Category: GM Death Watch

By on June 25, 2005

 Winston Churchill called it the phony war: the period between the Nazi conquest of Poland and their assault on Belgium, The Netherlands and Luxemburg. During these eight months, millions of English subjects believed they were safe from the storm clouds of World War Two. By the same token, tens of thousands of GM employees believe that The General's future is assured, regardless of recent financial 'unpleasantness'. Military historians don't tend to use the phrase, but both groups can be characterized by the expression 'living in denial'.

For those with the courage to look, ominous signs are everywhere. Last month, Rick Wagoner stood in front of his shareholders and promised to end the incentive programs crippling GM's profitability and knee-capping its branding. Instead, The General's general launched the largest incentive campaign since 'Keep America Rolling'. In addition to the usual problems, 'Employee Discounts for Everyone' may be pulling GM buyers forward, rather than winning conquest sales. If so, the ranks of potential GM customers will be perilously thin come winter. Meanwhile, Rabid Rick is fully committed, extending the Employee Discount program beyond the July first deadline. Log this one under "friendly fire, ongoing".

At the same time, Rabid Rick's public pledge to cut the United Auto Workers' health care benefits got lost in the fog of war. First GM's top brass set a July deadline for union concessions. Then the UAW's Supreme Commanders broke radio silence, warning their employers they would not tolerate having their feet held to the fire. GM back-pedaled furiously, denying the deadline's existence. Ford suddenly weighed-in, proclaiming that any UAW concessions to GM must also apply to Ford– completely eliminating any chance of a union roll-back. So GM and their union 'partners' are still eyeing at each other over the parapets instead uniting to save their common homeland. Log this one under "with allies like this…"

And then there is the weaponry. GM is counting on new products to [eventually] save the day. Unfortunately, the messages coming from GM's R&D department are, at best, garbled. For example, GM desperately needs a new rear-wheel-drive platform to compete against the increasing and ongoing success of competitors' RWD products, like the Ford Mustang and Chrysler 300. Or not. In April, GM killed its Zeta rear-wheel-drive platform. Last week, The General changed its mind, hinting that they might [eventually] cobble together a modified 'Zeta lite' platform to underpin new RWD products. That's 'might'. What's more, if GM gave its engineers the green light today, we wouldn't see the fruits of their labors until 2010.

Once again, GM will arrive at the field of battle years after the competition has established territorial dominance (e.g. the HHR vs. the PT Cruiser). But even if The General wins the battle, it's losing the war. A new study by Merrill Lynch concludes that GM is failing to update its products frequently enough to win the hearts and wallets of tomorrow's new car buyers. "Car Wars 2006-2009: The Product Pipeline and its Investment Implications" reports that The General will replace just 16% of its vehicles in the next four years, as compared to 30% and 21% for Korean and Japanese automakers. GM will be outgunned AND outmaneuvered.

Of course, The General dismissed the report. Spokesman Tom Wilkinson said that Merrill Lynch's findings were based on "data we try to keep secret" [note to counter-intelligence: must try harder]. And anyway, GM's got some 80 models out there; replacing them is more difficult for GM than its less prolific foreign competitors. Well EXACTLY. While it's certainly refreshing to hear a tacit admission from GM that its operations are too bloated for today's niche-driven marketplace, it's not exactly news. Insiders who believe that the next round of new GM vehicles (currently being hurried into production) will be enough to fend off its enemies' expert skirmishing should look away now.

When Britain signed the Munich agreement in 1938, appeasing German aggression, Churchill, then an MP, didn't mince his words. "We have suffered a total and unmitigated defeat." It was Churchill's ability to confront danger and disaster head-on that identified him as England's future savior. That said, England entered the war with a global Empire and emerged a pale shadow of its former self, stone broke. And then, gradually, it rebuilt. Is it too much of a stretch to imagine that GM will eventually suffer a similar fate?

By on June 22, 2005

Pssst.  Wanna buy an XLR, cheap?When my Mom returned from a major shopping expedition, she'd justify her voluminous purchases by telling Dad how much money she'd saved. "If you save enough money we'll go broke," he'd remark. The reverse is also true. To wit: General Motors was losing $2331 per vehicle BEFORE they launched "Employee Discounts for Everyone". As it's safe to assume that the promotion's new, lower prices mean new, slimmer margins, The General's latest sales gimmick is actually hastening the financial demise of the world's largest automaker.

I know; it's got to the point where you start to feel sorry for these guys. I mean, what would YOU do if you had 1.2 million new cars sitting on dealer lots and abandoned airfields, waiting for Mr. and Mrs. Godot to walk through the showroom door? (Remember: new vehicles continue to emerge from The General's sausage-making machine 24/7.) The temptation to just give the damn things away must have been intense. Instead, GM had to pay for the privilege. It's true: when a manufacturer loses money on every sale, they're literally paying customers to buy their product. According to recent projections by, GM's lastest incentive program will cost them nearly half-a-billion dollars. And that's only ONE of the ways this employee discount thing stinks.

Traditionally, companies don't discount their inventory until new and improved products are ready to take their place. Traditionally, the auto industry was no different, offering year-end and clearance sales at the appropriate moment. But times have changed. New and refreshed models pour into the goldfish bowl throughout the year. By discounting all of its products at the same time without the slightest regard to the multi-various timing of their replacements, GM has painted itself into a corner. How can you possibly justify a return to "normal" prices for the same old vehicle?

You can't. Automotive News reported yesterday that GM has cut prices on 85 – 90% of its 2006 Buick, Chevrolet, Pontiac and Saturn models. The Bean Counters still have their finger in the air regarding Saab, GMC and Hummer, but it's only a matter of time. Cadillac is supposed to get a "marginal" price hike, but don't you believe it. Bottom line: GM has cleared its inventory and hoisted its market share back up to 30% by permanently shrinking its profit margins. This after Rabid Rick Wagoner stood in front of GM shareholders and made incentive elimination a central plank in his recovery plan. Again.

The program's affect on GM's branding is equally disastrous. All eight GM brands are now discount car companies (a laughable concept for a corporation with such an enormous cost structure). While budget sales are almost a good idea for Chevrolet and Saturn, the emphasis on price damages the rest of the portfolio. Cadillac, for example, has spent the last twenty years trying to prove itself equal to or better than high-end German and Japanese imports. Once again, Caddy is the poor man's BMW. Equally worrying, bargain hunters are about as brand loyal as shopzilla surfers. And once they've bought a GM product, who's left? People who'll now perceive all GM products as, well, cheap.

And what of loyal GM customers who didn't cash-in on GM's fire sale pricing? The Employee Discount for Everyone program certainly isn't doing them any favors; it's instantly erased value from their current set of GM wheels. When trade-in time rolls around, they'll not be pleased to discover that all these penny-pinching newbies got a better deal at both the front and back end of the sales process. In effect, GM stiffed them. Of course, they're probably getting stiffed already anyway, what with finance charges and the extra cost of everything extra.

In case you didn't realize it, GMAC is the real beneficiary of this particular sales gimmick. You could even say that GM's current strategy is to make their cars a loss leader for their finance arm. It is, after all, the only solidly profitable part of the entire GM empire. But I reckon that would be giving GM's management team too much credit. I'm convinced these guys are genuinely clueless. Check out Marketing Mark LaNeve's rearguard action on the discount program's effect on GM branding, outlined in an email to The Detroit News:

"This program gives us a great platform to get out our quality and fuel economy story and showcase our products. The TV ad does not mention a price or a rebate. We simply say, 'It's a great price, you pay what we pay.''

In fact, some of the TV ads DO mention a price at the end: a typical monthly ownership plan for one of the cars. What planet are these people on? Don't they realize that the Employee Discount for Everyone program is a short-term solution to their bloated inventory that creates long-term problems for the entire corporation? Do they even care?

By on June 18, 2005

 Rex Raider recently ranted about The General's sales doldrums on The senior camp follower recognizes that hundreds of thousands of [former] GM customers wouldn't buy a GM car if it came complete with an employee discount, cash back, zero percent finance and free health care (no co-pays and dental). Raider posed a simple question: what would it take to win these buyers back?

The obvious answer is great product. But it isn't the right one. Even if GM built cars, trucks and SUV's that looked like sex, never broke and cost twenty dollars, most Americans wouldn't put them on their shopping list. That's because the average person (not you) is almost entirely risk aversive. When they purchase a product– whether it's a baked potato to a Pontiac G6– they're not looking for a Bigger Better Deal. They're not looking for a fantastic new taste sensation or the world's best car. They simply don't want to experience LESS pleasure than they did before. They don't want to lose.

 [BTW: this dynamic explains GM's favorable survey scores and loyal customer base. If a GM owner is accustomed to lower quality plastics or poor reliability, they're delighted by incremental improvements, even if the changes don't bring the car up to competitive standards. And despite any unpleasant experiences, they won't risk moving brand.]

And lose they have. Even without considering the vagueries of image and style, GM customers have been stranded by the road, bilked at the service department and empty-pocketed at trade-in time. In fact, GM horror stories stretch all the way back to 1967, the year The General substituted plastic for chrome and generally lost the plot. Even more alarming, despite Mr. Raiders' protestations, some of these tragic tales are as recent as last week. In any case, whenever someone buys a GM product and discovers that it's worse than their previous car, they've lost pleasure (a.k.a. experienced pain). The association is burned deep into their psyche. They will not risk losing again.

 To get disaffected customers back into the GM fold, one of two things has to occur. Either the potential customer's current, non-GM car (or service department) has to traumatize them or someone has to eliminate the risk of GM ownership. Obviously, there's not a lot of chance that non-GM brands are going to inflict duff vehicles or bad service on their customers. Which leaves GM one option: to create a risk-free ownership experience.

Audi did it when unintended acceleration puts the brakes on their entire operation. Mitsubishi did it when no one knew their name. So did Hyundai. Hello? GM? Where's your guaranteed buy-back deal, 10-year 100,000 mile warranty or risk-free trial period? While GMAC does right well by selling extended warranties, it's robbing Peter (dealer sales) to pay Paul (finance company profits). A direct and uncomplicated committment to a superior ownership experience would be costly, but it would work miracles for GM's long-term future. At the same time, GM must drive home the point that customers will not– CAN not– lose with a GM product. Lee Iaccoca understood the power of a public, personal guarantee. Rick Wagoner and Bob Lutz do not.

 To fully restore sales, GM must also sell to younger drivers who are naturally less risk aversive and/or have never lost on a GM machine (if only because they never owned one). Creating gotta-have products that look nothing like Dad's Buick is the way forward. The Solstice is a perfect example. As good as they are, the Cobalt and Malibu are not. In this arena, GM needs game changers, not reasonable alternatives. Again, the company must draw a line in the sand and tell people that they're never, ever going back to where they were in terms of image, design, quality, performance and service.

Unfortunately, GM has a nasty habit of dropping the ball. There's an increasing number of interesting GM products that fail at the final hurdle because of tepid design (G6), shoddy build (Impala), poor materials (HHR), over-pricing (SSR) and delivery problems (Solstice, 9-7x). GM needs to sort out its fundamentals first. If they jump in too soon with shoddy product or service, a consumer risk elimination strategy will make things worse. For example, if the Solstice runs into quality issues, if Pontiac dealers gouge or otherwise mistreat new GM customers, these buyers will also have that 'never again' moment. GM will lose another generation of potential buyers.

In short, until and unless GM builds great cars AND makes GM ownership a relatively risk-free proposition, hundreds of thousands of fine examples of Rex Raider's favorite brand will continue to languish in dealer lots and airfields.

By on June 15, 2005

Is GM's glass half empty or almost completely empty?Bob's blog is back. Once again, GM's Main Man has gone online to tell it like it is. Once again, T-TAC's ready to read between the lines, looking for the lead cloud surrounding the silver lining. Interesting enough, Mr. Lutz' June 10th entry, 'Only the Best', begins with a major mea culpa. GM's Vice President for New Product Development gives us a full and frank explanation of how The General earned its recent (as in 40-year-old) reputation for lackluster design and dubious build quality. Well, more frank than full, but it's still worth a careful read…

"A few years ago,' Bob writes, 'planners would sift through reams of data, segment the market, analyze and deconstruct the data until they discovered a niche in which we needed a new product…. the designers were given a formula to work with. Not a blank canvas, more like a paint-by-numbers scenario." So NOW we know why the Pontiac Aztec is so ugly: the design team lacked numeracy. Quite how the beancounters arrived at the formula that is the Corvette-powered SSR convertible pickup is anybody's guess. But wait! There's more! Things have changed! There's an answer!

"Our winning products will not be determined by careful analysis; they will captivate and enthrall through imaginative design and flawless execution." So it's out with all that boring old careful analysis stuff and in with free flights of the fancy! Bob's poster child for this endeavor– its tail lights providing bloggers with their only photographic relief from Max Bob's prose– is the upcoming Chevrolet HHR. While the HHR is little more than a PT Cruiser clone that's arriving several years late to Chrysler's retro-styled minivan party, Bob's blog clearly believes the vehicle represents the purity of GM's new "Right Brain Rules" philosophy.

What's more, Max Bob's blog celebrates the HHR's build quality, claiming it's constructed to, gulp, Lexus standards. "I ask you to compare that $15,995 Chevy HHR– in terms of sheet metal fits, hem flanges, the way all of the panels fit to each other– to a Lexus GS 400, and tell me if there is any significant difference." As soon as Bob tells the average car buyer what a hem flange is, I'm sure they'll let him know. Meanwhile, Mr. Lutz might be interested to hear that Lexus doesn't make a GS400; it's now the GS430. Still, comparing GM's new products to its competitor's old products makes an excellent point– if not the one Maximum Bob intended.

There's no mistaking Bob's subsequent admission that GM interiors have been a little "utilitarian" (presumably in the same sense that a hair shirt is a bit "uncomfortable"). I only wish he'd resisted the urge to defend GM's indefensible cabins by saying they're "easy to keep clean". And Max Bob's choice for aspirational quality is a bit bizarre for a guy whose company proclaims its products' domestic provenance: "You'll experience well-crafted interiors, great materials, knobs and switches that feel like they're on an expensive Japanese camera." Reports just back from the HHR front say it ain't necessarily so. And students of unintended irony note: America used to make cameras.

Speaking of latent anti-Americanism, Bob's blog feels free cast aspersions on his fellow countrymen. After promising to "really target being the best" (as opposed to simply being the best), Bob says the effort has 'required some recalibration of the internal culture, especially in the United States." Huh? Is Maximum Bob saying that GM's American workers are less willing to accept a competitive challenge than their foreign counterparts? If so, I agree– given the way GM goes about running its business in The Land of the Free.

Here's the deal: while Maximum Bob's blog correctly identifies GM's corporate culture as the source of its current woes, he fails to understand, admit and address the fact that GM's 'issues' run a lot deeper than an over-reliance on statistical data, or widespread indifference to competitive pressure. Maxi Bob's willful ignorance of the full scope and scale of GM's cancerous culture is completely understandable; GM execs live, work and play in their own little world. But Bob's inability to fully grasp the nettle is ultimately a sad reflection of his managerial myopia, and a dire warning about the company's future.

