So I read earlier this week that Bob Lutz is saying that the US Government killed Pontiac. He says that GM had big plans to rescue the struggling brand with innovative, rear-wheel designs that included small performance cars that would have set the Germans back on their heels. Had these plans come to fruition, he hints, enthusiasts would have been busting down the doors and the brand would have quickly returned to good health. Sounds like new golden age for Pontiac was just around the corner. And it would have worked too, if it weren’t for those meddling Feds. That’s what Bob says anyhow, but I’m not so sure. The way I remember it, I had a hand in killing Pontiac, too. Read More >
Category: GM Death Watch
According to our latest sales data, the Detroit Three have enjoyed something of a comeback relative to the “foreign” competition this year. And though it’s not clear how long that trend will last, the media is catching the Detroit-boosting bug again. The NYT’s Bill Vlasic epitomizes the mood, focusing on improvements in GM and Ford’s products in a piece titled American Cars Are Getting Another Look. Between IQS score improvements and anecdotal evidence of consumer interest in Ford and GM’s “gadgets” and “value,” Vlasic’s sidekick, Art Spinella of CNW Research, forwards an interesting theory for the death of the “perception gap” (a construct he helped create, by the way):
Ford has become almost the ‘halo brand’ for G.M. and Chrysler. Because of Ford’s success, people are less resistant in general to considering all of Detroit’s products.
Well, that’s not the dumbest thing ever said about the destruction of the perception gap… but it sure is a head-scratcher. Did Nissan and Honda just spend the last several decades skating by on Toyota’s sterling reputation (RIP)? Still, it might be interesting to hear Ford’s perspective on all this.
GM filed for bankruptcy today. From now on, TTAC will chronicle GM’s fortunes under the series name bestowed upon post-C11 Chrysler: Zombie Watch. For there’s no doubt in my mind that GM will not recover from its federal stewardship to emerge, as Dan Neil puts it, “smaller, leaner, smarter and hungrier.” Sure, I’ll spot Dan smaller (obviously). Leaner? An efficient government-funded company is an oxymoron to rival military intelligence. Speaking of which, smarter? GM is as far from smart as Steven Hawking is from professional wresting. In fact, listening to GM CEO Fritz Henderson bleat to the press today, it struck me that the automaker is pulling a Mark Mothersbaugh: it’s de-evolving. Less obscurely, the company is actually getting stupider.
To wit: when Bloomberg asked Fritz whether there would be any changes to post-C11 GM’s corporate culture (i.e., when would someone shit-can the overpaid yes men and women who’d run General Motors into the ground), Henderson said there was no need for an executive cull. “Natural attrition” would ensure fresh blood. Well, he would say that, wouldn’t he? After all, any such overdue housecleaning would start by sweeping Fritz Henderson out with the rest of the garbage hanging around RenCen (e.g., HUMMER).
Even so, it was a stunning admission that all that talk about GM’s preparations for a government-backed renaissance—trimming dealers, reigning-in the United Auto Workers, softening-up bond-holders, etc.— was complete and utter horseshit. More specifically, Henderson was spouting the same crap GM’s been foisting on shareholders since Nikita Khrushchev used shoe-leather to pound home a point.
The truth: GM’s management still doesn’t have the slightest idea how to right the sinking ship—sorry, raise the Titanic. Henderson point blank refused to specify a deadline for a return to profitability. No goals. No timelines. Nada. If I didn’t know better, I’d think Rick Wagoner’s hand-picked clone/successor was trying to give this GM Death Watch series closure, in that “here we are at the beginning again” way. But no; there is no plan.
Now you could say that Henderson can’t formulate a plan. It’s up to the next GM CEO—the one appointed by the same presidential administration that fired the old CEO and swears up, down and sideways it doesn’t want to run GM—to devise a detailed strategy for returning some $50 billion dollars to American taxpayers. And those pesky bondholders. To which I’d reply, sure; what’s the hurry? We’re from the government and we’re here to—say, are those fresh donuts?
More evidence of increasing numb-nuttide: on this historic day, GM signaled recently dismissed dealers that they company will honor their franchise agreements until they expire (Oct. 31, 2010). Huh? If GM doesn’t terminate the franchisees before exiting federal bankruptcy, they’ll lose the chance to do so without legal repercussions. The abandoned dealers will live to fight the “new” GM in all 50 states.
In other words, even Chrysler somehow managed to get it right where GM continues to get it wrong. Of course, both automakers are missing the golden opportunity to tell the United Auto Workers to FO&D. Damn! I forgot! This is a government-sponsored bankruptcy. When the feds pull the strings, the union owns you. Literally.
Meanwhile, and lots of it, the mainstream media seems obsessed with the idea that President Obama’s minions will force the automaker to build shit boxes to appease the environmental wing of the democratic party, and, thus, drive GM into bankruptcy. Oops. I should have said “continue to suck-up taxpayer money until British Leyland looks like a winning lottery ticket.”
It’s a ridiculous concerm. Government Motors has but one goal: nothing. Remember? No deadline. No timeline. Nada. Which makes a mockery of the most important part of Neil’s post C11 prognostication: the hungry bit.
Simply put, governments are not profit-driven. At all. On any level. Ever. So it doesn’t matter what kind of vehicles post-C11 GM manufactures. At all. On any level. Ever. Snap! That makes “new GM” the same as “old GM.” See what I mean about circularity?
OK, time’s almost up. How do I see this playing out?
Either the feds will sell GM to another automaker soon, or the feds will sell GM to another automaker later. By that I mean either Renault Nissan (or someone) will swoop in “to the rescue” (for bupkis), or the public will eventually grow weary of subsidizing Government Motors. At that point, Uncle Sam will jettison the public’s shares in GM for cheap. Some strip and flipper will buy it up and do what they do best.
In other words, one way or another, GM is headed for liquidation.
I’d like to say that this is the bankruptcy I recommended four years ago, which will allow GM to reinvent and reinvigorate itself. But it isn’t. So I won’t. I’ll just say so long and thanks for all the Corvettes. Although the interior still sucks.
GM was a politburo building cars. GM died for the same reasons that the Soviet Union died: because it killed initiative and proved unable to manage its resources at a pace that matched competing economies. Just as the Soviet politburo promoted the party faithful, demanding adherence to the party line, GM management brooked no discontent, and would get rid of any dissenting voices, banishing them to the corporate equivalent of Siberia: away from RenCen. The Soviet Union destroyed itself because of its unwillingness to accept reality. Spending untold billions on a show military force, it starved all other facets of its economic life. The Soviet leadership also accepted incredible inefficiencies in its production apparatus and failed to exploit its vast reservoir of natural resources. Ditto GM.
Among car makers, GM at one time had the size of the Soviet Union among nations (Russia alone covers 13 time zones). And just as the Soviet Union proved too big to manage, once the frailties had been exposed, GM also proved unmanageable, having been set on a course of self-destruction years ago. The leadership was unwilling to turn away from its crash course; that would have meant accepting they were wrong. The Soviet Politburo was never wrong. GM leadership was never wrong.
