By on March 4, 2011

As Ed asked just a couple of days ago, has the industry learned the lessons of 2008? What lessons are we talking about? In American GM’s case, Prez Dan Akerson himself said they hadn’t learned many. GM do Brazil though seems to be even more clueless.

We are in Brazil. The first letter of the BRIC countries which are feted as the savior of the auto industry, and the insurance company for worldwide car growth good for at least another hundred years. And what does GM do in Brazil? For them, it’s Brazil as in bungle, botch, busted. In Brazil. Chevrolet seems to be going down the same road they traveled back in the 70s and 80s and 90s in North America. Up there, it could be argued that GM has reached the end of the road. Who’d have guessed though that that road took a fork South. And that it’d be leading to a loss of one of GM’s crown jewels.

Just a couple of weeks ago, Denise Johnson, CEO of GM do Brazil stepped down after just seven months as President. This set the newspapers, magazines, on-line news portals and blog-a-sphere alive with speculation. What could have prompted such an early departure? No clue, of course, would be coming from the horse’s mouth itself, I mean, GM. Bestcars quoted Jaime Ardilla, President of GM South America (and now also acting as Brazilian GM’s head-honcho): “She left to look for new opportunities”. For good effect he added: “Her reasons for leaving are of a personal nature”.

In the video above, back from when Denise took the job, she said: “I’m here for execution.” And so she was.

Talk about throwing mud: In the corporate world, “leaving to look for opportunities” is code for “fired and in the jobless-line.” Reasons of “personal nature” usually allude to anything from alcoholism to social diseases. Is that a way to treat a lady?

This is evidently not true. An article written by journalist Marcelo Onaga in well-known Brazilian business magazine Exame, reveals what appear to be the real reasons.

Denise Johnson, poor soul, from the beginning crusaded against what she thought was a “lack of commitment” of GM’s top team. Apparently she also fought hard against what she perceived as her company’s products’ lack of quality. This internal struggle came to its flash point when she vetoed the launch of GM’s mini pickup, the Montana. Seemingly, she collided head on with GM Brazil’s Vice-President of Engineering, Pedro Manuchakian. For him, the trucklet was ready. Ms. Johnson thought otherwise and ordered improvements. This delayed the pickup’s launch by two months. This weakened her position as Detroit stupidly became unhappy at the extra expenses and higher costs incurred.

So, having invoked the wrath of her Brazilian staff and displeasing Detroit, she decided she had had enough. With a career of over 25 years at GM North America and witnessing firsthand US GM’s fall from grace, she could tell what an uphill battle she faced. Unwilling to risk her name on what she perceived as inferior products she threw in the towel.

The aforelinked Bestcars article tells us a little about Denise Johnson. She rose to the top from the technical side of the company. She has a degree in Mechanical Engineering from Michigan State. She also acquired two Master’s from MIT (in Mechanical Engineering and Business Administration). She was well equipped to talk and discuss her company’s products from the technical viewpoint. That was her downfall. She was unwilling or unable to just applaud and let things roll. Her knowledge led her to rebel against Detroit’s master plan for its South American goose of golden eggs.

Ms. Johnson could see that GM do Brasil’s recent course is plain wrong. The competition is advancing in leaps and bounds. Fiat’s new Uno and Palio (plus derivatives) are at least partially based on Fiat’s new worldwide new compact car platforms. Fiat’s new lines of engines, the Fire Evo and E-tor.Q are thoroughly modern and are almost universally praised. VW has the new Gol, which uses the Polo’s old Euro-platform (as does the Fox). A big advance from a company that up until a couple of years back offered this FWD, compact car with a longitudinal engine (a contradiction the original Mini put to rest oh so many years ago). It also retired (finally) the AP line of motors and launched the EA line. Even Ford, the forever slow child of the Big Brazilian 4, has presented the new Fiesta, not to mention it’s slowly but surely abandoning the old Zetec engines for the much more modern Sygma mills.

GM? Well, it relies heavily on Celta, Prizma and Classic sales. These cars are nothing more than Corsa reduxes ad nauseam. The Corsa of 1992 mind you. Thoroughly modern in 1990. Nowadays? Coupled with an engine that could trace its roots back to the one introduced in the Monza in the 80s, GM is at least 15 years behind the times.

