The top guns of the American auto industry parked their private jets, piled into their big, luxury hybreds, and headed back to Washington last week. The goal: 50 billion dollars in loans, credit and other forms of bailout money. The second installment of what one reporter called, “a long term payment plan in $35 billion installments.”
There’s no doubt GM’s failure would a terrible economic blow. Those jobs would be sorely missed, but would anyone miss the mediocre brands that GM’s been consistently producing for the last 35 years?
I don’t think so. Other than some loyal Chevy truck fans, consumers won’t miss a beat.
GM’s business problems are far reaching and complex. The Wall Street Journal says “it’s a bloated organization with too many dealers and too many factories producing too many cars for the marketplace.” (GM has 7000 dealers in the U.S. Toyota outsells them with just 1500.) The company is burning through cash faster than a Suburban sucks gas — $75 million a day, according to one account. Turning that land yacht around is is going to be much harder than anyone’s predicting. As one consultant said… “Even with a generous series of government loans, GM is likely to go bankrupt within the next two years.”
Let’s face it. GM has been losing ground slowly but surely since muscle cars were killed by the oil embargo of the 1970’s. If congress looks at the situation from a marketing standpoint, they wouldn’t cough up a dime.
According to Automobile magazine, “it’s been 50 years since GM built a car that was the standard of the industry in any category.” Overall, GM products have been poor in all respects, from design and driveability to safety and fuel efficiency.
I believe that GM’s quality issues and their current financial crisis is a direct reflection Alfred P. Sloan’s famous, flawed strategy of “a car for every purse and purpose.” Sorry, but quantity over quality just doesn’t work in the modern automotive industry.
GM’s business model for the past 30 years has been built around the assumption that they can keep making money off products that are unremarkable, at best. But even when you’re as big as GM, you can’t be all things to all people. Over time, that lack of focus is going to kill you.
Look at GM’s track record in the small-car market. First they had the Chevette and the notorious Vega, a car reknown for being the first aluminum block engine ever produced… (not exactly the type of innovation that propels a company into a new era.)
While Honda, Toyota and Nissan were dominating that market in the 80’s, GM introduced The X-cars… the Citation, Omega, Phoenix and Skylark. Yikes! Those weren’t economy cars, they were just awful, underpowered sedans.
GM fumbled around for 20 years trying to build a small car under the wrong brand: Cadillac. Remember the Cimmeron? It’s on Time Magazine’s list of the worst cars ever built. And the Catera, “the caddy that zigs.” The advertising was unbelievable and the product, unbelievably bad. For consumers, a small, sporty Cadillac just doesn’t compute.
Then there was Saturn, GM’s great hope of 1990. Nothing in the history of GM could match the enormity of this brand’s launch. They built a state-of-the-art manufacturing plant in Springhill Tennessee. They opened a new dealer network and adopted innovative new marketing and customer service programs, including a policy of “no haggle pricing.” To their credit, they did everything differently in order to compete with the Japanese.
Despite the plastic body panels, Saturn succeeded for a while. The cars were affordable, and they even won some industry accolades in the subcompact category. Unfortunately, GM starved that division of cash, kept them from launching new products for 10 years, and now is contemplating a shutdown of that brand.
So they can’t compete in the small car market. But what about GM’s bread and butter categories, like vanilla-flavored sedans? Unfortunately, they’ve even been losing on that front as well. The Ford Taurus was the best-selling car in the country for years, followed by the domestically produced Toyota Camry. In the meantime, The Oldsmobile brand limped along for years before GM execs finally pulled the plug in 1999. They tried all sorts of marketing ploys to save it, including more than a dozen different slogans for the brand over a 15 year period. They did everything BUT build a car that appealed to anyone.
GM missed the boat entirely on the minivan craze, and they were slow to market with their SUVs. (But no one will deny the success of the Suburban.) GM actually had the lead in green technology in the late 90’s with the EV1 electric car, but they pulled the plug on that for short-term financial reasons. Now, while the Toyota Prius flies out of showrooms, GM’s playing catch-up yet again with the Chevy Volt. The volt is not a hybred. It’s actually an electric car, leaps ahead of Toyota in the green car game. It plugs in and it looks racy too, but it might be too late to the starting line.
Clearly, GM has been all over the place strategically. Now it looks like the bailout will force them to focus their efforts a bit. There’s already talk of paring the product line-up, and in the recent Senate hearings GM execs said their new strategy is “to focus available resources and growth strategies on the companies profitable operations.”
I guess that means four core brands… Chevy, Buick, GMC and Cadillac. And potentially four more marketing failures: Pontiac, Saab, Saturn and the king of them all, Hummer. (Don’t even get me started on that.)
Even with the forced focus on just four brands, GM will have a difficult time turning a profit. According to Automobile Magazine, the Cadillac CTS is actually one of GM’s small glimmers of hope for something better down the road. “It’s not relevant at $60k, but it’s a reminder that GM knows how to build a very special automobile. It’s the pride of Lansing Michigan and proof positive that GM has a lively pulse.”
Hmmmm. How can a car be “not relevant” in the market, but hopeful? And why does the mainstream press assume that GM will suddenly “start building fuel efficient cars that people want to buy” as soon as this bailout comes through? They haven’t done it yet. And no marketing blitz or government bailout can turn a lousy product into a branding success.
There’s an old saying in advertising circles… “great advertising just kills a bad product faster.” Sadly, GM’s history is littered with products that died fast, deserving deaths.