Bunter

The Yaris in the US shares lots of common components with the Scion xB and xD. The vehicles also occupy many of the same market needs and are often cross-shopped. And what’s this Toyota Matrix thing that is sitting on their website?

I thought it was pretty obvious that Honda/Toyota/Nissan has “cloned” cars in order to enter various markets. A Euro-Honda-Legend is a USA-Acura-RL. This is a clone… it just spans into two markets to avoid excessive overlap within a single market. This is still the automaker’s attempt at splitting fixed costs by bumping up the volume of units sold.

When a company has high fixed costs, it needs a way to cover those fixed costs. Volume automakers have insane amounts of fixed costs. Saying “slash the fixed costs” is novel, but is rather difficult to execute in a short time period. When you slash volume before you slash your fixed costs, you go bankrupt as we witness in recent times. The Big 3 have been gradually reducing its fixed costs over time, but their volume is dropping faster than their fixed costs.

Bottom-line… if you don’t find a way to spread out your investment into lots of units, you cannot make money in the volume-auto industry. GM is getting crushed because they failed to manage both their fixed costs and their market strategies outside of the USA. But don’t confuse the issue by believing that all clones are bad.

How stupid was that?! Your primary market is leftist profs who loath GM and then you shove a GM logo on the car?! Notsobright. (And while I’m being somewhat tongue in cheek here, there is a grain of truth to my comment, as well).

As for Saturn, the buying experience should have been matched by the engineering of the car, without any US market carry over. In other words, GM could have saved themselves a ton of work and simply made Saturn a “Vauxhall” for North America in much the same way as Opels are rebadged as Vauxhalls for the UK.

Think of how Saturn might have done well with smart assembly lines at their ONE factory, churning out Astras, Vectras, Zafiras and Corsas. The buying public in the USA is largely ignorant of what goes on in Canada, never mind Europe; 99% would have never known that these “Saturns” were Opels in the rest of the world.

But GM simply can’t do “smart”. Hence, they are at death’s doorstep even while supposedly being the #1 volume auto manufacturer in the world.

Nothing lasts forever.

Having a separate full brand for niche/excitement/performance is a bad idea from a marketing perspective since it says that the other brands don’t have excitement or performance. You want to be able to say that you can get performance and excitement from Chevy and Cadillac. Don’t detract from the SS and V sub-brands within those divisions. Besides, unless Pontiac gets the Firebird and Corvette, it has no claim to being a performance brand.

Buick has such a strong association with elderly drivers at this point, it would be too difficult to change that perception. Besides, you really want to be focusing the luxury buyers on Cadillac.

Make it simple for buyers. Chevrolet is the value brand and Cadillac is the luxury brand. Both brands will give you performance and excitement. If you want even more performance, then go to SS and V versions of those brands. Simple stuff.

The only case I would see for a third brand is to bring in a brand like Opel that hopefully doesn’t have as much baggage as the other brands. They need something to try to bring back the disaffected drivers that want nothing to do with the existing brands.

Scion are clones? Of what? Not a single model is a clone of a model sold as a Toyota in the U.S. Now if you meant Lexus you have a decent example, but not Scion. Scions are sold as Toyotas in foreign markets, but they are not here so they are not badge clones. Even though Lexus uses some of the same platforms the cars are different enough that people can tell it’s not just some trim and options that they are paying extra for.

By the way, holydonut, are you the REAL Bob Lutz? I wouldn’t blame him for posting anonymously just to vent. I must be tough to be such an outspoken guy and have to force yourself to say the GM B.S. everyday.

Not sure I follow, but thanks.

What are the Toyota “clones” you speak of? You’re not meaning the vehicles that are Toyota Previa in the US but Tarago in Australia, or Tacoma in the US but Hilux everywhere else, as examples?

And there lies the problem. Sorry, but I don’t get your ardent defense of “cloning brands.” It is precisely why GM is in trouble.

Look at your sentence again. The part before the comma? That’s what GM should be fixing, reducing those costs until the company begins making sense — then make cars to fit the size. Cloning brands to support the mammoth size has to be about the stupidest thing ever.

GM hubris wouldn’t let them accept that they weren’t going to be the world’s top manufacturer, measured in volume, and that was the main criterium for company decisions: “How do we remain #1 in volume?”

For my money, #1 in Profitability would have done just fine, thank you.

I’m sure it would be convenient to trace events back to a single day when some person thought “Let me screw over GM in 80 years by launching the Pontiac Brand.” And, we cannot pin-point a date in 1970 when someone thought “I can kill Pontiac today, but I’d rather read about GM’s problems on the Internet in 2008 so let’s keep it around.”

These companies have massive amounts of inertia from prior business decisions. You have to consider that for the entire time that GM will exist – it will be a money pump. Money goes in, and hopefully money pops out. It takes a good strategy and a lot of management accountability to actually create a good pump, and similar challenge exists to change how that pump works.

It is clear to most people that the amount of investment dollars (money going into the money pump) for a clone is smaller than what it takes to pull off a unique car. So, companies love clones. These clones could be brand clones for a single market (what the Big 3 chose to do), or they can be clones that span other markets (the Asians).

