Category: GM Death Watch

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 kbb.com 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.

By on April 28, 2005

Hiroshi Okuda, Chairman, Toyota Motor CorporationWhen Toyota Chairman Hiroshi Okuda proposed raising the price of his company's products to help floundering US automakers, industry insiders didn't know whether to laugh or cry. The idea that inflating Toyota sticker prices would lead US consumers back into GM or Ford showrooms is so ludicrous that Okuda's comment struck many as a malicious joke. Either that or the head of the world's second largest carmaker hasn't driven a Ford, lately. To get a consumer to choose a Ford or GM product over a similarly priced Toyota, the Japanese would have to tack on a couple of grand. At least.

Although Okuda quickly recanted, the brouhaha focused yet more unwanted attention on Ford and GM's lackluster products. It's one thing for your bond status to head for the junk pile, it's another for potential customers to hear that the Japanese feel sorry for you. Of course, from a marketing point of view, Okuda's offer was a masterstroke; potential car buyers now have good reason to believe that Toyotas are underpriced. From an industry point of view, Okuda placed not one but two elephants in the room.

The Chevrolet Aveo: an American revolution courtesy of Bupyong, South KoreaThe first pachyderm is a media fantasy: import tariffs. Yes, there was once a time when Detroit covered its ass by taxing Japan's. Those days are gone. The Big Three are now importing an enormous amount of parts and products from abroad (e.g. Korean cars re-badged as Chevy's and Chrysler's plans to sell Chinese-made cars). An import tax would hurt the domestics as much as the Japanese. And now that Toyota, Honda and Nissan ARE domestics, an anti-import tax would be, well, silly.

The second elephant, another media invention, is that Okuda's comments indicate that he's worried about the potentially crippling impact of a GM or Ford collapse on the US economy. The reasoning is as simple as it is stupid: if GM or Ford go under, their extinction would damage the US economy so severely that fewer American consumers would be able to buy Toyotas. In other words, Okuda will do anything (including increasing his company's profit margins) to save the wounded domestics, to ensure his company's long-term success.

Alfred P. Sloan, former GM Chairman: 'When GM sneezes, American catches a cold.'  Not anymore Al...This logic assumes that corporate chieftains like Okuda have a deeper insight into "how things really are" than your local shopkeeper. Maybe, but I doubt it– especially when you consider the wisdom of Okuda's executive counterparts at Mitsubishi. In any case, it's laughable to paint Okuda as an altruist. Show me a shopkeeper who doesn't want his competition to F-off and die.

The Revelations theory also assumes that when General Motors sneezes, America catches a cold. Again, those days are gone. The US economy is far more broadly-based than it was when GM supposedly called the tune. If GM or Ford bought the farm, there'd be a lot of hand-wringing and the stock market would plummet, but the vast majority of the US population would go right on buying food, videos, houses and… cars. In fact, the chances are excellent that a stricken domestic carmaker would quickly re-organize itself and survive, significantly leaner and meaner (did I hear someone say crippling health care costs?) than before.

I don't THINK so...Of course, no one would want to see tens of thousands of workers join the welfare rolls (especially regional politicians). But let's face facts: propping up a terminally ill multi-national corporation just to protect jobs is the worst type of socialism. And the last time I looked, the US economy is a capitalist system. If GM or Ford dies because they take in less money than they spend, it will– eventually– strengthen the US economy. In fact, protecting GM or Ford would play straight into Okuda's hands; insulating the domestics from market forces would allow them to continue to producing unpopular cars, trucks and SUV's.

Hmmm. Maybe THAT was Okuda's cunning plan: to help GM and Ford stay afloat so that Toyota could continue to compete against a couple of paper tigers. Oh well. Never mind. The most important thing about Okuda's offer is that it's completely unimportant. It's a distraction from the main game: building vehicles that kick Toyota's butt. If Okuda's taunts energize complacent executives at Ford and GM into doing just that, then they're a blessing in disguise. If not, the US execs deserve Okuda's abuse, and worse.

Personally, I think Bob Lutz and Bill Ford missed a golden opportunity. They should have responded to Okuda's statement by announcing that their dealers would offer an extra 10% on all Toyotas trade-ins. But if they thought that way, and had the products to back it up, they wouldn't be in this mess in the first place.