So take a good look around Bob, before it's too late. Notice that GM's culture lacks any hint of accountability: bad executives fail upwards, incompetent workers hide behind union skirts. Clock the internal fragmentation and divisiveness: eight divisions fight for resources without the slighest regard for the corporate good. Observe the stifled creativity: decisions made by committees that can't make decisions, hampered by union rules that make innovation impossible.

When you're through with this no-holds-barred cultural cross-check, ask yourself this: what would it take to really shake up the place? Mass firings? Union confrontation (i.e. strike)? Brand re-organization? Relocation? Bankruptcy? Whatever it is, do it. Then, and only then, will GM have a shot at being the best.

By on June 13, 2005

The Saab AJ37 Viggen jet fighter: brand inspiration for Saab Mk. II? OK, so you want to save all eight remaining GM brands. Good for you! It sure would make a lot of people happy. So let's do it, starting with each GM division's USP. Each brand has to produce vehicles that do one thing better than anyone else in the world. No clones. No model overlap. Each vehicle must reflect, embody and personify its unique brand identity. If you look at a car, truck, SUV, minivan or crossover and know it's a GM product, we've failed.

Saab is a bit problematic. Smorgasboards up if you know what it means to be Swedish. In fact, Saab got into the car business through the aerospace industry. Well, even if they didn't, there's a connection there, somewhere. From now on, all Saab's are designed like jet fighters. We're talking electronics (heads-up display, night vision, headsets, military-style gauges, sat nav.), aerodynamics (world's lowest cd, active surfaces), aircraft construction (aluminum, carbon fiber, memory plastics) and ergonomics (cockpit seating, four point belts, maximum visibility). If you build it, it will fly.

Pssst!  Hey Gramps, wanna buy a new old Buick?Given Saturn's original image– the happy, shiny plastic panel people– let's make them the home of the hybrids. As an all-green division, Saturn would deflect critics of GM's gas-guzzlers. (Call it 'our test bed for new technologies' and keep forgetting to pass them 'round.) Saturn can build anything they want other than SUV's and trucks– as long as it's 100% recyclable, gets 40+mpg, wears lots of identifying badges and looks wacky.

Pontiac is easy. The "We Build Excitement" Division will build, wait for it, sports cars. Fun, fast and sexy sports cars. (Remember: no brand overlap. No hopped-up Chevy's or Caddy's.) The Solstice is a terrific start (if only in theory), but we need a whole line of Pontiac sports cars, from cheap and cheerful runabouts to pricey and dangerous death devices. Let's stay with two-door rear-wheel-drivers for a while, until the public "gets it". After that, if Porsche can build a four-door Panamerica, why not Pontiac?

The Pontiac Corvette?The official Buick website doesn't bother to offer a brand identity. No worries; we all know that Buicks are God's waiting room on wheels. So let's go the whole hog and REALLY appeal to the elderly. Buicks will have wide-opening doors, huge, easy-to-read gauges; enormous buttons, collision avoidance systems, automatic-parking, prescription bottle holders, oxygen masks for the rear seat passengers, etc. The styling isn't all that important (the eyesight fades after a while), so let's appeal to their sense of nostalgia and simply rebuild famous Buick designs with new technology.

Hummer is fine. Just make sure that every one of their vehicles looks like a box that someone hit with an ugly stick and can kick-ass off road. By the same token, GMC is also in pretty good shape brand-wise. Only one BIG change: no one else in the GM family is allowed to build a truck or SUV. If consumers want a working man's macho flatbed or a Lexified luxury Ute, they go to GMC. And that's it.

Build it.  Build it good.Chevrolet is also a reasonable proposition, provided we stick to VFM. Mind you, Value For Money is a market niche susceptible to attacks from both below (Hyundai) and above (budget Bimmers). Thankfully, Chevy still knows how to build vehicles people can afford. Again, we strip-out the SUV's and trucks, but give Chevy all the crossovers. The 'Vette goes to Pontiac. Purists will howl louder than a Z51, but desperate times call for coherent brands.

That leaves Cadillac. It's a no-brainer really: the world's best luxury cars, bar none. (Again, again: no SUV's or trucks.) From now on, Cadillacs will be designed for their brand from the ground-up, paying strict attention to every detail, from platform choice to build quality to engine note to key fob. They'll be sold from dealerships that look and feel like a trendy Manhattan hotel. And Caddies will be horrendously expensive. If thirty-somethings desperately want a Cadillac, but can't possibly afford one, we're there.

Saturn: welcome to GM's all-new, all-green division.And there you have it: eight re-invigorated warriors with enough high concept, tightly-focused branding to compete in today's niche-driven marketplace. If. however, you want to chop the deadwood, Saab would require the longest lead time, Saturn has the most expensive development costs and Buick has the worst demographics. But there's no middle ground: it's cut, adapt or die. When will it happen? In your dreams.

By on June 11, 2005

United Auto Workers Vice President Richard ShoemakerLet's be clear about this: the United Auto Workers is not going to let General Motors cut ANY union benefits without a long and vicious fight. GM Vice President Rick Wagoner knows it. UAW Vice President Richard Shoemaker knows it. GM workers know it. Wall Street knows it. And if you don't know it, listen up: last Friday, The General formally asked the UAW to re-open its contract. The UAW told them to fuck off.

Of course, we don't know if Shoemaker's crew used that expression. Both GM's request and the UAW's rejection took place behind closed doors. Still, you can get a feel for the UAW's perspective from their official response to Wagoner's promise to trim health care payments. Shoemaker ended his three paragraph reply with a simple statement: "We will do all that is possible to protect the interests of our members and their families." In other words, fuck off. And don't fuck with us.

As far as the union is concerned, GM should leave UAW-negotiated benefits alone. The company needs to concentrate on offering "the right product mix of vehicles with world-class design and quality." Health care costs adding $1500 to each and every one of those "world class" vehicles? That's YOUR problem. You guys are supposed to be the brains of this outfit. Design a 300C or something. Meanwhile, if you think we're going to let a GM exec pulling down $7m a year take away our members' right to health care and a decent living, you're nuts.

It's a powerful argument, but I don't imagine that Shoemaker's yearly salary puts an XLR or three out of reach. (The UAW pockets over $360m per year in members' dues.) And anyway, all that old-fashioned "us vs. them" class warfare rhetoric isn't exactly what you'd call helpful. Not when GM is shedding market share, burning through its cash reserves, gambling on big trucks (as if) and sloping towards bankruptcy– which would free the corporation from ALL its union obligations.

You'd think that UAW would take a hit just to help The General stay in business. You'd think wrong. The UAW has some 109k active GM members and at least twice as many retired GM employees. The organization also represents some 500k members working for other automakers and suppliers, and a huge number of non-GM retirees. Figure a constituency of over 1m.

If the union agreed to roll back their GM contract prior to its expiration, all Hell would break loose. Members would revolt (strike) and all the other struggling car companies, both large and small, would use the precedent to try to wiggle out of their union strait jackets. Expecting the union to act in its GM workers' long-term interests is like expecting GM to have a coherent marketing strategy.

The situation leaves GM with three scenarios. One: the company continues to downsize through [now] normal attrition, pays its UAW workers not to work and limps along until their labor agreement expires in '07. Two: GM doesn't make it. The General files for bankruptcy. The union contracts are void and management escapes to safe houses in Spain, France and Fiji. The union goes on strike. Someone buys up the remnants, the union settles and we start again.

Three: aliens land in Michigan and inject GM top brass with testosterone. They (the execs) instruct their army of lawyers to find a God damn loophole, and bail out of their contractual obligations. The UAW goes on strike. The union wins the strike and we go back to scenario two. Or the union loses the strike, GM's labor costs decline and we go back to scenario two (the extended re-mix version).