For the Asian firms, the clones require homologation to be accepted by those markets and to meet local regulations. As a result, the Japanese made business models that were supported with the development of low-margin small cars that could be sold in high volume once you add together their many international regions. This is a contrast to the American business model where they sunk money into saturating the USA with more vehicle types. Unfortunately, the Big 3 were rewarded for years with their attempt to have high-margin and high-volume sales concentrated in North America.

It’s not just laws that make it expensive for an automaker to nix a clone. Yes, $Millions are required to halt business operations from a legal perspective. But, keep in mind making fewer vehicles results in fewer dollars coming into the pump – so it costs you in the short run as well on the operating side. But, for GM the goal should have been identified that the company should shrink from its inefficient and large brand overlap. This would allow them to focus efforts on more profitable business decisions. But this is a long-term proposition and Americans rarely think in the long term. Shareholders definitely hate thinking of many quarters of poor earnings in order to have a better company 2 years later.

It would be very expensive for Toyota to suddenly abandon selling in one of their international markets – just as it would be expensive for GM to stop selling its cars to one of its US brands. The benefit for Toyota is that their strategy is good and it doesn’t benefit them to kill their clones. Unfortunately, GM kept up its clone games since their business leaders lacked the ability to impose necessary changes to their business model.

A corporation grows slowly, and the business planning also assumes a certain rate of acceptable change. But if your change is consistently short-sighted and executed with extreme greed (Detroit and Wall Street), a sudden shock to the business sends it into chaos. The Pontiac, Buick, and Oldsmobile Brands made sense for GM decades ago, but it started to make less sense as time progressed. The gradual decay made it hard for them to justify further cutting after they rid themselves of Oldsmobile.

I don’t even want to know how Saturn and Hummer came into existence…

For example; do GM have to produce a Pontiac Torrent from the Chevrolet Equinox because they just have to have something to supply out via those contracted Pontiac dealers?

Which part is the chicken and which part is the egg?

If it cost $500m to develop the Malibu why would it cost $750 million to develop the Aura, if the Aura and Malibu are basically the same car?

I could believe it would cost $500m to develop the Malibu and then $100m to develop the changes to make it an Aura, but why would it cost 1.25 times more to badge engineer?

But, regarding your confusion – the answer probably lies in semantics. Lutz points out it takes roughly $750M to “do” a brand clone. That $750M assumes all investment including marketing dollars (but excluding variable incentives per unit sold). So, Lutz is referring to his understanding that the FWD clones take about $750M each to bring to market. And yes, since he’s talking ballpark figures he’ll have a $100M spread.

$100M to do a brand clone would be a pipe dream. $100M might get you a refreshed IP, center console, armrest, fog surrounds, and grille.

However, bear in mind that if you were to take away any one of the clones then the amount necessary to execute the remaining vehicle(s) goes up since fewer vehicles would pick up what used to be common investment.

It is true that if you do not build the brand clone, then you will save money. But before your critical thinking skills get turned off – keep in mind that the absence of this brand clone also means you’re making less money. If there were no Auras, you can rest assured that the total number of Malibu sales would not be equal to 217,092 (assuming the cited numbers in the article).

Since GM has astronomical fixed costs, it needs to make lots of units. Assuming a normal SAAR for D-Segment cars (the SAAR for 2008 is just mind-boggling low), the Aura would pay off its investment during its development lifecycle while also helping pay Lutz’s salary and making sure future cars are able to be developed.

The problem is finding a proper balance with this approach while avoiding a deterioration of your brand and product positioning. Thus far, GM has not executed this well. It is obvious their attempts to make cheap bucks by offering 5 versions of the same vehicle end up destroying their ability to function as a company.

But it is rather myopic to say that the tactic is idiotic given any circumstance. Consider that even Toyota would attempt something similar with their Scion brand in the US and VW/Skoda/Seat play similar wacky games with clones in other markets.

I think GM and Ford should look more closely to their Australian counterparts on how to develop cars on a budget.

I hope Saab survives, not under GM control but under new owners that allow Saab to actually be competitive. I think GM should get rid of Buick, Saturn, GMC, Hummer and sell Saab to someone nice. That’d leave Chevrolet as the main brand, Pontiac as the sports/niche brand and Cadillac as the luxury brand. i dont understand the point in a ‘near luxury’ brand like Buick.

We in the automotive blogosphere spend too much time focusing on personalities and not enough time critiquing systems. Wagoner and Lutz are merely symptoms of GM’s malaise. They both would have been long gone if GM had a healthier corporate culture.

How ironic that GM’s big reformer turned out to be a guy in his twilight years who had some pretty backward-looking ideas about product.

I could believe it would cost $500m to develop the Malibu and then $100m to develop the changes to make it an Aura, but why would it cost 1.25 times more to badge engineer?

D

In all seriousness, I think Buick is in a better position than Pontiac however. Nobody can remember the last time they drove a Buick but everyone can remember driving the cruddy Grand Prix that Avis or Enterprise inflicted on the public.

If GM survives, Buick could be remade into a new make and take some swings out of the park. I mean, for Buick, why not do something totally different? Better to be the first choice for 5% of buyers than to be the 14th choice for 100% of the market.

I think Lutz has been on holiday for about 8 years and just came back to the office in time to see his furniture tossed out.

And anyway, Lutz will get a nice fat golden parachute when GM goes bust. Or the day before GM goes bust, I am sure Bob will cash a $50 m cheque before it bounces.