These were self-evident truths and had to be accepted. Filling its organization with sycophants and nodding-heads, the GM leadership willfully remained oblivious to the changing world outside its walls. Occasionally, demonstrating the obduracy and carelessness of Soviet leaders, they would dismiss what other car makers were doing, often ridiculing initiatives that would later prove their own undoing.
Living in the false security that they could always slap around any dissenters in their own ranks, thus ensuring discipline, GM let “too big to fail” cloud its judgment. The adage “What’s good for GM is good for America” permeated the walls, and allowed the company to grow complacent and ignorant.
Case studies will be mining the GM example in years to come, just as scholars of politics and international relations are still trying to come to grips with the fall of the Soviet Union. It’s worth remembering that until just a few months before the Soviet Union fell apart, the CIA and other intelligence bodies around the world were convinced no such thing would or could happen. This was because they and the nations and militaries they served, were dependent upon a strong Soviet Union for their own reason for being.
Likewise, with GM, we have seen a skull-clanking failure to accept the truth not just inside GM, but in the surrounding world. Corporate ignorance results when companies operate with blindfolds. It results in organizations that are change averse, and that think strength lies in never questioning its few basic tenets of faith.
One could claim that the fall of the Soviet Union was the result of bad engineering and outdated technology. If the place had been better run, if it had been in the hands of forward-thinking people, who allowed initiative and rewarded successful solutions, then we might not have seen the dissolution of the Soviet communist empire.
While the Soviet politburo devolved to cant and polemic in the service of a failed ideology, the GM politburo resolved to make money by financing cars that were subpar. Both believed propaganda could make up for the flaws in their products. Towards the end, GM was channeling hundreds of millions for campaigns that sought to establish differences among car platforms that were obviously similar to any outside observer.
Both organizations failed to “walk the talk.” The Soviet leadership rewarded itself with an opulent lifestyle completely divorced from the realities of life for ordinary people. In the end, the dissonance became impossible to hide or defend. Special auto routes for the apparatchiki through major cities; special airports; secluded residential areas; segregated shops and resorts—all contributed towards telling the Soviet “nomenklatura” that things were just fine.
Similarly, operating out of RenCen, the GM apparatchiki had also locked itself in a bubble. Occasionally, pronouncements from the elders would reveal how out of touch they were. Rich people didn’t care about the price of gasoline; global warming was a crock of shit; and it was hell to be standing in line at the airport, waiting for a flight.
The last hand on the rudder at GM was that of an accountant, and his manifesto was a spreadsheet. As the bow of the leviathan they had constructed struck land, the members of the GM politburo looked up from the spreadsheet, cried out for the people to save them and then abandoned ship.
The individual republics of GM, the car brands, have been left to their own. Some will disappear, a few will reconstitute themselves. All should curse the politburo that destroyed them.
How do you write an obituary for an entity that’s been dead for seventeen years? Like that high-school Biology frog-leg experiment, GM’s twitching since 1992 was due to externally administered stimuli. Yes, I would have much preferred to write GM’s obit in ’92. Back then, the guilty party was merely GM’s brain-dead management. It would have been easy just to rag on about all the lame cars they built. But it’s become a lot more complicated and uglier. Now we all have blood (and red ink) on our hands. And it’s not going to wash out easily.
While we rub on our damn spots, let’s refresh our short collective memory. In 1992, GM posted a $23.5 billion loss, coming off multi-billion dollar losses the year before. It was the culmination of GM’s most disastrous decade ever. Market share collapsed from 45 percent in 1980, to 34 percent in 1989. Share price was down 90 percent from its all-time (adjusted) peak of $358 in 1965. GM’s bonds lost their vaunted AAA rating. The whiff of bankruptcy was in the air. If only the plug had been pulled then. It would have spared us all hundreds of billions and untold agony, not to mention well over 250 General Motors Death Watches.
Up to ’92, it was pretty much all GM’s own (un)doing too, from Astre to John Z. DeLorean. Nobody else to blame. Well, mostly, anyway. Some of the “artificial stimulus” had already begun, in the form of 1981’s Japanese (not at all) Voluntary Export Restraints (VER) deal. Denial and the blame-game were high on GM’s agenda, and curbing Japanese imports was going to fix Detroit. It turned into a classic example of “be careful of what you wish for.”
The Japanese responded with higher prices, and reinvested the resulting outsized profits in Lexus and Marysville, Ohio, among others. Is that what the Motown boyz had in mind when they beggared Washington for relief? And who paid for it all? The consumer, of course. Japanese car prices jumped some 15 to 30 percent during the VER era; Detroit’s, not. Somebody was paying for the development costs of that Caddy-killing Lexus LS400.
The Lexus was overkill anyway; by 1985, the pathetically-shrunken Cadillac DeVille was just a mutated Chevy Celebrity. This self-inflicted damage was mortal, too. GM’s premium brands had been their money printing press since the 1920s. Reel in the consumer in with a cheap Chevy, but make the killing when they trade up.
GM could live with Ford or Plymouth getting into Chevy’s pants once in a while, as long as Mercury, Edsel, Lincoln, DeSoto and Chrysler kept their hands off their “golden girls.” Having managed to keep them chaste for decades, they proceed to royally fuck themselves with ugly look-alike dwarves in 1985. I could go on (and have), but need I say more to explain GM’s death as an auto-maker in 1992?
Going forward from 1992 is an oxymoron. Since the mid eighties, the domestic automobile industry, as well as much of the domestic economy, has been all too heavily influenced by government policy, or the lack of it. What might have seemed good for the US might have also seemed good for GM, but . . .
Let’s call the lack of political will to implement a steadily rising gas tax to curb demand and stimulate long-term investment in an appropriate (and stable) fleet mix of vehicles Exhibit A. Alan Greenspan’s repeated downward pressure on interest rates in the face of both the stock bubble of the late 90’s and the subsequent real estate bubble makes Exhibit B.
The explosion of the financial sector due to the low interest rates and the lack of regulation or enforcement is “C.” American’s eagerness to slurp up the resulting brew of over-leveraged mini-MacMansions and oversized SUV’s with which to make their forty-mile commute is Exhibit D.
The end result: an epic F.
This unsustainable potion of cheap gas and cheaper money created the Zombie Three, with GM at the head of the pack. Even during those boom SUV years, GM’s cost structure and low transaction prices on cars resulted in profits from vehicles that were dismal, at best. In a decent year, like 1996, GM’s North American operations had a 0.8 percent return. What profits GM booked during these past seventeen years were primarily from financing and whatever overseas operations were having a good run, for the moment.
Yet investors were still willing to pay $100/share for a company that couldn’t make a profit on a car. Artificial stimulus indeed.
Meanwhile, it’s no secret that Toyota and Honda were generating around 70 to 90 percent of their global profits out of the US market alone. By building cars and light trucks.
Reality’s last hope would have been C11 in 1992, restructure oppressive union contracts, and hire Roger Penske to vacuum “the tubes” from top to bottom. Oh, and a tax-stabilized price of gas. And a genuine, effective national health care policy. And a responsible financial industry. And a functioning regulatory system. And awake consumers. And . . . so much for wishful thinking.