You see, all this talk about health care benefits is a bit like the man looking for his car keys under a street lamp because the light's better. There's a lot more about the UAW's contract that's hamstringing The General: seniority clauses, plant closure restrictions, rigid working practices, rigid job classification systems, etc. There are literally hundreds of union rules and dozens of grievance procedures constraining the corporation's creativity. Multiply that times eight divisions, factor in decades of executive incompetence and territoriality, and you can understand why GM products are losing out to vehicles made by leaner, more flexible companies.

To meet its competitive challenges, both GM and the union would have to change the rules of engagement. Clearly, neither side wants to face that kind of chaos. The main players are too set in their ways. There's too much at stake. The situation reminds me of those TV fights where the hero and the baddie– locked in mortal combat– fall into a river. Except there is no good guy, and both of them are going to drown.

By on June 8, 2005

Rick Wagoner: locked and loaded.'We aren't going out of business in the next six months.' After yesterday's stockholder meeting, GM Chairman Rick Wagoner faced reporters and jokingly predicted that his company will last until November– just in time for the long-delayed launch of the new Pontiac Solstice. The irony would be delicious if there weren't so many diners at the table. GM's continuing slide threatens the financial future of hundreds of thousands of shareholders, workers, suppliers, dealers, even the Seven Million Dollar man himself. And yet Wagoner's "big idea" to revive The General's declining health is a sham.

While Wagoner unveiled a five-point plan for GM, the headlines focused on plant closures and screamed "GM to slash 25,000 jobs!" The Chairman's committment to downsizing was a guaranteed spin winner. You know the drill: American manufacturing jobs are disappearing. It's a crisis! Something must be done! Equally important from Wagoner's POV, there's a market-pleasing corollary: times are tough, but GM is taking tough action. News of the move sent GM's share price (which has lost over 50% of its value in recent times) up fifty cents.

The truth is less dramatic than Wagoner would have us believe. As Daniel Howes of The Detroit News pointed out, GM is currently shedding between five and six thousands workers per year through 'normal' attrition. GM will lose 25k jobs by '08 simply by continuing its present course. Lest we forget, it still has to pay out full health care benefits. And deep-sixing entire chunks of GM's workforce hasn't stopped the rot thus far. Since 1990, The General has closed six assembly plants, trimmed 117,065 hourly workers and decommissioned 14,296 bureaucrats. So much for magic bullet number one. Next round: new product.

Wagoner pledged to speed-up new vehicle development and invest another billion dollars in the process. A billion bucks is lot compared to most people's savings, but the extra money only brings GM's R&D budget up to $8b a year– compared to Toyota's $15b. While no one could criticize GM for trying to create vehicles people actually want to buy, there's disturbing news from the engineering front lines. GM recently scuppered its rear-wheel-drive program and the replacement for the Northstar V8 is rumored to be at least four years away.

It takes The General over two years to get a new machine off the drawing board and into production. At best. 'Speeding up' the introduction of new product sounds good on paper, but any greater rush to market could mean more Solstician holdups and/or quality issues. The General's immediate future depends on what Wagoner and his team hath wrought in the last five years. If GM's PT Cruiser wannabe bombs, if their new full-sized SUV's and trucks tank, well, there's not much GM can do about it in the short term.

Other than offer incentives. Which Rick plans to cut. Bullet three: eliminate discounts by "streamlining" GM's dealer structure, improving sales in metropolitan areas, loading vehicles with more standard features and advertising vehicles closer to their "actual" retail price. Is it me, or does this sound like firing blanks? It's not the kind of strategy I'd depend upon to shift 1.2 million unsold vehicles (and counting). Surely, the only way to eliminate discounts is to build the right product for the right cost, and then sell it at a price that generates enough profit to stay in business. Most of the other guys seem to get it.

Of course, most of the other guys don't carry health care costs that equal $1500 per vehicle. Bullet four: renegotiate the UAW's contract. Hmmm. So why hasn't Wagoner formerly requested re-opening their contract? Anyway, how are those "intense discussions" going? 'We have not reached an agreement at this time, and, to be honest, I'm not one hundred percent certain that we will,' Wagoner said at the shareholder meeting. 'If we can't do that we'll have to consider our other options."

Such as importing more parts from China. This is the final round in Rick's gun. Although it didn't get nearly as much media attention as the nominal job cuts, the Chairman's announcement that he'll reduce costs by replacing UAW-made parts with Chinese parts is big news. Given that GM is now manufacturing cars in Slave Laborland, the clear implication is that GM could move more production overseas. It's not a bad idea, financially, but it ain't gonna help if and when GM tries to play the patriotic card.

And there you have it: too little, too late. For whatever reason, Wagoner couldn't bite the bullet. He couldn't lop off dying brands. He couldn't go nuclear on the UAW's costs and practices. He couldn't reinvent GM. The ship is sinking, but as far as Wagoner is concerned, it's steady as she goes.

By on June 3, 2005

Maximum Bob Lutz behind the wheel of the Pontiac Solstice.GM and its supporters have a mantra: product. By continually chanting "product, product, product", they hope the company's critics will believe that a string of hot cars, trucks, SUV's and minivans will pull the world's largest automaker back from the brink. While the argument ignores GM's sky high costs and decades of soured consumer relations, it sounds plausible enough. Chrysler's doing it. Why not GM?

For one thing, GM doesn't know how to sell a hot product when they have one. Take the Pontiac Solstice. No wait, you can't. Despite promising the car for summer '05, production problems have delayed dealer delivery until October. Ish. While GM wants props for selling no Pontiac before its time, you've got to laugh (or cry) at their incompetence. The company finally comes up with a blockbuster, generates massive awareness through a hit TV show, opens a special website for an "early order program" (EOP) and then… nothing.

The roadster is a summer blockbuster!  Or will that be a Thanksgiving turkey?Make that worse than nothing. GM won't commit to a new delivery date and leaves the "lucky" 1000 EOP winners twisting in the wind. GM also fails to contact customers who registered on the Pontiac website for Solstice updates. [Many of these customers already feel hard done by; the web winners cut the line.] And then there's talk of Pontiac dealers adding a "market adjustment" to the Solstice's retail price. Potential buyers wanting to know what's what can't get a straight answer from their dealer. GM remains mute.

When aspiring Solstice owners finally hear word of 'their' car, the message doesn't come via email, or registered letter or a courtesy phone call. GM addresses the 'issue' through our old friend Suffice it to say, GM Line Executive – Small Cars Lori Queen says nothing whatsoever about potential dealer surcharges and makes no firm committment to a delivery date. And then she tells surfers that she's toodling around town in a pre-production Solstice and it's great! As the British like to snarl, it's alright for SOME.

Great-looking cockpit, but it's got to compete with the best: the MX-5. But not most; including GM. You don't have to be a New England Pontiac dealer to know that launching a convertible roadster in October is not a great idea. What's more, Mazda is about to unleash– on time– their latest generation MX-5. Unless the Solstice is damn near perfect, the highly evolved Japanese roadster is bound to kick the American newcomer's ass. But even if the Solstice is rated the better of the two cars, the ideal sales window will be closed for winter, and the chance of a pre-emptive strike against the class leader will be gone.

C'mon, supporters say, cut GM some slack; everyone makes mistakes. Yes, but this is the exact same mistake Pontiac made with the G6. That Great Wheeled Hope also experienced a horrendous gap between marketing hype, consumer backlash (a $7k tax bill for Oprah's G6 winners) and eventual delivery. A company living in junk bond Hell, an automaker that's losing $2,331 on every vehicles it sells, simply can't afford to build-up consumer expectations and then drive them into a tree.

Sexy stuff.  So where is it?The second reason GM's product mantra won't forestall foreclosure is that The General is simply too slow off the mark. As good as it may be, the Solstice is taking aim at a segment that Mazda has been exploiting for 15 years. When the Solstice finally arrives, it will hit the marketplace almost four years after the concept car was first introduced.

