NINETY EIGHT REGENCY

Dead brands walking

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Dead brands walking

Now that it is Number Two, GM has to rethink its strategy, says Fortune's Alex Taylor.

FORTUNE Magazine

By Alex Taylor III, Fortune senior writer

April 26 2007: 1:39 PM EDT

NEW YORK (Fortune) -- The news that Toyota has finally passed General Motors in global sales is about as surprising as John McCain finally announcing he's running for president. But now that it is officially Number Two, it is time for GM to perform some long-overdue surgery on its brand portfolio. Age has taken its toll, and GM is overdue for a face lift.

In some ways, GM (Charts, Fortune 500) is still built for the size it was 50 years ago. In the United States, GM's market share is half of what it used to be but it sells seven brands - two more than in its heyday. Toyota (Charts), by contrast, gets by with only three brands: Toyota, Lexus and Scion.

Despite its shrinking market share, GM has always argued that there is value in its broad brand portfolio. Consumers want choice, and having a variety of brands allows GM to segment the car market more finely than its competitors. If GM eliminates a brand, it fears losing long-time buyers.

But there is a big cost to maintaining all those nameplates. Buyers increasingly demand uniquely engineered models that are costly to develop. Multiple brands mean multiple expenditures for marketing, advertising and distribution. Still suffering from negative cash flow, GM simply has too many mouths to feed.

So GM should adopt a template similar to Toyota's. Keep Chevrolet where it is - the volume brand that is the heartbeat of America. Maintain Cadillac at the top of the market and expand its product offerings with derivatives of the popular CTS. And continue to use Saturn, with its dedicated dealer channel and loyal buyers, as the brand for import intenders.

Plenty of excess baggage remains. Here are my recommendations:

* It is past time to perform euthanasia on Buick. Successive waves of new models haven't moved the needle on sales and it is unlikely that the new Enclave crossover will make a big difference. For nostalgia buffs, the Buick brand can soldier on in China, where it is uniquely beloved.

* Pontiac should get the same treatment, though without the Asian escape hatch. Its boy-racer image is dated and GM's one-time excitement division has deteriorated into a regional blue-collar brand. In a world that increasingly is going green, there is little upside for its testosterone-laced pavement rippers.

* Whatever noble intentions GM had for Hummer, they have been permanently damaged by the greenhouse gas debate. Hummer should be sold to whomever winds up with Jeep after Chrysler is broken up. More Jeeps fall off the truck on the way to the dealer than Hummer sells in a week.

* Turn GMC into a commercial truck brand. As gasoline becomes more expensive, there won't be enough traffic in personal-use trucks for GMC to share with Chevy. There are lots of opportunities with huskier trucks that a player with GM's scale could exploit in the business-to-business market.

* Say goodbye to Saab. With its perpetually tiny volume and high-cost European manufacturing base, Saab has defied GM's efforts for nearly two decades to make it consistently profitable. The success of Japanese sport-luxury brands Infiniti and Acura has made Saab irrelevant.

GM has been down this road before when it killed Oldsmobile. Compensating Olds dealers was expensive but, in the end, nobody really missed the brand. Other U.S. manufacturers have some soul-searching to do, too. Ford (Charts, Fortune 500) needs to take a hard look at Mercury, and the Chrysler brand may not survive a change in ownership, now that Automotive News has disclosed that nearly half of Chrysler's sales go to fleets. Like Plymouth, DeSoto and Packard, these are nameplates for customers who scarcely exist any more

There may yet be a silver lining in this cloudy forecast. Detroit has mostly lost the baby boom generation, but may have an opportunity to capture their children. Analyst John Wolkonowicz of Global Insight is convinced that since these young Gen Y buyers will never shop the brands their parents did, they may boomerang back to domestic nameplates. What GM and the rest of Detroit have to do is clear out the dead brush and concentrate on brands that still have growth potential.

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While the ideas on Hummer and GMC are gross exaggerations, the other stuff is the typical view of an inner-city [insert large urban city] person. He's probably from San Fran.....but that said, that's not supposed to give fuel to those here who will resort to name calling. He has a right to his opinion just like everybody else; it's just that this is the mindset that GM has to deal with.

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Compensating Olds dealers was expensive but, in the end, nobody really missed the brand.

O RLY? :confused0071:

I'm sure there are people on these forums and even on other, more general automotive forums who would really disagree with that statement. I generally dislike front-drive cars, but I do have a hardcore soft spot for the Aurora and maybe even the Intrigue to a certain point. Maybe the general buying public doesn't care, but there are people who would probably love to have a new Intrigue to replace their old Intrigue. Saturn may eventually fill Olds's old niche, but it's going to take awhile for this new, ascended Saturn to catch on, as shown by recent sales figures.

Edited by YellowJacket894
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Hey, Alex Taylor III, "f\/ck off".

the three after his name refers to his penis size, i assume.

BPG is working

Cadillac is already combining with Hummer and Saab I've seen

Saturn will explode

Malibu will buoy Chevy

While the ideas on Hummer and GMC are gross exaggerations, the other stuff is the typical view of an inner-city [insert large urban city] person. He's probably from San Fran.....but that said, that's not supposed to give fuel to those here who will resort to name calling. He has a right to his opinion just like everybody else; it's just that this is the mindset that GM has to deal with.

yes, he's an urban dick who more than likely doesn't even have a car.

This is America.

a group of 'movers and shakers' with executive or intellectual (i.e. desk) jobs where if you have one, especially a high level one, it is no longer acceptable for you socially to drive an American car. this group is becoming smaller and more elite but making more money than ever.

the laborers.......those who work in cubes or with their hands that get the hand labor and technical labor done in this country. this group doesn't really seem averse to buying US cars but the trickle effect and influence from the mover and shaker group is meaning the percentages of US auto purchases is declining from this group as well. this group is expanding and their relative pay is decreasing.

the poor and unemployed who either do not work, or don't get squat for pay. this group is expanding and they were never able to buy new cars anyways.

so yeah, when you wirte articles from an elitist viewpoint it would seem there is only one view to this, but this is the group that is knit into the media so I guess it must be true then.

Edited by regfootball
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GM needs to kill off the struggling Chevrolet brand before it's too late!

GM needs to bring back Oldsmobile with a lineup made up entirely of rebadged Korean cars!

GM needs to add a full line of cars to its Hummer lineup! Preferably all from Korea as well!

This is the only way GM is going to survive! I'm tellin' ya!

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He had this article in his archive for 4 years waiting for the time to come for GM to be #2. Now the time arrived, it took him two days to publish this BS.

Alex baby it is easier said than done.

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GM needs to kill off the struggling Chevrolet brand before it's too late!

GM needs to bring back Oldsmobile with a lineup made up entirely of rebadged Korean cars!

GM needs to add a full line of cars to its Hummer lineup! Preferably all from Korea as well!

This is the only way GM is going to survive! I'm tellin' ya!

Thats sarcasm right?

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It's funny... GM slipped to #2 globally, but his suggestions are strictly US-Market based where GM is still #1.

Buick-Pontiac-GMC are pretty much one division. Their combined sales for last year equaled over 27% of GM's sales volume in the US. Why on Earth would someone demand or recommend for GM to shut down a division that produces 27% of its national volume? Or even recommend discontinuing a global brand in only one country when we're discussing Global market total and sales position?

Reducing GM to three brands to mimic Toyota in one country when GM is still almost 1.5 Toyota’s current size in that country is idiotic.

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Hey, I liked how he took a critical look at Lincoln and its lack of compelling products. The fact that Volvo has a line of very modern, very nice cars yet can't move them in significant numbers is thoughtfully discussed. He also brought up how every one of VW's recent attempts since the New Beetle have failed or been met with mediocrity and how their sales have also been slipping. And he wrapped it up with a hard-hitting analysis of how Mitsubishi is closing dealerships left and right and don't even release concrete sales figures on a monthly basis and furthermore, can't sell anything.

Oh wait...

Weak analysis and a lousy rehash of old school thoughts...GMC not worth the investment? Yeah, ask B-P-GMC where they get their money from.

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Blah,blah,blah, more blather from yet another know-nothing in the press.

Idiot!

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Yada Yada everyone ones thinks he is a expert!

By the way I have this idea how to save GM..........................................!

GM knew this was coming and made the expected were not going to take this sitting down statment. But the fix has been started for a while and it takes time to heal the wounds they have inflicted on themselfs over the years.

I am not too worried about GM but Chrysler and Ford are still far from recovered. The future could prove that there might only be one American owned car company. That is far more tragic than GM being #2.

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You know what's funny, two years ago Saturn would have been on that list of brand that should be killed/sold. Now Saturn has products and the big Mo, Saturn should be a core brand for GM according to these guys.

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You know what's funny, two years ago Saturn would have been on that list of brand that should be killed/sold. Now Saturn has products and the big Mo, Saturn should be a core brand for GM according to these guys.

He deleted the line about closing Saturn when he went to revamp his 4-year old write-up.

Actually, most articles appear to be extremely shortsighted except when dishing out grievances and flops. Most people don't actually offer suggestions to help. The above article included. They just want to cut and paste a successful model (toyota). They can't actually think for themselves and come up with a strategy that actually utilizes GM's strengths and applies to GM's unique circumstances.

I guarantee you two years ago he wouldn't have recommended importing Opel as Saturn.

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* Pontiac should get the same treatment, though without the Asian escape hatch. Its boy-racer image is dated and GM's one-time excitement division has deteriorated into a regional blue-collar brand. In a world that increasingly is going green, there is little upside for its testosterone-laced pavement rippers.

:censored: Lamer.

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Here's the original article link:

Dead brands walking on Fortune

I emailed him a link with a few comments... feel free to send your own:

ataylor@fortunemail.com

or

autos@cnnmoney.com

Edited by ellives
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The biggest problem I have with his analysis is the way he dismissed the problems GM has with too many brands as though a magic wand can be waved and they just disappear.

Sure, in a dream world, GM should only have 3 brands, but that is not the way it is. During the past 25 years, Toyota has shown the world what a focused attack on a market can do, but they had the luxury of a few good breaks on their hands (rising gas prices, for example) and the ability to expand into fresh and growing markets (not to mention stealing a lot of GM's expertise - how many GM dealers own one or more Toyota stores?). GM, on the other hand, has been on a 25 year slide - some of it inevitable, IMO.

We can debate whether GM invited disaster upon itself or even deserves it, but the undeniable truth is that it is far easier to build something from scratch (while enjoying a protected market at home) than to dismantle an empire brick by brick.

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No one misses Olds? Olds is (was) a huge part of american auto history.

GM is downsizing - it is in a way doing what you are already saying by making Buick-Pontiac-GMC esentially into one division. There is no reason to get rid of them. They will all one day be great again like they used to be.

The last generation Camry and ES330 or whatever were escentially the same car but no one noticed, because only GM and ford-mercury is known for badge jobs. Just stop hatin on your country's automakers

Toyota is gonna take the number one crown for GM at the end of the year but I guarantee you it will NOT hold it for 75 years like GM did. What does up will come down, and Toyota sure as hell will be no exeption

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Some will blast me for saying this, but if GM will not develop a smaller RWD platform and if GM ends up cancelling Zeta, I would not shed a tear if GM drops Pontiac and/or Buick.

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>>"...toyota, by contrast, gets by with only three brands: Toyota, Lexus and Scion."<<

Wrong-O: toyota's global sales number are a result of FIVE brands (hino & diahatsu were included). This, curiously, is ALWAYS glossed over. Wonder why?

>>"...it is unlikely that the new Enclave crossover will make a big difference."<<

Why not- aren't the calling cards of Big Turnaround all present: price, quality, design, features, powertrain?? Or is it just because it's a "Buick"?

>>"For nostalgia buffs, the Buick brand can soldier on in China, where it is uniquely beloved."<<

It's beloved in china because they're nostolgic for it? Or are American Buick fans supposed to move to china? Not making a &#036;h&#33;load of sense here.

Alex Taylor 3's research process:

Ask 5 other guys just like me about cars at the water cooler: 'Hot or not?'

Make up the rest.

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As much as nobody here wants to hear it, there has to be a point where it just isn't worth the effort to keep some of GM's brands. Consolidating Buick, GMC & Pontiac was a good move, but if Buick and Pontiac continue to mostly fail to bring in new customers, then what's the point of keeping them around? To appease a few diehards and continue to fleet out huge chunks of their production? Sorry, but that just is not how a successful business works. As another poster said, if they don't get Zeta, what do Buick and Pontiac really have to live for?

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GM hasn't even started to deal with Pontiac's future yet (though they are getting a Zeta. Buick is just getting off the ground as well, and the integration of BPG is in its infancy. The Pontiac fleet sales will disappear with the end of those models.

Any talk of failure is very premature.

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These industry analysts and investment bankers do not have patience and also their research is heuristic. They want fast money.

I am sure most of them have options and futures invested against the GM stocks. So that they make money as GM's stocks go down.

Remember how they were trumpeting that GM is going to be bankrupt by 2006. Well we are four months into 2007!

We guys just need to have patience and faith in GM and at the same time, help to change the perceptions of people about GM. That is how we can help GM and that is how GM will regain #1.

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To get around franchise laws while at the same time slashing development and marketing costs on two dying brands, GM should immediately make Buick and Pontiac straight re-badges of corresponding Chevy vehicles. The only difference should be the logos. Sales will fall, but they're going to fall anyway (sorry cheerleaders I've been watching this play out now for over 20 years). Like I've said before, because of global peak oil production gasoline will never again be as cheap as it is today. As cool as Zeta and the G8 are they'll be the wrong vehicles at the wrong time. Because of the permanent energy crisis that's about to unfold, BPG dealers should get the 4-door G5 and the Wave immediately. If Zeta gets cancelled, Chevy should get a G-body re-badge of the Lucerne called the Caprice to keep profitability up on the G line "while the going's still good."

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Be careful what you wish for: that is the strategy GM has done in Canada (where the Pursuit/G5 has been available from the outset, as has the Wave), with the result that it is killing the Chevrolet brand. GM is still in free-fall in Canada where P-B-GMC has always been a reality. The result here is that neither the Silverado or Sierra dominate the market here (the Ram outsells the Silverado) and the Envoy outsells the Trailblazer, to name only two alternate realities.

Even with the internet supposedly helping, many consumers are too stupid to differentiate (or don't care) between Pontiac or Chevrolet. Because of the huge blue GM logo on our signs, lots of people wander into our Chevrolet store, looking for the Acadia, Envoy, Vibe, etc. They get real confused when we tell them we don't have them.

Make no mistake, the lawyers have advised GM that they walk a fine line with the dealer body, and we up here KNOW that a handful of powerful P-B-GMC dealers do a lot of whining to get models that have no business being made. I have said this before: we are the only manufacturer that eats its own. When a customer walks out of our store, we don't just have to worry about Toyota or Mazda getting them, we have to worry about a Pontiac dealer grabbing them. What kind of f$#ked up business model is that?

Take a look at the large urban markets to see what is coming your way. Whereas 20 years ago, you would see Oldsmobiles, Lincolns and Cadillacs everywhere in rich neighborhoods, now you only see a sea of dark grey BMWs and Lexuses. Whereas you used to see a ton of Cavaliers and Escorts, you now see Civics and Corollas everywhere. Japan Inc has no confusion and is not hampered by an old, antiquated dealer body. They can make a model the best it can be straight out of the box, not have to spread the money around like GM does- then they can advertise the hell out of it, because there is only one.

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