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http://www.forbes.com/columnists/2005/05/31/cz_jf_0531flint.html

Backseat Driver
GM's Plan To Save Pontiac And Buick
Jerry Flint, 05.31.05, 11:07 AM ET

NEW YORK - General Motors' new strategy for its six vehicle lines sandwiched between Chevrolet and Cadillac makes sense: narrowly focused lineups and fewer copycat models in each division. In some ways, this is already taking place. For example, U.S. Pontiac dealers are not getting a new small car to replace the Sunfire, nor am I aware of a big sedan in the works to replace the Bonneville when it is discontinued.

In truth, four of those six General Motors (nyse: GM - news - people ) divisions are no problem--if GM can use some common sense. Hummer is fine as Hummer. Of course, GM must realize that Hummers are for he-men. So it must stop doing dumb things, such as putting a weak five-cylinder engine in the new H3. And Hummer still needs a smaller, lower-priced model to take on the Jeep Wrangler.

Saturn has been starved for product all its life, but Vice Chairman Robert Lutz has some good cars coming to that division. Saab is too small to worry about. And GMC is trucks, plain and simple. GM's big problems: Pontiac and Buick.

Pontiac and Buick can be saved, but I'm not enthusiastic about one part of GM's new plan, which is to combine Pontiac, Buick and GMC dealerships. Even with smaller lineups, the dealers end up with too many models to display and stock. Another concern: The customers for such dealerships cover too broad a demographic range.

Next, GM can't avoid building different vehicles from common underbodies, but this shouldn't mean badge engineering. The trick is to give each vehicle a distinct identity while holding down costs with a common platform. GM once knew how to do this. It's what made it the great automaker that it was.

Last year, Pontiac sold 474,000 vehicles, and lots of other auto companies would love to have that volume. But in its best year ever, 1986, Pontiac moved 952,943 units.

When Pontiac was in trouble in the 1950s, Semon 'Bunkie' Knudsen took over the division and saved it. He built high performance cars, such as the first Bonneville, and took Pontiac racing to make the point. Pontiac became a winner. A quarter century later, Pontiac was in trouble again, but Bill Hoglund took over the division and brought it back to life. He figured out that Pontiac should be a "driver's car," meaning driving excitement. Again it worked. And in between Knudsen and Hoglund's reigns, there was John Delorean, who built the first GTO.

It's clear what Pontiac should be: a division that offers affordable performance and handling to a young, striving crowd. A recent Pontiac TV ad has a woman soothing a crying baby with the sound of a Pontiac engine. When Pontiac was a winner, the motto was: "We build excitement," not: "We put babies to sleep."

Let's say it another way: Pontiac's mission is to build a cheap BMW. Even the finance guys should be able to understand that sentence. To reach that goal, Pontiac needs a leader who knows cars and how to make them fast and muscular. I know one man at GM who could do it: Mark Reuss, who currently heads the GM performance group.

Second, they must give Reuss the proper rank: GM vice president and general manager of Pontiac. He needs that clout to ensure that the division gets the right platforms and powertrains and to muster the troops so that new vehicles are launched on time.

The Pontiac Solstice roadster, coming this fall, is a start in the right direction. The new GTO, a project pushed by GM product czar Robert Lutz, is off to a slow start, but it was the best he could do in a short amount of time. The GTO needs some looks and a lower price. Unfortunately, GM just canceled the rear-drive platform that would have gone into a new U.S.-built GTO. So it will be a tough job, but Reuss is the man to do it.

Pontiac also needs a rear-wheel-drive sedan and it needs upgrades for the dated engines and transmissions in its current models. The lineup should also include a sporty minivan and a racy crossover SUV.

What about Buick? Last year, Buick sold 310,000 vehicles. I don't have an executive in mind to head Buick, but it, too, needs to be headed by someone (a vice president, so he has some power) who understands and loves the auto business. That person should look into Buick's long history, to the time when it was a flashy, powerful, comfortable, soft-riding car for a successful, older person. I think there's still a market for such a car today--if it is done right.

Buick needs modern rear-wheel-drive and all-wheel-drive vehicles. It needs a state-of-the-art crossover wagon, and modern V-6s and V-8s throughout its lineup. Value, too, has to enter into the Buick equation. Consumers need a compelling reason to purchase a Buick over a Toyota (nyse: TM - news - people ), Lexus or Acura.

Long term, Buick and Pontiac should have exclusive dealerships. I say, get the product right and the excusive dealers will come.
 

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Pretty much everyone knows the problem at GM is product. Everybody knows it's possible to save the general by just making great product and making each division shine. The question is, why haven't they done this already? I believe that GM has become such an established fixture in America that no one that works in management there truely believes it can go out of business and that the changes need to be made are in "their department"

Therefore, I beleive that GM has to hit absolute rock bottom, ie: bankruptcy, before a real change can be made there. If they were to go chapter whatever, there would no doubt be a government bail-out. At the head of the "reorganized" GM would be a powerful hatchet man with enough clout to wack out the dead wood. In an ideal world this person would be a automotive industry person that is also a "car guy". That way the company could be steered in the direction of making great cars instead of just selling off assets, closing plants and making an attractive deal for a Toyota buy out.

Just shuffling people around within the organization isn't going to do anything. There's a reason they don't just reverse engineer a BMW 3 series or Lexus 300, stick a Pontiac or Buick badge on it, and sell it for thousands less, thus saving the day. That reason, IMO, is competing departments within GM. In their efforts to please pissed off shareholders, not everyone there is working together on a focused plan. First it was productivity, so millions went into new assembly lines instead of product developement. Then it was more profit margin in each vehicle, like cheap Chinese pushrod engines and outdated automatics in the G6, hoping no one would notice or care. After that there's focus groups, surveys and hundreds of thousands to come up with names like Alero. Now it seems to be just a bunch of shuffling people around and empty press promises. Of coarse they'll be asking for UAW consessions.

Who's actually working on better cars??

I think at this point the only thing that will get them to wake up and say "It's the cars stupid!" is a total bankruptcy and restructuring. Unfortunately, as long as they keep foisting the blame on someone else, and telling the press "just you wait" and "stop being so tough on us" better cars will not be built. I think that the Solstice is not the hint of what's to come, just something that we were just lucky to have slip through the cracks of corporate beauracracy.
 

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You may have hit on a great point AD. A couple years ago already, they were promising "great products." The Epsilon cars were to be just that. Then the Malibu, followed by the G6 hit the market to luke warm responses. Neither was a failure, but neither lived up to the hype GM had built around them. Sure, they are fine automobiles, much better interiors than the cars they replaced, but neither did much to stand out or differentiate itself either. GM got very defensive when people criticized these cars because they felt they were good, and they are good. They just are not great and they did lead everyone to believe they would be great.

GM talks a good game, of restructuring, building better cars, differentiating better, etc. However, they need to actually prove they can do it, and not just talk about it in press releases and marketing campaigns.

They have the design, engineering, and manufacturing talent to build truly great cars. The Corvette, Solstice/Sky, and all the new Cadillacs are proof that they have this talent. They just need to get more consistent with it.
 

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Of coarse they'll be asking for UAW consessions.

A lot of us here have an insiders' opinion: STAY AWAY from our bargaining table :cuss:
 

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Audio Imagez said:
One word seems to be missing from most of the cars GM offers....... affordable.
Do you mean, based on MSRP, they do not appear affordable? I would agree with that, and I think that may be one of GM's bigger problems. Overpricing vehicles, and then relying on the carrot of rebates and incentives to "sweeten" the deal. Nobody pays that MSRP figure (except maybe on a select few vehicles like the Corvette, and then generally not). However, if someone goes Sunday window shopping, and compares sticker prices of GM cars to competitors, they certainly will not look like much of a deal, if not overpriced.
 

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Maybe GM wants people to think that their cars are worth more than they really are. Cut out the incentives and rebates (what good do they actually do?) and just sell the cars for what they are worth.
 

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Some random thoughts....

1) Are most dealerships in the US single make? As far back as my 35 years can remember in Canada it's always been Chev/Old/Caddy and Pontiac/Buick/GMC and it seems to work fine.

2) MSRP over-pricing is an issue to me. I know now-adays eveyone seems to feel a sense of pride in proclaiming how big a discount they negotiated on their new car, but personally I have better things to do then run from dealer to dealer knocking a $100 off or having floor mats thrown in. If the price on the sticker doesn't reflect fair value to me I don't even stop to shop.

3) I have seen the comment about a government bailout being what GM needs, but wouldn't that be a political hot potato? I mean GM has the size and wherewithal to compete. Wouldn't your typical retail worker making 1/3 the wage be upset at their tax dollars being used for a bailout? No offense as I know there auto workers here, I'm just curious.
 

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Discussion Starter #9
Darkhamr said:
1) Are most dealerships in the US single make? As far back as my 35 years can remember in Canada it's always been Chev/Old/Caddy and Pontiac/Buick/GMC and it seems to work fine.
The Pontiac/Buick/GMC seems to be a popular combo (although there are still some older stand-alone dealerships with just one).
 

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Darkhamr said:
Some random thoughts....
Some random thoughts on your random thoughts... :)

1) Are most dealerships in the US single make? As far back as my 35 years can remember in Canada it's always been Chev/Old/Caddy and Pontiac/Buick/GMC and it seems to work fine.
It depends on dealership and region. Around this area, Chevy dealers are almost all stand alone. One is hooked into a Pontiac franchise, but for the most part they are by themselves.

There has been an ongoing push to consolidate Buick, Pontiac, and GMC dealers, and we have one of those. Most of the rest of the Pontiac dealers also have GMC franchises.

However, there seems to be no set formula otherwise. Some Buicks are stand alone, one is attached to a Hummer dealer, another to a Cadillac. A seperate Cadillac is attached to a Saab dealer. :willy:

2) MSRP over-pricing is an issue to me. I know now-adays eveyone seems to feel a sense of pride in proclaiming how big a discount they negotiated on their new car, but personally I have better things to do then run from dealer to dealer knocking a $100 off or having floor mats thrown in. If the price on the sticker doesn't reflect fair value to me I don't even stop to shop.
:agree: People like to brag about their deal, but you can still give people a sense of a deal by knocking less money off the price, if the starting price was closer to being realistic.

Audio Image may have the reasoning against this. GM is trying to convince people it's cars are not just bargain basement cars with high MSRP's, but still sell them at bargain basement prices through tons of rebates.

So although people brag on the deal they got, they get insulted when they hear their resale value 3 years later too. Selling closer to MSRP would make for better cross shopping, easier transactions, and better resale value (since the poor resale is based in part on the car's value compared to its original MSRP).

3) I have seen the comment about a government bailout being what GM needs, but wouldn't that be a political hot potato? I mean GM has the size and wherewithal to compete. Wouldn't your typical retail worker making 1/3 the wage be upset at their tax dollars being used for a bailout? No offense as I know there auto workers here, I'm just curious.
It is a touchy issue. There may be some backlash to it, but its not unprecidented either. Chrysler has been bailed out in the past. Airlines, Steel, etc. Unfortunately, it becomes harder to justify a bailout when GM just sent $2 billion in cash to Fiat, and also has many Billions in cash remaining. They are struggling and losing money, but they are not insolvent (yet).

What GM really wants is for the government to do some realistic health care reform, or send them a subsidy for their health care costs. Their argument is that foreign competitors are more often than not in countries with sociallized health care, and therefore they do not have the high health care costs of the big 3. However, it doesn't look like either is about to happen right now.
 

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Fformula88 said:
However, if someone goes Sunday window shopping, and compares sticker prices of GM cars to competitors, they certainly will not look like much of a deal, if not overpriced.
Not to mention when some one looks in a "buyers guide" or reads an article in a magazine, or even goes to one of GM's websites and sees the MSRP, and then hears from the automotive press that GM cars are still just same ol' same ol'. Chances are, these buyers won't even go to the dealership, and these type of buyers are on the rise. I remember reading recently that Pontiac dealers were reporting that IF they could get a buyer to the dealership, they had no problem selling G6s, but no one was going to the dealerships. Wonder why? :rolleyes:
 

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Discussion Starter #13
Fformula88 said:
What GM really wants is for the government to do some realistic health care reform, or send them a subsidy for their health care costs. Their argument is that foreign competitors are more often than not in countries with sociallized health care, and therefore they do not have the high health care costs of the big 3. However, it doesn't look like either is about to happen right now.
The whole heath care thing is a bit unfair to American companies. I don't know for sure if we are the only country where private business foots the health care bill? but if we are and have to compete against other countries where the health care paid by their goverment, it does put us in a big hole compeition wise. Health care is a huge cost that seems to rise at 30% clips every year.

