General Motors Cannabalism

Discussion in 'OT Driven' started by TriShield, Jan 29, 2008.

  1. TriShield

    TriShield Super Moderator® Super Moderator

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    General Motors Death Watch 162: Cannibals

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    By Andrew Dederer
    January 29, 2008

    Back in the eighties, a GM executive congratulated a colleague who worked for the Cadillac brand. “Well done for reaching 300k sales.” The Caddy man was having none of it. “We didn’t sell three hundred thousand Cadillacs; we sold three hundred thousand Buicks.” The remark was prescient in two ways. First, it acknowledged Cadillac’s ruinous move “down market.” Second, more importantly, it reflected the fact that Caddy’s success was Buick’s failure. GM was already descending from a well-ordered familial hierarchy into the madness and chaos of cannibalism.

    Alfred P. Sloan’s motto “a car for every purse and purpose” established the framework for this descent. Sloan encouraged GM customers to work their way up from cheaper to more expensive brands. When GM’s brand delineations were rigid, when there was a steady supply of customers at the bottom of the ladder, the system worked beyond Sloan’s wildest dreams. GM was the world’s biggest carmaker AND the planet’s most profitable company.

    Today, GM’s overlapping brand and product portfolio has rendered Sloan’s system meaningless. GM’s eight brands compete with each other for business with similar if not virtually identical products. Saturn Aura, Chevy Malibu or Saab 9-3? Chevy Traverse or Saturn Outlook? Or GMC Acadia?

    Honda killed the Prelude when the S2000 came out, then killed the RSX when the Civic went up-market. Toyota killed the Celica when the Scion-tC arrived. While all of these cuts had something to do with lowered sales, they were more about preventing cannibalism. Conversely, GM doesn’t seem to want to cut anything.

    GM’s CUVs are selling reasonably enough, but their SUVs are still out there, somewhere. As GM’s shrinking market share proves, their CUV sales haven’t been anywhere near large enough to compensate for the drop in “traditional” trucks. Even if they were, GM’s unibody CUVs are more expensive to produce than their body-on-frame predecessors. Downsizing customers are downsizing GM’s profit margins, Big Style.

    On the face of it, this CUV on SUV cannibalization seems logical and unavoidable. GM’s SUV customers are abandoning the genre anyway, so why not keep them “in the family?” Better some profit than none. But the counter-argument is far more compelling. Overlapping products dilute or destroy the central brand message. Product development and marketing resources are spread paper thin. This kind of cannibalism makes its practitioners weak, and lazy.

    New vehicles always draw customers away from rival products. The cars that suffer the most are the least “competitive” in or near that market segment. Unfortunately for GM, they often own both the next big thing AND the tired old timer. Note how the Malibu push mirrors the Impala’s fall. And the Saturn Aura’s. And the Pontiac G6’. And God knows what else.

    Sadly, GM executives seem completely oblivious to the problem. The new CTS may be a hit product, but no one in the organization seems to have stopped and considered the fact the bright shiny newcomer will consume Caddy customers who may have (for some reason of other) hankered for a pricier DTS or STS. By the same token, the rear wheel-drive (RWD) Pontiac G8 could well be an exciting ride, but if it’s too exciting, it could steal sales from both the (RWD) CTS and the now po-faced front wheel-drive G6. And God knows what else.

    Dealers are active conspirators in all this. Whenever a hot product appears at a rival brand, they demand a “tit for tat” version. This leads to badge-engineering, which further divides the sales pool, which ensures that any successful new car will eat its “father” (or uncle) first. It’s a vicious circle that dooms all its participants to eternal feast and famine.

    As GM’s recent history proves, there will always be a “bright spot” in the bigger, bleaker picture. Some vehicle will always be relatively healthy– as it feasts on its predecessors, ancestors and weaker siblings. The success of a new model builds executive careers down at RenCen, but it does the company no good. With GM’s lack of build flexibility, the automaker ends-up overworking 25 percent of its plants while idling another 25 percent somewhere else.

    GM’s not the only example of auto industry cannibalism. Chrysler’s four-door Wrangler has been eating away at the Liberty, while the Compass, Nitro and Patriot all nibble on each other as they vie for the same sort of customers. VW has some issues in the US market (bumping into Audi) and much worse ones back in Europe (SEAT/Skoda). But GM is crazy with cannibals.

    There is but one way to end this misery. GM must either return to the kind of rigid brand/product discipline of Sloan’s day, or declare bankruptcy (to void dealer power), kill all but two or three brands and THEN return to the kind of rigid brand/product discipline of Sloan’s day. There is no other alternative.

    http://www.thetruthaboutcars.com/editorials/general-motors-death-watch-162-cannibals/
     
  2. TriShield

    TriShield Super Moderator® Super Moderator

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    All three American automakers suffer from this same issue. Too many brands, too many dealers, and their own products eating each other instead of the foreign competition.
     
  3. deusexaethera

    deusexaethera OT Supporter

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    You are Trishield.

    Another an interesting read. It's mind-boggling how so many people can see the fatal flaw in GM's master plan, and GM executives either don't understand or don't care. It really says something about how entrenched the levels of bureaucracy that sit between the executives and the rank/file workers are.

    Then again, I had a great-uncle who worked for GM his entire career, and every single day he and his fellow middle-managers would go out for a two-martini lunch. (This was back in the 50's.) It sounds like nothing has changed, despite some people's best efforts. It almost seems like GM's only hope is to be able to suffer through the increasing force of global trade (which they didn't used to have to deal with before the 70's or so), and limp along until all the old-timers who will be retiring in the next few years are gone -- then maybe they'll be able to recover properly.
     
