General Motors Death Watch 103: Deja Vu All Over Again

Robert Farago
by Robert Farago
general motors death watch 103 deja vu all over again

About three years ago, GM CEO Rick Wagoner made a critical decision about his company’s products. Rather than radically revamp The General's full-sized SUV’s or divert serious time, energy and money into small car development, Rabid Rick decreed that GM should rush through a “refresh” of their current Tahoe, Yukon, Suburban and Escalade. At the precise moment that these new[ish] four-speed gas guzzlers arrived, safety, environmental and fuel prices whacked the genre. Strangely, both pundits and PR flacks were nonplussed. These things are good. They’ll sell. How wrong can you be? Oh, I’m sorry. Didn’t you hear? The GMT900’s are a flop.

Perhaps you remember the hoopla surrounding the GMT900’s. I do. And I remember the scorn, derision and invective aimed at this website when we declared GM’s new[ish] SUV’s a mediocre misallocation of effort. Well read ‘em and weep. Some 120k full-size GMT900 SUV’s are out there, somewhere, waiting for customers willing to pay $5k or more below list. The Chevrolet Tahoe, for example, currently lingers on dealer lots for 77 days. Many of these are ’06 models. Hence GM’s decision to halt GMT900 production in January for two weeks. After that they’ll reduce throughput by over ten percent.

When the GMT900’s debuted, GM Car Czar Bob Lutz confidently predicted that his employer’s new[ish] behemoths would capture a profitable slice of the diminishing pie. So far this year, the SUV market has contracted by 24%. In that time, GMT-900 SUV sales fell 16.9%. (Toyota's large SUV sales fell 23.7%, but we're only talking about the difference between 40k and 30k units.) Meanwhile, overall, GM's light truck sales sank 11.6%, while Toyota's climbed by 12%. So… great landing, wrong airport.

And now Maximum Bob has become maxim Bob: the poster child for that old saw about repeating your mistakes 'cause you were busy dreaming of flying combat jets against the Ruskies when you should have been paying attention in history class. This time out, Maximum Bob’s telling the world that the automaker’s GMT900-based pickup trucks– upon which his boss said The General’s recovery depends– will rack up over a million sales this year, and more next.

Yes, the same man who tut-tutted the demise of the full-size SUV two days before Hurricane Katrina decimated the Gulf region’s gasoline production predicts that “pickups will pick up” a few hours before the Fed warned that the U.S. housing market faces a “substantial” cold spell. A significant housing slowdown is the pickup truck equivalent of a category five hurricane. And The Vice Chairman of Global Product Development still can’t see it coming.

Now don’t get to thinking Maximum Bob is spinning a tale to bolster his beleaguered troops/GM’s stock price. This man is deluded past the point of crazy-like-a-fox credibility. To wit: when pressed on the impact of the deep discounts offered on pickups produced by The Blue Oval and the Dodge Boys, Maximum Bob admitted "This level of discounting on the pickups is uncharted territory… But the good news is that incentives of $7,000 to $8,000 a vehicle is not sustainable.”

Huh? Is Maxi Bob saying his competitors are about to go under? Or that they’ll come to their senses, stop discounting and use their unsold vehicles for artificial reefs? OK, so what about next year’s debut of the new Toyota Tundra? Surely, that's going to put the hurt on GM’s pickup truck margins. “The Tundra will take share, but [it] will steal from the older Tundra and from the Tacoma," Lutz said. "I don't think we'll see that much switching from American truck owners to the Tundra." Now that’s what I call confidence! Or, more accurately, complacency!

Even if the Silverado and Sierra somehow manage to cling to their current volumes in a collapsing market, the General’s margins are about to get hammered. Neither Ford nor Dodge can afford to surrender market share; they’ll do are doing will continue to do whatever it takes to keep the pickup pipeline flowing. And Toyota didn’t build that truck plant down in Texas just for show. If they have to slice prices to move the metal, they can surely afford to do so. And by God they will.

This, folks, is Rick’s bad. Instead of holding off and building game changers– vehicles that can recover lost ground with undeniable, unassailable superiority, GM’s CEO thought it best to get the new shit out the door as fast as possible, regardless of its ability to wow the non-faithful.

One wonders what would have happened if Rabid Rick Wagoner had sat down with his execs and said “Build me a truck that gets 25mpg in the city, feels like an Audi inside, tows more than anyone else and outlasts Ron Jeremy. I don’t care if you have to stick a hybrid synergy drive under the hood. I don't care if we make a plug nickel. Just do it.” Or, alternatively, "Lutz, you're fired."

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2 of 180 comments
  • Finger Finger on Dec 18, 2006 least this is my theory.

  • on Mar 11, 2007

    First of all there are no rice burner cars getting 40 miles per gallon except for the prius and the insight, maybe a couple of others made in Europe or Korea. The rice burners have the same problem as everyone else, you can't make bigger fancier cars and increase fuel economy. To do work one has to expend energy which means gas. As for trucks, there are no rice burners that can come close to dodge ford or gm trucks in towing. In fact, a guy at work that just spent a fortune on a new yoyo extended cab pickup is not happy with gas mileage less than what he got in his old blazer. True the 3/4 tons domestic trucks use fuel but they can also tow a house and do it day after day without a any complaint. No nissan or toyota pickup could pull 15,000 pounds over the Sierra Nevada or Siskiyou mountains without problems. I drive them all at work and find ford trucks the most trouble free of them all with gm the best at saving your fuel dollars.

  • Inside Looking Out "And safety was enhanced generally via new reversing lamps and turn signals fitted as standard equipment."Did not get it, turn signals were optional in 1954?
  • Lorenzo As long as Grenadier is just a name, and it doesn't actually grenade like Chrysler UltraDrive transmissions. Still, how big is the market for grossly overpriced vehicles? A name like INEOS doesn't have the snobbobile cachet yet. The bulk of the auto market is people who need a reliable, economical car to get to work, and they're not going to pay these prices.
  • Lorenzo They may as well put a conventional key ignition in a steel box with a padlock. Anything electronic is more likely to lock out the owner than someone trying to steal the car.
  • Lorenzo Another misleading article. If they're giving away Chargers, people can drive that when they need longer range, and leave the EV for grocery runs and zipping around town. But they're not giving away Chargers, thy're giving away chargers. What a letdown. What good are chargers in California or Nashville when the power goes out?
  • Luke42 I'm only buying EVs from here on out (when I have the option), so whoever backs off on their EV plans loses a shot at my business.