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http://www.reuters.ca/locales/c_newsArticle.jsp?type=businessNews&localeKey=en_CA&storyID=7988293

GM Says It May Kill Off One of Its Brands

Wed March 23, 2005 3:43 PM GMT-05:00
DETROIT (Reuters) - General Motors Corp., which issued a shock profit warning last week and has been losing market share, may phase out one of its weaker car brands if sales fail to meet projections, company Vice Chairman Bob Lutz said on Wednesday.

GM's Buick and Pontiac are both "damaged brands" due to lack of investment over the years, and GM is working to correct that with an array of new vehicles coming to market, Lutz told a Morgan Stanley automotive conference in New York.

But if some of its brands fail to meet sales projections, "then we would have to take a look at a phase-out. I hope we don't have to do that. What we've got to do is keep the brands we've got."

Financial analysts have said for years that the world's largest automaker has too many brands to support, even with the gradual phase-out of the Oldsmobile brand a few years ago, particularly with its weaker U.S. sales.

Sales for both Pontiac and Buick have lagged in recent years. But GM is in the midst of a $3 billion investment in new vehicles for Buick, and Pontiac showrooms and they will have four new vehicles this year, including the Solstice roadster, Torrent SUV and the G6 mid-size coupe.

GM, which last week cut its earnings outlook for 2005 by as much as 80 percent, posted a 6 percent drop in U.S. sales for the first two months of the year. GM's U.S. market share fell to about 25 percent, far below its share of 27.5 percent for all of 2004.

Analysts said last week that GM's March sales could fall as much as 10 percent in March, while foreign automakers such as Toyota Motor Corp., Hyundai Motor Co. Ltd. and Nissan Motor Co. Ltd. would continue to gain U.S. market share.

Lutz said GM will post relatively flat U.S. sales for March, however, performing much better than expected.

"I think we're going to be just about even, our best guess at this point. Either a percent over or a percent under," he said. "It is a substantially better month than January or February, and it looks like the whole industry is up."

"A HUGE ALBATROSS"

No details about an expected restructuring at GM, the largest private U.S. provider of health care, have emerged since it roiled markets with its warning last week.

But the company, which has about $300 billion in outstanding debt, said on Wednesday it was in talks to sell a stake in its GMAC Commercial Mortgage unit after potential investors expressed interest in the unit.

And Lutz and Gary Cowger, GM's president for North America, spoke of possible demands for a cut in mounting health care benefits for the company's hourly union employees in remarks on the sidelines of the New York auto show on Wednesday.

An elimination of any one of GM's brands would likely mean plant closings and a shrinking of GM's hourly work force.

"An across-the-board competitive health care plan for salaried and hourly employees could literally save us billions," Cowger said. Health care costs, added Lutz, are "a huge albatross hanging over American industry today."

Lutz particularly acknowledged that the automaker, which will struggle to make a profit this year, faces challenges. But he said GM was "taking the necessary step to right this ship."

"Sure, we face short-term challenges, and this is not going to be a banner year," he said. "It's a difficult period of adjustment. But we will get through it."

He said some of GM's new cars, such as its Chevrolet Cobalt small car and the Pontiac G6 mid-size car, will post their best sales to date in March, and told the Morgan Stanley conference "I don't know where all the gloom and doom is coming from."

He quoted one car reviewer who said, referring to GM's troubles, that the quality of the Cobalt convinced him that "the Titanic may yet turn fast enough to miss the iceberg."
 

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Doom and gloom. I don't think GM should drop either Buick or Pontiac, just spread them farther apart in identity eliminating all the overlap. There are still Pontiac and Buick people out here. I don't know where all the Oldsmobile people went, probably to Acura, Lexus, Audi, BMW, apparently not Chevy, Pontiac, Buick, Saturn.
 

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I am on record in recent threads about my strong opposition to any hint of removing another GM division.

Even with Buick and Pontiac sales down, each division still sells far more vehicles than most of the other brands on the market. So maybe in GM's massive company, a division with 300,000, or 400,000 sales seems too low to support. However, you get rid of 300,000-400,000 sales at one division with a phase out, and then at a second division, and before you know it your talking a lot of cars, and a lot of buyers.

In fact, lets look at GM's yearly division sales from 2003 and 2004. Both calender year. (Source, GM press release on unit deliveries published 1/3/05).

Division......2003 Sales.......2004 sales......2005 thru feb
Buick.........336,788...........309,639.........38,461
Cadillac......216,090...........234,217.........30,494
Chevrolet....2,655,777........2,763,238......357,141
GMC...........578,783..........602,064.........69,016
Hummer......35,259............29,345...........3,730
Oldsmobile...125,897..........28,851...........578
Pontiac.......475,615..........474,179.........55,841
Saab..........47,914............38,159..........4183
Saturn........271,157..........212,017.........28,067

* Of Chevy sales, only 795,446 in 2003 and 861,245 in 2004 were cars. The rest were light trucks. By comparison, Buick sold 259,348 and 223,329, and Pontiac 408,549 and 406,393 in cars.

So essentially, what GM is saying is that they are dissatisfied with their #2 and #3 divisions in car sales, and #3 and #4 overall.

From what I gather, the biggest reason to get rid of a division is to save GM all the marketing and support money, which it can use to bolster the remaining divisions. So wouldn't it make more sense to target the divisions with the lowest sales? With all due respect to the Sky and Aura, Saturn is certainly the division suffering the most, and they probably have one of GM's worst reputations for making substandard cars (send thanks to the idiots that approved the Ion). The dealer network is good, but its not translating into sales or profits. Saab has some loyal buyers, but its also far from a volume division, and GM's attempts to make it a volume division with the 9-3 and 9-2X have been dissappointing (9-3) and an utter failure (9-2X, only 366 deliveries in Jan and Feb) at this point.

GM is killing divisons due to its own inept management. If the current management thinks that continuing to kill divisions is the way to go, so be it. However, they will be wondering what happened to their corporation when they are down to Cadillac and Chevy, and both divisions sell no more cars than they are right now with a lot of other divisions.
 

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Yea gotta agree with you Ff88, don't think #2 and 3 would be good choices but maybe sales volume doesn't tell the full tale. Could also be a threat to try to get the unions to move on pensions and health costs which they seem to be highlighting lately. If something has to go Saab and Saturn look better.
 

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I won't go on and on about it again, but what I would do is, IF it were really nessicary to kill divisions, I would clearly pick Saturn and Saab. I might also merge the Hummer products with GMC, so it would be a GMC H1, H2 and H3. To kill Pontiac and/or Buick before Saturn and Saab is absolutely rediculus. I agree that Buick and Pontiac need to get thier act together, but which GM division doesn't?
 

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Here's my $0.02

We have:

Everyman's division - Chevrolet (with the exeption of Corvette)
Performance division - Pontiac (move the G6 and maybe Vibe to Chevy)
Luxury division - Cadillac

Where does Buick fit in?

I think Saturn is worth keeping around for their customer service reputation.

The big Foreign automakers more or less all have two major divisions. One for "everyman" and one luxury. We have Toyota/Lexus, Honda/Acura, Nissan/Infiniti, VW/Audi. All US automakers should trim their fat. GM and Chrysler (Daimler/Chrysler) already have begun the process.
 

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I still feel the problem is with too much overlap. I personally don't care what the badge is as long as the vehicle is what I want. Sure there is loyalty to each badge but that loyalty has jumped ship to the foreign makers over the years. Define the badges by type of market as already suggested and then hit that market hard. GM is GM, does it really have to worry if the Pontiac division sells less vehicles than the Chevy division if they are both filling a niche in the market and they are both turning the overall profit GM wants? Show the foreign makers that GM can play the same game, and maybe even play it better. GM, cut the fat out of your system.
 

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With the numbers Fforlmula88 put up, not counting Olds since it is gone already, of the divisions that lost sales from 02 to 03 this is how they fared.

Buick, off 8.6%
Hummer off 16.8%
Saab off 20.36%
Saturn off 21.81%
Pontiac off 0.3%

Yes Pontiac was down LESS THAN 1/2 % You can't base it on sheer volume because Hummer probably makes more margin per unit than any other division than Cadillac. (I said probably, just based on sticker, I am no expert and don't have the numbers)

On erosion of market alone, Saturn and Saab were the worst performing divisions and Pontiac outperformed Buick by almost 3 times. Problem is GM is setting Pontiac up to take the fall by removing product from the division (Sunfire, Bonneville) without replacing that product. It wouldn't even surprise me that the Pursuit(Canada only) numbers get added to Chevy instead of Pontiac since that model is not sold here.
 

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They do not have to replace those products (Sunfire, Bonneville) since they have the Vibe, mini SUV plus same price range and now a Grand Prix with a V8 Eng. I think it was a good decission to eliminate them IMO.
 

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There is a whole huge segment now called Cobalt that screams performance. I've got nothing at all against Vibe, we have one. It just seems that they can go through the hoops and design and tooling to sell a Cobalt as a Pontiac up north yet they don't think it will sell here? And the GXP V8, by the time it comes out they'll have to rename it as a 2006 instead of 2005. Maybe it will beat the G6 GTP to market, maybe it won't.
 