Ambitious and ultimately blind cost cutting has also led to a deterioration of build and parts quality. Brazilian consumers are absolutely not as demanding as American ones, but even they can see how far back GM has gone. Get inside that Corsa 92 and get inside a Celta 2011. All the original shortcomings are still there (lack of space, pedals completely offset, which force an unnatural and tiring driving position, no place to rest your left foot, no place to put your odds and ends). The fit and finish is unbelievably worse. Just compare the fabric present on any old Corsa’s seats. Now compare that to the Celta’s. The prosecution rests its case. For a few seconds …

As to GM’s recent launches, the Agile and Montana…Well so unfortunate. Neither have broken into the top ten cars sold. The Agile is outsold by the Palio, the old Fiesta, VW’s Fox. Not to mention that even Renault’s Sandero is breathing down the allegedly Agile’s back. The Montana is outsold by Fiat’s Strada at a rate of 3 to 1. Could GM possibly be happy with these results? Though both offer Brazilians some extra space, both suffer from well-known and terrible finishing mishaps and very so-so driveability. Yes, GM, Brazilian consumers have noticed. They don’t seem too awed now do they?

GM do Brasil seems determined to take this as far as it can. Convinced this is the only way to remain profitable, they ignore the competition’s advances at their peril. Denise Johnson saw this. She fought against it. She lost. The current team can go on their merry way. They can forget that January and February of 2011 have shown that GM has lost two points in market share over the same period last year.

As VW is preparing a re-designed Gol and Fiat is readying the new Palio and Siena, GM seems to have nothing. Having lost heir traditional buyers to the Japanese (and Hyundai) and competing now in the lower rungs of the market with noticeably inferior cars, relying just on price, promotions and cash-on-the-hood schemes, GM do Brazil’s lot is oddly similar to the one experienced by GM of America in recent history. Weirdly, differently than in America where it wrapped itself around the flag, GM’s recent propaganda in Brazil has been to wrap itself around nostalgia. All GM commercials now show old Chevys along with the new one they are purportedly hawking, along with background music that modernizes old hits that remind (?) consumers of old jingles (sadly of course this does nothing for the younger crowd which don’t recognize the old jingles and in fact, for the most part, find recent Chevy commercials’ music perfectly cheesy).

However, like in America, customers are showing many signs they have tired of GM. Even GMs die-hard fans recognize that VW, Fiat, Honda, Toyota and even Hyundai have better brands (and are better value propositions). The question is: How long GM? How far down the road to oblivion are you willing to go? Have you a death wish? Or do you want to rely on China alone?

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24 Comments on “GM do Brasil: Clueless and Rudderless...”

  • avatar

    Quick correction: Pedro Mandruchakian should be Pedro Manuchakian. Great engineer, has been with GM do Brasil for many many decades. I think he has been there since the Opala (as many others did when I was there).
    There are clever and stupid ways of reducing car costs, GM do Brasil did both. The problem is that the stupid ones are easier and quicker so they happen more frequently.
    And to think that in the 80’s and early 90’s they were at the top of their game; best cars in Brazil. But they reached the top and remained there, not moving forward so everybody else passed them easily.
    Today I get so surprised and disapointed at people who buy Chevrolets as I was in previous decades with people who bought the Gol. It makes no sense! For any criteria you choose, there is at least one better option from somebody else.

    • 0 avatar

      As I, and many others who post regularly to TTAC have alluded to – the problem with GM is not in the engineering and manufacturing sectors.  The problem is the BEAN COUNTER and MBA-driven GM management culture.  Always has been.  And, this will more than likely continue unless GM management decides to collectively pull their heads out of their posteriors and take their competition more seriiously.

  • avatar

    Bom dia Autobraz!

    Thanks for correction. Will send to Bertel to see if we can correct. Plus pic of Montana of discord is wrong. Try to fix it.

    Now, do you think this article is more or less right? As an ex_GM man did you get these rumors, too? Or have all the press benn fooled?

    You’re right in your analysis comparing GM to Gol. It’s exactly how I feel about it.

    • 0 avatar

      My knowledge of GM is getting outdated at this point. My educated guess is that GM worldwide is in a financial position that does not allow them to invest in a modernization of Brazil’s line up at this point and they chose to invest first in China or other markets with greater potential. So the market share loss shouldn’t be a surprise for them.
      I’m 100% sure that GM do Brasil engineering knows exactly how their cars compare to the competition and what they need to do to get ahead again,  no need to change the (previously) winning formula: choose the best products from Opel, USA and now also China and Korea, adapt them to South American needs for stronger suspension and cheaper final price.
      It is not as expensive as creating a new car for the Brazilian market from scratch but it is still a surprisingly expensive proposition, hence the delays in a situation of tight money.
      It doesn’t help that the Marketing department in Brazil is just as bad as its American counterpart. I’ve never understood how such a big company, so good at many other aspects of the business – engineering comes to mind, can be so bad at Marketing.

    • 0 avatar

      Thanks Autobraz!

      Your input as always is succint, enlightening and to the point. Sadly yes, we have taken a backseat to China.

      As to GM’s marketing. You said it all, nothing to add.