By on April 15, 2005

OnStar: fear sells. OnStar's radio ads are powerful stuff. The 30-second documentaries– featuring real life rescue coordination by OnStar staff– jerk more tears than Terms of Endearment and The Divine Secrets of the Ya-Ya Sisterhood combined. The fact that you can summon the same emergency crew by punching 911 into you cell is neither here nor there. After hearing an OnStar rep soothing a toddler crying "Momma's passed out", you'd gladly get a second mortgage to pay for their emergency coverage.

Considering the ads' impact on OnStar's takeup rate, the General's plan to translate the radio spots into a series of 30-minute TV infomercials makes perfect sense. Provided the producers keep it real (in the best 'based on a true story' TV tradition), the marketing campaign will be a sure-fire hit. You can almost hear new customers choking back the tears as they relay their credit card number to their toll-free friends.

The Saturn VUE: Mom puts People First-- well, her children. But the OnStar effect doesn't end there. The service's commercial success has infected the rest of The General's marketing staff. The safety bug has gone viral.

A recent TV ad for the Saturn Vue highlights the pathology. In this flawlessly executed vignette, a young woman admits that she bought a Saturn SUV because impending motherhood shifted her priorities towards safety (and away from imports). While exploiting maternal paranoia is a no-brainer for admen aiming at the family car market, the commercial is a major change in Saturn's branding. If the TV ad is anything to go by, 'The People's Car Company' is now, simply, 'Deathbusters'.

GM's got your back, and wants your cashBut wait! There's more! (NOW how much would you pay?) In a recently unleashed national TV campaign called 'Only GM', fresh-faced children tell viewers how their lives were saved by GM safety features (including OnStar). The odd thing about the ad– other than a strong sense that the pint-sized "survivors" were carefully rehearsed– is that it touts GM's entire model line-up. It's not just Saturn that keeps you from experiencing the last word in personal depreciation. It's GMC, Pontiac, Hummer, Saturn, Buick, Chevrolet, Cadillac and Saab.

Well how about that: GM as Volvo, times eight. Cynics might point out that the majority of GM's safety features are either federally mandated or late to market (e.g. their SUV anti-rollover technology). But there's no doubt that GM's multi-divisional we-got-your-back shtick represents a significant shift in The General's marketing focus. (Just having a focus is pretty big news for GM.) What's more, there's no reason to believe a division-wide safety campaign wouldn't work. It's OnStar's "Field of Nightmares" writ large: if you protect them, they will buy.

Badges!  We don't need no stinkin' badges!   The ads– the first multi-marque General Motors campaign since tail fins went out of fashion– may also reflect a sea change in GM's overall corporate strategy. (Just having a corporate strategy…) Maybe the big guns have finally listened to all those critics who've condemned the automaker for badge-engineering its divisions' identities into oblivion. Rather than mounting a hugely expensive effort to re-delineate its brands through new product and marketing, perhaps The General has simply thrown in the towel. Are we about to see GM fold all its divisions into one?

Yes, it sounds dopey. But why would GM suddenly announce that it's going to affix the corporate logo on ALL of its brands' products? Will a Corvette owner gain street cred when onlookers clock that his favorite phallic symbol was built by the world's largest car company? Will a Hummer piss off more tree-huggers by virtue of its dual branding? Nope. So what's the point? If you discount the move as a morale booster for financially challeged stockholders, GM's big badge boom is a tacit acknowledgement that the whole multi-brand thing is a dead flow chart walking.

Or do we?Think about it: Ford is the other big multi-divisional carmaker, and look how THEY'RE doing: Lincoln's a joke, Mercury's the punch line, Jaguar's a drain, the rest of the boutiques are irrelevant and the mainline brand is slouching towards Bethlehem. BMW and Mercedes have only one subdivision apiece (MINI and Chrysler) and they sell millions of cars in every imaginable market segment. In short, all those analysts calling for GM's dissection could be punditing in the wrong direction. The answer to GM's perilous financials could be consolidation.

Let's face it: these days, only die-hard pistonheads care about brand history. We live in a world where a Chevy can be a re-badged Korean or Australian import, where a Sky or Solstice will fly out the door regardless of the badge on its butt, where a Chevy Silverado and a GMC Sierra are all pretty much of a muchness. So why not drop all pretence of brand differentiation, reduce costs across the board and sell all 40-plus products under the GM banner? As OnStar proves, sensible and safe aren't always the same thing.

