuffling GM’s motley crew of proven losers is a labor of love. An ennobling endeavor.

No joke. By convincing the feds to keep GM out of the garbage disposal of a real C11, Fritz has protected the paychecks, pensions and benefits of hundreds of white collar compatriots. Top executives like Gary Cowger and Troy Clarke must have kissed Fritz’s feet when he knocked on their door with the “bad” news. In a genuine bankruptcy, these proven losers would have been ejected from the Renaissance Center without so much as a fare-thee-well (excluding any monies they may have stashed away during decades of serious rooting). You can hear failed Car Czar Bob Lutz’s gleeful cackles echoing through the automaker’s increasingly empty cubicles, as New GM’s new marketing maven tries (and fails) to assimilate his reversal of fortune.

As far as Henderson being “forced” to promote from within, does Howes really think that the CEO considers fast-tracking GM insiders to positions of greater power is bad for GM? Brent Dewar, Chevy’s new VP of Chevrolet, started working for GM in 1978. Bryan Nesbitt, new GM of Cadillac, is a relative piker, but he’s relatively young AND he’s been with GM for eight years. C’mon; these guys are Henderson’s people. Presidential Task Force on Automobiles or not, Fritz Henderson’s desire to protect, preserve and extend his BFF’s careers (to protect, preserve and extend his own) runs so deep it’s instinctive. It’s what GM employees do.

Howes had the strange idea that the New GM would be a new GM. He’s going through the grieving process, as the writer and his fellow cheerleaders realize that GM’s talking a lot, but it’s not saying anything. In fact, the moment Old GM accepted new federal money (and thus ownership) any meaningful idea of a re-imagined GM disappeared. The whole point of the federal bailout: preserve the status quo. And so it has.

New talent? Government agencies—for that is what GM is—are not known for hiring outsiders to create and implement radical change, to improve efficiency and foster accountability. Even in those rare cases where such appointments are made, the existing workers inevitably drag their heels and destroy the outside “virus” before it has a chance to reproduce.

There is only one way GM can truly “reinvent” itself: surrender to the creative destruction inherent in genuine capitalism. It’s an answer that Howes and GM and many, many others find too horrible to contemplate. But it’s the truth.

By on July 10, 2009

General Motors has left bankruptcy behind. The MSM is greeting GM’s graduation with guarded not to say advertiser-sponsored optimism. Meanwhile, the populist backlash has begun. Yesterday, for the first time, I heard a “civilian” refer to GM as “Government Motors.” And then, another. Even if you discount the protest as right wing rhetoric (I was listening to Fox Talk), it’s clear that General Motors is becoming a lightning rod for anti-government sentiment. With tax hikes looming and the federal deficit ballooning, the public is starting to see the “new” General Motors as a symbol of federal impudence, intransigence and impotence. In fact, GM could be President Obama’s Iraq: the Gordian knot that strangles his political fortunes. To fully understand the futility of this financial folly, consider Cadillac.

Cadillac is supposed to be the ne plus ultra of automotive brands: the “standard of the world.” Since its pre-War heyday, Cadillac’s brand management has rivaled Neville Chamberlain’s foreign policy for craven expediency. Cadillac has been a deeply damaged division for decades. In 2007, TTAC’s Paul Niedermeyer charted Cadillac’s decline and fall in gory detail. Since then, the brand’s rep has retreated even further into its last redoubt: the consumer’s imagination.

“We all use the expression ‘the Cadillac of toasters’ or ‘the Cadillac of something else,’” deposed Car and Driver Editor Csaba Csere reassures the Detroit News. “It still means ‘the best of’ to a lot of people.” News flash: my thirty-something appliance guy calls KitchenAid the “Lexus of dishwashers,” without apparent irony. Cadillac’s brand expectations have been unrealized for so long that even the idea of Cadillac as the ultimate object of desire is rapidly disappearing.

This transition reflects reality. At best, Cadillac’s current cars are competitive (CTS, Escalade). At worst, they’re pathetic (STS, DTS, BLS). Somewhere in between, they’re inappropriate (SRX, EXT, forthcoming CTS SportsWagon and Converj plug-in hybrid). None of these Cadillac models are class-leading—never mind world-beating.

Cadillac’s mid-year sales stats tell the tale. At 33,043 units, they’re neck and neck with Acura (32,637), trailing Lexus (44,942) and getting crushed by Mercedes and BMW (65,160 and 75,443 respectively). Meanwhile, Audi’s in hot pursuit (28,347).

Equally disheartening for fans of the Cadillac brand, the automaker’s margins are nowhere near those of its competitors. Cadillac is discounting heavily to move the metal—sending exactly the wrong message about the brand’s inherent “value,” eroding Caddy’s cachet to ever-lower levels. Not to put too fine a point on it, they’re in a death spiral.

There’s only way for Cadillac to recapture faded glory. Cut the crap and build the best. The best no-holds-barred luxury cars. Stylish, no excuses vehicles, meticulously engineered, rock solid. And then they have to create a dealer network that kisses customers’ asses like none before.

Never. Gonna. Happen.

Even if we assume Cadillac’s rebirth could happen—that GM could find the courage to cull Caddy’s cancerous cars and trucks, that it could summon the creative and financial resources needed to be the best of the best—the U.S. government can’t let it happen. It’s the wrong image.

America is not as class-bound as, say, any other country on Earth. But using tax money to cater to high society’s personal transportation needs is about politically palatable as a tax cut for the top two percent of income earners. And that’s before we talk about the product-related demands of the Democratic party’s environmental oath of allegiance. Simply put, you don’t put “the people’s money” into a company that builds leather-lined luxury land yachts sold at ritzy palaces of automotive art.

