Much Debate: What’s GM Going to Look Like?

Buick Behind Gate

Since nobody knows, many are making educated (and very uneducated) guesses. The media, the wire services, the pundits—all are speculating. Even David Brooks, not widely known as a car guy, is speculating. He predicts a quagmire for the new GM and offers six reasons that have to do with the dreadful corporate culture that has existed for years at the company.

Brooks has a point but drives his argument to the extreme because, finally, he doesn’t understand the car culture. We won’t rehash all the reasons why the company went down (you know most of them), but we will state the obvious: If GM is to be reborn, it must come back totally reinvented, and not on the Alfred P. Sloan model of providing cars at all price points for all major market segments.

If it’s smart, GM.2 will not go head-to-head with Toyota, Honda, or Ford. It will create specialty offerings to serve niche markets that are only now emerging, plus established brand centers where it has dominance. I still think, though some have protested, that a specialty division for cars like the Corvette and Cadillac CTS-V makes sense. As Matthew DeBord suggests, let Chevy have the small cars and sedans and eco-cars; let GMC do the trucks and SUVs. Restructuring this way will require new business and merchandising models built on the way the car culture operates—something GM does understand.

What appears to bug so many people are GM’s egregious past mistakes and pursuit of short-term gain. Randy, who commented on my last post, argued this very well and, like Brooks, identified one of the big failure points that led to the debacle. I don’t agree that the Toyota model will work for them, however. “GM,” Randy says, “desperately needs a good enema, starting at the top, to wash out the entrenched Big 3 thinking that is proven poison at this point.”

Yup, it’s hard to disagree with that. On the CarGurus Facebook page, yesterday’s post drew almost 30 comments, most expressing anger at GM and an intent never to let them off the hook by buying that brand again.

Some of these folks don’t realize that GM is entering Chapter 11, whose outcome is a reorganized, recapitalized company, not Chapter 7, whose outcome is liquidation. And too many forget what Michigan Governor Jennifer Granholm said yesterday: “This is a terrible day in Michigan; there’s no doubt about it.” GM will survive, though it will leave great damage in its wake.

—jgoods

1 Comment

  1. I can’t agree that specialty or niche manufacturing will establish the “new” GM. At the most basic level, this company needs about ten million units sold per year to start making money, and it can never do that on niche sales. (Add up the total sales of ALL of GM’s niche products- Camaro, 2-seaters, Hummer, etc.) and you’ll see what I mean.) The cost to design, tool and validate a single car is about $150-$250 million dollars, which makes it even hard to make money with low sales. Frankly, niche markets are best served by very small companies.
    On the other hand, GM has the potential to have a real powerhouse in the Chevrolet and Cadillac divisions, and have some great trucks too. I guess I’m a Chevy guy and simply like the products and the value, as do lots of other folks. If Chevy can get everything up to the quality and value levels of cars like the Malibu, they’ll do extrememely well. The real refutiation of the niche model is the fact that GM knows it must shed all it’s brands that tend to be on the niche side, like Saab and Hummer.
    As for the Toyota model, the basic difference from GM is the lack of multiple duplication of car models by Toyota. If you look at Toyota, they have a very similar product mix to GM, from large trucks down to minicars, but without trying to sell 2, 3, 4 or more versions and frequently fielding the “best in class” vehicle as well. (Camry, Prius,Lexus.) They do this by concentrating on total, uncompromised quality instead of making multiple versions of a single car.

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