By SHARON TERLEP and NEAL E. BOUDETTE
The Wall Street Journal
A few months ago, General Motors flooded the prime-time airwaves with commercials introducing the G8, a big, powerful sedan that is supposed to re-energize GM’s Pontiac brand.
But the ad blitz hasn’t had much effect. In August, GM’s 2,712 U.S. Pontiac dealers sold only 1,915 G8s — not even one per dealer.
GM has problems on many fronts, including high gasoline prices, falling truck sales and billions in losses. The G8 illustrates one problem that’s often overlooked: The automaker’s lineup contains many vehicles that deliver barely any bang for the buck.
Consider the Saab 9-5 sedan. GM promotes its Swedish brand’s smaller 9-3 sedan, but the midsize 9-5 gets little exposure and as a result draws little interest from shoppers — or even dealers.
Mark LaNeve, GM’s top marketing executive in North America, said the additional costs of offering slower-selling models are "really very incremental" because most share parts with higher-volume models.
The G8, for instance, is a version of a car that has been a strong seller for GM’s arm in Australia. Yet auto analysts say slow sellers are a bigger drag on profit than GM acknowledges.
Ron Harbour, a partner at the automotive consulting firm Oliver Wyman, said each model, even if only a variation of another vehicle, requires some engineering effort.
Producing models in small numbers lowers manufacturing efficiency. Every vehicle needs its own documentation, manuals and brochures. Dealers have to be trained to service each model and have to spend money to keep them in stock. And each vehicle needs a certain amount of advertising and promotion. "For every model, you’ve got some investment costs, and if you don’t sell enough of them, you might not be able to cover the capital costs," Harbour said.
GM recently said it hopes to cut $10 billion in costs over the next 18 months. Frederick "Fritz" Henderson, GM’s president and chief operating officer, has ruled out closing or selling any of GM’s eight brands besides Hummer, which GM has put up for sale. But he hasn’t ruled out getting rid of some of its slow-selling models.
Ford Motor Co. and Chrysler have made simplifying their model lineups a central part of their turnaround plans.
Ford has sold its Jaguar, Land Rover and Aston Martin lines. People familiar with the matter have said Ford also intends to sell its Volvo division, although the company denies that Volvo is for sale. Volvo offers eight models, all slow sellers. Chrysler dropped four slow sellers last year and has said it plans to eliminate a third or more of its remaining models.
Link: http://www.star-telegram.com/business/story/905984.html