Again, we're talking about a pattern of behavior. Maximum Bob's latest blog entry assures readers that he understands enthusiasts' current fondness for rear-wheel-drive passenger cars (i.e. the Chrysler 300C). In fact, Bob says, his minions MAY start another rear-wheel-drive program to replace the one they just spiked. The company is also "studying" the trend towards "nostalgia vehicles". In other words, by the time GM translates its current rear-wheel-drive "studies" into action, and delivers its new nostalgic designs (?), the market will have solidified, or moved on.

The end of the beginning or the beginning of the end? Bottom line: 'me too' products won't cut it. Toyota spends some $15b a year on research and development for three brands, and leads the way in hybrid technology. GM spends $7b a year for eight brands, and still sells pushrod engines. Obviously, creativity and innovation isn't simply a matter of money. But if GM believes that product is all, they should be putting their all into product. The car business isn't brain surgery. As Thomas Ho's post on the fastlane blog puts it, GM should…

"Make a solid product, market it, sell it and back it up with great customer service. Instead, they market [a product] before it is ready for prime time, receive orders and then delay it. Is it just me, or are people in GM smoking something?"

By on May 30, 2005

Robert Lutz, Vice Chairman of The General Motors CorporationBob blogs. Mr. Lutz' entries on are irregular enough to merit cybernetic Metamucil, and the GM Vice Chairman's comments are about as 'off the cuff' as the State of the Union address. Even so, the blog provides fascinating insight into The Main Man's mindset. Sure, you have to slow the spin and read between the lines. That just makes it more fun. Bob's last entry, May 12th's 'The Game Plan… an Edited Version', is a perfect example.

Even before we start, he's waffling. The 'edited version' in the title implies that the full blueprint for GM's turnaround is too long or complicated for the General's public. It's a stunningly efficient projection of corporate condescension. In case you missed the point, Maximum Bob immediately reassures visitors that he reads their comments. The hand-holding exercise is necessary because Max Bob never answers a specific post, yet understands that his impersonal commentary violates the spirit of the exercise. To wit: 'I know that some bloggers more quickly than others…we're all doing what we can.'

Now THERE'S a commitment to customer satisfaction. You might even call it GM's attitude in microcosm: "I know some companies build better cars and make more money than GM… we're all doing what we can." Maximum Bob's reliance on the royal "we" is predictable enough, but it still demonstrates that he's ready to hide behind his title when responsibility time rolls around.

Bob's blog then says 'The second and more important issue I've seen asked repeatedly is, 'What is GM's strategy for fixing its issues?'', leading to '…there's no magic bullet for our issues, at least none that we've uncovered.' Michael Jackson has "issues". Dr. Phil has "issues". Auto execs up shit creek without a 300C-shaped paddle should be talking about "problems" or "challenges". And is there or isn't there a magic bullet? Fence-straddling is not an attractive attribute for the head of an automaker losing market share like the Titanic lost buoyancy.

After raising and praising the 'watcha gonna do?' question, Maximum Bob runs away. First he claims that he's already outlined 'what we intend to do", then he says "what we won't tell you is exactly how we intend to do those things." Huh? I'd like to believe that Max Bob is concealing a secret plan to upend the United Auto Workers or unleash new product, but I doubt it. As he doesn't justify his silence, it's all too easy to assume that Max Bob simply doesn't want anyone taking shots at his strategy (should one exist). It reminds me of Nixon's secret plan to get us out of Vietnam, and we all know how THAT turned out.

It gets worse. Max Bob slams the door on any discussion of GM's underlying "issues": "We will not turn this into a debate about health care costs or public policy or anything related." So that's that then. GM has a "game plan" for extracting itself from its financial woes, but the Vice Chair can't tell you what it is and won't talk about what it needs to do. But what really galls is the previous sentence, which says "This is intended to be a blog about cars and trucks, by the way, and some of the peripheral issues surrounding the buying and selling of same." By the way? Call me an unpatriotic GM-basher, but the expression used in this setting sounds an awful lot like "fuck you". That's not helpful.

After a brief bout of self-congratulation, Max Bob reveals his master plan: build higher quality cars, price and sell them more effectively and cut "waste" across the board. Bizarrely, MB publicly admits that his plan isn't dressed to impress: "Sound pretty general? You bet it does." In fact, Bob might as well have promised to implement my father's business plan: "Take in more money than you spend"– only his record so far indicates an inability to follow this simple recipe.

MB then compares his "game plan" to the Super Bowl-winning New England Patriots', insisting that the Pat's coach wouldn't have "turned over the script for his first 15 offensive plays from scrimmage…not even on his blog." I'm sorry; when did GM's corporate strategy become a matter of national security? And if loose lips sink automakers, what was Max Bob's lieutenant Rick Wagoner doing playing footsie with Toyota in Japan? Offensive plays indeed.

And then Max Bob throws the Hail Mary: "Believe me, GM has a crystal clear strategy in place to turn around our fortunes, particularly in the U.S." When an exec pulling down a ten-digit salary resorts to "believe me", you know he's in trouble. Especially if that high flying exec does nothing to establish his credibility with the people who count, in the one forum where earning trust is as easy as telling the truth, the whole truth, and nothing but the truth.

By on May 22, 2005

Spiro 'nolo contendere' Agnew shared GM's current antipathy towards the media.Vice President Spiro Agnew used to call the press 'nattering nabobs of negativism'. The barb was part of Agnew's campaign against the press during the Nixon administration. Today, GM and its apologists are also accusing journalists of negative bias. While their language isn't as colorful as the disgraced Veep's, the idea is the same: GM is the victim of a malicious media. Sure, the company has a few 'issues', but the media's perception of GM's products (and therefore the public's) lags behind reality. GM isn't bad. It's just misunderstood.

This anti-media bunkering was recently emboldened by customer surveys from Strategic Vision Inc. and JD Power. In Strategic Vision's 'Total Quality Award', GM scored more victories than any other manufacturer. Six GM products took the top slot in their genre: the Pontiac G6, Buick Rainier, GMC Sierra, Cadillac Escalade, Chevrolet Corvette and Hummer H2 (tied with the Range Rover). Given the G6' lukewarm reviews, the scorn heaped upon the gas-guzzling Hummer and the cold shoulder afforded the Ranier, Sierra and Escalade; the survey provided plenty of ammunition for GM supporters who consider the press 'hopeless, hysterical hypochondriacs of history'. Well it ain't necessarily so.

The '05 Buick Ranier scoops 'best mid-sized SUV' in Strategic Vision's 'Total Quality Award'.  Huh?Strategic Vision's Total Quality Award study is based on founder Dr. Darrell Edwards' 'Tree of ValueCentered Knowledge', a 'comprehensive theory of human behavior… that describes, explains, and predicts choices that any individual or group of individuals might make'. Strategic Vision uses this trademarked theoretical construct to measure a customer's feelings of 'balance, self-esteem, freedom and security' as they relate to a product. Strategic claims to have quizzed over 40,000 new car owners about, well, I'm still not really sure.

Even if you accept Strategic's enigmatic methodology, there are serious questions about the company's independence. Strategic lists GM, Daimler Chysler, BMW, Kia, Nissan, Ford and Volvo as clients. Is it a coincidence that these companies topped 18 of the 20 categories? I'm not qualified to comment on the Buick Ranier's ability to foster self-esteem, but the fact that this obscure vehicle scooped best mid-size SUV– on any level– is deeply suspicious.

