"Can GM Learn From Its Past?"

[wildcat]

Ed Wallace, the host of the radio talk show "Wheels," is offering his opinion on GM's present situation, "Can GM Learn From Its Past?." Read the article by clicking on Business Week Online. In his writing, Mr. Wallace draws a parallel to GM in the 1920s.

P.S. - Check out my latest signature text.

[Newbiewar]

good article... didnt realize that happened in the 20's

[DBeaSSt]

Great article and a lot of truth.

Chevrolet was targeting Ford's customers, who hesitated to buy the exact same vehicle they had purchased once or twice already. Oakland, as it became Pontiac, was marketed as the next step up the ladder. Oldsmobile fit middle-class budgets and desires perfectly. Buick would come to be known as the preferred vehicle for doctors and white-collar professionals. And the wealthiest in society would advertise their arrival in the ultimate automobile: the Cadillac.

An updated version of this is exactly what GM should be focusing on!

Entry Level = Chevy

Lower Middle Class = Pontiac

Upper Middle Class = Saturn

Lower Upper Class = Buick

Upper Class = Cadillac

[Hudson]

Great article and a lot of truth. 

An updated version of this is exactly what GM should be focusing on!

Entry Level = Chevy

Lower Middle Class = Pontiac

Upper Middle Class = Saturn

Lower Upper Class = Buick

Upper Class = Cadillac

This is a great theory for 1930, but for 2006, it's not quite the same thing.

In 1930, each "brand" sold basically one car. It may have been offered with several body styles but they were all basically the same car of about the same size and price range (excluding custom bodied models).

Starting in the 1950s, these brands added additional models. Chevrolet added the Corvette...then the "compacts"....and "intermediates"....and "subcompacts".....

By the 1970s, each brand had a range of models that were only connected by the dealership that sold them. This range became the heirarchy that a buyer would progress through. Instead of jumping from Chevrolet to Pontiac to Oldsmobile, a buyer would move from a Chevette to a Citation to a Celebrity.

This has become part of the problem with GM. They still run on the antiquated ideal that the company needs five or six or seven brands for a buyer to progress through in their life, when they probably only need two or three. And one (or two) of them will NEED to have an older demographic.

Cadillac should be aspirational. Make it more rare and more expensive. Something desired by the young and a symbol of financial independence for the owner.

Chevrolet should be the entry-level. Your first car.

A brand in between could be the stepping stone, but I don't really think it's necessary. While Scion is a niche brand (probably something that Saturn should go after, youthful and ever changing...sounds like what they were supposed to be in 1990), Toyota, the entry-level brand, steps up into Lexus, the aspirational brand.

Everything else just seems to detract from the core direction of the company.

There are hundreds of reasons why GM cannot do this. But THIS is the direction the company SHOULD go.

[DBeaSSt]

Good points. I was thinking out loud. I know there are so many facets to this and it's not a simple answer problem.

I agree, Cadillac should be pushed even further up market, go head to head with the best, most expensive/luxurious cars in the world.

That leaves more room for Buick to sell luxury cars that right now would compete with Caddy's.

And Chevy should continue to be a "your first car" company.

It's finding a place for all the other divisions that's not so easy. Should Pontiac be a performance only division? Saturn a niche division? What about Saab and Hummer?

It's a tough one. But GM does need VISION for it's divisions, they don't have that now.

[Newbiewar]

i think Chevy should be for lower class... 10-40k

Pontiac ought to be a step up from chevy... give them excitement... give them a chevy type vehicle, with enough excitement to step up the price a little...20-40k

so the person is like... i could have this chevy, but for 2-4k more... i could get this awesome pontiac... pontiac

then saturn steps in... saturn might not be as exciting as it is contemperary... something that is very refined an elegant, but still obtainable from the the middle class ought to be ought to be 25k-50k

then buick should be very nice... someone who is very successful. someone who wants premium comfort, style, and elegance. ought to be near 40-70k

cadillac should be sold to those who want only the best, a tycoon or something. although pushing cadillac up that far makes it very expensive and a very small market. Cadillacs ought to be near 60k+

Hummer, and GMC are all ready what they need to be... GMC could use a little differences but hummer is perfect...

Saab needs to be an import brand... saab ought to be a saturn price counterpart... a 25-50k but it needs to have global presence, a german style car... something with pestige

Edited February 13, 2006 by Newbiewar

[Hudson]

i think Chevy should be for lower class... 10-40k

Pontiac ought to be a step up from chevy... give them excitement... give them a chevy type vehicle, with enough excitement to step up the price a little...20-40k

so the person is like... i could have this chevy, but for 2-4k more... i could get this awesome pontiac... pontiac

then saturn steps in... saturn might not be as exciting as it is contemperary... something that is very refined an elegant, but still obtainable from the the middle class ought to be ought to be 25k-50k

then buick should be very nice... someone who is very successful.  someone who wants premium comfort, style, and elegance.  ought to be near 40-70k

cadillac should be sold to those who want only the best, a tycoon or something.  although pushing cadillac up that far makes it very expensive and a very small market.  Cadillacs ought to be near 60k+

Hummer, and GMC are all ready what they need to be... GMC could use a little differences but hummer is perfect...

Saab needs to be an import brand... saab ought to be a saturn price counterpart...  a 25-50k but it needs to have global presence, a german style car... something with pestige

How's this different from the current situation?

Chevrolet should offer cars...mainstream, low-end, entry-level, with sporty and classy options covering the lost Pontiac and Buick brands. Cadillac should offer cars...high-end, prestigious, exclusive. Perhaps Saturn could offer entry-level, youth-oriented to compete with Scion, Mini, etc. Then, perhaps, two truck groups: GMC for usable work trucks and Hummer for up-level luxury trucks.

With these five franchises, you can cover all of the territory currently covered by the domestic seven with little or no overlap. A Chevrolet dealer could carry a GMC franchise in an area where trucks sell very well and/or pick up a Saturn franchise if the market calls for it. But by splitting this up, models don't compete with other brands' models.

Fans of Buick or Pontiac won't like this plan. Fans of Chevrolet trucks or Cadillac trucks won't like it either. Heck, "GMC Truck" could just as easily be "Chevrolet Truck" and be a floating franchise (not necessarily tied to the Chevrolet car franchise), but calling it GMC was just easier to explain. All of the names were just to explain a principle.

[ehaase]

GM could compete with just Chevrolet (cars, trucks, and SUV's) and Cadillac (cars and SUV's). I don't want this to happen because there have been many great Pontiacs and Buicks in the past and I think that the Solstice and Enclave are impressive (although not my kind of vehicles). All both need are some great Zeta platform cars. But I think that the odds are 50-50 that GM could be down to Chevrolet and Cadillac in 10 or 15 years.

[FUTURE_OF_GM]

EXCELLENT ARTICLE!!!

GM NEEDS TO; HAS TO realign it's divisions to where EVERY ONE is relevant... AND THEY CAN. The question is; WILL THEY or will they waste time and watch one or two other storied and priceless franchises go under?

I have put a lot of thought into it and I think GM should modify the Sloan model to look like this:

Chevrolet/Buick: These are the cars for the common people. Chevrolet, the volume division would do the exact same thing it does now, sell to everyone. Buick would become the common man's luxury car, not as luxurious as a Cadillac and not really sporty, just a nice, VALUABLE offering that conveys success and style.

Pontiac/Cadillac: These are the car companies for ENTHUSIASTS. Pontiac would sell in LOWER volume than Chevrolet and appeal to people more enthusiastic about style and performance. BUT, it would still hve to remain affordable. Cadillac would be the PINNACLE of GM and cater to the enthusiast (I'm using that term broadly: as in; a person who is more interested in a car as what it is, not an appliance) Cadillac would obviously be higher priced, more exclusive and lower volume than Buick.

Saturn/Saab: This would be the european arm of the operation. While the true draw of an asian car is quality, something that ALL GM cars should have, ask ANYONE with a pulse and they'll prefer the driving experience of a European car. Therefore, those style concious, technology loving people would go through this channel. Saturn would be the affordable mas market offering and Saab could be the techy, upper level offering.

It would be three DIFFERENT, MORE FOCUSED channels for consumers to go into. This would result in a greater variety of offerings, would enable GM to react more quickly to market needs and would hopefully keep the brands from fighting/getting confused over where they are among MANY other advantages.

The OLD sloan structure can NEVER be realized in todays market.. It's just too much, the competition is TOO fierce and the divisions are too muddled.

Personally, as it stands now, I'm not a fan of eliminating divisions as I think that's not wise... GM's divisions ARE NOT AS STRONG as divisions from Toyota or Honda. Therefore cutting 5 of 8 divisions is SUICIDE.

What GM needs to do is define a direction for all of their brands... Cadillac needs to go UP MARKET, even if it forsakes volume. That would then give Buick room to breath and thrive. Cadillac should be GM's margin over volume division while Buick can be the volume luxury division... For example; there is NO WAY that a Lucerne and a DTS should EVER be cross shopped.

Chevrolet is THE volume division, so why not make Pontiac TRUE TO IT'S MISSION as the EXCITEMENT DIVISION by limiting volume yet producing AWESOME performane cars. Then Saturn can have a moderate to large line up to go after hard core import conquests and Saab can sell to euro intenders.

GMC is fine... It's sells fine and makes plenty of money and Hummer is so limited that it is nothing more than a profit maker.

But, alas, if GM were to ONLY offer 2 to 3 divisions, then I and many others wouldn't really have a reason to buy GM. I don't WANT to have the same, GENERIC, BASIC '15 billion sold--and in the same color' car as everyone else. That's one of the whole reasons I haven't been an asian car fan. And I think relinquishing gained ground without even putting up a fight (a.k.a. ground that you'll never see again) is a very dumb business move that has been constructed by those without GM's best interest at heart.

[mkaresh]

Correct that GM could do a better job individually targeting its brands. And that its brands could be an advantage if this were done.

Incorrect that Sloan's ladder ever really worked this way after the 1920s. It was never as perfect as the story suggests, and collapsed in the early 1930s when every brand needed a cheaper car to survive.

Need to distinguish between myth and reality.

I wrote a paper in grad school on this very topic. The charge that "all GM cars look alike" is a related issue. If you look at old magazine articles, you'll find that journalists were claiming that all the cars were looking alike as far back as the 1930s, when the move to steel bodies forced the use of common parts.

The real change was that foreign producers entered the market with much different products, and that American society stopped thinking of itself as homogenous.

When everyone sold a variety of apple, then people noticed the difference between the Gala apple and the Jonah Gold apple. But then other companies introduced oranges, bananas, etc. Afterwards all of the apples look alike.

And at the same time, society fragmented such that many people began to want to set themselves apart from the mainstream. Import cars with obvious differences from Detroit iron were one way to do this.

In sum, the big problem was not that GM changed, but that the context within which it operates did, and it didn't change with this context.

[Hudson]

Incorrect that Sloan's ladder ever really worked this way after the 1920s. It was never as perfect as the story suggests, and collapsed in the early 1930s when every brand needed a cheaper car to survive.

I have never done this type of specific research, but I do know of items that would point toward this conclusion. Oakland introduced Pontiac (both ran simultaneously for a few years). Buick introduced Marquette. Oldsmobile introduced Viking. Cadillac introduced LaSalle. Each brand believed they needed a "sister" car to their main lineup. While Pontiac was popular enough to take over Oakland and LaSalle lasted until WWII (and became a lower-level Cadillac model afterwards), Marquette and Viking didn't survive more than a few years.

After WWII, each brand didn't see the need to introduce a new brand to enter a new segment (although this can be argued as well since Plymouth advertised the Valiant in the same way it would a new brand and others worked similarly).