The inconvenient truth: for decades, GM has not been an automaker, but a wealth and capital-destroying dragon. Some $200 billion dollars in equity has been wiped out. Throw in another $27 billion in debt gone tits-up, as well as “your” contribution of some $45 billion: well over a quarter trillion dollars up in smoke. Where’s Saint George when we need him?
There was a time when we just said goodbye or good riddance to our failed companies. Studebaker was once the biggest wagon maker in the land. No more. Now we’re incapable of killing GM, and it’s too late to genuinely revive it. Just think up some new (electric) stimulus to keep it twitching.
It’s a waste of time and energy to blame GM for anything it’s done, or not, since its real death in 1992. Rick Wagoner’s immutable face is just another mask in our national tragedy play. Even worse, he’s what we see when we look in our collective mirror. In Pogo’s immortal words: “We have met the enemy, and he is us.”
The Associated Press called it: GM is set to enter popular parlance as “Government Motors.” When the automaker files for Chapter 11, the nickname will stick, as the debate over GM’s future centers on whether or not the United States government should own a commercial enterprise. To which the only possible answer is no. It was no back when President Bush over-ruled Congress and authorized the first multi-billion dollar “loan.” It’s no now, as the feds prepare to stump-up another $20 billion dollars to keep GM in business. There are lots of reasons why “new” GM is a bad idea. But here’s the most important impediment: Government Motors doesn’t have the vehicles it needs to survive.
Let’s assume “good” GM lowers its cost base to transplant levels and single-out the models that could give the post-C11 automaker a fighting chance. We’ll combine objective information (last month’s sales data) and some subjective analysis (the enthusiast’s perspective).
Although we’ve long argued that Chevrolet and Cadillac are the only GM brands worth saving, that’s not how Government Motors will roll. So we need to identify potential money spinners lingering within Buick, Cadillac, Chevrolet and GMC.
Buick is a lost cause. The “take a look at me now” brand stands for nothing, save God’s waiting room on wheels. In April, the LaCrosse and Lucerne sedans combined generated 1481 sales. That’s more than the Enclave (5,194 vs. 3,731), but less than Toyota Tacoma sales (8,925 vs. 9,027). I’m no fan of the Enclave’s exterior, but we’ve got to keep something. The Enclave stays.
There’s no nice way to put this: Cadillac is another dead brand walking. Last month, the “standard of the world” also accounted or less sales than Ye Olde ToMoCo Taco. Sales of all eight Caddy models combined clocked-in at just 8,337 units. Caddy has some new models in the pipeline, but c’mon. CTS Sportswagon? SRX replacement? While waiting for a flagship, the CTS is the only Cadillac vehicle worth saving, in terms of product excellence and sales (3,876).
GM’s volume brand is looking decidedly lackluster. The Impala topped Chevy’s sales chart in April at 17,532 units. The Malibu and Cobalt are next up, at 14,665 and 10,627 sales respectively. So, despite the fact that the Impala is a low-profit fleet queen and the Cobalt’s a POS, we’ll keep the old girl, the new ‘Bu and the crap ‘Balt. We’ll also hang onto the Camaro. Corvette? If you must. Volt? Cruze? Equinox? More pie-in-the-sky from America’s master BS baker.
Chevy trucks are still where the money is. Incentives be damned; 26,437 Silverado pickup trucks moved off the lots in April. I’m also liking the Traverse (8,204). By [literally] the same token, GMC should keep the badge-engineered Sierra (8,273) and Acadia (4,764), and stay the course with the Tahoe/Suburban twins (12,586 combined).
And there you have it: one Buick, one Cadillac, five Chevy cars, two Chevy trucks and three GMC trucks. Your list may differ here and there, but I reckon these are the eleven vehicles upon which taxpayers will risk at least $40 billion dollars. Which would be OK, if that was the long and short of it. But it isn’t. In fact, it can’t be.
As the New York Times recently asserted (welcome!), we can blame GM’s sclerotic corporate culture for their abject failure to create a complete line of compelling/profitable vehicles. The idea that the United States government will reform GM’s way of being and reverse the curse is completely preposterous. It’s like asking a cocaine dealer to sponsor a crack addict.
Initially, the Chinese walls separating Government Motors’ management from its political masters will prevent excessive tinkering. But there’s no way GM can insulate itself from “undue” political influence. Not when the feds are both the automaker’s controlling stockholder AND its main lender. And certainly not when there are so many GM “stakeholders” ready, willing and able to play political hardball with GM’s new owners.
Why wouldn’t they? The bottom line is that there won’t be a bottom line. The Obama administration may genuinely want to create and then sell off a profitable GM but it’s under no obligation to do so. To wit: there’s no deadline for returning taxpayer’s money. Even if a reasonable turnaround strategy emerges—complete with performance-based reality checks—the new management team is destined to fall afoul of institutional apathy. I mean, we all know how many government-sponsored projects come in on time and/or under budget . . .
Think of it this way: the above list of cars GM needs to keep AND cull to survive presumes that Government Motors’ new overlords will ignore the blowback from closing factories in any given country, state or congressional district. That’s simply not realistic. If the survival of federally-funded weapons programs depend on their sponsors’ political pull as much the systems’ efficacy, why would we expect anything less (or more) from GM’s lineup?
To paraphrase Lowell George, GM’s been down—but not like this before.
The Detroit News headline: “Obama Auto Bailout Draws Fire.” Suddenly, without warning, Motown’s hometown newspaper has changed sides. What was “their” bailout has become “Obama’s.” The altered allegiance comes hot on the heels Chrysler and GM’s decision to terminate around a thousand dealers apiece. This is not music to the domestic supporters’ ears; the dealer cull represents the complete, final and unavoidable end of Motor City’s domination of the American car industry. The fact that the domestics’ supporters are suddenly behind the franchisee push back—which could scupper both automakers’ future—shows the depth of Detroit’s denial. While the bailout boosters gave The Presidential Task Force on Automobiles (PTFOA) props for shit-canning GM CEO Rick Wagoner, you can file this one under no good deed goes unpunished.
Like any political battle, the latest front in Motown’s wider war against reality is a race against time. Can the axed dealers’ political allies wrest control of GM’s post C-11 future from president Obama’s “smartest guys in the room” before (as?) the company sinks into complete chaos? We’ll see. The DetN reports that Congress critters are firing multiple salvos against US Treasury Secretary Tim Geithner. Reps Kucinich, LaTourette, Conyers, McCotter and others sent Timbo a missive calling for the Obama administration to hand the whole bailout thing “back” to Congress.
To do what, exactly? Other than saving the dealers cast adrift by Chrysler and GM, they got nothing. Which puts the offended politicians at level pegging with the PTFOA. Remember: the PTFOA decided to arrange a shotgun marriage between Chrysler and Fiat, swap the “old” Chrysler’s liabilities for a worthless promissory note (i.e., shares in “new” Chrysler), give the born-again (and again and again) car maker a multi-billion dollar dowry and . . . call it good.
