Monday, March 2, 2009

Why so many brands GM?

Okay, so here's a question for a certain U.S. Automaker: Why do you have to have so many different brands or makes of car--just for the U.S. Market? Chrysler has Jeep, Dodge, and Chrysler (they got rid of Plymouth). Ford has Lincoln, Mercury, and Ford (not bad-but why keep mercury). But General Motors has Buick, Cadillac, Chevrolet, GMC, Pontiac, Saturn, and Hummer. Buick and Cadillac are both luxury brands.


Both have upscale cars, with lots of amenities and lots of price. Is Cadillac a little more upscale than Buick? Historically, that had been the case. Historically, meaning the 1950s! In this economy, who needs two separate luxury brands? How many of these luxury vehicles does GM think they can sell? It borders on lunacy. To make matters worse Cadillac and Buick are trying to compete with each other for the same market. Maybe that is an indicator of why they need so many government loans to stay afloat- they compete with themselves, and both sides are losers...Pick one (Cadillac) and support it exclusively. Buick can disappear into the sunset, or to China (where it's popular.) But I digress; we are discussing the vast U.S. market. Think of all the money GM can save by not having Buick around?


Now just when you thought the problem was solved, GM has yet another luxury brand, Hummer, which sells upscale pseudo-off road vehicles. Hummers compete directly with Cadillac SUVs. Good idea for business? Probably not. As we mentioned previously, competing with ones self isn't a good business strategy, it’s called cannibalization, and it means higher costs and lower sales. Sell Hummer, which luckily is what GM claim they are trying to do. Fingers crossed everybody!


Okay, lets step into the middle market-the car for us “Average Joes.” GM offers four different brands for us to chose from. Chevrolet, Pontiac, Saturn and GMC. Someone please explain to me, the difference between Chevrolet and Pontiac. They target the same market from economy cars to middle of the road cars. Again they compete against each other. And they cost more money to keep around.


Why can't we just call the best cars from each: Chevrolet? Sounds simple to me? Pontiac only sells a few models and no SUVs. Chevrolet offers a full line of cars, trucks, SUVs and minivans. Sounds like enough choices to me. Pontiac should just disappear off into the sunset...bye bye.


Now the easiest one, GMC. GMC makes the EXACT same trucks that Chevrolet does, just with a few minor cosmetic changes. They are like identical twins wearing different clothes. GM does not need two of them. GM certainly doesn't need any more cannibalization.


If consumers want to buy a GMC truck, they will want to buy a Chevrolet truck, because they are, essentially, the same truck! Duh! Let me repeat for emphasis, Duh!


We now turn to the hard choice, Saturn. Saturn does compete with Chevrolet and Pontiac for the small to middle market, so there is some cannibalization. But Saturn could be shaped into a low cost, youthful brand for GM, like Toyota's Scion brand. Keeping Saturn around is only worthwhile, if the development of a youthful brand is desirable, otherwise it’s a waste of resources, just like Pontiac, or Buick, or GMC. Instead of buying a Saturn, just buy a comparable Chevrolet. Oh did I mention the cars might be even cheaper without all that extra corporate overhead.


So what is the downside to all of this? Well, most likely its job losses, which is unfortunate and should not be taken lightly. Those employed by Buick, GMC, Pontiac, and Saturn would possibly lose their jobs, although many employees would still be needed to help the remaining brands handle the increased sales shifting over from the closed brands.


It is also abundantly clear that due to slower sales in this tough economy, some job cuts at GM, are inevitable, whether we shut down brands or not. If we use the brand shut down to target the job cuts, we end up with a more efficient company with employees in the right places to grow the company.


Random company-wide job cuts will only hurt morale across the company, and do nothing for efficiency or production costs but save some short term money. No underlying company problems would be addressed with random cuts. Strategic targeted cuts are most likely to result in a healthier, and more competitive GM; a GM that will need to hire more workers once growth returns to the marketplace. This would ultimately yield the more jobs in the company than the alternative.


The other question is that of dealerships. Eliminating 4 brands would certainly cause great dislocation in the distribution channel. But if the overall number of cars that GM sells remains the same, some of the Pontiac, Buick, GMC, and Saturn dealers will still be needed to sell and service Cadillac and Chevrolet. If given the choice to continue dwindling sales, or to change brands with an investment in the dealership, the smart and profitable dealers will chose to invest. The weaker dealerships will close, or shift to another carmaker. Even losing a few dealerships is acceptable in view of the ultimate lean mean GM turnaround.


If you disagree or think I am wrong, just look at other successful car companies in the U.S. For example: Toyota, Scion, and Lexus; Honda and Acura; Nissan and Infinity; Volkswagen and Audi; BMW and Mini. Chrysler, Dodge and Jeep; Ford, Mercury and Lincoln; Mercedes; Porsche; Hyundai; Mitsubishi; and Mazda. Looks like that might just be everyone else, I wonder if that means something...hmm. Come on GM, clean up your act for real this time! where the Buick brand is quite popular. market, they all have one or two brands or at most three brands.


www.Bananasaboutcars.com


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