Wednesday, March 23, 2005

Getting Rid of a Brand

I'm sorry I've been harping on GM so much lately, but they have been at the center of news for the automotive world as of late, so more articles will be on the way concerning them. The most recent bad news to come out of GMHQ has been the possibility of cutting a division.

Has cutting Oldmobile helped GM at all? 2004 was the very last year for Oldsmobile production, and 2005 has lead to incredibly grim forecasts and quarterly earnings announcements. A cursory analysis shows that the cutting of a division and the improvement of the company do not go hand in hand.

I'm against cutting a division. Why? Because of the repercussions a cut will have. It is in the long run more expensive to cut a division. Dealers will immediately sue, as they did with Oldsmobile, and GM will be forced to settle with them for breaking contracts. Laid off UAW workers will cost money as well, because many of those lay offs will be early retirement, and that means paying idle workers. The only ones who will be pleased by this move will be Wall Street pundits, who will then ask that the stock price be raised, which will help GM for a few months.

A far, far cheaper way of doing things would be to design good looking cars, not cars that emphasize engineering or price. Good design COSTS NOTHING. A good design is essentially a permanent, constant advertisement for a car. Tacking on a brand emblem attracts people to that brand. The attraction means sales.

To cut a brand means that no one in their right mind will buy from it. In Los Angeles where I live, the trendy capital of the world, three years ago, no one would be caught dead in a Chrysler. Now, the Chrysler 300 is a common sight on the roads. What's stopping Pontiac from making something similar? Or GM?

If a brand needs to be cut, cut SAAB. It's harder to lay off unionized workers in Europe than it is here. SAAB hasn't turned a profit ever since GM acquired it. Or how about GMC? Here's a brand that is competing directly with another GM brand, Chevy, diluting product power for a market segment that could be gone by this summer. With GMC gone, dealers would simply get Chevy trucks in their place. I highly doubt there are people who are GMC fans, and who will be furious with GM for making them buy Chevys. Everyone knows the two trucks are exactly the same, so who is being fooled?

GM should go back to looking at what they did well. The height of GM was the 1950s. Look at Buicks from that era. Chrome laden, large. Comfy. Look at Pontiacs from the 1960s. Fast, sleek.

Engineering-wise, all of GM's cars should be the same, with Cadillac being an exception, and the Corvette. The only thing to differentiate them should be design, and engine power. Right now, nothing differentiates them, because they are almost universally bland, and bubbly.

Remember folks, design costs nothing. Just pencils and papers. But mistakes cost billions.

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Monday, March 21, 2005

Stop Right Now

The Detroit News is reporting here that GM is reacting to the news of its falling market share by abandoning their future RWD platform, and speeding up new truck and SUV production. This is the worst news possible.

Bob Lutz has more power over product than anyone has had at GM in decades, possibly ever. Therefore, blame can be collected against him. He has got to invest in design, and stop the conservatism. SUVs and trucks are not the future. Three dollar per gallon gas is the future. SUV sales are plummeting for GM not because they are at the end of their product cycle but because people can't afford to fill them up with gas! It is utter insanity that the heads of the largest car company in the world are unaware that the earth is almost out of gasoline. There literally isn't enough! And yet they have staked their hopes on vehicles that are fuel gulpers.

The shareholders should be furious. The employees of GM, many of whom are about to be laid off should be furious. Furious at themselves for letting things get this bad, and furious at the leadership. Every pundit, every analyst has been saying GM cars are ugly for decades. And they have rarely listened. It's not about RWD great handling, it's about design. Every successful American car of the last two decades sold not on the basis of handling, engine power, or reliability, they sold because they looked great. Every future GM car that has been finalized except the Saturns and the Pontiac Solstice are bland, and unexciting.

If there is going to be significant change at the bottom with the rank and file, there should also be change at the top. It is up to the shareholders to get angry, and get their money's worth. Make your voice heard. It is your investment.

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