[mkaresh]

I have never done this type of specific research, but I do know of items that would point toward this conclusion. Oakland introduced Pontiac (both ran simultaneously for a few years). Buick introduced Marquette. Oldsmobile introduced Viking. Cadillac introduced LaSalle. Each brand believed they needed a "sister" car to their main lineup. While Pontiac was popular enough to take over Oakland and LaSalle lasted until WWII (and became a lower-level Cadillac model afterwards), Marquette and Viking didn't survive more than a few years.

After WWII, each brand didn't see the need to introduce a new brand to enter a new segment (although this can be argued as well since Plymouth advertised the Valiant in the same way it would a new brand and others worked similarly).

They didn't only introduce lower-line brands, they also drastically cut prices on the existing models. The price difference between a Chevrolet and a Buick shrank drastically. Olds and Buick never had a clearly defined relationship, even in the 1920s.

The LaSalle went away after the war when Cadillacs themselves got cheaper. Cadillac essentially took over LaSalle's price point as it went downmarket. Through the late 1930s it was a much more expensive car that sold in much lower volumes than it did in later decades.

In the end the main reason the mythical "price ladder" never existed in reality is that Chevrolet dealers aren't interested in passing their customers onto Pontiac dealers, and Pontiac dealers aren't interested in passing their customers on to Olds dealers, and so forth. So in the end each got a full line.

Combining multiple brands in the same dealers is a brilliant idea if executed well. For the first time in GM's history it will have a proper foundation on which to truly differentiate its brands. With Pontiacs and Buicks in the same store--and GMC there as well--the dealer doesn't have a reason to pretend that either brand can do everything. Instead, it can point customers to the car that is truly best for them, without pointing them to a different dealer down the street.

[ellives]

I don't think the "price ladder" needs to be as complex as it once was. Toyota is certainly proof of this. Of course the challenge is if you eliminate divisions you end up with unhappy dealers. This is part of the reason for the comcept behind pushing Pontiac, Buick and GMC into the same dealers. Even this idea has problems as in my area there are multiple dealers with both Chevy and Buick. They will likely but uninterested in abandoning Buick since they built up the brand in their respective areas. GM market analysts should be able to figure this stuff out and come up with a workable plan.

The problem I see is the overlap of models within brands. This is the benefit Toyota has with only Toyota and Lexus. The "step up" is Lexus - no matter which model you choose within the brand. The same can't be said for GM with the rebadging strategy. I've always thought it interesting that Pontiac is the "excitement" division yet Chevy sells the Corvette. This is the kind of paradox that confuses the buying public.

Combining multiple brands in the same dealers is a brilliant idea if executed well. For the first time in GM's history it will have a proper foundation on which to truly differentiate its brands. With Pontiacs and Buicks in the same store--and GMC there as well--the dealer doesn't have a reason to pretend that either brand can do everything. Instead, it can point customers to the car that is truly best for them, without pointing them to a different dealer down the street.

[turbo200]

Multiple paths and creative ideas are the way to take GM's brands. It should no longer be constituted that Chevy's have to feel cheaper than Pontiac or Buick should have more expensive MSRPs than Pontiac. It is not a question of pricing but of image and the right product. Give Pontiac nothing but performance machines with exotic styling, base engines and content can lower the MSRP, but there should be no confusing a Pontiac for a Chevy. Buick must be entry level luxury. That's it. Romantic styling, mysterious looks, dramatic round curves, Enclave is the embodiment of this. Quality interior with some of the best of materials GM has to offer. MSRP should reflect thier entry level status. Saturn can continue to be a slightly upscale Volkswagen competitor they are headed towards. Chevy needs to be the everyday man's car, with upscale appointments that everday man can be proud of and great design that everyday man can be enthusiastic about. Cadillac is perfect where it is headed towards---ultimate luxury and performance along with cutting edge style like BMW, MB, Audi, Porsche, etc....This is what the brand "ladder" should be, not a literal ladder, but brands that are marketed distinctly, have a real image, and are targeted directly with direct messages...

[Mule Bakersdozen LS]

I hate to ask, but does anyone think that Cadillac might spread downward and introduce smaller cars (sub-CTS, XLR, and SRX that is) in North America and sort of usurp Buick's role, kind of like what happened with LaSalle after 1940? The biggest consolidation story in modern times I can think of is what happened with the 1986 Chevrolet Caprice. The Oldsmobile Delta 88, Buick LeSabre, and 1987 Pontiac Bonneville went to vastly inferior, barely-full-size, front-drive platforms, the Impala was turned into the base Caprice, (the Pontiac Parisienne sedan dropped after 1986, Safari wagon after 1989), and the Caprice line branched into Base sedan (and 1987 wagon), Caprice Classic coupe, sedan, and wagon, Caprice Classic Brougham sedan and Caprice Classic Brougham LS sedan. What I mean is, Chevy expanded to cover their former market segments, and they've more or less done that ever since-I'm seeing it now with the Impala's today. GM desperately needs to learn from their past, and I'd love to help them do that, mostly because they don't seem to be learning much, if anything at all right now (see: Lucerne, minivans, Pontiac Torrent, etc.).

[balthazar]

mkaresh = >>"Incorrect that Sloan's ladder ever really worked this way after the 1920s. It was never as perfect as the story suggests, and collapsed in the early 1930s when every brand needed a cheaper car to survive."<<

Where does the linked article suggest that the Sloan Model was anything akin to "perfect"?

It also plays it a bit loose with the facts to support it's point (for instance, it would have prudent to mention that all GM plants shut down beginning in Nov of '20, with the exception of Cadillac & Buick).

The 'Sloan Model' was still working quite effectively thru the 1950s, but once the proliferation of 'non-standard' models within each division occured in the '60s, the pricing overlap was widespread and the Model was no longer followed. Still sales continued to increase thru the '60s and '70s.

WRT "every brand needed a cheaper car to survive"- that is not supportable by the facts. Pontiac was created (for '26) at the corporate level to realize volume economies with Chevrolet. Pontiac was 'paired' with Oakland but Oakland had nothing to do with Pontiac's development beyond loaning a corner of their antiquated factory to PMD for a year. Oakland took a bath because it was poorly run & engineered.

Buick's Marquette lasted little more than a year, introduced in '29. Olds' Viking was actually a higher-priced marque. It only lasted 2 model years. Both Viking & Marquette were too weakly established to survive the Crash of Oct '29 & the subsequent depressed market and were discontinued.

LaSalle was quite successful even up to the discontinuance after '40. But it is perilous to make assumptions regarding the LaSalle's effect on Cadillac in the years around it's discontinuance due to the volatility of the war-time market. Also- Cadillac's 'essentially a LaSalle' (incorrect) Series 61 was never close to a sales leader. In '40 Cadillac & LaSalle's combined sales (of course- GM never reported their numbers as combined- further deconstructing the theory that the 'companion' makes were designed to bolster the core division's numbers OR business cases) were almost half of Cadillac's '41 sales.

>>"If you look at old magazine articles, you'll find that journalists were claiming that all the cars were looking alike as far back as the 1930s..."<<

I have encountered exactly the opposite. For proof- look no further than the whole hubbub over the '29 'pregnant' Buick, then look closely at '28 & '29 Buick pictures. In the context of the times, the differences were clear.

>>"...when the move to steel bodies forced the use of common parts."<<

Sharing rooflines in some instances hardly makes for "looking alike" IMO, but to each his own.

>>"The real change was that foreign producers entered the market with much different products....

And at the same time, society fragmented such that many people began to want to set themselves apart from the mainstream. Import cars with obvious differences from Detroit iron were one way to do this."<<

The only vehicle that truely fits this theory is the beetle. Other imports tried very hard to emulate American product, with precious little success until the fuel crisis of '73 put an undue focus on economy, a by product the imports had due to being uncompetitive with the market of the times (no V-8s, few 6-cyls, no sports or muscle cars, no full-size trucks, etc).

>>"In sum, the big problem was not that GM changed, but that the context within which it operates did, and it didn't change with this context."<<

It is ludicrious and unsupportable to allege that "GM didn't change". Everything changed, moreso than with most other manufacturers.

Edited February 20, 2006 by balthazar

[Guest buickman]

REPORT COURT

"We believe there is, among all of us at GM, a renewed sense of urgency... Nineteen Ninety Nine is the year for GM to retake the lead."

1998 Annual Report

"True, our market share, in the all-important US market was flat last year. Of course, we are not pleased with that."

1999 Annual Report

"Overall US market share fell one percentage point to 27.8 percent, while GM's global market share declined half a point to 15.1 percent. Make no mistake; we do not accept GM's continued share decline..."

2000 Annual Report

"It would be wrong to say we're satisfied, we are not. Overall we were disappointed with our 2001 results... Our margins were well below our expectations and targets."

2001 Annual Report

"Despite our progress, we know there's plenty more to do. Too many potential customers don't consider buying our products..."

2002 Annual Report

"Here's What's new about GM's strategy this year: Nothing.

2003 was an encouraging year along that road. Not because our results fully met our expectations. They didn't."

2003 Annual Report

"But overall, it was a year in which we did not take the step forward we were aiming for."

2004 Annual Report

Bet you can't wait to see the 2005 Report.

"It's in the Bill of Sale."

Denny Crane

Buickman

Founder

www.GeneralWatch.com

[Dsuupr]

Good article and point well made.

[Hudson]

I hate to ask, but does anyone think that Cadillac might spread downward and introduce smaller cars (sub-CTS, XLR, and SRX that is) in North America and sort of usurp Buick's role, kind of like what happened with LaSalle after 1940? The biggest consolidation story in modern times I can think of is what happened with the 1986 Chevrolet Caprice. The Oldsmobile Delta 88, Buick LeSabre, and 1987 Pontiac Bonneville went to vastly inferior, barely-full-size, front-drive platforms, the Impala was turned into the base Caprice, (the Pontiac Parisienne sedan dropped after 1986, Safari wagon after 1989), and the Caprice line branched into Base sedan (and 1987 wagon), Caprice Classic coupe, sedan, and wagon, Caprice Classic Brougham sedan and Caprice Classic Brougham LS sedan. What I mean is, Chevy expanded to cover their former market segments, and they've more or less done that ever since-I'm seeing it now with the Impala's today. GM desperately needs to learn from their past, and I'd love to help them do that, mostly because they don't seem to be learning much, if anything at all right now (see: Lucerne, minivans, Pontiac Torrent, etc.).

A few points. I don't see the H-body cars as being "vastly inferior" to the B-bodies...they had better use of space and were more fuel efficient. But I'm assuming youre point was based on your own personal opinion...with which I can't argue.

The Caprice lineup lost the Impala and coupe editions shortly after the introduction of the H-bodies. Any "expansion" of the Caprice lineup was intended to keep the factory going since five brands were down to two (Chevrolet's B and Cadillac's D-body, discounting the few Buick and Pontiac wagons sold) after the introduction of the H-body.

After the 1990 introduction of the new GM300 Caprice (and demise of the Safari), the full-sized, body-on-frame lineup EXPANDED with the Buick Roadmaster and Estate, Oldsmobile Custom Cruiser, and Cadillac Fleetwood.

In any case, sales of the Caprice did not take off when the Buick, Oldsmobile, and Pontiac versions of the B-body sedans were dropped. And when Buick and Oldsmobile returned to the body-on-frame design, sales were not good enough to keep the factory building them past 1996.

[balthazar]

Providing 'better use of space' meanwhile providing less overall space is seldom looked upon favorably by those outside of the engineering profession.