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Could GM's product launches have something to do with their poor sales, and poor image in the market?

Let me take the G6. Now, Pontiac tried marketing this as a fun to drive, exciting sports sedan. Lutz is raving how he is positioning Pontiac as the poor man's BMW. They said G6 would rival the Accord, Passat, and Mazda6.

So what do we get, a sedan that does not drive sporty, has numb, quirky electric steering, blend in with the crowd styling, an engine that has less power than those competitors and delivers it more coursely, and a 4 speed auto transmission only (no stick, no 5 speed).

Um, where is this BMW-like sporty car GM?

Its on the way they say. They have this great 240 HP V6 on the way, a slick 6 speed manual, a convertable hardtop! Tuned suspensions, and hydraulic power assisted steering to get rid of the numb electric on base cars.

So OK, I'll take it.

Well, um, it will be 12 months before we can sell you one, and 18 before the convertable is ready.

Maybe it would work for Chevy who is not trying to sell every car as a performance car, but this strategy is unacceptable at Pontiac. By the time they get the good car to market that may live up their marketing created reputation, its no longer going to be the latest exciting product. The styling will already be a year old, and the competition will have something faster, sleeker, or more fun.

The Cobalt is another great example of a botched launch. Starting in late November, GM was promoting the heck out of the SS Supercharged coupe. TV adds every 10 minutes, print adds. Cobalt SS's at autoshows you could crawl through and paw all over. Glowing magazine reviews. People ran to their dealer. I want one. Not there yet. They went in January. No car. February. No car. March. No car. In fact, according to the Cobalt forums, there have been only a handful of SS coupes produced to date. A few have been shipped and delivered to those who pre-ordered, but it doesn't appear that they will be widly available anytime soon.

GTO. They had the full court press on marketing it too. They launched it in December. Where? They sent most of these RWD musclecars to the snowy frozen tundra of the northeast, where they rotted on dealer lots. Meanwhile, warmer climate dealers suffered shortages, prompting them to try and gouge which turned away countless buyers. Another failed launch, and GTO sales will never recover from it.

Its no wonder GM is struggling.
 

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Discussion Starter · #13 ·
BUT they gave away G6's on Oprah - that alone should have been enough "buzz" to carry at least the first year of G6 sales!

Remember, it was the most brilliant marketing move in history.:rolleyes:
 

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solsticeman said:
BUT they gave away G6's on Oprah - that alone should have been enough "buzz" to carry at least the first year of G6 sales!

Remember, it was the most brilliant marketing move in history.:rolleyes:
:lol: I presume :lol: Recent reports say otherwise. Now on the other hand after Kelly Ripa showed off massaging the Sky (I did post a link to the replay, I'll look for it) they can't build it fast enough. :lol:

go to http://gmtv.feedroom.com and click on drive time 3/21 for the replay of the Saturn on Regis and Kelly. (can't fast forward so you have to watch whole broadcast, its not real long) Badly scripted, "170hp and $20k price" when we already know 177 and 20 is base Sol and Sky will have several options standard which will make its price higher
 

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The 170HP part was correct. The official Sky brochures from Saturn say the engine is 170HP, and the Torque is less then the Solstice too. Which I guess 7HP makes the Solstice more "performance oriented" then the Sky, but it's the crapiest differentiation ever.
 

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brentil said:
The 170HP part was correct. The official Sky brochures from Saturn say the engine is 170HP, and the Torque is less then the Solstice too. Which I guess 7HP makes the Solstice more "performance oriented" then the Sky, but it's the crapiest differentiation ever.
Yeah, but if Saturn has brochures out those were printed back when we thought the SOlstice was only 170 hp.
 

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achieftain said:
Yeah, but if Saturn has brochures out those were printed back when we thought the SOlstice was only 170 hp.
No, the brochure on their website. If you go to the Saturn website and download the brochure PDF that's what it's been saying since release. It's also what's at all the other Auto shows. At NAIAS the Solstice had the 177HP value and the Sky had the 170HP value. I don't think it's old or mis-typed info because the Torque value for the Sky is 162 ft-lbs which is a value never associated with the Solstice before. With the Solstice before it was always 170/170. I think this might have to do with the Solstice having a less restrictive intake and exhaust system over the Sky.

Either that or GM's messing with my head again. :brentil:
 

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brentil said:
Either that or GM's messing with my head again. :brentil:
Just stay away from the GM Canada site. :brentil:
 
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