The plan sounded crazy—and it still does. Strangely, despite the dealers’ howls of protest, no one [who votes] seems to care that the feds sold Chrysler down the river. On Friday, Fiat named the three Board of Directors members who will control the new, taxpayer-supported Chrysler LLC. Ignoring the Wagoner problem (Fiat CEO Sergio Marchionne will be both ChryCo’s CEO and a Board member), the announcement was a tacit admission that Chrysler will now be an Italian company. Protectionist outrage? Nowhere to be seen.
This is no small point. As we count down the final hours until GM’s C11, as Congress bellyaches to no practical effect, we can expect history to repeat itself. Former Chrysler exec Jerry York is active again, desperately seeking a chunk of post-C11 GM to call his own. OK, Renault/Nissan’s AND his own. In other words, GM’s C11 could be Chrysler II.
And why not? In Chrysler’s final analysis, all the xenophobic rhetoric about federal tax dollars “saving America’s industrial base” counted for nothing. Not only have the zombies been “allowed” to shutter plants and jettison American production jobs, they’ve been “encouraged” to terminate tens of thousands of dealership-related jobs.
I’m not saying it was the wrong thing to do. I’m simply pointing out that the original logic underpinning the entire $100 billion (and counting) bailout process has disappeared. Which brings two maxims to mind: nature abhors a vacuum and a week is along time in politics.
Will Renault/Nissan fill the hole where the world’s largest automaker used to be? Given that Uncle Sam didn’t get dime one from Fiat for Chrysler, there’s literally nothing to stop them. And if not them, someone. While the feds’ restructuring plan assumes public ownership of the “new” GM, Obama’s army isn’t stupid enough to cling to the ship as it’s sucked beneath the waves. Congress is—which is a scary thought.
Either way, the clock is ticking, and it’s a time bomb. Voters will not put up with this Motown mishegos forever. And the longer this process continues, the worse GM’s chances of even pretending to be in a position to recover. Immediately after The General files, May’s sales figures will emerge. And after that, June. And so on. Anyone who thinks that the GM sales chart’s arrow won’t point straight to hell is seriously deluded.
Delusion is, of course, GM’s strong suit. It suffuses the company’s management. It blights its unions. It envelops its dealers. It infects its pet media. It even afflicts its customers. That’s how General Motors got into this pickle. And that’s how they’re not going to get out.
Unless, that is, Renault/Nissan or some other outside “investor” repeats Fiat’s “pay no attention to this faux Chapter 7″ strategy, scarfs up GM’s good bits for bupkis and cleans house. In that case, General Motors might survive. If so, it will be a vastly smaller enterprise.
In fact, any GM that emerges from C11 won’t be GM in any recognizable way. That would be a good thing for some of the automaker’s current stakeholders. But by no means all. Whether it’s warfare or bankruptcy, “surgical” doesn’t mean bloodless.
I’ve just purchased a Pontiac G8 GT. Sport red metallic with every option. I paid too much (even though it was a below-invoice deal). The car just begged me to buy it. Yep, car guys make the dumbest deals when it comes to their own personal transportation. And I love it. I will drive the wheels off this car, and enjoy every torque-rich moment. But enough about me. Now about Pontiac, and GM. With fewer than eleven days to go before what was once the largest corporation in the world files for bankruptcy, with the Pontiac brand disappearing (what exactly is a “niche” brand anyways?), the G8 GT is a reminder of what could have and should have been. But is it also an indication of what will be? And is that a good thing or a bad thing?
As good as it is, the Pontiac G8 GT highlights GM’s greatest failing: the formerly world’s largest automaker’s unshakable tendency to take the path of least resistance. Remember: the G8 is an Australian import. Originally, this state of affairs was supposed to be a “temporary” fix: a quick way for Pontiac to sell a suitable product in the American marketplace. As with the Belgian Saturn Astra, the G8 was sold internally (and to the UAW) as a “place holder.” After the models succeeded, production would switch to American soil.
Did GM really think that would happen? Who knows? If laziness was GM’s worst sin, self-delusion was its second (followed closely by ADD). Importing cars for a mainstream brand from high cost countries is an inherently risky proposition. (One of the main reasons Toyondaissan builds here.) And sure enough, surprise! GM got nailed on the exchange rate before either car crossed either ocean. More importantly, instead of developing an American Pontiac G8, GM hit [what looked like] the easy button. In so doing, they sowed the seeds of their own destruction. Again.
It’s important to remember that the American automaker has always a deep bench of world-class design and engineering talent. GM also enjoyed complete access to the marketplace. And it had billions to spend on advertising. GM could have fostered strong brands with domestically built, highly competitive profits. But that would have taken genuine commitment from a management team committed to product excellence, rather than the Peter Principle.
How many Pontiac G8′s died because GM’s CEOs and “car czars” sat back and allowed the company’s divisions to expend their energy fighting each other; executives jockeying to generate the quickest, easiest and largest profits, rather than facing their real enemies outside the gates?
GM’s endless internecine warfare led to less competitive products. A growing number of divisions mortgaged their future by offering copy-cat (i.e., badge engineered) vehicles across multiple brands, using aging platforms and retro engines. Why? Why not? And so GM’s products fell behind their Japanese competitors’ reliability, build quality and value for the money.
At some point, GM simply forgot that it was in the car business. It forgot the fact that people buy cars from strong brands that meet or exceed the brand’s underlying promise. How cynical and lazy does a car company have to be to change its brand promise—”Pontiac is car”—rather than build vehicles that deliver the original premise?
In truth, there was nothing wrong with Pontiac’s mantra “We Build Excitement.” There was everything wrong with Pontiac’s products, and, by extension, the corporate culture that provided them. The Pontiac G8 GT is a “true” Pontiac: a poor man’s BMW. Aztek? Montana? Wave? It’s far too late to convince consumers to come back.
The Pontiac G8 GT I drove home last night gets it right. The Aussie sedan lacks a luxury interior and some “surprise and delight” features (e.g., rain-sense wipers, HID headlamps, and power reclining seats). But it delivers excitement at a price the average working stiff can afford (more so every day). It is a Pontiac. Perhaps even “the” Pontiac; a car that completely surpasses the performance and handling of the parts-bin specials from which the brand was born. The G8 does exactly what a Pontiac’s supposed to do.
That’s the lesson for the New GM. Demote the bean counters to their rightful position as guardians of profit, not destroyers of initiative. Elevate the engineers and designers. Build a limited range of vehicles that fulfill their brand’s promise (although God knows what a Buick is supposed to be). Cut all the models that fail to fit the remit.
If you want to know if the post-C11 GM will make it, that’s where you need to look: at the vehicles GM doesn’t build. In that sense, the Pontiac G8 GT is both a clarion call and a warning. In today’s bloated, highly competitive automotive industry, if GM does the easy thing instead of the right thing, nothing can save them. Nothing.
“G.M. is very different than Chrysler,” said Rahm Emanuel, President Obama’s chief of staff. “But I suppose the one lesson for G.M., and all the other players, is that this is a moment when a Democratic president said, ‘I am really willing to let a company dissolve, and there’s not going to be an open checkbook.’ There’s got to be real viability.” Huh? I was under the impression that this was the moment when a Democratic president said “I am NOT really willing to let a failed automaker dissolve. Uncle Sam’s checkbook is as open as a hooker’s gams. For the sake of political expediency, there’s got to be pretend viability.” Of course, it’s much worse than that. The White House has caught Detroit disease, where stupid decisions vie with no decisions for supremacy, leaving the status quo bruised and battered, but triumphant.
