Category: GM Death Watch

By on August 3, 2005

Will customers enter the new GM matrix?  I should have seen it coming. How could GM flog its remaining '05 cars, trucks and SUV's at anything other than the Employee Discount for Everyone (EDFE) price? As we've said here before, you can't very well raise the price on an old product when its replacement is heading down the pike. Besides, Ford and Chrysler are continuing their Grab Your Checkbook and Work for Us programs through the summer. So the extension of GM's EDFE program until September 6th makes perfect sense. My bad for believing GM's public promises.

Speaking of which, The General is revving-up its "Total Value Promise" program. That's right, GM's post-fire sale 'Value Pricing' program has evolved. Originally, The General was simply going to lower '06 sticker prices to reflect the products' actual purchase price after [what would have been] incentives. Now, the automaker is saying they've "lowered prices, added features or redesigned over 50 GM models" so "you get more without paying more on the cars and trucks you really want."

The Australian children's entertainment ensemble will be well pleased; never in the course of corporate history has a company created so much wiggle room. All that's missing is the conjunction "and/or"– and you just know it's there in spirit. More specifically, a new GM product might have a lower sticker, or new features for the same sticker, or new features for a lower sticker, or a redesign with new features for the same sticker, or a redesign without new features for a lower sticker, or… the mind boggles. And that's before regional discounts or cash back allowances.

I'm also more than a little impressed by the phrase "on the cars and trucks you really want". What about the cars and trucks people DON'T want? I thought the whole point of incentives– I mean 'a value promise' was to off-load the losers. Correct me if I'm wrong, but isn't the new Chevrolet Corvette one of those cars customers "really want"? And wasn't it excluded from the EDFE program? No wait, the 'Vette's been redesigned, so GM draws a "Get Out of a Lower Sticker Price Free" card. But hang on, the 'Vette was redesigned for '05. Does that mean the new Value Promise is retroactive?

Confused? So what else is new? GM singularly fails to grasp the fact that the public's imagination was captured by the EDFE program's simplicity. The "You pay what we pay" message eliminated most of the confusion and stress of wading through the incentives morass. EDFE wasn't a return to Saturn's old no-haggle pricing, but it was damn close. (One suspects many EDFE customers treated it as such, much to dealers' delight.) The EDFE elevated The General in its customers' estimation, allaying their suspicion that all those complicated incentives were designed to fool them into thinking they were getting a bargain when they weren't.

Which was true. The only way you can judge a car's value is by comparison. It's no coincidence that GM products' official sticker price has been higher than their direct competitors'. That way GM can take money off the 'suggested' retail price to bring the GM product down its competitor's level AND make it seem like customers are getting a "deal". For example, in 2005, the Pontiac Vibe stickered for $1k more than the Toyota Matrix, leaving a nice pad for discounts. Will the Value Promise program end this faux inflation? It's doubtful.

Before Value Pricing morphed into "We Give You Our Word That This Price Represents Excellent Value", pundits were saying that the move towards realistic stickering was motivated by the Internet. GM's official prices supposedly put them at a disadvantage during electronic price comparisons. Not true. The General's websites include a program that calculates post-incentive pricing. More importantly, savvy web shoppers have been heading for sites like to scope the dealer invoice for quite some time. Which they will continue to do, Value Promise or not.

The point is this: GM didn't so much miss the honesty boat as get on it and then hop off mid-river. If The General had created a program in the spirit of EDFE, they would have capitalized on the public's good will. The Value Promise pisses on pricing clarity and further sullies GM's rep. No doubt the program will succeed in some cases, and fail in many others. Creating a class-leading product that makes its competitors look over-priced is the only strategy that works in every case. Hey Rick, what are the chances of THAT happening?