By on April 10, 2005

'You want excitement from the 'Excitement' division? Try to get this thing to turn in a sharp corner.'Unbelievable. GM’s lost the plot, they’re losing the game and now they want to take their ball and go home. After automotive critic Dan Neil ripped apart the new Pontiac G6 GT and called for an executive putsch, The General pulled its $10M adspend out of the Los Angeles Times. While you can’t begrudge GM’s right to place—or not place—its money where it chooses, the decision to pull the plug on the Times displays an unappealing combination of arrogance and petulance. To wit: GM spokesfolk defended their action by saying that the review (and other GM-related coverage) contained “factual errors and misrepresentations”—without providing any specifics. So there. Nuh.

GM’s version of The Wizard of Oz‘ “pay no attention to that man behind the curtain” routine is good for a few laughs. It’s always fun to watch the rich and powerful act like victims. Nevertheless, it’s a worrying situation. The General’s muscle-flexing will certainly have a dampening effect on the already obsequious US automotive press. The ripples will be felt from the biggest buff books to the smallest local supplements. Even the blogosphere and ad-free sites like this one will sense the heat (if nothing else, we depend on manufacturers for access to test models). With the threat of retribution lingering in the air like sulfurous gas, the truth is bound to suffer even greater indignities.

'...someone's head ought to roll, and the most likely candidate would be the numinous white noggin of Lutz.'  The press’ silence on this story is deafening. Ironically, this lack of coordinated response actually works against the automotive media; leading the public to the not-so-wrong conclusion that lapdoggery towards the big advertisers is the norm. I’ve said it before: the press’ greatest asset, perhaps its only asset, is its credibility. If the car media doesn’t stand up for Neil, if they don’t defend the principles which they claim govern their profession, they risk losing their readers’ respect, and thus, affections.

At the same time, GM’s vindictiveness will hurt GM’s bottom line. The move against the LA Times catapulted Neil’s column out of pistonhead backwaters into the national consciousness. By doing so, it focused yet more attention on the generally piss-poor performance of GM products vis-à-vis their competitors, as well as the likelihood that the General may axe two entire divisions. Buyers who’ve long suspected that domestic automakers try to hide their products’ mediocrity behind a wall of hype and ad spend—consumers who don’t want to buy a car from a brand that might disappear—now have even more reason to shop Toyota.

'Interior styling: The GT comes with comfortable leather-lined bucket seats, nicely bolstered with heaters. I like the soft grip on the hand brake. That exhausts my praise for the interior.'GM’s assumption that the general public would side with big business in a fight against a lone (not to say rogue) journalist also raises serious doubts about the company’s understanding of PR. The proper response to Neil’s criticisms was obvious: demand that the Times publish a detailed refutation of the charges leveled against the company and the G6 GT. At the very least, when GM pulled their ads, their objections should have been made clear. But no. As far as the public is concerned, GM’s action was designed to punish the Times for doing what newspapers are supposed to do: report the truth. News flash to GM brass: people LIKE newspapers. And they don’t like bullies.

Of course, GM couldn’t really offer a point-by-point reply to Neil’s review because the G6 sucks. Oh wait, Neil didn’t say that. With uncharacteristic reserve, the Pulitzer Prize-winning critic called the G6 “uncompetitive.” If GM doesn’t agree with this assessment, if they can’t read their own sales figures and come to the same conclusion, they are in deep, deep denial. At the risk of sounding as obvious as an alcoholic’s friend during an intervention, lashing out at the LA Times doesn’t change anything. The G6 is still mediocre. GM is still in deep shit. The General’s assertion that it’s being unjustly persecuted doesn’t make it so.

'This is an uncompetitive product, an assertion borne out not by my say-so but by sales numbers. When ballclubs have losing records, players and coaches and managers get their walking papers.'Both domestic carmakers and car hacks need to wise-up. Until and unless the automotive press puts their readers’ interests first, advertisers will have them over a barrel. Until and unless GM faces the truth about its products, they will keep making boneheaded, self-defeating and futile attempts to protect their increasingly illusory reputation. Meanwhile, send [email protected] an email. Let him know that his short-term prospects are a lot better than GM’s.

By on April 3, 2005

Pontiac: going down in flames?