Like the Motown moguls that the Presidential Task Force on Autos (PTFOA) protects, all the president’s car guys’ dementia began with an idee fixee. Unlike Chrysler and GM execs, the PTFOA’s starting point had nothing to do with ensuring that they could afford to fly first class to Gleneagles for a round of golf and a hot stone massage for the Mrs. It was a simple question: “How do we save these failed companies (a.k.a. union votes)?”
At that point, the PTFOA developed a massive hardon for federal intervention that’s lasted a lot longer than four hours. Bad craziness was a given.
For example, the bureaucrats running GM’s car business—giving a thumbs-up or thumbs-down on any transaction over $10 million—swear up, down and sideways they don’t want to run a car company. PTFOA boss Steve Rattner has publicly declared that his employer will not “interfere” with GM’s decisions about brands or products. This at the same time that the PTFOA is planning to convert $22.8b of GM’s federal “loans” (so far) into a controlling stake in a newly reconstituted GM. Even The New York Times wonders WTF that’s all about.
Members of Mr. Obama’s auto task force say that even after the government owns a majority of the company, it will have no role in management. That, they say, will be farmed out to professionals, the work supervised by government-appointed members of a new G.M. board.
That doesn’t even make sense. The federal government won’t be involved in GM’s management, but the federally appointed Board of Directors will. And that’s totally different because they’ll be independent, right? Even though they’ll serve at the government’s pleasure. Anyway, I guess we can be thankful that the PTFOA has no desire to farm out GM to amateurs—although God knows I’d put my money on my fellow armchair executives before I’d “invest” a single dime on a GM suit. You know; if I had a choice.
I’m completely confused by the PTFOA’s reluctance to roll up its sleeves and tell GM how to build what for whom, where, what brand to sell it under and how to sell it. I don’t want the feds to run GM. But if they are running it—and they are—how can they do so without getting down to brand and product-related decisions?
Truth be told, the car business is about . . . wait for it . . . cars. If the feds are “protecting the taxpayers’ investment” in GM, they should start by firing all the people who had anything to do with GM’s current brand and product plans—before they make any more. How in the world does anyone expect Fritz “the Wagoner Clone” Henderson to make the correct pre- and post-bankruptcy car-related decisions when the ex-CFO has shown no ability to do so in the past?
By the same token, not firing marketing maven Mark LaNeve is proof positive that the lunatics are still running the asylum. This is the man who ran eight GM brands into the ground, destroying any and all brand equity through a massive miasma of mixed messages. I wouldn’t let LaNeve write a Craigslist ad for my minivan, never mind control a $3 billion ad budget. Why has no one rid GM of this troublesome man?
Again, I’m not in favor of Uncle Sam running GM. Clearly, they don’t have the appetite or the aptitude for the job. But as the Brits say, it’s time for the PTFOA to piss or get off the pot. Either the quango should take full responsibility for GM’s product-related plans (please, God, no) or offload this entire mess on someone else (liquidation or cough-Nissan-cough).
Either way, an immediate palace putsch would be a damn fine idea. Given that the PTFOA has already shit-canned GM’s CEO, there’s no reason to delay a more thorough housecleaning. Every day that the PTFOA allows GM’s current management to chart the automaker’s course makes reversing their lunacy more expensive. And less likely.
GM’s investors and bondholders have taken their lumps. The value of their investments have plummeted and they’ve been blamed for enabling GM’s mismanagement. Hedge fund managers and institutional investors are not the most popular people in the wake of the financial meltdown so it’s easy to forget that many investors are not Wall Street wheeler dealers, but regular folks with investments.
Patricia St. Pierre is a nice lady. She and her husband Cliff worked hard, raised a family, got their kids through college and retired on their investments. They live on Grosse Ile, a comfortable island suburb downriver of Detroit. She’s 70 now and she’s worried about having to go back to work because their life savings may be wiped out in a GM bankruptcy.
Mrs. St. Pierre and her husband have what she calls a “large amount” invested in unsecured GM bonds. The St. Pierres attended a meeting at Warren’s town hall, across the street from GM’s Tech Center with other individual bond holders on Thursday as the President was announcing the bankruptcy of crosstown rival Chrysler. When I asked her how she came to own the bonds, she said that they had moved to bonds during a downturn in the stock market with their mutual funds. They wanted to try “something that was safe”.
They initially did well with Ford bonds but moved to GM debt three years ago when Ford seemed to be at greater risk than GM. As their broker told them, “you don’t think they’ll ever be out of business.” That same reason is why they haven’t sold before now. They also didn’t know at first that the debt was unsecured. Then the bottom fell out last fall. “Everything turned on a dime.”
Though neither has worked for the company in years, the St. Pierres have ties to GM. Her father is a GM retiree and she worked for GM right out of high school for seven years. Cliff St. Pierre graduated from the General Motors Institute. LIke GMI grads back in the day he worked as an intern at GM and then started his career there.
The St. Pierres live off the income from their investments and Patricia acknowledged that they’ve earned interest since owning the bonds, but they face losing all the principal since the bonds are unsecured. GM has offered debt holders 225 shares of stock in a reorganized GM in exchange for $1000 of the $27 billion in debt GM owes, plus whatever accrued interest the bonds have at this point. If they don’t accept the deal, GM will declare bankruptcy and they’ll get nothing.
The stock offered to bondholders will represent 10% of GM’s equity. Stockholders, punished for enabling a feckless board of directors, will own 1 percent of GM stock. The government will own 50 percent of GM, and the UAW’s VEBA will own the remaining 39 percent.
One thing that troubles the St. Pierres the most is that they are being left completely out of the loop and not informed by either GM or the government. While the large bondholders are negotiating with and in constant contact with GM and the Presidential Task Force on Automobiles (PTFOA), the St. Pierres haven’t heard a thing except for the most recent prospectus from GM.
There is nobody in the process representing their interests. They’ve contacted Senators Stabenow and Levin to complain but their elected officials haven’t been very reassuring. They feel pretty helpless. Their broker doesn’t really know any more than they do. The St. Pierres aren’t destitute, but you could hear the worry in her voice. “I’m glad my kids aren’t about to graduate (high school) and go to college.”
While it can be argued that they took a risk and lost their bet, the government cutting in line ahead of other prior creditors creates a huge dilemma for investors, investors that may be you, your neighbors and your family members. As Cliff St. Pierre said, “who will want to buy bonds?” Who will want to invest if the government is going to step in and declare your investment virtually worthless?
Some say that GM’s stakeholders, management, the UAW, shareholders and bondholders, all deserve blame for the company’s decline, but the bondholders and stockholders, while perhaps giving management too little oversight, played by well defined rules, the rules and laws we’ve used to become the wealthiest society in the planet’s history. Now the President is rewriting the rules.
When I asked her who she thought would protect her interests more, the administration in Washington or a bankruptcy judge, Patricia laughed ruefully and said the bankruptcy judge. She’s not happy about the government owning GM. GM’s bondholders, after all, do have a bigger investment in the company than the government. “It’s not a good situation,” she said.
It doesn’t seem that long ago that General Motors was pouring billions of dollars into Cadillac in a bid to create a line of world-class luxury cars. American enthusiasts rejoiced. Now, with GM on the verge of bankruptcy, all signs point to a full-scale retreat. Assuming GM pulls through, within the next five years it will kill Buick outside China–or at least kill its Lexian aspirations—and shift Cadillac downmarket into a “near luxury” position.
Cadillac’s bid for a return to greatness met with an early success. The 2003 CTS’ angular styling might have polarized opinions, but it made a strong statement and grabbed everyone’s attention. The car’s performance suggested that GM was capable of developing a first-rate rear-wheel-drive sport sedan.
The Escalade sold well, but its pushrod powerplant and antiquated chassis did not fit Cadillac’s new mission. A DOHC-powered, independently suspended crossover would be much more fitting. Problem was, in the late 1990s it was hard to tell what would make for a successful crossover. Should the proportions be those of an SUV, or more like those of a station wagon? Cadillac opted for the latter, while the market opted for the former. Combine wagonesque proportions with a BMW-like price, and the 2004 SRX flopped.
The 2004 XLR roadster was sharply styled, but insufficiently luxurious and (like the SRX) over-priced. Perhaps emboldened by the CTS’ success, Cadillac convinced itself that it could give subsequent models Teutonic prices from the start—a bad move. Both Toyota with the original LS 400 and Hyundai with the Genesis recognized that new entries must start low. If they sell, then you can raise the price. So the XLR became strike two.
The CTS had carved out a spot vis-a-vis the BMW 3-Series. Could a rear-wheel-drive Seville replacement do the same against the 5-Series? First, newly hired car czar Bob Lutz delayed the STS. Not a fan of Cadillac’s new look, he ordered that the STS’ greenhouse be redone to add tumblehome—even though such a major change late in the process cost tens of millions of dollars.
Though perhaps an improvement, the revised design both failed to be beautiful and failed to make a strong statement. The interior, though more luxurious than that of the CTS, was still not luxurious enough for the STS’ richer target market, and its styling was boringly conventional. The market yawned, and stuck with the imports. Strike three.
Hyper-expensive supercharged STS-V and XLR-V variants were little more than a distraction. If the basic product isn’t a winner, adding power isn’t going to make it one.
Lutz’ desire to offer a production version of the gargantuan 13.6-liter Sixteen? To those thinking with their heads, the Sixteen seemed overly ambitious and a poor use of corporate resources. Before it could realistically attempt a statement like the Sixteen, Cadillac first needed to succeed not only with the STS but with a never approved S-Class competitor. In retrospect, this embodiment of the Detroit executive ego seems downright ridiculous.
Back in the real world, Cadillac’s upmarket adventure was dealt a fatal blow when the STS failed to carve out a beachhead north of $50,000. In the aftermath, Cadillac couldn’t decide what to do next. Plans to replace both the STS and DTS with a large rear-wheel-drive luxury sedan wandered this way and that, then died. The V8 that would have powered this car met the same fate. Hyundai could field a competitive DOHC V8. Detroit would not.
Yes, the redesigned 2008 CTS has been a hit and deservedly so. But you can’t base a luxury brand on one $35,000 model.
At the same time, Cadillac can’t simply return to where it used to be. The DTS has solidered on, but sales have slowed to a trickle. With the Zeta-based replacement canceled, and no new large front-wheel-drive platform in the pipeline, Cadillac could simply abandon the large luxury sedan segment. With the collapse of the conventional SUV market, the Escalade also seems unlikely to live on in its current form.
So, whither Cadillac? With the foray into Teutonic territory one for four, and no funds for another round, Cadillac’s target must shift from the Germans to entry-level Lexus. For 2010, the SRX switches to an Equinox-related front-wheel-drive platform. Next up: a LaCrosse-based sedan. After that: perhaps a Lambda-based Escalade.
In short, Cadillac’s new focus will be Buick’s current focus: front-wheel-drive-based, comfort-biased vehicles with transaction prices in the thirties to low forties. If the two aren’t to overlap, Buick will either have to shimmy closer to Chevy or become China-only. Among the many casualties of GM’s meltdown, this forced acceptance of Cadillac’s second-tier status could be the saddest. Even Lincoln, which beat a similar retreat post-Nasser, could emerge with a stronger product line.
Want to remember Cadillac at its final zenith? Buy a 2009 CTS-V.
This is not what I expected. Sure, I got the bankruptcy bit right. Big deal. Better analysts than me were making that call back when I was playing with Corgi toys (another car company destined for the scrap heap). But I never thought Uncle Sam would nationalize GM. Ace commentator PCH101 will tell you it’s all in good fun: a temporary government intervention that gives taxpayers a shot at recovering some of the tens of billions [we shouldn't have] spent keeping the zombie automaker alive. Or at least postpones GM’s inevitable dissolution for a less financially fraught finale. But I reckon politics will rear its ugly head, create a distortion field around GM’s car making business and kill any hope of GM surviving in any way, shape or form. The acid test: the Chevy Volt.
Clearly, the Volt is a born loser. For one thing, it’s too late. If GM’s electric/gas plug-in hybrid had appeared ten years ago, before the Toyota Prius created and satiated the market for econo-hybrids, the Volt might have had a chance. Second, it’s born under a bad sign: bankruptcy. Third, it’s arriving (if it ever arrives) at the wrong time. With the economy in the doldrums, gas prices in Davy Jones’ locker and new car prices about to tank (thanks to GM’s aforementioned C11), a relatively cramped $30K high mileage sedan boasting untested technology that requires consumer behavior modification (i.e., plugging it in) is, well, doomed. Which reminds me: the Volt doesn’t work.
The undaunted cheerleaders over at Autoblog (AB) posted a behind-the-wheel test of GM’s “plug-in savior.” Click on the video and you learn that the EV boosters were treated to an “80 percent plus representation of what [the Volt buyer's] electric vehicle driving experience will be in the Chevy Volt.” The test—such as it wasn’t— completely missed the point. It’s not the “experience” that counts. It’s the utility. Can the Chevrolet Volt drive a full 40 miles on battery power only? Uphill? Upwind? In an arctic chill? In the desert heat? How long does it take to recharge? And how does it drive on gas power AFTER the battery discharges? GM’s Volt man proudly proclaims The General’s about to build 75 Volt prototypes. Big friggin’ deal. Show us the practicality. Now.
Better yet, don’t. There is no business case for this car. In fact, the Volt is a near-perfect representation of the kind of half-baked, reality-divorced, over-optimistic product development that drove the artist formerly known as the world’s largest automaker into Uncle Sam’s loving embrace. It’s a Hail Mary from a company that doesn’t have a prayer of dislodging the Toyota Prius from its stranglehold on environmentally conscious, financially frugal car drivers. Never mind the Volt’s plug-in aspect. ToMoCo is already working on a plug-in Prius. If the Volt proves that power cords are pistonhead paradise, the Prius will have one. AND it will work.
