General Motors Death Watch 188: The Bottom Line

Justin Berkowitz
by Justin Berkowitz
general motors death watch 188 the bottom line

If there's one thing Wall Street’s wizards are taking away from Rick Wagoner's morning press conference, it's that money's too tight to mention. Meanwhile product is, was and always will be the real meat of the matter. On this score, Wagoner doesn't. "Eighteen of the next 19 products will be cars or crossovers." Sounds good– provided you don't ask "what are they?" The answer to that question flags the fact that General Motors still doesn't realize that they're in a business of building cars and convincing people to exchange their money for those cars.

While cutting models presents labor and contract challenges, green-lighting new products is even riskier. And GM is approving cars that are either crossovers (sales in the crapper) or niche vehicles (competing in the most volatile, risky market segments).

Cadillac, for example, is getting a new crossover: the BRX. The SRX it replaces was better than the Lexus RX, but never approached the Lexus's sales. Why follow-up with another trucklette, especially as the market is shrinking? And to this tall Cadillac wagon GM is adding… a CTS wagon. BMW can barely move its 3-Series wagon in the US. Benz passed on offering its new C-Class in wagon form to U.S. customers. So Cadillac is entering a market where even more established competitors fear to tread.

GM's "luxe" brand will add a CTS coupe to its showrooms. It’s the two-door version of the current entry-level Caddy, presented in concept form at the Detroit auto show. Armchair CEOs are fond of describing the coupe market as "fickle." Yes it is. It's also tiny, crowded, seasonal and shrinking.

And everyone knows it. Toyota is killing its Solara coupe. After selling 154 units in June, the Lexus SC430 is on death row. Lest we forget, the last Cadillac coupe– the Eldorado– ended in abject failure. And the current XLR coupe/convertible sold just 117 units last month. Unless you are Porsche, expecting to make money on coupe sales is akin to trying to earn an annual income at the horse track.

Next up: the new Saab 9-4X. Wagoner announced that the ostensibly Swedish crossover is headed for production. And why not? GM spent a lot of money developing this beast (ahem, sunk cost). It’s the first new Saab product since the Saabaru and Saablazer debacles. But it’s not that simple.

For one thing, GM's crossover sales have cratered. All of its Lambda-platformed barges are underwater, sinking fast or launching straight into the teeth of a howling gale. We're talking double digit sales declines.

Saab needs less expensive hatchbacks and wagons, not another competitor for the GMC, Chevy, Buick, Saturn and Cadillac crossovers. This is the time to rekindle Saab's green image, or at least offer adequate performance. The 9-4X's planned turbocharged 2.0-liter gas engine won't cut the lingenberry jam.

Pontiac is getting the Solstice coupe (not a targa) and the G8 Sport Truck. They should be cool-looking and fun to drive. But this is niche within niche. Neither is bound to pass 1000 sales per month.

We now learn that Buick (U.S.) will be blessed a rear wheel-drive (RWD) Invicta sedan come spring 2009. GM’s RWD program is like Homer Simpson at the light switch (on, off, on, off), I’ll believe it when I see it. And anyway, awesome as it might be, Buick dealers are going to sell it alongside the Pontiac G8 GT, across the street from the Cadillac CTS and STS? Oy vey.

Chevy’s ostensibly good news: the mostly somewhat probably partially all new Chevy Cruze compact car is go. From spy shots, the wee bow tie beastie looks promising– especially inside. And the promised 40mpg is extremely appealing in these fuel conscious times– even if the turbo-charged engine will require pricey premium.

Marketing? Who needs marketing? Once again, GM is rolling-out a new product name. The Cruze replaces the Cobalt, which replaced the Cavalier, which replaced the Monza, Chevette and Vega.

Unlike the plug-in hybrid electric gas vehicles destined for the Eurozone, the Cruze will sell in Europe as a Chevrolet. And that means one of two losing options: (A) It's going to be a piece of crap, because Chevy Europe competes at the very bottom of the new car market; or (B) It’s going to be good; in which case they are competing with the established GM Opel brand.

GM’s die-hard (with a vengeance) CEO can talk all he wants about cutting costs and securing flammable cash. At the end of the day, The General’s in the automotive business. If it wants to stay in business, the automaker needs to build and sell the right cars at the right time. And do it better than their competition. This they haven’t done. This they aren’t doing. And it is this failure that will ultimately be their undoing.

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  • Cheezeweggie Cheezeweggie on Jul 20, 2008

    Eighteen of the next nineteen designs being cars ?? For GM that means six actual designs spread across three divisions.

  • Joeaverage Joeaverage on Jul 29, 2008

    All this talk about killing this division or that division makes no sense. Instead of killing off divisions - sell all GMs at the same dealership and quit playing this game where each division needs a full product lineup. No reason for a Caddy crossover. No reason to have both a Saturn roadster and a Pontiac roadster that look the same. What they ought to do is kill off the divisions and keep the badges. GM can make 15 different products and badge them as Pontiacs, and Chevies and Caddys and GMC as appropriate. Kill off the unique divisions, merge the remains and eliminate any duplication of efforts. An engineer or marketting guy could work on a Pontiac or a Buick or a Caddy all in the same day. That eliminates the competition (kingdoms) between the divisions and the urge to release a CUV as a product from each division. There is prob enough internal corporate resistance to the idea that they will have to go broke to get people to go away. The idea of selling Holdens here as Pontiac is a good one. The idea of selling Opels here as Saturns is also good but I'd rather have the Opel brand name than the Saturn name but that's just me. Whatever is left can be divided (never duplicated) between the Chevy, GMC, Buick and Caddy names and all sold off of the same dealer lot. Talk about selection!!! Of course profits are needed so they might have the build the Holden and Opel designs here. Just don't let the Detroit guys screw around with them too much!!! Lastly the idea of a Caddy wagon seems like a fairly good one at first glance but I fear the result would be quite Dodge Magnum like and we know how that turned out. Tits up. A better wagon would be one that is less muscular and more athletic (leaner) like a Volvo/BMW/Mercedes but again that is just my tastes. I do think a shift towards GOOD wagons needs to be pushed like they pushed the SUVs way back when. Much more realistic vehicle than a SUV with better mileage.