General Motors Death Watch 196: Fact Vs. Fiction

general motors death watch 196 fact vs fiction

Discovery Channel’s “Mythbusters” takes on urban myths that have been circulating through the culture. The show’s producers go to great extremes to prove or disprove the stories, and establish a coherent, no-nonsense scientific basis for their conclusions. Although copyright prevents them from using the term, GM has decided to play Mythbusters. Their new “GM Facts and Fiction” website claims to rectify analysts and commentators (including this site) who have been trash talking The General and its wonderful products. Unfortunately, their “busting” consists of a lot of hyperbole. Their responses are short on facts, and constantly cherry-pick the stats they deploy in their defense. Let’s take a closer look, to separate fact from fiction.

Myth: GM didn’t anticipate the growing demand for fuel efficient cars

GM says: Early this decade, GM put a major focus on improving its cars and expanding the number of crossover vehicles that it offers. As a result, of the last 13 new GM products introduced in the U.S. 11 have been cars or crossovers. Of the next 19 launches, 18 will be cars or crossovers.

The Truth: “Crossover” vehicles are barely more fuel efficient than the SUVs they’re supposed to be replacing. Of the “last 13 new GM products introduced in the U.S.,” four are variations of the same vehicle (Lambda), two were based on an existing platform (Malibu, Aura), two were large pickups (Silverado/Sierra), and one is a re-bodied captive import with a gas-guzzling V8 (G8). As far as truly “fuel efficient” vehicles go, the only fuel-efficient car GM has on the horizon is the Cruze, which we won’t get here until two years after it debuts in the rest of the world.

Myth: GM quality is not competitive

GM says: GM quality is very competitive, and it continues to improve, according to both our internal measures and independent surveys. For example, in the most recent J.D. Power and Associates Initial Quality Study, Chevy Malibu and Silverado were the highest ranked midsize car and large pickup in the industry. GM’s 5 year/100,000 mile powertrain warranty reflects our confidence in the durability of our vehicles, as does our 12 month/12,000 mile bumper-to-bumper warranty on GM certified used vehicles.

The Truth: Yes, GM’s quality has improved, especially compared to what they produced in the 80s and 90s. However, so has everyone else’s. The General brags about having two cars as “highest ranked” in the Power IQS. That’s out of over eighty models they sell. Also, as we’ve discussed time and time again, the IQS survey only covers the first 90 days of ownership, when very few problems show up. If GM’s quality is so high, why don’t they offer a 10 year/100k warranty like some other manufacturers, instead of cutting off coverage at five years?

Myth: GM can’t make money selling cars

GM says: Well before the recent dive in truck sales, GM was moving to increase the profitability of its cars and crossovers. This starts with stronger products. Recent entries like the Cadillac CTS, Chevy Malibu and Buick Enclave have won praise from the press and public. Customers are willing to pay more for them, and they are selling strongly, even in a very weak market. Chevy’s next generation small car, the Cruze, should further strengthen GM’s presence in that important segment.

The Truth: This claim that “GM was moving to increase the profitability of its cars” should come as a surprise to the UAW. The fact that GM couldn’t make a profit on cars was the justification for union concessions. So was GM lying then, or are they lying now? And since they won’t be introducing the Cruze here for another two years (at least), how does GM know it’ll be profitable?

Myth: GM is looking for a government bailout

GM says: We are not asking for a bailout, or a handout. The program under discussion – part of major energy legislation signed in December 2007 — is intended to lower borrowing costs for carmakers and suppliers who are investing in energy-saving technologies. This would be done through direct loans, which must be repaid in full, with interest.

The Truth:
The only “carmakers and suppliers” who will benefit from these loans are The Detroit Three. The legislation is written to specifically exclude the transplants. If this $50b loan isn’t a bailout, if it really is for carmakers to invest in “energy-saving technologies,” they should be available to everyone. The “loans” are at a much lower interest rate than anyone would give these companies. And if they “must be repaid in full,” what penalties are in place for late payment or nonpayment? And if “early this decade, GM put a major focus on improving its cars” because they anticipated “the growing demand for fuel efficient cars,” why do they need all this money at this late date? What happened to all the development they’ve been doing for the past ten years, and how did they pay for that?

Myth: The Volt is vaporware

GM says: While we can’t comment on the efforts of others, we can assure you, the Volt is for real. On June 3, GM announced that production funding for the Volt had been approved, and that GM’s Detroit Hamtramck plant has been selected as the assembly plant, pending government approvals. Meanwhile, development of both the car and its lithium-ion batteries continues apace. For the latest information, please see our Volt website.

The Truth: OK, they’ve announced the the plug-in electric – gas hybrid Chevy Volt is approved for production. They’ve named a plant that will produce it. They’re developing batteries. So when do we see a road-worthy version of the powerplant and the batteries? Oh, that’s right… they’ve just now decided who’ll produce those batteries for them so they don’t have any to install. And they’ve leaked photos of the headlights of what the “production” version. So where’s the rest of the car? And if they have one, why are they using the concept in all of their commercials? Define vaporware.

Myth: GM still doesn’t make cars that people want to buy

GM says: In 2007, the Saturn Aura and Chevy Silverado won North American Car and Truck of the year. In 2008, the Chevy Malibu was named North American Car of the Year, The Cadillac CTS was Motor Trend’s 2008 Car of the Year. Customers have responded just as enthusiastically as the critics. Despite a very tough market, GM cars and crossovers have enjoyed significant sales increases so far this year.