Did I mention the Honda Insight? By the time the Chevy Volt gets around to getting around (for real), the Insight will have mopped-up the few thousand American consumers who want a Prius, but prefer someone else’s version. Lest we forget, GM has been producing knock-offs that singularly fail to knock the competition off their sales perch for the last thirty years or more. Be they economy, muscle or luxury cars. Truth be told, in the last two decades (at least), GM’s only consistently competitive, consistently profitable vehicles have been trucks and SUVs. Uh-oh . . .
Common sense says whatever’s left of GM after bankruptcy needs to make as much money as possible to pay us back. To stop sucking-up billions of our hard-earned tax dollars to provide work for union workers, management idiots and federal bureaucrats. The American automaker openly, brazenly admits that they’re not going to make money on the Volt for a long time. [See video above.] An indeterminate amount of time, in fact. Meanwhile, the Volt will require further billions to [maybe] make its technology work. And then tens of millions more to market the damn thing.
So kill it.
If the goal is to return to profitability, post-C11 “good” GM should focus on building the most profitable vehicles left in their arsenal. Then they should pick a couple of vehicles that have the most potential to be profitable and figure out how to make them profitable. There’s no way that niche products can pass this stress test. CTS Sports Wagon? Dead. Chevrolet Volt. Gone.
Of course, a return to profitability is no longer GM’s goal. Since when does the US government care about profitability? Have you looked at the federal deficit lately? When President Obama outlined his reasons for rescuing Detroit, it was all about green jobs and a healthy planet. Not profits or ROI. Which means the Volt will not die. But GM will.
Time’s up! GM has announced that 2010 will be Pontiac’s final year. No surprise to anyone who’s been reading the writing on the wall. But nevertheless a sign that those in charge of GM’s destiny are more interested in appearing to be doing something than in actually addressing the core weaknesses of the car manufacturer. Why is so much attention focused on GM’s brands? Because, like the CEO, they’re what outsiders can see and at least superficially understand. The real problems are both less visible and less easily comprehensible.
As some within GM have long recognized, a wide array of brands could be a major competitive advantage. When you have multiple brands to work with rather than just one or two, each brand can be tightly focused, and thus be more meaningful than a brand that must be all things to all people. GM didn’t prosper because it failed to provide each brand with distinctive, desirable cars. Instead, every brand attempted to be all things to all people. Why? Partly because distinctive products cost more to develop than badges alone, but also because each brand had its own dealers, and each dealer wanted one of everything.
Dealers’ desire was not irrational. Demand for different sorts of cars varies with gas prices, the economy, and fluctuating consumer tastes. Any dealer that wanted steady sales—a key goal for any business—wanted a diverse set of products to sell. This longstanding problem was finally addressed a few years ago, when Buick, Pontiac, and GMC were combined into a single channel. This should have freed up Buick and Pontiac to focus on specific groups of car buyers with finely tuned products.
Pontiac’s focus was to be enthusiasts—for real this time. Bob Lutz announced that every future Pontiac would be a rear-wheel-drive performance-oriented car. Three models, each with two or three body styles, would have been sufficient: the Solstice coupe and roadster, the large G8 sedan and (planned but canceled) wagon, and a smaller Alpha-based coupe, sedan, and (possibly) hatch. No other mainstream brand offers a compact rear-wheel drive sedan, or focuses so tightly on enthusiasts. An Alpha-based Pontiac could have been a big winner. Hopefully we’ll still see this car from Chevrolet. But it would have been better from a brand focused entirely on driver’s cars.
So, maybe GM had finally figured out how to realize Pontiac’s potential, only to have gas prices shoot up and then have the bottom fall out of the market. GM being GM, plans for performance-oriented cars were tabled not long after gas prices spiked. Unlike the strongest auto companies, GM has long had a habit of constantly second-guessing its plans and over-reacting to car market fluctuations. Of course, this time around GM had no choice: it’s out of cash. It might have finally muddled through to a solution, but too late.
And so Pontiac will die next year. Saturn, Hummer, and Saab will be gone even sooner. This doesn’t change one key fact: killing brands does not address GM’s historical inability to consistently create distinctive, desirable cars.
Limited resources have often been blamed for this inability. Supposedly GM split its product development and marketing funds too many ways. But if each product was viable, it should have been possible to gather the necessary funds for it, at least before the recent collapse. Funds were limited because of limited faith, both inside and outside GM, that proposed products would be profitable.
The root problem: senior executives at the top of the corporation continue to be involved in more product decisions than they can possibly make well. These senior executives cannot understand each product and market the way an empowered, dedicated product team could. And they lack the time to personally make all of the decisions that need to be made.
The visible consequences: a few great cars that received the undivided attention and logjam-breaking influence of senior executives, and a larger number of not-so-great ones that did not receive this attention and influence.
Two possible solutions: reduce product offerings to a number that senior management can personally attend to, or transfer decision-making authority for these products to multiple units lower in the organization. GM made feints at the latter strategy, most notably with the mid-nineties formation of cross-functional vehicle teams led by Vehicle Line Executives. But this decentralization was never complete, and with each crisis the organization backslid to its old ways.
Even with GM on the brink of bankruptcy, there’s still no sign that substantial changes are being made to the GM organization. They’ve replaced the CEO and they’re reducing the number of brands. This treats the symptoms rather than the disease. How this course of action generally turns out: the surgeon (wielding a cleaver in this case) cuts and cuts and cuts until the patient dies.
Excitement is an ephemeral phenomenon. As was Pontiac. It had its glorious day in the sunshine of the exciting sixties. Pontiac was like the polite, quiet middle child who ran away to California in the early sixties, became a huge star, crashed in 1970, and played the county fair nostalgia circuit ever since. In between repeated bouts in rehab. And now we’re here to pay our last respects.
Not only was Pontiac the “quiet” child in the GM household, it was also the unplanned “accidental” child. Created in 1926 as a minor lower priced “companion” to Oakland, one of GM’s original five car companies, Pontiac survived its mother’s death in the Depression. To save costs, GM’s President Alfred Sloan had Pontiac share a lengthened Chevrolet body and chassis as well as other major components. It became a tarted-up Chevy, and with Pontiac’s first straight-eight engine in 1933, a more powerful one. Thus badge-engineering was born.
In Sloan’s “a car for every pocketbook” dictum, Pontiac became the (realistic) aspiration for the Chevy driver of the thirties. Pontiac’s prices slotted in exactly between the most expensive Chevy range and the cheapest Oldsmobile.
But Sloan’s religiously hierarchical structure collapsed at the beginning of the Depression. And by the fifties, the divisions were all over each other. It was like a new twist to a professional wrestling tag team match: The GM Mid-Price Thee Stooges. And although the GM team made sure to make it look like they were also fighting with each other, it didn’t really matter, as long as the real competition was flattened. The competition’s contestants like Edsel and DeSoto were tossed out of the ring, permanently. Mercury, Dodge and Chrysler were left bloody. And it wasn’t ketchup either.
But Pontiac was the laggard of the GM team until 1959. That’s when it reinvented itself, started working out in earnest, grew a “wide track,” and let its (now dyed blonde) hair grow long. And overnight, it became the Star(Chief).