  4. Mjolnir

    Mjolnir WHM6D > *

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    This sentence should be carved into the plaza in front of the RenCen.
     
  5. deusexaethera

    deusexaethera OT Supporter

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    I'd rather see them spin off all the non-core brands they bought during the 90's (and the dealer franchises along with them), and then return to the whatever that guy said.
     
  6. deusexaethera

    deusexaethera OT Supporter

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    Wow. This thread is getting the fuck ignored out of it.

    (I love how the English language lets me write a sentence like that and it still makes some kind of sense. :big grin:)
     
  7. There's really not much to argue about.
     
  8. Mjolnir

    Mjolnir WHM6D > *

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    dawt

    The solution to GM's problem is obvious to everyone but GM.
     
  9. SilverTurtle

    SilverTurtle New Member

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    and it will continue to be obvious to everyone but GM until each and every brand has either re-established itself as a whole individual mark or until the lawyers start arguing in bankruptcy court.

    I'd like to think that GM will take the Camaro and use it as a starting point to stop the madness, seeing as how they've already axed the GTO that was supposed to be coming... but I have a feeling that this was due to the US government's decision to mandate the 35mpg CAFE rather than any kind of logic being infused into the company's business strategy.
     
  10. twistid

    twistid Banged By Super Models Moderator

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    from what i hear... in rural markets, gm is trying to trim the fat... they want the rural dealers to only sell from the chevy/gmc name plate, and their other "exclusive" brands will be only sold in larger metro area markets.
     
  11. P07r0457

    P07r0457 New Member

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    I hate that. I'm in a "rural" market and I want to see a Hummer here.
     
  12. twistid

    twistid Banged By Super Models Moderator

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    the town i live in only has a ford and dodge/jeep/chrysler dealership, and the gm dealer closed it's doors about 5 years ago... a family wanted to reopen the store, with the gm brands and were denied... because we were not that big of a market, for gm to ever come back... and if people wanted gm products, it wouldn't hurt them to drive a 1/2 hour.

    the town i work in has ford/lincoln/mercury, dodge/jeep/chrysler, chevy/gmc/buick/pontiac, and honda dealers, and the the family that bought the honda dealership was told honda would never come back if they closed the doors... because they only want to be in large markets, to be exclusive.
     
  13. deusexaethera

    deusexaethera OT Supporter

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    It makes a hell of a lot more sense to sell Hummers in the sticks instead of in the city. Hell, there's a Land Rover and Hummer dealer in Tyson's Corner, which is right along the DC Beltway. There's barely room to fit a compact car on the road around there, to say nothing of a huge fucking SUV.

    That...is bullshit. There's been enough talk about what GM needs to do on the corporate side to return to profitability, but it's all totally dependent on actually selling cars to people. To do that, to really convince people that GM is the brand they want to buy, they need to be everywhere, they need to have products people want, and they need to look like a friendly neighbor. Do you run a contracting company? Your friendly local GM dealer has the durable trucks you need and speedy service in case something does break. Are you a single mom who moved out of the city to save money, but you still work downtown? Your friendly local GM dealer has a nice gas-saving hybrid with your name on it, and if the thing attached to the other thing starts making that weird noise, you don't have to limp it 45 minutes away to get it serviced. You get the idea; Toyota got the idea; when is GM going to get the idea?

    EDIT: Hell, I almost think GM should set up an on-site service department, to make it more convenient to own a GM car than any other kind of car. Leaky radiator hose? They'll change it in the parking lot. Flat tire? They'll patch it in front of your house. The engine exploded? They'll haul it away on a flatbed and bring it back when they're done, dropping you off at your destination along the way.
     
    Last edited: Feb 1, 2008
  14. Mjolnir

    Mjolnir WHM6D > *

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    I'm going to disagree with you on this one, but only kinda.

    One of the big problems with GM is dealer bloat.

    Of the multiple problems that brings, the two biggest are commoditization of the product and extreme competitiveness on sales.

    Making your product ubiquitous drives down resale value because it's not "special"- it's everywhere. Combine that with a lower purchase price because Chevy dealerships with sales territories and overlap similar to Starbucks are slashing prices in order to move metal, and you get vehicles sold at or below cost with brutal depreciation from day one. Sound familiar?

    Once you start factoring in customer gouging to make your slice of the pie profitable, the overhead in providing each dealership sales/technical material, the hassle of trying to get approval from 7,000 small business owners, etc, etc, etc, it becomes clear that what GM needs is fewer dealers, not more.

    The reason I don't totally disagree with you is that you could put "dealers" everywhere if those "dealers" were actually branches of the same corporation.

    If (not really, but I'm simplifying for clarity's sake) you only had 50 dealers, one for each state, it wouldn't matter how many locations the Utah dealer had because (like any monopoly, to a certain extent) it's in his interest to keep prices high and provide enough customer service to keep clients from buying a Ford.

    Obviously you need more than one "dealer" per state for competitive reasons, but the theory is sound.

    As it stands, GM is trying to feed to many mouths and getting too much bullshit from those mouths.

    I really, truly believe that a measurable percentage of GM's errors come because it's hard to think when you have 3000 ex-used car salesmen yelling in your ear about what they want in their showroom.
     
  15. dr.zed

    dr.zed DR.ZED OT Supporter

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    The GM Oshawa plant is not too far from where I live. Its not a good time there these days. Good ole Buzz is really pissed off that the Camaro appears to be the only car being built there. The local f-body club was there in the plant (I as well) when they made the announcement. I took video, it was pretty cool and everybody was pumped up.

    Now the rumours are running rampant and the morale has gone way down. Too bad.
     

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