The press dismisses the Chevrolet Suburban as a gas-guzzling dinosaur, owners love it and sales are dropping.  Go figure.  JD Power's 2005 Initial Quality Study (IQS) appears to be more scientific than Strategic Vision's touchy feely assessment. JD quizzed 62k customers after the first 100 days of new vehicle ownership, measuring 135 attributes in nine categories (e.g. ride and handling). The survey establish a vehicle's 'problems per 100 vehicles' (pp100). JD awarded five GM products top slots in their segments: the Chevrolet Malibu, Buick Century, Buick LaSabre, GM Sierra and Chevrolet Suburban. Once again, the results are good news for GM (accepted without question by the 'pusillanimous pussyfoots' of the press). Once again, the results do not speak for themselves.

For one thing, JD's methodology is not subject to independent review. They also sell their services to the same companies they investigate. Equally important, the IQS gauges the discrepency between a customer's expectations and their experience. By that standard, JD's survey tells you more about a car's owner than the product's build quality. The results may well reveal nothing more profound than the fact that a working class Malibux Maxx owner is less demanding than a white collar Porsche owner.

The results may also be irrelevant. Since 1978, the auto's industry pp100 average has dropped from 176 to 118. As anyone who ever bought a car in the 70's will tell you, ALL vehicles are better than they were, most are damn fine and very few require lemon-aid. I wouldn't want to be at the bottom of JD Power's IQS chart, but neither would I assume that a top ranking equals brand loyalty.

Of course, neither of these psychological surveys is a reliable indicator of a vehicle's popularity in the only arena where it really counts: the commercial marketplace. There is only one objective measure for that: the sales charts. By this accounting, the vast majority of GM's cars, trucks and SUV's are failing to cut the proverbial mustard. Fixing that trend is the best– indeed, the ONLY way– to silence the 'impudent corps of effete snobs' known as GM's critics.

By on May 19, 2005

Mark LaNeve, GM North America's Vice President of Vehicle Sales, Service and Marketing.  A scary-looking guy with a scary-looking plan. Ladies and gentlemen, we have a plan! Post-Fiat payoff, post-financial quarter from Hell, post-Kerkorian, post-junk bond status, pre-stockholder meeting, The Detroit News has finally unearthed GM's strategy to extract itself from the multi-billion dollar hole that threatens to swallow the entire corporation. Step one; stop digging.

According to Mark LaNeve, GM North America's Vice President of Vehicle Sales, Service and Marketing, The General is going to trim overlapping models across all eight domestic brands. We will no longer see re-badged versions of identical vehicles being sold under different GM banners (e.g. the Pontiac, Buick Satrun and Chevrolet minivans). As part of this overlapicide, only Chevrolet and Cadillac will sell a full model range. Everyone else will sell niche-specific vehicles, and nothing else. This leads us to…

Saab: exclusive, European-styled and engineered sedans, crossovers and SUV's.Step two; define the niches. Saab will now be restricted to "exclusive, European-styled" sedans, crossovers and SUV's. Hummer will sell "market exclusive, premium" SUV's and trucks. Buick, Pontiac and GMC will join hands in the showroom to sell trucks, SUV's and "premium and near-luxury" vehicles. Saturn will "move upscale" to slot between Chevrolet and Buick, selling "models styled and engineered to European standards".

And there you have it: GM's plan to cut costs, generate sales and build better brands. While all interested parties will be relieved to see someone at GM step up to the plate and aim his bat at the left field stands, LaNeve's grand vision of a tightly knit portfolio of complementary automotive brands is a conundrum wrapped inside an enigma.

Buick, Pontiac, GMC: trucks, premium and near-luxury American vehicles and performance models.For example, LaNeve sees Chevy and Cadillac as "book ends" to the rest of GM's brands. While there's a logical progression from Chevrolet to Buick to Cadillac, where does GMC, Hummer, Pontiac, Saab and Saturn rank within this new world order? Is a Saab sedan now more or less prestigious than a Cadillac sedan? Is a Pontiac GTO above, below or beside a Chevrolet Corvette? As Hummer goes down market, at what point do its products collide with upmarket GMC's? Where does Saturn fit?

The words used by LaNeve in his DTN rundown are doubly troubling. What's the difference between "premium", "near luxury" and "exclusive"? By my reckoning, a Hummer H3 is an exclusive, premium, near luxury truck. As is the way of such things, even if you strip away the genetic doppelgangers, keeping eight brands with similar types of vehicles from filling overlapping niches is just about impossible. I don't foresee a day when GM execs tell Saab to make its top-spec SUV less luxurious so as not to "step on" Cadillac's SRX. Or look at a Buick concept car and says, "Sorry, it's too Euro-styled. That's Saturn's thing."

Saturn: upscale models styled and engineered to European standards, slotted between Chevrolet and Buick.Even if LaNeve's plan is cunning enough to resolve these issues, it still faces some enormous road blocks. For one thing, it would require all of GM's fiefdoms to rationalize AND harmonize their efforts. That's no small feat for the world's biggest automaker, a company famous for its deeply entrenched bureaucracy. If Mr. Lutz and Mr. Wagoner aren't ready to cut, cauterize and reconstitute the management charged with implementing this brand re-co-ordination plan, it ain't gonna work.

LaNeve's plan also fails to address the UAW's stranglehold on The General. It's highly doubtful that the union would 'let' GM close the necessary factories without a fight. And what about GM's crippling labor costs? Until that little item is resolved, the difference between the company's expenses and its income will continue to be unacceptably narrow, no matter how many of what type of vehicle each brand does or does not offer for sale. And although LaNeve claims to have schmoozed the plan with 2500+ GM dealers (why didn't someone tell us about this sooner?), it's not clear how well the strategy would work at ground level. Can Saturn dealers go upscale? Can Saab, Buick or Saturn dealers survive without rebadged GM trucks?

Hummer: exclusive, premium SUV's and trucksIn short, I'm not convinced. I'm good with the idea of Chevrolet at the bottom and Caddy at the top; it harkens back to the aspirational strategy that made GM into such a successful colossus. But the rest of the brands' positioning strikes me as a vaguely-defined irreconcilable farrago of vehicle types, identities and price points. LaNeve is to be complimented for attempting to bring order to the chaos that is GM's portfolio, but, well, he hasn't.

The more logical answer would be to have Chevy and Caddy sell a full line of cars, station wagons, minivans and crossovers; restrict Pontiac to sports cars, deep-six Buick and Saturn, sell off Saab, combine GMC and Hummer and leave ALL SUV's and trucks to this new, re-jigged division. With this set-up, there would be less product sloshing around and zero brand overlap. As LaNeve of all people should know, when it comes to sales and marketing, confusion is to be avoided at all costs. Clarity is all.

By on May 16, 2005

 Last week, we learned that embattled GM Supremo Rick Wagoner was flying to Tokyo to discuss the possibility of 'sharing' Toyota's hybrid technology. GM officially denied the story. Today, we learn that Wagoner did indeed meet with Toyota President Fujio Cho (on a Sunday no less) to discuss "fuel cell development". In the news biz, this is what you call going from bad to worse.

Hydrogen fuel cell vehicles are decades way from actualization. Despite billions of dollars in development funding, engineers have yet to devise a hydrogen fuel cell efficient/practical enough for anything other than a large commercial bus. While not insurmountable, the challenge requires entirely new technologies and materials, which must then be subjected to the same rigor that applies to gas-powered propulsion: performance testing, manufacture, packaging, mechanical reliability, recyclability and more. And then there are safety concerns, especially at pump time.

A Shelll hydrogen refuelling station-- in Finland.Yes, there is that. If GM unveiled a workable hydrogen fuel cell vehicle this afternoon, there'd be less than five hydrogen refilling stations in the country able to fuel it, and none of them are open to the public. In thirty or forty years, sure, the technology and infrastructure for hydrogen-powered cars, truck and SUV's might be in place. By then, we may even have hundreds of thousands of small alternative power plants cranking out hydrogen for the masses, vastly reducing our dependence on foreign oil.