Instantly, Pontiac jumped to fourth place in US sales. The dreamy 1960 “Wide Track Pontiac” ads as rendered by Fitzpatrick and Kaufman are icons of the time when Americans were ready to fully embrace image, youthfulness, style, and most of all, excitement. Pontiac’s decade had arrived.
Unarguably the best styled cars of the sixties, Pontiac jumped to third place in 1962 and held that spot though the decade. It was a crushing blow to Chrysler’s Plymouth division, which had claimed that perch since the late twenties. And in doing so, Pontiac sucked Chevy right into the GM tag team spectacle. And before long, even Caddy would be in the ring too, fighting for the working-man’s attention (and suspension of disbelief).
But all during the sixties, Pontiac had the moves to keep the eyes on it. The first was the 1963 Grand Prix coupe. It had the exclusiveness and formal elegance of the Buick Riviera coupe, at about three-fourths the price.
But Pontiac really wowed the crowds with its 1964 GTO. Now here was something that hadn’t been seen before. Drop-kick the big 389 into the light, mid-size Tempest, along with suspension, tire, appearance and interior upgrades, and the affordable American enthusiast car reached its zenith. In this pre-BMW era of fossilized British roadsters, the GTO overwhelmingly had the best overall performance/dollar equation. Pontiac was BMW before BMW was cool (or available).
But like for so many stars of the sixties, the seventies were not kind to Pontiac. Its flabby beltline was clearly showing. What remaining life forces it could muster were all concentrated on one remaining move, the Trans Am. And even that became a bit of a joke after one too many times. Pontiac’s star had passed, and it tumbled out of the coveted number three spot.
Now its moves were reduced to pathetic little imitations of Chevrolet: Phoenix, Astre, Sunbird, J-2000, T-1000, etc. Having lost its mojo, Pontiac also began endless self-conscious attempts to capture the BMW cachet, like with the original 1973 Grand Am.
Oddly enough, Pontiac’s last-ditch BMW-caricatures enjoyed a brief revival of interest during the mid-eighties. But the crowd that was paying (not very much) was not exactly a highly coveted demographic. As in this uncharitable description of the stereotypical driver of a (red) Grand Am: “a nail manicurist who lives in a trailer with an unemployed (former wrestler?) boyfriend”. Pontiac had become the Wal-Mart BMW. Be careful what you wish for.
Despite a few desperate last-ditch twitches induced by steroids smuggled in from Australia, Pontiac was tossed out of the ring for good. And the once-invincible GM tag team is desperately looking for signs of life among its few bloodied remaining members.
As GM’s journey to bankruptcy nears its conclusion, the punditocracy is busy contemplating the company’s afterlife. The current line of thinking: the feds will cleave General Motors in two. Bad GM gets Buick, GMC, HUMMER, Pontiac, Saab and Saturn. Good GM “buys” Chevrolet and Cadillac. It emerges from Chapter 11 unencumbered by outdated production facilities, warring management, befuddled marketing, over-priced labor, restrictive union work rules, astronomical pensions and onerous health care obligations. Chevillac rises from the ashes to steal share from both mainstream and luxury brands, repay its debts and thumb its nose at Bailout Nation’s critics. But here’s the thing: good GM is “saving” the wrong brands.
“What’s a Chevrolet?” branding guru Al Reis asks, rhetorically. “It’s a small or large cheap or expensive car, truck, SUV or sports car.” Reis has been sounding the alarm on Chevy’s branding for over twenty years, claiming the company lacks the focus it needs to survive in a market place with over 40 competitors.
So how could the liberated Chevrolet rebrand itself for success? “Get rid of the trucks,” Big Al suggests. “Take Chevy back to its roots. Make it what it was before Saturn arrived: an entry level car brand.”
Yes, well, what would distinguish this new Chevy from its competitors? Toyota owns reliability. Hyundai owns price. Nissan owns value. BMW owns driving pleasure. So. . . what? “It should be an American brand,” Reis says. Even if the cars are made somewhere else like, say, South Korea? “These days consumers don’t care where their products come from. Ralph Lauren’s clothing is made in China.”
When I push Reis for a unique selling point for Chevy, he hesitates. I can almost hear him shaking his head. “It’s too late to narrow its focus,” he says. “Other than appealing to patriotism, there isn’t anything left.”
I suppose Chevy could play the patriotic card, returning to the brand’s former “baseball, hotdogs and Chevrolet” appeal. It could even play off its taxpayer subsidy to assert itself as “America’s car company” (yes way). Chevrolet could offer comfortable, affordable and reliable American-styled sedans. Sort of like the groundbreaking Chrysler 300, only better.
Fine, but I doubt the US market would value four-wheeled flag waving enough to make Chevrolet profitable. Remember: Ralph Lauren’s WASPy brand ID convinces customers to pay a premium for his Chinese made apparel. If Chevy can’t charge a premium for these “all-American” products, it will have to compete on price with some of the world’s most efficient automakers. Why would the end result be any different than it is today?
Cadillac sits on the opposite end of the scale. As Lexus, Mercedes and Audi have proven, you don’t have to restrict yourself to one automotive genre to be a successful luxury automaker. But, like Chevy, like any car company, it’s all about the brand. The CTS may be as good as an equivalent BMW, but in this rarefied air, perception trumps product.
“If someone goes down to their golf club and says ‘I just bought a Cadillac,’” Reis says, “it doesn’t mean anything. It doesn’t mean you’ve made it.”
Restoring the Cadillac brand to the pinnacle of automotive desirability would require a multi-billion dollar investment in new products and an equally expensive marketing effort. At the same time, Cadillac would have to abandon its current willingness to maintain volumes with badge-engineered bling. Does Cadillac have the time/will/money to ditch/evolve their current lineup and make and promote the kind of world class cars that could reinvigorate the brand?
Meanwhile, GM is throwing the baby out with the bath water. Buick, meh. But GMC is a strong brand that would gain strength the moment Chevy transfers all its SUVs and pickup trucks to the professional graders. Assuming the US economy recovers sometime before the next century, the pickup market will return. And after driving the Chevy Tahoe hybrid, I’m convinced there’s more room for the genre’s fuel efficiency, packaging, durability, safety, style, convenience, etc.
HUMMER may be the antithesis of President Obama’s vision of the American automobile’s future, but it’s an instantly recognizable brand. HUMMER’s underlying concept—SUV as survivalist’s enclave—still has resonance. Saturn has the touchy feely thing happening. It could be the home of green vehicles. American sports cars? Give Pontiac the Corvette, Solstice, Camaro and a performance brand is born. Saab could return to its roots an, uh, do whatever it is Saab used to do.
Alternatively, nothing. While resurrecting two or more of GM’s eight brands is doable, so is going to the moon. Judging from recent polls, Americans are more willing to fund lunar colonies than pour endless billions into GM.
That’s because they know that Uncle Sam isn’t “protecting ” or “investing” taxpayer’s money by subsidizing GM. They’re gambling on a loser. “GM has destroyed the equity of eight car brands,” Reis says. “You could almost say that’s what they do best.”