  • avatar

    Over here in Argentina are also getting tired of GM, at least on the Internet. The Agile has notoriously bad reliability. I have no idea how it still sells, probably because of all the “bells and whisles” they added on the car like cruise control. They even made a limited edition of just 200 cars with bundled 3G dongles and made a HUGE advertising campaign which said “Agile: the first car with Wifi in Argentina”. Too bad you can’t buy the car anywhere. The only reason they stay afloat is because of the cheap Classic and the Aveo sedan, which is imported from Mexico and doesn’t suffer from the same reliability problems as the Agile, and is cheaper too. It’s so sad that someone like Denise, who wanted GM to have a decent lineup, gets fired like that.

  • avatar

    rudderless often describes shipped being abandoned. women first…

  • avatar
    Robert Schwartz

    Time for Death Watch 2 yet, Ed?

  • avatar

    A death watch for GM Brazil might be appropriate, but not for GM as a whole. Maybe GM is winding down in Brazil so its Chinese partners can enter the low price market. Their entry would be much easier if they piggybacked on GM’s existing manufacturing/retailing network. Then GM could go upscale in Brazil. I wonder how well a Cimarron would sell?

  • avatar

    Hola Marcelo. From now on, I can tell you mate, and no it’s not the infusion.
    Sad to see stuff like this happening, but just a brief browsing of VW and Fiat .br websites makes anyone realize what you said (the old lineup).
    I never understood why GM do Brasil never updated the Corsa to the current one, which looks awesome and would have given Fiat and VW a run for the money. Even the Aveo looks fresher than the one you have there. Same applies to Astra and Vectra/Insignia
    I’ve seen here the Astra that followed the one you have there, and the interior alone is much better. Seen also the last Vectra (much much loved by Mr. Clarkson) and even as it looks as a plain car, is an honest and right sized sedan.
    Maybe their main fail is located in the product planning and marketing departments, which are not seeing what is going out outside.
    Too bad, because I’ve seen the Cruze in person and it would be a terrific car in Venezuela (I can only speak from my experience). I have yet to see the 5dr version since production started about 2 weeks ago. The new Spark, wows and looks much better without the dinky 13″ wheels. And well, I have finally seen the Commodore in person, and even the Omega version is a looker, and you should see and hear a Clubsport passing by.
    Have a nice day Marcelo.

    • 0 avatar

      Hoa Stingray,

      Have not seen Cruze, but it’s coming soon. Do not absolutely expect it to be an immediate hit as the former buyers of Opalas and Vectras before the current clown that poses as one, have moved on to Toyota and Honda. And I have a suspision that these people will soon migrate to Hyundai (if it gets its aftersale mess together). Sonata, Cerato, Azera (along with Fusion) are looking like the it car for that special ‘middle class’ you probably know as well as I do. Not to mention now they have competition from crossovers, pickups and SUVs to split that middle class with. Women specially go for the crossovers (Tucson and ix35 huge hits here, so is Sportage). GM’s Captiva sells well but it was the it car for only about 6 months. Hyundai ix35 has taken that title. And Fiat Freemont could well take a huge chunk of that market.

      So no. Even with Cruze GM will continue in the dolldrums. Slowly but surely sinking.

      As to Spark, it would fight with Agile here as would Aveo or Sonic. Some talk of bringing it in from Mexico (specially Sonic), but it would be marketed as a premium small car and have to go against Ford’s new Fiesta, the current it car in the segment. As well as Punto is well established. And new Palio might also take some sales away.

      That’s GM’s problem. From favorite they now fight an uphill battle in every segment they’re in. Competitive only when price is right (in other words, low).

  • avatar
    doctor olds

    GM is investing more than 5 billion reais ($2.8 billion) in Brazil through 2012. They are investing another $1 billion in the rest of South America. This demonstrates their commitment to compete vigorously in the region, as well as recognition that product needs attention. They have been clear in explaining that the bankruptcy delayed product development by nearly a year. It would be unwise to bet on them phasing out GM do Brazil! There really is not that much spread among the top 3 brands’ market shares, btw and 4th must be far behind since the top three command around 3/4 of the market.
    Re: Denise- I remember her as a young validation engineer in the (former)Olds engineering center. She is a wonderful person and very competent. It has been pleasing to see her career advancement and a disappointment to see her leave. We will probably never know the real reasons and details behind her departure. It really could be personal reasons, with her family in the U.S. 
    If Media gets it right, it is purely by chance.   

    • 0 avatar

      Man, they can pour all the money they want, if the product is not there, they’re not gonna make it. And they have the product (always has had). I haven’t seen the new Aveo in person, but if they did a good job like the one on the Cruze and Spark, they have a chance. The Insignia rocks, same for the new Astra. The current Commodore have BMW-like proportions and seem rightsized to me.
      In Venezuela they are and have been the market leaders for 25+ years. But at some point they will to change the current Optra, Aveo and Spark, or people just will get tired and buy something else of what they can or is available.
      Really, take a look at ; .ar; .ve ; .co; .cl and see what they have. Then see Opel, Holden or US GM sites, and compare by yourself.

