GM Is In Auto Industry Chaos

GM Is In Auto Industry Chaos

We have continued to follow the saga of GM and Chrysler as they attempt to find direction and a method to be successful automobile manufacturers. 

Success for 2009 is defined many ways but this article will focus on two of paramount importance to the Car Guy – Product & Dealers.  One success track is providing Washington a written game plan on how they will be successful.  When the plan is approved, and funded, then each plan will have to be implemented.  Plan implementation represents a several year commitment and then Proof Is In the Pudding will tell the world, and Washington, if the plan works.  This is definitely not going to be a quick process.

Allante Was A Sales Loser

Chrysler has their own set of problems and the Government has given them only one option for survival and that is a forced marriage with Fiat.  This is not a bad thing.  Fiat has significant strengths and a synergy with Chrysler would permit a full product line to come to market.

General Motors has a much more difficult situation.  The Tribune has continued to follow the GM Saga with an article dealing with the Reorganization Opportunity and then again looking at GM’s position at 101 Years Old. 

Allante Left and Corvair Greenbriar Right

With the key foundation issues clearly identified our immediate focus will shift to Product and Distribution.  Product can be defined as what comes out of the manufacturing plant and Distribution can be defined as where you get the product.  From a definition standpoint Product is simple.  If it gets to the back door of the plant then the manufacturer is probably glad that you have the opportunity to purchase it.  If you do not purchase product then manufacturers rent space to park the product.  You have probably seen photos of acre after acre of new cars just sitting or you have seen your local dealer’s lot overflowing with product.  Neither of these visual images is consistent with a balanced inventory.

Vehicles Sit At GM Hamtrack, MI Plant as shown in Google Earth

Distribution to the consumermeans that the car goes through a dealer.  The factory sells to dealers and dealers sell to customer.  You buy the car from a dealer.  GM reported that it had about 6,375 stores in January with 3,780 Chevrolet, 1,080 Pontiac, 550 Buick and 400 Saturn.  Automotive Tribune believes that GM should look closely at the Toyota model which has about 1/2 as many dealerships that sell an average of 3,500 new vehicles a year in California.  Automotive News reported on January 25, 2009 that a GM spokesperson said that in the plan GM submitted to Congress they wanted to reduce the Dealer count to about 4,700.  This might not be quite Toyota, but it certainly would improve that all important cash flow to the dealers.

Moving the clock ahead and with GM dealer count down, then what types of vehicles will GM sell?  Chevrolet, Cadillac, and Buick are our favorites in this race.  Let’s take a look at the not-so-successful franchise picks.  Note, this is crystal ball gazing so if have a different opinion then that is fine too.

Saturn is dead unless something remarkable happens and it is real unfortunate since they have an excellent product lineup

Hummer is dead.  That looks to be pretty historic.

GMC Truck should be dead.  It seems to have the same product lineup as Chevrolet so GMC can go.

Saab is dead.  It never achieved the market share that had been hoped for.  A decent car that the public just never wanted.  It is  history in the GM Rear View Mirror.

Pontiac will shrink to a couple of cars onto a Corporate GM lot.

Oldsmobile ceased production in April, 2004.  If GM could figure out a good Oldsmobile product then maybe a good Oldsmobile car would be a good idea.  In 1985 Oldsmobile sold over 1,000,000 vehicles.  Today GM’s market share is about 22%.  If 10,000,000 vehicles sell in North America and GM sells 22% then GM sells 2,200,000 vehicles.  Olds at the high point would have represented about 45% of total production GM production today if we get creative with the math and push the numbers around.  The point of this exercise is that Olds had the right product at the right time.  Unfortunately, Oldsmobile and GM did not adapt with the time to provide the type of product that the public wanted to purchase.

2010 Camaro RS

GM will have a Federal Restructuring Plan in place this summer.  The real question is whether or not GM can get organized to provide the type of product that customers want to purchase and drive.  GM has some winning products and every new GM product must be a winner such as the 2010 Camaro.