So why not just let Caddy go? Surrender the top of the market to the Axis of Axles, retreat into the mass and mid-market (with some upscale Chevys badged Buicks) and call it good? Other than the inevitable Cadillac dealer backlash, there’s one main reason the company can’t eliminate Cadillac from their rancid roster: corporate psychology.

Old GM was once the standard of the world: the world’s largest car manufacturer and the planet’s most profitable company. Cadillac represents Old GM’s zenith, its ability to put the world to shame. Like the U.K., GM is not ready to face Empire’s end. Even if Cadillac’s become hopelessly tarnished, even if its crown has been stolen by foreign usurpers, you can’t sell the Crown Jewels! For GM, losing Caddy would be tantamount to admitting defeat.

Sadly, facing reality is the one thing that GM—Old or New—cannot do. All of which means that New GM is not about reinvention. It’s about revisionism. We made a few mistakes, got a bit big for our britches, got battered and bruised by the slings and arrows of outrageous fortune. But we’re good. And soon we’ll be better, better than we ever were. Cadillac will rise again!

Cadillac’s survival, its planned model expansion and move down market, highlights the fact that GM still suffers from the worst kind of hubris: taxpayer-funded hubris.

By on July 6, 2009

So how long before New GM fires Uncle Fritz? In the most pragmatic of all possible worlds, where the Presidential Task Force on Automobiles (PTFOA) looked out for the taxpayers’ $50 billion as if it were their own—Fritz wouldn’t even BE GM’s CEO. Henderson would have been defenestrated along with Rick Wagoner. You know: the ex-CEO who groomed Henderson as his replacement. (How hard is it to connect those dots?) Henderson has assured his place in The Peter Principle Hall of Fame, capping his career as the PTFOA’s toady. And now, best case, he should follow Old GM onto the scrap heap of history. Not a chance.

The fact that Henderson wasn’t terminated with extreme prejudice the moment the United States government assumed complete control of General Motors tells us that Uncle Fritz is no Richard Nixon; the PTFOA will have Henderson to kick around some more. I repeat: the man’s a patsy.

Fritz didn’t decide to kill thousands of GM dealers. Fritz didn’t decide which GM brands to keep. Why would he? They’re family. White collar cull? Heaven forfend! We’ll use attrition. Mr. Henderson, it’s Congressman Barney Frank on the other line, asking for a stay of execution for a GM parts distribution facility in his constituency. Mary, why didn’t you forward this to the PTFOA? If I told you once—Barney! Hi! What’s that? I’ll check. Rest assured, I feel your pain. [Joke deleted].

Anyone harboring illusions that Uncle Fritz is large and in charge should note: Henderson didn’t take the stand and tell federal bankruptcy court that New GM had to be created by July 10—or die. It was Harry J. Wilson, a heretofore unknown member of the PTFOA. “We have no intention to further fund this company if the sale order is not entered by July 10,” Mr. Wilson told Judge Gerber. “It’s better to cut one’s losses.”

One’s losses? Hey Bub, those are MY losses you’re talking about. Anyway, who talks like that? Not Uncle Fritz. In fact, let’s pay a little attention to the man behind the curtain  . . .

“Prior to joining Silver Point in 2003, Mr. Wilson was a principal in the private equity business at The Blackstone Group, where he completed a number of private equity investments and leveraged buyouts,”youthinc-usa.org reports. “Mr. Wilson began his career in the Investment Banking Division at Goldman, Sachs & Co., where he worked in the Energy & Power group on a range of merger and corporate finance transactions.”

Hang on; the same Blackstone Group that competed with Cerberus to buy Chrysler? Yup. Although my wife destroyed my tin foil hat whilst heating-up some chicken nuggets, it’s clear that’s a cabal of investment bankers—led by Steve Rattner and Ron Bloom—are deciding the fate of the artist known as the world’s largest automaker. While Barack Obama has publicly stated his intention to “let GM run GM” [presidential paraphrasing], nothing could be further from the truth. Uncle Fritz is so not The Man.

So why keep him around? First, remember that the general public couldn’t give a damn who’s running GM. In fact, they’ve never heard of Uncle Fritz. If they see him on the tube, well, he looks nice. Avuncular. Credible. Non-threatening. So why not?

Second, as GM’s former CFO, Henderson is an excellent pencil pusher. If you were a member of the PTFOA and wanted to grab some numbers upon which to base your otherwise uninformed decisions about the automaker’s fate, Henderson’s the go-to guy. He couldn’t save GM if his life depended on it, but Uncle Fritz knows his onions.

Most importantly of all, Fritz is a terrific fall guy. If/when GM’s NA sales fall [further] into the trash, the PTFOA can throw Henderson on the pyre. The President has taken new steps to put General Motors on the path to profitability; a management shake-up is on its way!

The PTFOA should, of course, dump Henderson now. What better way to celebrate New GM’s birth, to draw a line under Old Skanky GM, than offing the bureaucratic bumbler who helped bring The General to the brink in the first place? Passing the torch PR, and all that.

Yes, well, who would replace Uncle Fritz?

As TTAC’s Ken Elias has pointed out, there are only a handful of auto executives capable of running GM, even in its truncated form. The number who could turn the ailing American automaker around is even smaller. And none of these talents is likely to do so for $500,000: the salary cap dictated by Congress for TARP (Troubled Asset Relief Program) recipients. Also, any CEO who’d take on the job (for real) would want independence from the PTFOA. And the PTFOA can’t have that, now can they?

So Uncle Fritz will soldier on. Or not. Either way, GM is unlikely to receive the one thing it needs to survive: leadership.

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