By then, GM may be out of business. Wagoner's company is in the fight for its life RIGHT NOW. It needs to cut costs RIGHT NOW. It needs to manufacture popular products RIGHT NOW. Anything GM's Wagoneers can do to stop the rot RIGHT NOW– closing factories, shuttering divisions, re-negotiating contracts, selling lame models at fire sale prices, shortening product cycles, re-badging Opel, Holden or competitor's products; divesting GMAC, going into Chapter 11, anything– is better than pie-in-the-sky environmentalism.

Pssst.  Want to by a Hybrid Synergy Drive, cheap?Why in the world would Wagoner and Co. take time away from the current crisis to play footsie with GM's number one competitor, chasing an unproven technology that can not possibly improve The General's bottom line for at least a decade, if ever? I can't quite bring myself to believe that Wagoner's travels are nothing more than tree-hugging propaganda designed to get investors to forget about the commercial cancer threatening to destroy the entire company. But what other explanation is there?

Perhaps the hydrogen story is a cover for the real story, which was the first story: GM IS buying hybrid technology from the Japanese. If true, why not admit it? At this point, the market would welcome any effort on GM's part to get back in the game– even if it meant re-badging Toyota hybrids as GM products and, well, selling them. (Of course, the UAW might have a thing or two to say about that.) Would the buying public care if their Chevy was a Toyota? They don't care that it's Korean. Would customers complain if their Tahoe had a Toyota drivetrain? Probably not.

Will Toyota continue to carve out pieces of GM's biz? Perhaps Toyota is negotiating to buy GM. Or part of GM. Or maybe GM is going to buy part of Toyota, and then pay a few billion dollars not to buy the rest of it. Or maybe the trip is like that peace meeting before the Japanese bombed Pearl Harbor; an attempt to lull GM into a stupor– as if it isn't already in one. Despite Toyota's offer to increase their prices to help GM's bottom line, despite all this technological sharing stuff, Mr. Wagoner would do well to remember that the sushi knives are always out for GM.

If I sound confused, well, I am. I see no evidence that GM has a master plan to reverse the fact that it spends too much money making cars, trucks and SUV's that less and less people want to buy. I see no evidence that Mr. Wagoner's international movements are part of this [yet unexplained] strategy. I've asked GM to respond here, without editing, without success. Of course, the pages of the New York Times, Detroit News or Wall Street Journal would be just as good…

Meanwhile, I would advise Wagoner to make another sort of trip, to the vast airfields outside of Detroit. There he will find acre upon acre filled with brand new GM product. Strolling through these vast lots, Wagoner would get a humbling perspective on GM's industrial might (and accounting procedures). Who could help but admire the organizational genius needed to create a sea of entirely serviceable merchandise? He might also understand that his company's survival, and the survival of all who work for GM, depends on finding happy owners for each and every vehicle. Either that or crushing them all and starting again.

By on May 12, 2005

John Carr wants someone at GM HQ to take responsibility, and take charge.Whenever a domestic automaker goes to the wall, it's always someone else's fault: the foreign exchange rate, health care costs, pension obligations, product cycles, changing tastes, the media, government regulations, union contracts, etc. Executives start shuttling off to Washington to talk about "leveling the playing field'. By now, we're wise to these buzz words; they're an attempt to hide the fact that a US automaker "suddenly" lacks the competitive skills to take on their foreign rivals. This time it's GM. Well it's time for GM to stand up and take some responsibility for their actions.

This is not GM's first chance to come clean. Remember the Arab Oil Embargo of the 70's? Gas stations lines went around the block and gas prices rose to unheard of levels ($1 a gallon!). When consumers reacted by flocking to smaller, higher mileage foreign-made cars, GM claimed that the Japanese were "flooding the market" with cheap imports– as if it was some vast conspiracy to put Americans out of work. The plain fact was that the Japanese and German product was better than ours: better engineered, better built and more economical. Not that they'd say so, but GM's corporate laziness simply caught up with them.

A Pontiac Safari from 1973, when the Arab Oil Embargo hit.  Are today's GM SUV's also suddenly obsolete?   Egged-on by management, American autoworkers destroyed foreign vehicles at rallies, wouldn't let foreign cars park in manufacturing lots and generally hid behind the banner of patriotism. When the immediate crisis eased, The Big Three "woke up" and realized that their products' quality was sorely lacking. They made great strides, but rigid unions and timid management resisted change to the point of near extinction. They produced some truly pathetic product (e.g. Chrysler's K-cars and GM's Cimarron).

Fast forward to today. Once again, gas prices are soaring. Once again, consumers are buying high quality, high mileage vehicles from someone other than General Motors. Once again, GM has the wrong vehicles in its lineup. Once again, highly-paid executives are saying protect us, give us time and we'll turn it around. And once again, we're supposed to feel sorry for/support them simply because they're an American company, with American workers.

An '87 (yes, 1987) Cadillac Cimarron.  What were they thinking? Well can someone please explain to me how in thirty years GM went from depending on sales of cars that got lousy gas mileage to depending on sales of trucks and SUV's that get lousy gas mileage? Why did they basically walk away from the small car market? Oh that's right: it's the Government's fault. By excluding SUV's from CAFÉ standards, GM and Ford were "allowed" to sell consumers huge, gas-guzzling vehicles, to rely on them for the lion's share of their profits. Never mind that the domestics used their influence to maintain this "light truck" legal exclusion in the first place.

During the highly profitable SUV times, the domestics claimed there was "no money in small cars". Rather than plowing their profits in new, better-built domestically-made cars, GM spent billions buying up a failing boutique brand (Saab) and "investing" in Fiat. Meanwhile, the Japanese and Korean automakers continued to mop-up the small and medium-sized car market, and developed headline grabbing hybrids. Does it strike anyone as funny that GM imports and re-badges Korean cars for their lineup? Not me.

How much would you pay NOT to buy FIAT?  GM paid $2b.  Whose fault is all this? Who at GM has taken responsibility for all these blunders and blown billions? Who has stood up in front of the media, stockholders and consumers and said, "We were wrong. We got ourselves into this mess, and we're going to get ourselves out"? Where's the rescue plan? Where's the vision of what comes next? Simply pointing at its current models and saying, hey, we're doing a great job but the media hates us, is dangerous nonsense.

GM needs to stop looking for excuses or an easy out. If they're waiting for a white knight (Kerkorian? Toyota?) to rescue them, or hoping for some government intervention that will "level the playing field", the game will be over before they know it. America is no longer willing to support corporate ineptitude in the name of some "America first" campaign.

GM should stop its hand-wringing and publicly declare some ambitious new goals for future products' mileage, safety, pollution and market share. They need to tell the financial community what they're going to do to cut costs, and then do it; come what may. Simply announcing these targets for new product and committing to belt-tightening would transform GM from a victim to a fighter. From there, it's not that complicated. All GM has to do is produce world-class affordable products with fabulous designs, robust engineering and great mileage. I know GM has it in them. And if America loves anything more than a fighter, it's a fighter with the guts to make a comeback.

By on May 10, 2005

The '05 Chevrolet Cavalier: not a lot of laughs for some owners.Mr. Witzenburg's recent TTAC editorial criticized Mr. Farago for his anti-GM bias and asked us to give the domestic automaker a fair shake. While I respect Mr. Witzenburg's loyalty and patriotism, he seems to have overlooked the fact that his former employer makes some truly awful automobiles. As the cornerstone of his defence, the automotive journalist asked readers to name one– just one– poorly-made car from the General Motors line-up. Alright then, what about the Chevrolet Cavalier?