Not sure what the answer is because the quality of our health care system is considered first-rate when compared to many of the government run versions but it does suck that private industry has to foot the bill.

On the issue of health care being free to employees, those days have been over for 20 years at most other American companies. Employees have been chipping in a share of the costs for decades. I think this is where GM is heading since they've been making waves lately about health care costs. I assume they'll want employees and retirees to start to chip in some but that's JMO.
 

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Pontiac/Buick/GMC is the only combo that will not only allow Pontiac and Buick to survive but will also guarantee a future for GMC. GMC would not make it as a stand alone dealership (although in some places it is). GMC gives Pontiac and Buick a truck line, as it has traditionally done in the past. The trick will be to reach a distinctive market within each divisions models ending inter divisions model duplication and overlaping. Ending the competition between division models on the dealers lot is the way to make this succeed.
 

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mceb you make some valid points, however now that I think more about it looking for instance at Canada's national health care the majority of the burden is covered by companies in the form of the EHT or employer health tax and a smaller portion by employees. But isn't the reality that there is only one pool of money, the same as there is only one tax payer? If you were to remove the onus of paying for the benefit off of the company then the employees will expect a higher wage to pay for the insurance premiums they now pay or they suffer a reduction in their standard of living. If the government picks up the tab sooner or later it will either have to be made up through tax hikes or a reduction in standard of living through carrying costs of the national debt. I don't think there is any free ride in a situation like this.
 

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Discussion Starter #16
Darkhamr said:
I don't think there is any free ride in a situation like this.
Yup, probably right, just moves the cost from company to tax payer.
 

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Certainly there is no free ride in health care. The money certainly must come from somewhere.

Our system may not be totally bad either. However, health care costs have been skyrocketing the last 5 years or so, and I have a feeling this is a big part of GM's sudden problems.

Continuing a private health care system would probably be fine, if there is a way to reign in the escalating costs of it. Now I am not well versed enough in all aspects of it to really tell if this is possible, but I do know there are people who think it is. For instance, trying to curtail escalating drug costs.
 

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Darkhamr said:
I would still think private health care to be much more efficient. Here is a stat to make your heart stop. Health care spending in my province as a percentage of total government expenditures will drop this year to 44.5%

http://www.occ.on.ca/2policysubmissions/Microsoft Word - 2004 Provincial Budget Key Stats.pdf


If you want to talk burdens..... :willy:
Wow, I'd hate to see what our health care would cost us if it were taken over by the government! :eek: Our medicaid program, which is essentially government paid health care for really poor, injured/cannot work, elderly, etc is in the process of bankrupting all of the counties in New York State. Every county is sending nearly all of their tax income to it. For example, in my county, every penny of property tax goes to medicaid. Our property taxes are also some of the highest in the country, and are 50% higher than the national average! This area of the country would be finished for sure if we had to pay more!
 

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Fformula88 said:
Wow, I'd hate to see what our health care would cost us if it were taken over by the government! :eek: Our medicaid program, which is essentially government paid health care for really poor, injured/cannot work, elderly, etc is in the process of bankrupting all of the counties in New York State. Every county is sending nearly all of their tax income to it. For example, in my county, every penny of property tax goes to medicaid. Our property taxes are also some of the highest in the country, and are 50% higher than the national average! This area of the country would be finished for sure if we had to pay more!
Well your area may be finished as soon as the "free prescription drug benefit" starts kicking in, because that is going to send health care costs soaring even higher. I am sure you are happy to pay for George Soro's free prescription drugs so he doesn't have to tap into his $7 Billion bank account for it. Real nice. Has nothing to do with need. Only with age. And you are going to pay for it for the rest of your working days. Nice, huh... :brentil:
 
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