I could probably fix GM.
That’s how bad it is — because the solutions are that obvious. And because GM management clearly doesn’t see them. Or maybe (to be charitable) management just can’t do anything to implement them because of bureaucratic inertia/rigmarole, legal issues, whatever.
But look, it’s not rocket science — and I’ll happily pass along the fixes without demanding $25 billion for the info, either.
1. Stop It Already With the Badge-Engineering
I just got finished reviewing an ’09 Chevy Aveo, which is a perfectly competent little economy car GM gets from its Korean-based subsidiary, Daewoo. This makes some sense, because buying the car from its Korean partner is cheaper than having Chevy build an entirely new car from scratch. Chevy is also GM’s economy brand.
Good so far, right?
Then you find out that GM also sells the car — the exact same car — through its Pontiac arm as the “Pontiac” G3. But it’s just a rebadged Chevy Aveo, which of course is just a rebadged Daewoo — which means GM has to spend money marketing two of the same thing as well as extra money on styling gewgaws (such as a slightly different front bumper) to make the “Pontiac” version look somewhat different from the “Chevy” version.
But it’s the same car, dammit! Why sell it twice instead of just once?
Also, isn’t Pontiac is supposed to be GM’s “upscale performance” brand — not its economy brand? So why is Pontiac selling an economy car that competes with Chevy (another GM brand, after all) for economy car buyers?
This “twinning” thing is madness — and just plain dumb business, too. You never see Toyota (or Honda) doing it.
The successful Japanese brands don’t diminish their efforts by diffusing their resources over multiple overlapping — and essentially identical – versions of the same basic vehicles. There aren’t two or three versions of the Corolla or Camry (or the Civic or Accord) being sold under different, other-than-Toyota names.
Yet GM continues to play this game of sheet-metal musical chairs – apparently, because it still thinks buyers won’t realize that the Pontiac they’re looking at is virtually identical to the (usually, just slightly less expensive) Chevy across the street. That may have been so in 1979. People are better informed these days. There is a thing called the Internet….
The Aveo-G3 thing is by no means a unique or unusual practice for GM, either. GM re-sells the same basic minivan at least two different ways (Chevy Venture, Pontiac Montana), the same “crossover” wagon at least three ways (Saturn Outlook, GMC Acadia, Buick Enclave) and the same basic SUV three ways (Chevy Tahoe, GMC Yukon, Cadillac Escalade). These are just a few examples. Divide and conquer is a great idea in politics; in the auto business, it is a recipe for confusion, needless waste of resources — and bankruptcy.
2. No More Than Three Brands, Please
It is 2008, not 1968, and GM no longer controls 50-60 percent of the U.S. car market. It controls about 20-22 percent. And that’s shaky. Maintaining six full line divisions — Chevrolet, GMC, Buick, Pontiac, Saturn, Cadillac, each of them with its own roster of cars, trucks and SUVs — is certifiable.
Each of these divisions has to fight with the others for an ever-decreasing share of the overall pie, and that’s before they even begin to compete with non-GM brands.
It takes (and wastes) lots of cash to maintain six separate divisional marketing and PR efforts and dealer networks, to say nothing of the wastage that comes from having to spend money on parts and cosmetic pieces differentiating one badge-engineered car from another.
GM’s “ladder” made sense back in the day. You started out with Chevy, and as you got older and earned more money, you moved into a Pontiac or Buick and maybe eventually you finagled a Caddy. Each of GM’s divisions also had its own in-house engineering arm and even built its own engines.
So while a Chevy and a Pontiac and Buick may have shared the same basic chassis, each car had a Buick (or Pontiac or Chevy) specific engine, which made each car legitimately different.
Today, with the exception of Cadillac, GM cars all share common “GM” engines. What’s under the hood of a current-year Buick is the same as what’s under the hood of a Chevy or a Pontiac.
Why not cut out the fluff, and sell it just one way, under a single nameplate?
Given GM’s 20-something percent of the market, there is justification for maybe three divisions — an economy or “value” brand, a performance brand and a luxury brand. No more.
Such a restructuring, which bankruptcy would probably force, would allow the automaker to focus its efforts on the competition, instead of GMC trying to make a case for a more expensive, tarted-up version of the same truck sold by Chevy, or Pontiac trying to up-sell Chevy economy cars — and likewise across the range.
3. Executive Pay Tied to Performance
No reasonable person can object to compensation, irrespective of the amount, that reflects the recipient’s contribution to the company’s fortunes. If GM does fabulously because of the brilliant leadership of its CEO, hey, the CEO deserves his pay. But it is an outrage when a CEO is paid a high seven figure salary regardless of the company’s fortunes.
Welfare queens sometimes wears Brooks Brothers suits, but it doesn’t change the essential nature of the thing. And it’s got to stop.
When average workers don’t perform, they get fired. Surely, when a CEO — the guy ultimately responsible for the decisions that determine the company’s actions in the marketplace – isn’t performing, at the very least, his meal ticket should not be open-ended. Ideally, there should be meaningful consequences for bum-rushing an entire global company into the poorhouse.
These are three roads to GM’s — and, ultimately, the U.S. auto industry’s — recovery. Not another strings-free taxpayer handout, which will only delay the next crisis and the next taxpayer-funded bailout.
Like an addict, GM has to look within, understand the cause of its woes, and be willing to reform itself. Money isn’t the problem. Neither is the economy — as such. Nor is it the unions – or retiree benefits.
The problems go much deeper than that.