Killing Brands The Cure?

[TurboRush]

The idea of killing General Motors brands has come up again, this time from Jerry York.York was once a Chrysler financial officer but today he works for Kirk Kerkorian, who is a major stockholder in GM. And York could be Kirk's man on the GM board of directors one of these days.

He gave his ideas in a talk and interviews in Detroit and you read them here on TheCarConnection.com. Most of his ideas are on target. But he suggested that GM dump Saab and HUMMER. Wall Street analysts are always suggesting GM slim down this way, but usually they talk about killing Buick or Saturn or Pontiac.

Well, they are just wrong, even Jerry York.

First, York probably doesn't understand what's happening to Saab. It's being turned over to Opel, the German arm of GM. Future Saabs will be variations of Opel cars built in German factories. One day the Swedish Saab plant probably will shut, too. So the cost of this operation is being drastically reduced. It's not going to be a problem and opens the chance for GM Europe to sell some more upscale cars. The 38,000 or more cars Saab sells here are just an export bonus for what will be a German GM operation. And 2300 of last year's Saab sales were a Saab version of the Chevy TrailBlazer. If they can get that number up it will be a good bonus to the U.S. TrailBlazer/Envoy/Saab 9-7X platform sales here have, by the way, dethroned Ford's Explorer, its number-one SUV seller.

HUMMER is doing well with the H3, too, and that could grow from the 33,000 sales in part of last year, say to 50,000 or more. Those vehicles are built off the platform of GM's small Colorado pickup, a terrific bonus for the platform's production and those five-cylinder engines used in both vehicles. It's the way to make money.

Saturn, Pontiac and Buick: Stayin' Alive

As far as killing other divisions go, it doesn't make sense, either.

Saturn has four new models coming: the Sky roadster this spring for excitement (it's built off the Pontiac Solstice platform) will be the first. Then there are three more new models by year's end: a new Aura sedan, good-looking and patterned after a German Opel but built here; a new crossover SUV called the Outlook; and a hybrid version of the Vue SUV. Saturn's dealers are good and I figure that 2007 will be their comeback year, with closer to 300,000 sales than last year's 214,000. So why stop the recovery?

Pontiac had 438,000 sales last year, nearly ten percent of all GM sales here. Who would want to dump that kind of business? Sales could go up this year, too, with the new Torrent, a version of the Chevy Equinox.

Buicks still has problems. The new Lucerne sedan is in a tough market and the new Buick crossover still is 18 months away. But that's no reason to kill a famous name.

What some don't seem to understand is that a single GM plant doesn't just make a Buick or a Pontiac. Models of several divisions come from the same platform and run off the same assembly lines. If you eliminated the Pontiac Torrent, for example, there would be less volume for the factory that makes the Equinox and the Torrent. Kill Buick and you starve the factory making the Cadillac DTS and the Lucerne. The trick is to make distinctive models off the same platforms.

Chrysler Shows the Way

Chrysler has done an excellent job of this. In one plant, from one platform, it makes three different-looking cars: the Chrysler 300 and Dodge Charger sedans and the Dodge Magnum wagon. It might add the Dodge Challenger coupe some day. The plant runs three shifts at a 300,000 a year pace. That is how profits are made.

None of this means GM is out of trouble. But killing a line just loses customers and reduces plant volume. The trick for GM is to build distinctive vehicles from the same platforms.

Chrysler has a different challenge. It's 70 percent trucks, meaning minivans, pickups, and SUVS, but it's hard to see that volume growing. There's more competition all the time: a new big pickup from Toyota and GM's new pickups, all coming next fall; Korean minivans, and SUVs from everyone.

Chrysler's opportunity to grow is in cars. It's done a good job with those Chrysler 300s, and Dodge Magnum and Charger. Next will the Dodge Caliber to replace the Neon, but it's difficult to see sales reaching the 200,000-plus numbers of the old Neon. That's because the Plymouth division, which used to sell the Neon, too, was killed. But that's the challenge: more cars. Too bad they killed Plymouth. Two new Jeeps, built off that Caliber car platform, will be coming this year, too.

After that there will be replacements cars for the mid-size Dodge Stratus and Chrysler Sebring.

The way up is to grow, not to kill.

[Cory Wolfe]

I was expecting something bad... but it was actually a good read. He makes good points, although I don't necessarily think Saab is worth keeping. It's only lost GM sales and I thought Saturn was supposed to be variations of Opel...

[Robert Hall]

I guess the rationale that people use in promoting a brand culling approach is that Toyota covers pretty much the same high-volume market segments as GM does with only 2 brands.... (not counting Scion, which is somewhat redundant with Toyota itself).

While it takes GM 8 brands to cover much of the same segments ....

It seems to me that performance cars, heavy duty trucks, full-size vans, and gaudy SUVs (Hummer) are the niches that GM covers that Toyota doesn't...

(I'm not proposing killing brands, I'm just trying to understand the rationale that people that propose such drastic measures are using...)

Edited January 25, 2006 by moltar

[Sal Collaziano]

Good article. It makes sense to me.. There is too much product. Keep the brands.. Just get rid of all the overlap. Too many vehicles means too much marketing and technology money moving in too many directions...

[balthazar]

I guess the rationale that people use in promoting a brand culling approach is that Toyota covers pretty much the same high-volume market segments as GM does with only 2 brands.... (not counting Scion, which is somewhat redundant with Toyota itself). While it takes GM 8 brands to cover much of the same segments ....

It seems to me that performance cars, heavy duty trucks, full-size vans, and gaudy SUVs (Hummer) are the niches that GM covers that Toyota doesn't..

C'mon: scion is without question a third division- there's no way even partially around that. The cars, regardless of shared mechanicals & platforms, do not appear as badge jobs. toyota: 3 divisions.

And if we're comparing the two corporations directly, you have to discount those GM divisions for which there is no toyota competitor, which would be Hummer, saab and GMC. Therefore, GM: 5 divisions.

[PurdueGuy]

I would think that brand shouldn't be axed, but possibly brand infrastructures consolidated. Why ditch something that has brand recognition? Find some way to use it, even if you have to somewhat redefine what that brand is. For example, if they decided that Pontiac wasn't pulling it's own weight - combine it with Chevy, and make the pontiac vehicles simmilar to the chevy vechiles (share platforms), but with different sheetmetal and with details more oriented to a performance customer. It's practically what they are already, you just make it so the same people that handle the admin stuff for one brand also does the other, and sell them out of the same dealers.

Of course there are downsides to that - the Pontiacs sold through chevy discourage things like the SS chevy models. But face it, that's already overlap, and that overlap might be addressed more effectively if it's in fewer offices.

*shrug*

[Sixty8panther]

If SAABs will not even be made in Sweden but in Germany and are going to end up just rebadged Astras and Vectras then just kill them now.... Jeezus it's not a very strong brand and the best it has going for it is the whole Viggen fighter Jet conncetion. If it's not a Sweedish SAAAB anymore just call it quits.

Don't f@#k wiht Pontiac or Buick however or I'm giong ot get violent!

[Newbiewar]

I was expecting something bad... but it was actually a good read. He makes good points, although I don't necessarily think Saab is worth keeping. It's only lost GM sales and I thought Saturn was supposed to be variations of Opel...

saab is just a brand name... it holds more value to GM then anyone else, because saab has no assets... they have nothing worth any money, so if GM is going to sell it they couldnt get a damn penny for it, but the name... soo

[Guest YellowJacket894]

If SAABs will not even be made in Sweden but in Germany and are going to end up just rebadged Astras and Vectras then just kill them now.... Jeezus it's not a very strong brand and the best it has going for it is the whole Viggen fighter Jet conncetion. If it's not a Sweedish SAAB anymore just call it quits.

Don't f@#k wiht Pontiac or Buick however or I'm going to get violent!

<{POST_SNAPBACK}>

[buyacargetacheck]

If SAABs will not even be made in Sweden but in Germany and are going to end up just rebadged Astras and Vectras then just kill them now.... Jeezus it's not a very strong brand and the best it has going for it is the whole Viggen fighter Jet conncetion. If it's not a Sweedish SAAAB anymore just call it quits.

Don't f@#k wiht Pontiac or Buick however or I'm giong ot get violent!

Why does the photo of the 1981 Datsun 810 Maxima Wagon crack you up? In addition to being plush it handled pretty well and had a killer diesel option (that didn't self-destruct like a certain diesel engine we all know) that was perfect for the times.