The Truth: COTY awards have no relevance to sales (e.g. Saturn Aura). GM’s “debunking” lists several cars, bragging about their sales increases this year. However no fewer than two of every ten Vibes and Auras built the first half of this year went to fleets. With the Cobalt and Malibu, it was more like three of every ten. And the G6? Almost half. The hard fact is that GM’s sales for the first seven months of this year were down 26.1 percent from last year and their market share dropped 3.6 percent over the same time, regardless of how well a few individual models sold.

Myth: GM has too many brands

GM says: GM has grouped its eight U.S. brands into four retail channels: Chevrolet, Buick/Pontiac/GMC, Saturn and Cadillac/Saab/Hummer. This allows GM to offer the broad range of choices that customers want, while streamlining product development and back-office operations. GM has announced a strategic review of the Hummer brand, which will study options ranging from revamping the product portfolio to selling the brand. GM is also using its global operations to develop distinctive new products for its U.S. brands. Fact is, to continue growth, many carmakers have entered new segments or added new brands as the market has grown and fragmented. The number of brands is not the key, but rather GM’s ability to provide strong products and efficient marketing support for them.

The Truth: GM has more brands in the U.S. than Toyota, Honda and Nissan combined. All they’ve done by creating these “retail channels” is enforce the point that they have about twice as many brands as they need. Their “streamlined” development and “efficient marketing” of their “strong products” seems to consist of degrading brands by giving everyone versions of the same car or bringing cars from overseas. Other carmakers may be adding brands, but none of them approach GM’s brand complexity, lack of coherent ideentity and model overlap.

Myth: GM opposes higher fuel economy standards

GM says: GM fully supports new national corporate average fuel economy (CAFE) standards of 35 mpg by 2020, a dramatic increase of 40% over previous standards. Along with other interested parties, we will work with the government throughout the rulemaking process on details of the new regulation. GM continues to believe that a single set of tough national fuel economy standards is the best way to focus the industry’s efforts and to reduce fuel consumption and CO2 emissions nationwide.

The Truth:
When the new CAFE standards were coming up for vote, GM and the other automakers lobbied Capitol Hill not to pass the new standards. Once again, they protested that the new standards would mean the end of the auto industry as we know it. Now, suddenly, when they see a chance of getting a multi-billion dollar handout for “investing in energy-saving technologies,” they’re the perfect corporate citizen, standing behind the new standards. If they truly supported the standards, they wouldn’t be trying to influence the “rulemaking process on details of the new regulation.”

There are several “myths” that GM forgot to bust. The “myth” that they are the victims of an unforeseen rise in gas prices, and related shift in consumer tastes. The myth that their current business model is sustainable– but for a few hit products. The myth that the Volt could possibly compensate for lost pickup truck and SUV profits within the next five years. And the myth that federal money will not disappear down a rat hole. Then again, I guess that kind of mythbusting is best left to someone who’s willing to tell The Truth About Cars.

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  • Njoneer Njoneer on Sep 10, 2008

    Did they actually try to deny that GM has too many brands? Eight brands! The Saturn Aura should be reason enough to only focus on Chevy and Cadillac. It is essentially the same car as the new Malibu without the advertising budget. GM made a great car that nobody knows about because GM can't afford to maintain eight brands. EIGHT BRANDS! Imagine how great (and how quickly) GM could make the new Chevys if they did not have the distractions of fighting to support the other brands.

  • Ron Ron on Sep 11, 2008
    GS650G : Kari is still the best part of mythbusters. Hard to believe she is 33 YO WOW a whole 33 years old?! Seriously?! As in, three three??? OMG. You must still be in diapers. 33 is just getting started, so try to get some perspective.

  • Inside Looking Out Why EBFlex dominates this EV discussion? Just because he is a Ford expert?
  • Marky S. Very nice article and photos. I am a HUGE Edsel fan. I have always been fascinated with the "Charlie Brown of Cars." Allow me to make a minor correction to add here: the Pacer line was the second-from-bottom rung Edsel, not the entry-level trim. That would be the Edsel Ranger for 1958. It had the widest array of body styles. The Ranger 2-door sedan (with a "B-pillar", not a pillarless hardtop), was priced at $2,484. So, the Ranger and Pacer both used the smaller Ford body. The next two upscale Edsel's were based on the Mercury body, are were: Corsair, and, top-line Citation. Although the 1959 style is my fav. I would love a '58 Edsel Pacer 4-door hardtop sedan!
  • Lou_BC Stupid to kill the 6ft box in the crewcab. That's the most common Canyon/Colorado trim I see. That kills the utility of a small truck. The extended cab was a poor seller so that makes sense. GM should have kept the diesel. It's a decent engine that mates well with the 6 speed. Fuel economy is impressive.
  • Lou_BC High end EV's are selling well. Car companies are taking advantage of that fact. I see quite a few $100k pickups in my travels so why is that ok but $100k EV's are bad? The cynical side of me sees car companies tack on 8k premiums to EV's around the time we see governments up EV credits. Coincidence? No fooking way.
  • EBFlex "I'd add to that right now, demand is higher than supply, so basic business rules say to raise the price."Demand is very low. Supply is even lower. Saying that demand is outstripping supply without providing context is dishonest at best.