By on July 31, 2005

Anyone care to pay full sticker for one of these bad boys?And so General Motors turns to 'value pricing' to maintain the momentum created by its now defunct Employee Discount For Everyone (EDFE) program. OK, so what the Hell is value pricing? 'Value' is a subjective term. Stick it front of the word 'pricing' and the phrase simply indicates that someone somewhere thinks that a particular price is fair. Whether or not customers agree with The General's assessment will be revealed in a month or so. Meanwhile, let's try to find the truth behind this slippery concept…

This is what we know for sure: the official sticker price for GM's '06 models will be lower than the official sticker price for its '05 models. Whether or not the new sticker price will be significantly less than the EDFE price, or the pre-EDFA discounted price, is not yet clear. (To refresh your memory: the EDFE price represented a large discount from the official sticker price, but a relatively small discount from the actual, discounted price available before the EDFE program began. In a few rare cases, the EDFE price was actually higher than the discounted price.) More importantly, The General swears it will no longer slash prices to chase turnover and market share. The fire sales are finished.

It's a gutsy move. GM is betting the farm that it can create an enormous shift in consumer expectations. The General wants potential purchasers to ditch the idea that GM is the Wal Mart of automakers, where everything is always on sale and price is, let's face it, the main reason you came into the store in the first place. From now on, they want customers to see GM as an automaker who sells real value: excellent cars at an excellent price.

It won't work. First of all, GM does not make excellent cars. While virtually all of its 80 models [now] qualify as worthy, hardly any of them excel in relation to their rivals. If GM tries to sell a Chevrolet Aveo based on anything other than its low price, they're heading for trouble. Unfortunately, the same limitation also applies to everything from the Chevrolet Impala to the Cadillac CTS. Aside from the Pontiac Solstice, Chevrolet Corvette and Hummer H3, GM's products lack the spizzarkle, the killer app, the USP they need to stand apart from their competitors and say, 'Don't worry too much about price 'cause we're the best.' When customers see your products as roughly equivalent to the competitions', price-based comparison shopping is both inevitable and unavoidable.

Second, GM is ignoring the supply side of the equation. The General is locked into union contracts which make it virtually impossible to stop making cars; they have to pay the workers full freight regardless of plant closures. There's no escaping the implications: as soon as supply exceeds demand, the market value of those cars drops. Lest we forget, GM launched the EDFE program to clear enormous inventories of unsold cars. If GM swears off discounts and cars pile up they'll have to… what? Let them rust into the ground on abandoned airfields? Crush them? Anyone who bets against some sort of clearance sale isn't playing with a full deck.

Lastly, The General is lying. According to spokesman Jeff Kuhlman, GM will continue to run regional incentive programs, which might include rebates, dealer cash or cut-rate financing. Huh? Since when is a regional incentive not an incentive? That's a distinction without a difference. What's more, GM is happy to point out that the 's' in MSRP stands for 'suggested'. If a GM dealer wants to sell a vehicle for less than the 'value-priced' sticker, well, that's just the way it is.

GM's new 'value pricing' strategy does not, in fact, signal an end to The General's cut-price mentality. It's a cynical concept designed to hide the fact that GM's limbo dance will continue apace. If GM REALLY wanted out of the bargain basement, they'd bully their dealers into introducing no-haggle pricing; that's the element of the EDFE program that made it work.

In any case, there's no getting around the fact that any product is worth exactly what someone will pay for it. No more, no less. As long as the cost of its products exceeds their market value, The General faces the prospect of being 'value priced' out of business.

By on July 21, 2005

copyright GM's second quarter financial results prove what we've been saying all along: sales do not necessarily equal profits. Thanks to its Employee Discount for All program, The General's turnover climbed by a staggering 47%. The automaker's US market share rose to 30%. And yet GM lost another $1.2b, which is nearasdammit the same amount they lost last quarter. Add up cash reserves, marketable securities and available assets (from an employees' healthcare trust no less) and The General has about $20.2 billion in the bank. Simple math says that GM's US division will be completely bankrupt in a little over four years.

