Saturday, April 23, 2005

GM's Troubles

It seems like every few years, one of the major American car manufacturing companies have been hit by earnings troubles. This year, it's GM's turn.

The company needs major changes to its business model in order to survive. Here's my list:

  • Discard superfluous brands (Buick, GMC, Pontiac) that were useful back when Americans didn't have a lot of auto brand choices.

  • Relocate manufacturing to the south and western US, away from overpriced union shops. I think unions do good work ensuring that workers aren't abused, but they can be just as greedy as the companies for whom they work. No one deserves $60,000 a year to mop the floor.

  • Target young people better. Who made the dumb decision to kill off the Chevy Camaro and Pontiac Firebird/Trans Am in 2003 without any kind of replacement until 2006's GTO? The pitiful Pontiac Aztec and ghastly Chevy Aveo are perfect examples of how to build a car that won't appeal to anyone. And how about building more than one convertible that costs less than $50k (the just-released 2006 Pontiac Solstice finally put GM into the low-end convertible market)?

  • Stop ignoring the compact and midsize sedan markets. People want a choices in this area. Now that gas prices seem likely to stay above $2/gallon for the long-term, GM and Ford are feeling the pinch along with the American consumer.

  • Upper-middle-class people are more likely to buy new cars, and yet, GM does not court this large group of consumers with much beyond SUVs. Instead, this crowd is turning to the sporty Mazda 6 and lower-priced offerings from BMW, Lexus, Acura, and Infiniti.

  • Improve your quality. Yes, it's easier for people to buy parts and service for American vehicles, but this should not be an excuse for poor quality control. The formerly reviled Hyundai is a perfect example of how an improved commitment to reliability can boost sales and improve consumer confidence in the brand. It's gone from being perceived as the rival of Yugo, to tying with Honda as the most trusted car brand.

  • Bring more distinction to your brands. Chevrolet should be the flagship which mostly targets middle-aged men and economy buyers, Saturn should look to the young buyer, Cadillac should improve its vehicle performance, and Pontiac should produce only sports cars (if any at all).

  • One more: spin off Saab and Saturn. They're distinct enough brands to be able to survive on their own. Free them from the big conglomerate.

Others' thoughts on GM:
Detroit News columnist Daniel Howes, Rand Simberg, Adfunk Auto, Glenn Reynolds, Blog for America.

News items: