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March 30, 2009

GM’s next step should be brand rationality

Jack Yan/11.06

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Photo by http://www.flickr.com/photos/29117764@N08/[Cross-posted] has become the casualty of the American ’s finger-pointing with his resignation today, his hand forced by the Obama administration.
   The press has centred on this rather than explore the union’s role in the industry’s difficulties. For those of us old enough to remember it, it all smacks a bit of the days of ’s effective in the 1970s.
   If we look at , perhaps part of Wagoner’s behaviour deserved to be lampooned: catching a private jet to Washington to ask for a bailout wasn’t a good look. And it’s true that did push trucks, but then, so did every one of the American . Even Toyota joined the Big Three in a lawsuit when California tried to impose fuel economy standards. Everyone’s been complicit in selling large trucks, even the American media’s Japanese-brand heroes.
   It is unfair to gloss over some of the good that Wagoner did, when they should be mentioned.
   GM’s Adam Opel AG unit has put out some good cars of late, and last year took the Car of the Year award in Europe with its . Buick sells well in . GM has moved toward a more integrated R&D structure than its rivals at Ford, managing to adopt a model using centres of excellence for engineering platforms—so that the next Opel Corsa will have huge Korean input, and the Chevrolet Camaro was engineered in Australia. The could be a world-beater and GM has been willing to be braver with its R&D processes.
   There’s a lot that GM can build on—but maybe someone other than Wagoner should put the next stage into action.
   That is, if that person knows what the next stage is.
   It’s in the home market where GM, as Ford, as Chrysler, has been making mistakes. If I could see the need for fuel-efficient cars at the turn of the century for the US market, then there’s no way the Whiz Kids at these companies couldn’t. They were fooled by their own excess.
   The real problems are reflected in how unmanageable GM has become over the years with its subsidiaries and . It has let fail without new models—it pales in comparison to the plethora of models Volvo has managed to develop under Ford. Legacy costs with the unions are another problem, which deserves another blog post altogether.
   There has been talk over the years about trimming the GM brand portfolio, but I wonder if this is a wise thing.
   This is no longer the era when we live by counting beans, but by how brands resonate—and consequently how well they can sell. The problem is not so much that GM has so many brands, but that they have become confusing for customers.
   British Leyland—once the world’s second largest car manufacturer, and now a mere unit of the Red Chinese government—shows what can happen when brands are trimmed.
   There, the loss of brands such as Triumph meant that the streamlined Austin Rover Group in the 1980s could not compete in the sports saloon and sports car sectors. As people become more greatly segmented, what a company can’t afford to do is lose its brands.
   Triumph died with a lot of goodwill still out there—which is why BMW, which acquired the name through taking over Rover in the 1990s, is too scared to ever let the name go. It knows that Triumph occupies the same market it does.
   I warned about the demise of the low-cost Plymouth line when DaimlerChrysler killed that—and I bet Chrysler now wishes it still had it to field captive imports or smaller models now for entry-level buyers.
   The trick is to find a way for the brands to resonate with consumers once more, and no one seems to want to talk about that.
   GM knows that to kill a brand it would have massive payouts to make to dealers and lose certain segments of the market to competitors. It would also lose economies of scale, and its cost per unit would rise greatly over the next decade.
   The other problem with killing brands is the consumer mindset.
   A couple of years ago I talked about brand rationality as the new decade began—not rationalization. People only want so many brands in their minds and those brands should only offer so many products. It looks like it’s time to explore these very ideas.
    knows this. While in Japan, a country with a very different buyer behaviour to western markets, it offers subcompacts such as Vitz, Ist, Passo, Porte, Raum, bB and Rush, it knows that to export such a wide range would be commercial suicide elsewhere.
   It would rather sell more of a certain model, such as the Yaris, while leaving others to be sold under different brand names such as Daihatsu and Scion.
   ’s greatest success in markets like New Zealand came when people understood the range of Escort–Cortina–Falcon; and even GM itself experienced sales’ growth when it was able to bring some logic to its range there with Barina–Astra–Vectra–Commodore. Toyota took the mantle when it was able to organize Starlet–Corolla–Corona in the 1980s. And BMW has been doing it for decades with 3–5–7.
   In the , it makes some sense to field Chevrolet, Buick, Cadillac, Pontiac, Saturn and Saab; less so Hummer and GMC, which never made much sense during my lifetime.
   In each of these brands, there is a way to find an ideal selection of models that the consumer can understand.
   GM has already made some headway with this by effectively turning Saturn and Pontiac into import brands, fielding offerings from other parts of its empire that appeal to their buyers’ attitudes toward them. There’s no reason this cannot continue: Opel can engineer for Saturn, Holden for Pontiac. It has always amazed me that cars like the Corsa D are not sold Stateside. The Brazilian Chevrolet Vectra—Astra H sedan in Europe—could have been a decent Saturn.
   Saturn could have the current models plus Corsa, Meriva B and Zafira; Pontiac might survive on a future rear-wheel-drive mid-sized car and the VE Commodore.
   Chevrolet, the all-American brand, has adorned Korean- and Japanese-designed models over the years. It’s the core line that should field a full range, but do three of each type: three passenger car lines, three SUVs and three minivans. Of course, it should keep iconic hero models such as Corvette and Camaro.
   Cadillac has become better organized than most with its tiered range. It just needs to improve its quality. It certainly has more cachet than Lincoln.
   That leaves Buick and Saab. GM has done its level best to kill Saab. While it should remain it really should be considered alongside Saturn. If Saturn fields smaller import models, perhaps the Saab name could be used for larger ones. The problem is that competitive, newer models are still some time away. Stateside, GM might not have much choice but to rebadge the Opel Insignia with the Saab name and see if this attractive new model can find buyers, as a stopgap. Its large US-only SUV fills a gap in the market-place as a performance model with some of Saab’s cachet.
   Buick, meant to plug the gap between Chevrolet and Cadillac, still needs to do that, and its latest Lacrosse and Lucerne models are competitive for now. Some think that Buick should be China-only—just as Holden is Australasia-only and Vauxhall is UK-only—but we run the danger of losing the premium segment that neither Chevrolet nor Cadillac can sell to.
   Cost-wise Buick could continue with smaller models and have a twin spawned off the Holden Commodore platform. Already Buick in China sells the Holden Statesman as the Park Avenue, a far more advanced car than anything sold Stateside with that name. While it may offend Buick loyalists, Chinese exports could sell Stateside—especially if the choice is killing off the brand versus sustaining it. The quality of models such as the Park Avenue is considered high, and a tiered range of Regal–Lacrosse–Park Avenue (or more accurately their successors) could work in the US in the 2010s, just as it does in China today.
   The key is to make sure GM cars get sold in as many markets as possible, as sensibly as possible. It’s just that few have taken a look at GM , preferring to base their solutions on what they can chop among the US range. And since GM’s failures have been in part down to its inability to put its international models on sale, it seems foolish to not consider models that the company has already spent billions on elsewhere. It’s do or die time, and it’s stupid to put the blinkers on just because a vehicle was —Not Invented Here—in the US.

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