My best friend, sister and mother all had the displeasure of owning a Cavalier ('94, '00, '04). During their stewardship, pieces fell off, the electronics failed (headlights, windows, and stereo) and there were several major mechanical failures (transmission starter, alternator and master brake cylinder). Witzenburg may dismiss these complaints as relating to an "old" design, but their saga is not peculiar to the Cavalier. Perhaps owners of other GM products would like to email their tales of woe to Mr. Witzenburg. Anyway, a car company is only as good/bad as their weakest model.

I also reject Witzenburg's argument that build quality is everything; he claims you can't criticize a GM product simply because you don't like it. Sorry? Why not? Despite Mr. Witzenberg's affections for JD Power, 'objective' quality surveys are not the ultimate measure of an automaker's products. It's whether or not people like their vehicles enough to buy them. Is Witzenburg saying that people are "wrong" because they don't like a GM car's looks, handling, performance or cost of ownership? GM may still sell a Hell of a lot of cars, but their declining market share says it's GM– not its customers– that's been getting it badly wrong, for a long, long time. To suggest otherwise is blaming the victim.

There's another way to gauge the public's general regard for GM's products: depreciation. If GM was making great cars, they'd all hold their value like a Honda Accord. They don't. For example, within one year, the aforementioned Cavaliers shed nearly 45% of their original value. In fact, the pro-GM writer should click-on-over to and have a look at the used car values right across the GM range. There's no better place to get a feel for how little the public thinks about GM's engineering and design.

But let's get back to new product. Continuing our quest for lousy cars, how about Saturn? They may last a long time, but is that a good thing? Most of these cars use plastic far cheaper than Mattel dinky-cars. They have underpowered engines, terrible interiors, weak suspensions, junk brakes and dismally uninspired interiors. And they're ugly. The media reports that GM will rectify all of these problems with a new batch of high-quality product. Now where have I heard THAT before?

While many cars in GM's line-up aren't lousy in and of themselves, they're clearly not "up" to the competition. The top-spec Saab 9-5 is a nice car, but so is a fully-loaded Nissan Altima, for $10k less. Or, for the same price as the Saab, how about a BMW 525? The Bimmer's retained value would even pay for a few extra toys. Buick's latest and greatest, the Lacrosse, or a Nissan Maxima? Guess which is cheaper, better styled in and out, has more power, better gearing, and still gets better fuel economy. Bottom line, in every situation, there's at least two or three compelling reasons to buy from GM's competition.

Witzenburg and his supporters like to point to the one supposed bright spot in GM's constellation: Cadillac. Although the CTS is a great car that builds on the Escalade's success/excess, Cadillac is hardly out of the woods. The XLR and STS are both perilously close to being flops: over-priced and under-deluxed. Again, check the sales charts; Caddy have yet to prove that they have what it takes to take-on Lexus, BMW, Mercedes, etc. and win. And again, cliff-face depreciation tells the tale of a division with more pretensions than product.

It's time for GM and its supporters to wake up. The only people giving them high numbers on surveys are those that don't know anything about cars, or what a decent car actually feels like to drive. When they do try a GM competitor's product, they usually don't come back. You can shout that GM makes great cars until you're blue in the face, but the there's no getting around the fact that people aren't buying them– any of them– like they used to. There's a lot of good reasons for that, and it isn't media propaganda. Until and unless GM builds great cars, like it or not, it's going to get exactly what it deserves.

By on May 5, 2005

Pssst.  Anyone want to buy a new Sierra?Oh dear. It seems that the long predicted "perfect storm" is massing above the stricken supertanker that is General Motors. Storm cloud one: the Wall Street Journal reports that SUV sales have tanked in Texas.

Never mind today's sales figures, which reveal that GM's light truck sales dropped 17 percent last month, to 209,917 vehicles. Or today's S&P downgrade, which reduces GM's bonds to 'junk' status (raising their borrowing costs). If Texans are abandoning their Conestogas, GM's number one [non-finance] profit engine is running out of gas– without a service station in sight. Unlike Chrysler and Ford, GM doesn't have a plan B: a supply of more fuel-efficient sedans, SUV's and crossovers ready for sale. I'm not talking about hit products like the Mustang or 300C. I mean reasonably frugal vehicles appropriate to these $2.70 a gallon times, like the Ford Freestyle.

Rick Wagoner, GM Chairman and CEO, is Tokyo bound.      Storm cloud two: these vehicles are not on the immediate horizon. That's why GM Chairman Rick Waggner is heading to Tokyo. He's exploring the possibility of GM getting (as in buying) Toyota's help (as in patented technology) on safety and environmental issues (as in engines that don't burn gas like GM's health care obligations burn money). If Wagoner is traveling to the Toyota camp just a week after they humiliated The General with an offer to raise their prices in sympathy, GM's upcoming product plans must be very bad indeed.

[NB: on 5/9, GM officially denied that Wagoner's trip to Tokyo will include meetings with Toyota.]

Kirk Kerorian a.k.a. 'The Quiet Lion'. Founder of the Las Vegas mega-resort.  Destroyer of GM?Storm cloud three: Mr. Kirk Kerkorian. an investor so rapacious they had to name him twice. Mr. K. just bought 22 million GM shares, upping his total stake to 9%. Kerkorian is what the business community calls a "tree shaker"; which is a bit like calling an M1 tank a "peacemaker". He likes to buy his way into the boardrooms of large companies and force them to sell off noncore assets, cut costs and restructure the whole damn shooting match. Sounds like a plan to me. It also sounds like the end of GMAC Finance, Buick and Saturn. At the least.

As far as I'm concerned, that's no bad thing. As far as the unions are concerned, it is. In fact, the UAW recently decided that the huge crisis facing the world's largest automaker requires them to do nothing whatsoever. There will be no union flexibility regarding GM's chronic excess capacity and the company's disastrous labor costs– save keeping the plants open come what may and increasing members' compensation when their contract comes up for renewal in 2007. The idea of dismembering GM to save it is about as high up on their list of priorities as lowering union dues.

The UAW: our contract stays as it is until '07.  But will it be too late?The brewing tempest here is union intransigence vs. Kirkorian intransigence. While Wagoner, Lutz and the rest of the GM rat pack are happy to hold the fort, appease the unions, scramble for market share and pray for cheap gas; Kirkorian is just as likely to tell the UAW to go to Hell. (Lest we forget, the guy is an 87-year-old billionaire.) As is the way of such things, if the UAW is going to Hell, they'll take GM with them. How does a UAW workers' strike sound right about now?

How about bankruptcy? Bankruptcy, the room-dwelling elephant that scares the shit out of everyone except real capitalists, would afford GM protection from its creditors: the unions. Obviously, no GM exec with a desire to retire with the respect to which his wife has become accustomed wants to be known as the guy who drove The General into the world's largest Chapter 11. They'd get down on their knees in front of Congress Lee Iacocca-style before accepting that scenario. Kirkorian, by contrast, would not be afraid to go nuclear. He might even enjoy it.

Oh, I forgot to mention that Mr. K also likes companies to turn their huge cash stockpiles into stock dividends. You know, to create a little walking around money for long-suffering stockholders like… him. A cash-strapped GM wouldn't have the wherewithal to fund new product development and their own stupidity (e.g. the $2b+ Fiatsco and ongoing recalls). Denied the opportunity to live off the fat of its finance arm and automotive heyday, hemorrhaging cash at the rate of a billion or so per quarter, GM would, eventually, go out of business.

Could it happen? Sure. Would I want it to happen? Now that's a different question; which a lot of people have been asking me lately In fact, I've recently been accused of wanting to be the instrument of GM's destruction. Well nuts to that. Automakers should sell products that consumer want to buy: stylish, safe, reliable, affordable, efficient and pleasurable to drive. Is that too much to ask? If GM in its current form isn't up to the job and goes under, it's a shame. But rest assured: America will weather the storm.

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