When The Donald calls aspiring apprentices into the boardroom to determine which one to fire, I’m always hoping for a miracle. I want him to can ALL of them. My feelings about GM are identical. When GM Vice Chairman Bob Lutz hinted that he’d axe Buick or Pontiac if the divisions didn’t “gain traction,” he ignited a debate over which of the General’s lackluster brands deserved death. The answer is, of course, all of them.

General Motors was born as a conglomeration of independent car companies. In the beginning, all of GM’s acquisitions maintained their own distinct mechanical, design and marketing identity. Despite the imposition of centralized control in many strategic areas (e.g. choice of suppliers), each sub-brand remained true to its niche. Exactly when, how and why the structure fell apart, or became one big amorphous mass of poorly made product, is not as important as the fact that it has.

Vauxhall Lightning spawns Saturn Sky.  Corporate synergy or corporate sloth? GM’s eleven brands—Buick, Cadillac, Chevrolet, Holden, Hummer, GMC, Opel, Pontiac, SAAB, Saturn and Vauxhall—are virtually interchangeable. You could rebadge a Vauxhall Lightning and call it a Saturn Sky; or a Holden Monaro and call it a Pontiac GTO; or a GMC truck and call it a SAAB 9-7X. Those are just the real-world examples. How about the new Cadillac STS as a Buick, or the Hummer H3 as a GMC? And that’s without mentioning the elephant on the assembly line: platform sharing.

GM’s brands bring new meaning to the words “product overlap.” Pontiac GTO or Chevrolet Corvette? Chevrolet Cobalt or Saturn Ion? Saab 9-5 or Cadillac CTS? The divisions might have better luck competing with non-GM brands if they weren’t so busy competing against each other. As a result, whenever one of the eleven non-identical twins tries to make a case for itself, it unintentionally demeans a fraternal partner. GMC’s claim to be “professional grade” makes Chevrolet seem amateur. Hummer’s “like nothing else” makes Buick seem common. And so on.

Is there room for Saturn in Saab's state?The marketing departments may beg to differ, but their campaigns don’t. Pontiac still touts itself as GM’s performance division—at the same time that Cadillac emphasizes its products’ supersonic speed. SAAB’s ‘State of Independence’ exhorts buyers to go their own way—while Saturn continues to chase iconoclastic buyers. And here’s a compare-and-contrast from Hell: Chevrolet’s marketing strategy for its full-size pickups vs. GMC’s.

The situation reminds me of Coca-Cola’s plight in the 70s. When the competition started offering strange and marvelous soft drink variations, Coke responded by introducing a wave of new flavors: Coke, Diet Coke, Cherry Coke, Diet Cherry Coke, Caffeine Free Diet Coke, etc. The bottom line? Add all the sales of all the new Coca-Cola sub-brands together and … the company LOST total market share. Am I the only one who sees a parallel with GM, which is responding to their diminishing slice of the US car market by introducing a flood of new products?

More products = less sales?  Whatcha gonna do Bobby?Vice Chairman Lutz could axe a couple of brands, figure out what the remaining ones are supposed to be, erect some Chinese walls and—like Hell he could. Thanks to decades of bureaucratic bungling, craven UAW appeasement and intra-departmental intrigue, GM has neither the will nor the skill to kill the omnivorous cancer devouring it. There’s only one thing for it: sell off all of the brands.

GMAC Finance is the only solidly profitable part of the entire multi-billion dollar corporation; everything else is either limping along, a dead loss or a loss leader. Dump the car and truck making side of the equation and GM becomes instantly profitable. What’s more, under independent ownership, each division would be leaner, meaner and quicker on its feet. Think about the breakup of AT&T, and the highly competitive, hugely profitable baby Bells it spawned…

If the Hummer brands gets bogged down, why can't it be someone else's problem?Even if a liberated division’s new ownership WASN’T entirely independent, even if some other multi-national car-making goliath bought up, say, Hummer, and ran it into the ground, well, so what? As a GM stockholder, I’d say “better them than us”.

The idea of being wrenched from the corporate tit is not bound to please GM’s employees and suppliers. Most sensible financial analysts would view GM’s dissolution as an improbable corporate Krakatoa: a violent, tectonic shift signaling the end of big business as we know it.

Of course, these are the same sensible people who don’t buy GM products anymore. They buy Mercs, Toyotas, BMWs and other vehicles made by companies who don’t try to juggle eleven balls at the same time. If these experts want to feel GM’s seismic rumblings, all they have to do is look at their own driveway. Even the Donald would savor the irony.

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