Of course, that assumes a steady burn rate. It's entirely possible that the automaker's fire sale has sucked-up most of the cash from GM's customer base, leaving a diminished market for new products. These new whips will have to kick some major league ass (i.e. Toyota et al) to stave off an even more precipitous earnings slide. And again, that's income. GM's expenditure is still wildly out of control; despite Rabid Rick Wagoner's public pledge to hold the union's feet to the fire on health care benefits, he, um, hasn't. There's no word about containing equally onerous (though less publicized) production, labor, management, administrative, inventory, distribution and marketing costs.

At some point, the situation will reach a tipping point, where everyone from suppliers to politicians will realize that the Titanic isn't going to make it. The words coming from the Chief Financial Officer's poop deck are hardly what you'd call reassuring: 'We have not put targets and we've not put dates on a North American recovery plan, but believe us, we have those targets internally.' So that's alright then. If the lifeboat known as GMAC finance is sold, you can expect the resulting panic to greatly accelerate the main company's demise.

But even if GM's profitable divisions are retained until the very last, it's highly unlikely that GM shareholders will simply stand by and watch the world's largest automaker slip into Chapter 11. When the ship's lights start flickering, Wagoner, Lutz, LaNeve and the rest of the current crew will be cast adrift. Divisions will be shuttered, plants terminated, product lines scuttled, unions confronted, assets sold. In fact, the rescue plan will be pretty much what it should have been five years ago. While you can't blame a Neanderthal for not winning a MacArthur genius award, watching this once proud company creaking and groaning towards a watery grave is as depressing as it is predictable.

The GM story has all the inevitability of a Greek tragedy. While the ending is never in doubt, the tale's twists and turns are endlessly fascinating. Consider Pontiac. While other GM brands managed to (at least) clear out lots of unsold inventory, and some even gained traction (Hummer sales up by over 200%), the Chief's sales were down 14.1%. Meanwhile, Pontiac's secret weapon is stuck in the lab. When the division recently announced that the Solstice would appear in showrooms this August, beleaguered front liners shouted huzzah! Yes but… actual, honest-to-God customer deliveries are still delayed until fall. Oh well.

Pontiac's misfires are yet more proof of the axiom that character is plot. The reason that Pontiac is a dead brand waiting is that it's just one facet of a corporation suffering from multiple personality disorder. In other words, there is no way on God's green earth that GM can make eight– count'em: eight– carmaking divisions fire on all cylinders all at the same time. Even if one or two members of GM's portfolio suddenly become wildly successful– a fair proposition given the law of averages– the others will take the resources generated and piss them away. There will always be a crisis somewhere in The General's ranks. It's a no-win situation.

Need proof? Look overseas. GM's European operations posted a $37m profit. It's not great, but a profit beats a loss every time. So why is GM Europe floating while its US parent flounders? European labor costs are worse than America's, and governmental taxation and regulation is on the far side of burdensome. But GM Europe doesn't sell eight different brands. Vauxhall [UK] is a single strong brand with a coherent message and worthy products. Ditto Opel on the Continent. These companies have focus.

Of course, that's changing. Chevrolet/Daewoo is planning a major European expansion, Cadillac wants to play on the world stage, Saab fancies its chances and… The trick to avoiding tragedy is to be the master of your own character. Clearly, GM is hamstrung by its hubris, and, ultimately, defeated by self-denial.

By on July 13, 2005

Photo courtesy AutoWeekSo, GM car Czar Bob Lutz breaks cover again. This time, Maximum Bob strolled into the offices of AutoWeek to face a grilling from the magazine's [unnamed] editor. Well, maybe not a grilling; more like a few minutes in a reasonably warm room with his coat off and feet up. In fact, the rambling and less-than-grammatical nature of Max Bob's replies to AutoWeek's underhand lobs indicates some kind of no-edit deal with the mag. Presumably, what we're getting is unvarnished Lutz. It's pretty scary stuff.

After a bit of warm-up softball, we get down to the main event: branding. In two of the longest, most 'puddle of consciousness' paragraphs ever posted on the web, Bob provides a guided tour of the magical mystery maze known as GM's branding strategy. [NB: Immediately after this editorial appeared, Autoweek removed its interview with Mr. Lutz from its website.] "I don't want to start a debate" the Editor begins, leading with his chin, "but how many divisions are adequate to cover the market?"

Max Bob immediately attacks GM's critics for double standards. Why accuse The General of excessive divisionality when Toyota has plenty of brands: Scion, Toyota, Lexus, Daihatsu and "I don't know what else"? Hmmm. Although Toyota bought Daihatsu in '99, the company's US operations died in February '92. In its quarantined capacity, Daihatsu isn't exactly a threat to GM's subs. And if Max Bob really doesn't know "what else" GM's arch rival has in its arsenal, well, that's not good– especially as there IS nothing else (excluding Hino commercial trucks and busses).

Adding insult to apathy, Bob goes on to list the VAG group's brands: "Volkswagen, Audi, Goldan, Bentley, Lamborghini, and I probably forgot one or two along the way." You can forgive Max Bob for forgetting Bugatti (as they've forgotten to deliver the Veyron), but you'd hope GM's Vice Chairman for Global Product Development would remember SEAT and SKODA. And who the Hell is Goldan? Maybe Maximum Bob said "Gol dang Bentley", and Autoweek's transcription service heard a more palatable (if imaginary) homonym.

When Max Bob finally turns his attention to his employer's lineup, he declares that Chevrolet is "the essential", Cadillac is "very clearly needed" and Hummer is "expandable". And then Bob's off, chasing cheese in the labyrinth, banging into dead ends at every turn. To wit: "When I say Pontiac should be more BMW, it should be into the niche of somewhat outrageous, aggressive performance. Will a Pontiac obtain a level of perfection of a 3-series? No. That's Pontiac's story."

I think I missed a few chapters. Perhaps Max Bob is trying to say that Pontiacs should be more like BMW's, but only somewhat, because Pontiac doesn't have a hope in Hell of matching BMW quality and engineering at its presumed price point. I'm not sure. In any case, Max Bob's remarks aren't exactly what I'd call a rallying cry.

On the Saturn front, Max Bob posits a philosophical question: "Why do we have to pick between great cars and lousy dealers and great dealers and uninspired cars? What would happen if we put the two together?" Excellent question, but why it applies to Saturn any more than any other of The General's seven other domestic brands is an even better one. Perhaps MB simply forgot about them. After revealing that Yukon-Denali buyers have more money than Escalade owners, Bob says, "So those are basically the brands now, what do we do with them?" Hello; what happened to SAAB?

We later learn that "Saab has a good future, but the part of the future that had to be changed was operating Saab as an independent car company. It just made absolutely no sense, so you've probably seen the announcement that we're establishing a Saab control center. It is sort of like the keepers of the Saab flame."

It's sort of like, you know, frightening; hearing Max Bob admit that GM brands can not act as independent car companies. For one thing, this Saab story makes a mockery of Marketing Mark LaNeve's pledge to eliminate product overlap (i.e. badge engineering) across the GM Empire. For another, genuine independence gives an automotive brand its character (hence GM's lack of same). When Lutz goes on to say that Saab has "never really been totally able to develop their own cars", he's either being disingenuous or pissing on Saab's heritage from a great height. Either way, it doesn't bode well for the Swedes.

In fact, MB's Autoweek appearance gives us no reason to revise our opinion of GM's prospects. Not that his words mean much; it's the next round of Lutzerific vehicles that will tell the tale. If they don't cut the mustard, if they can't be sold at a reasonable profit, The General will continue its inexorable slide into bankruptcy. At that point, Max Bob will regret his words, especially this classic example of hubristic doublespeak: "I don't think we have a lot of over-capacity. What we have is under-demand."

By on June 29, 2005

The hybrid-powered GMC GraphyteOpening up a recent issue of Autoweek, I was astonished by a picture of a new SUV. The vehicle's design was clean, modern and butch, without the slightest hint of off-roader clichés or overarching futurism. The newbie's sheet metal instantly trumped the latest crop of SUV's: the hideously-nosed Subaru Tribeca, the narcoleptic Saab 9-7x and the ungainly Audi Q7. I was even more astonished to see the GMC logo on the stunner's snout. When I saw the words "Hybrid Fever" in the title, I was ready for a big plate of humble pie.

The GMC Graphyte is, I soon learned, a concept car; though not in the Chrysler sense of the phrase. It's not an SUV that will eventually appear at your local dealership in roughly the same form. It's more like "here's something we spent a lot of money on to distract you from the fact that our next generation of trucks is just like the current generation of trucks with slightly better everything, but nothing particularly interesting, and certainly no killer ap like a really good hybrid engine." In other words, if you think GM has a secret weapon waiting in the wings to counter Toyota's inexorable march towards replacing The General as the world's largest automaker, dream on.

A gorgeous shape with tremendous emotional appeal.    In fact, Autoweek let slip that the Graphyte is a sham. The demo SUV was powered by the same old GM iron– despite the plastic cover proclaiming it a hybrid. "We later learned that actual prototypes are out in the real world doing engineering tests…" So no one at GM told Autoweek that the demo SUV had a gas-guzzling V8 until AFTER they drove it? You couldn't ask for a better illustration of the dishonest desperation infesting The General's ranks.

By the same token, Autoweek brings no glory to itself for saving that crucial factoid for paragraph ten, and accepting GM's contention that the engine in question even exists. The truth's late entry into the game can be attributed to the length of the author's pro-GM intro. After accusing hybrid supporters of Stalinist tendencies, the writer reveals that "insiders at GM… admit to not appreciating the emotional appeal of the segment" and "GM expects to become a major player in the model years 2007 and 2008." Translation: GM didn't make hybrids because they didn't realize its customers are such PC morons, but now they do."

An engine cover does not a hybrid make. Heads-up guys! Since when is a car NOT an emotional purchase? Are we to believe GM's product planners are in tune with the emotional appeal of a gas-guzzling Cadillac Escalade, but couldn't get their heads 'round the idea that consumers are willing to pay a premium to do their bit for America's energy independence and the environment– even if their assistance is only marginal? And again, where's the hard evidence that GM's "next generation" (read: late but superior) hybrid technology is ready for MY '07 or '08? If the powerplant ain't in the Graphyte right now, what are the chances it'll be market-ready in just two years?

To its credit, Autoweek understands the reasoning behind GM's continuing reluctance to fully commit to hybrid technology. The magazine repeats the anti-hybrid argument I've heard coming from The General's command post for some time: hybrids are merely halo cars, media-friendly anomalies that burnish a carmaker's green rep but have little appeal to the majority of American car buyers. Autoweek cites an oft-quoted JD Power survey predicting that hybrid-powered vehicles will carve-out a 3% market share by 2012. So it's just not worth it.

Want one?  Can't have it.  Ever. Older readers may remember similar arguments when Japanese imports first arrived on US shores. "Nobody wants those small, cheap cars except a few pot-smoking liberals and poor people.' Well, it didn't turn out that way– especially after the Arab oil embargo changed the rules of the game. This time, GM has failed to recognize that 911 has triggered another sea-change. More and more US consumers want hybrids, and they want them NOW.

Check this: GM just released a study revealing that 39% of Americans believe that improving gas mileage and reducing vehicle emissions should be our top energy priority. Does that sound like a hybrid market to you? GM's response: the poll shows the need to tell the public about our work developing fuel-efficient vehicles and our research into vehicles powered by hydrogen fuel cells. Wrong answer. Graphyte mock-up or no, GM needs to realize that the time for talking is through.

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.

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