    • 0 avatar

      Ok Doctor Olds, will give it to you. No one really knows what went down. But is media is correct, it means they’re penning pinching when everyone else is spending at least a nckel to improve and modernize. So a re-re-re-re-re-re-cycling of old Corsa won ‘t do anymore. I’d say to be competitive they need to scratch Agile and derivatives like Montana and start from Sonic/Aveo, use new Euro-Astra as Astra, bring the Insignia (the real new Vectra) and do something about that S10 dinasour!

      Now that money is going into Agile line. A money pit if there ever was one. If media is Correct, Denise Johnson just knew that any tweaking you do on old and tired second generation Corsa platform (the basis for Agile line) is not good enough. Like I said in article, everybody else is moving on. Plus Hyundai will starti sellin an i15 or i20 in Brazil next year to compete with Celta. Don’t forget Toyota Etios. It’s due this year. Fiat is responding with brand new Palio (so new they could’ve have changed the name, but the Palio moniker carries all kind of weight in Brazil). The Celta, Classic and Agile are enough for this onslaught?

      I wouldn’t bet on it. GM’s course in Brazil is plain wrong. Read Autobraz’s comments above. Therein lies the secret for the continued success of GM in Brazil. Or from 3rd GM will fall to 6th or 7th and fight with the likes of Peugeot for market share

    • 0 avatar
      doctor olds

      @stingray- GM’s $3.8Billion investment is in capital improvements. That means investment in new products being engineered or built in the region! GM puts great value on the Brazilian market. I am sure they have no intention to shy away from the competition.

      @Marcelo- You may be right regarding higher incentive spending. All makers have to do that with aging products in the face of fresher competition. That is a big factor right now in GM’s incentive spending in the U.S. btw. 
      2010 Brazil sales: #1 Fiat- 760,474, #2 VW- 697,342, #3 GM- 657,622 #4 Ford- 336,309
      The top 4 captured almost 3/4 (74%) of the market leaving all other manufacturers to share the remaining 1/4. GM may be slipping, but their 2010 sales looked pretty strong.

  • avatar
    doctor olds

    BTW- GM do Brazil was gaining market share and not far behind the leaders as recently as last June. They were also forecasting record sales this year. What happened? These things don’t turn on a dime. I have not found a source for actual sales numbers in Brazil.

    • 0 avatar

      you are a plant, an imposter, a phony and a liar. I see right through your game and  laugh at you.

    • 0 avatar

      Yes early adopters were reaching into pocket and buying Agile. Then word got out . Agile sucks. Market stopped buying. Since then it’s one promotion after another to try to keep afloat. Case in point: Celta officially starts at 27k reais. To move the metal the real price is like 23 (which makes it the second cheapest car on offer from Big 4. Only Fiat’s Mille is cheaper at 22k, but Fiat’s discount is only 1k as official price is 23K). Classic official price 29k. Selling price 25K and going down (and it sells cause it’s the cheapest sedan in Brazilian market).

      The whole market sold more than ever last year. Fiat didnot discount Uno or Siena or Strada. VW sometimes discounts Gol but rarely discounts Fox. Ford discounts Ka and Fiesta. So while GM never moved so much metal like last year their margins are surely not as healthy as others. How long can you keep that up?

  • avatar

    furthermore, General Motors is in a whole heap of trouble. they didn’t have anyone who knows how to sell a car, now they aren’t going to have people who know how to build them either. as Goofball Gisky solidifies his circle of yes men and Akerson ditches anyone with enough nads to speak up, this company dwindles into lala land and loses even more market share to companies who operate intelligently and effectively. bottom line…GM sucks as bad as ever. this from your friendly Buickman who is, and has been, the world’s leading authority on General Motors.

    • 0 avatar
      doctor olds

      Buickman, where do you come up with these crazy ideas??

      It seems your hatred is clouding your reasoning capacity. Are you related to Charlie Sheen by chance?
      Why is it so difficult to accept the truth that GM is really not going down the tubes. Their ’10 profit of $4.7B in still depressed market can only be described as an impressive turn around. 
      They are likely to be much more profitable this year, to re-gain global sales leadership and continue to gain market share in the U.S. When the new product pipeline starts to flow again it will only get better.   

  • avatar
    doctor olds

    Buickman- I am a little curious why your website seems frozen in 2005 or earlier.

  • avatar

    once again my knowledge and vision shines above the bs put out by the corp…accept it dude.

  • avatar

    Note to Ford: Call Denise. Before someone else snags her.

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