Can This General Be Saved?

by Lance Thompson - Contributing Editor
2/2/07

Ordinarily, I would never offer advice to a general, but one in particular is fighting a losing battle with outdated strategies, ineffective equipment and a dysfunctional command structure. Immediate action must be taken to prevent total defeat. Therefore, I hereby humbly submit a plan to save America’s oldest general--General Motors.

A 2 February 2007 article in the Wall Street Journal, by John D. Stoll and Neal E Boudette reported that GM sales fell 16.6% in the month of January, despite a growing economy and in contrast to sales gains by Honda, Toyota and Daimler-Chrysler. GM plans to produce 175,000 fewer vehicles in the first quarter than it did a year before. Toyota is poised to surpass GM in number of vehicles manufactured in 2007. Toyota estimates building a total of 9.42 million vehicles to GM’s expectation of 9.18 million vehicles. It would be the first time GM has lost the number one spot since the ignition key was invented.

General Motors didn’t take Japanese competition seriously until the 1980s, when Honda, Toyota and Datsun surpassed American cars for quality, reliability and economy. GM and other American car manufacturers eventually closed the quality gap, and enjoyed the double restorative of cheap gas and Americans’ embrace of high-profit SUV’s. GM could have used this reprieve to invest in research and development of fuel-efficient cars, but instead behaved as if the party would never end. A spike in gas prices hit the SUV market like the asteroid hit the dinosaurs, and GM was stuck with a line of brand new large SUV’s just as Americans were bailing out of them.

GM had another ace in the hole–their best-selling vehicles had always been full-size pickup trucks, a market in which the Japanese never competed. That changed in recent years as the Nissan Titan, Toyota Tundra and Honda Ridgeline became hits with Americans who gladly traded their American pickups for models from Japan.

General Motors has several domestic divisions–Cadillac, Buick, Chevrolet, Hummer, Pontiac, Saturn, GMC trucks. The overlapping domestic brands are leftovers from the fifties, when Americans were used to three choices–three car companies, three TV channels, three flavors of ice cream. In those days, it made perfect sense to have several GM divisions offering variations of the same automobile because car customers acted out of product loyalty, family tradition, and consumer inertia. It was common for a family to trade the two- or three-year old Buick on the new Buick model because the portholes were bigger.

The landscape has changed substantially since those days. One of the three major American companies is now a subsidiary of Mercedes. The Germans, Japanese, Koreans, Swedes, English, Australians. Chinese and French all manufacture automobiles competing for the American market. Japanese and German firms have built factories in the United States, employing American workers and building popular, high-quality cars and trucks.

GM has steadily improved quality, but aside from cutting out the Oldsmobile brand in 2000, they have balked at major reorganization such as that proposed by Alan Mulally, the ex-Boeing executive who took over the CEO spot at Ford. As number one car maker, GM could rationalize complacency. But as they fall to number two in 2007, complacency will come to a screeching halt. At least, it should.

The prescription for turnaround may be wrenching and difficult, but it is nonetheless necessary. Each GM brand must have a unifying identity and purpose. Product lines must not overlap. Redundant lines must be eliminated. Specifically:
Eliminate Chevrolet Cars. Chevrolet cars range from the entry-level South Korean-built Aveo to the world-renowned Corvette. The Chevrolet car line tries to be all things to all people, and has no division identity. Chevrolet cars should be eliminated, (despite the excitement over the return of the Camaro).

Retain Chevrolet Trucks. In contrast to Chevrolet’s anonymous car line, Chevy trucks have a robust reputation, and the Silverado pickup is GM’s best-selling vehicle. Chevy trucks are identified with dependable, hard-working service. This even suggests a marketing direction: "Chevy–Trucks That Work." Chevy would become GM’s truck division–heavy duty, SUV’s, pickups, crossovers and even the popular compact HHR would all fit easily under the marque.
Eliminate GMC Trucks. GMC bills itself as "Professional Grade," but Chevy outsells GMC with essentially similar products. Whatever marginal advantages GMC vehicles offer over their Chevrolet twins could be made available as options. Let Chevy sell the trucks.
Eliminate Hummer. Despite its high visibility, Hummer has always been a niche market, and no matter how small they become (H2 and H3), a Hummer will always be a dated symbol of gas-guzzling excess. The underpinnings of Hummers are regular GM trucks. Let Chevy sell the trucks.

Eliminate Buick. Buick recently has offered beautiful cars–the Lucerne and LaCrosse are stylish and handsome. But Buicks are built with aging car buyers in mind. Controls are easily manipulated, instruments are large and legible, interiors are living-room comfortable. Most of GM’s most loyal customers are seniors already–they don’t need an entire division that advertises the fact.

Eliminate Cadillac Trucks, Concentrate on World-Class Cars. The swing away from big SUV’s is the perfect excuse for Cadillac to get out of the truck business. Cadillac capitalized on the success and high profit margins of massive SUV’s, aided by publicity about NBA players and rap stars cruising around in bling-festooned Escalades. But Cadillac should be the prestige division. Cadillacs should be the most powerful, technically sophisticated, stylistically distinct automobiles in the world, not over-indulgent trucks.

Emphasize Pontiac Affordable Performance. Pontiac should be the youth-oriented division, offering performance and active lifestyle for a reasonable price. That means compacts and coupes for singles; SUV’s and crossovers for young, active couples; and sedans for young families. Every Pontiac should emphasize power, handling and styling.

Emphasize Saturn European Performance. Saturn has recently turned to Opel of Europe for its new models, including the new Vue SUV, and is an ideal division to showcase GM’s worldwide technological reach. Even the Saturn Sky, an affordable roadster, recalls the drop-top sporting days of the MG and Triumph. Saturn should not sell any rebadged domestic vans or SUV’s.
Share Corvette Magic. While most Chevrolet cars will not be missed, the Corvette remains a superstar. Corvette should be available by special-order only, through any GM dealer. Its Cadillac cousin, the XLR, is distinctive enough to continue, but the magic of the Corvette nameplate could then enhance the entire GM line. The special-order status would add exclusivity to the plastic classic and ensure that every one that comes off the line has an eager owner waiting.

These changes would cut repetitive products and lines, reduce excess inventory, and make GM a leaner, more focused company. The changes will be costly and painful, but so is maintaining a course which gradually erodes the company’s dominance in the automotive world. Leaders make decisions, take action, and boldly take the initiative. The General must realize that without such drastic action, the company will never return to the winner’s circle.