8 GM Brands: 1 or 2 Too Many?

Lots of folks are speculating about GM’s future. If you take all the press reports at heart, you would think that General Motors is on life support. Quite frankly, the opposite is true especially when you look at the global picture. In 2005, “the General” sold more than 9 million cars worldwide, the first time the automaker reached that figure since 1978. Yes, U.S. auto sales are down and some are calling for GM to reduce its many brands, currently numbering 8. Who should GM let go? Or, should General Motors stick with the game plan and maintain all 8 brands? For the record, GM’s 8 brands are: Cadillac, Buick, Pontiac, Chevrolet, Saturn, GMC, Hummer, and Saab. You could take Saab out of that pack as the Swedish automaker (although fully owned by GM) builds few cars in North America. Still, GM includes Saab in its marketing schema so we’ll keep them in for argument’s sake. Clearly, Cadillac is GM’s luxury division; Chevrolet is it’s budget or “All American” division; while GMC is the truck division. Beyond that, there is much muddling of divisions, but Buick is a maker of “near luxury” vehicles (Cadillac lite) while Hummer is GM’s specialty truck division. The Saab line is a bit confusing as it once was a true European division. Now, the make is chiefly featuring rebadged GM and Subaru vehicles with little original models to show for it. Finally, Pontiac and Saturn duplicate much of what the other divisions do, although the Saturn mystique of “no haggle pricing” gives the make a certain aura to it. That leaves Pontiac. Pontiac, like the recently killed off Oldsmobile name, is probably one of the most vulnerable of the true “American” makes. Saturn will survive because its dealer network is tops and consumer satisfaction ranks up there with Lexus. Ultimately, the Saab name will likely die first. Outside of the U.S., particularly in Europe, Opel is a known name and an important GM make. Word has it that some of Saab’s production will shift to Germany and certain rebadged Opels will begin to sport the Saab name. Let’s just say once that happens, there is little reason to continue making Saabs. Let the Saab name die with dignity. Why spoil it by selling rebadged Opels as Saabs? Personally, I think GM should leave well enough alone with its remaining American brands. I wasn’t in favor of Oldsmobile’s demise and I am not in favor of killing off trusted brands. GM is retooling its operation as old models are killed off and as new or revived models step in. Look for the Chevy Camaro, Pontiac Firebird, Saturn Sky, and the Buick Enclave to help spark their respective divisions to renewed glory. Am I living a pipe dream? Maybe, but at least my imagination is going in a positive direction.

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You Can Replace Your Car's EGR Valve

Located smack dab on your car’s intake manifold, an EGR [Exhaust Gas Recirculation] valve functions by sending exhaust gas back into the combustion chamber as “exhausted air” is much hotter than intake air. By bringing warmer gas into the combustion chamber, your engine operates much more cleanly and efficiently. Like any part, your Ford EGR valve or Toyota EGR valve is subject to getting clogged with dirt or crud. A clogged unit may cause your car to stall, hesitate, or idle roughly. Sometimes, simply cleaning the EGR valve with a product like STP carburetor cleaner will resolve the problem. Still, if you take your car in for its MV inspection and the diagnostic tests shows that your EGR valve is not working, you will fail inspection and be forced to swap out the device before bringing your car back in for a follow up inspection. What a hassle, but something you just don’t want to forget about. Prices on replacement EGR valves are all over the place: some parts are reasonably priced while others will cost you a mint. Your Ford or Toyota dealer will charge you a mint if you purchase one through their parts department, as buying through any dealer can quickly turn into a financial nightmare. Instead of going through all that aggravation, you can save big money by shopping online through a quality wholesaler such as All EGR Valves. As is common with all high quality auto parts wholesalers, you can purchase an EGR valve at a huge discount and save a bundle over dealer mark up prices. Leading wholesalers deal directly with manufacturers, buy in gigantic quantities, negotiate the lowest prices, and pass big savings on to you. Replacing an EGR valve is a simple process and can be accomplished with standard automobile tools. With your handy Chilton repair manual at your side, you will quickly remove and replace the device and have a strong sense of accomplishment on a job “well done.” Best yet, you will have saved yourself plenty of money which you can use for other parts, like the K&B cold air intake that you always wanted!

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Is America Ready For A Tiny BMW?

I wrote previously about Mercedes’ foray into the small car market. As strange as that may seem to many Americans, both Mercedes and BMW have long produced smaller and less costly models for the European market. Now, it appears that BMW is considering doing the same: introducing to the North American market a truly compact car, smaller than any BMW that has ever graced our highways and back streets. Is this a good move for the German automaker? Or, will it water down a prestigious brand name? Part of any automaker’s marketing strategy is to convince you, the consumer, what their vehicle line is all about. Dodge would like you to believe that they sell sporty cars and rugged trucks; Scion touts their youth oriented vehicles; and both BMW and Mercedes, like Cadillac, sell luxury vehicles. Millions of dollars of advertising is spent per year to reinforce brand image which is supported by consumer surveys of that particular sentiment. Speaking about Cadillac, in the early 1980s GM’s luxury brand briefly marketed a compact car – the Cimarron – that ultimately bombed, in part, because it strayed far from its big luxury car base. Sure, the car was little more than a rebadged and re-tweaked Chevrolet Cavalier, but it contradicted the entire Cadillac mystique. Even a slightly larger and much later model, the Catera, also failed as the car was perceived for what it really was: a remade Opel. So, now the dilemma: will consumers accept the “1 Series” BMW’s planned entry or will it cause confusion and diminish the BMW name? As a backgrounder, the current 1 Series is expected to be overhauled in 2006. Right now the car is offered as a sport hatchback, but the hatchback isn’t likely to be imported due to America’s aversion to that particular body style. Thus a sedan version is being considered by BMW for production according to published reports. I visited BMW’s U.K. site to examine the current Series 1 model. With the typical BMW fascia in place the Series 1 resembles a slightly stretched Volkswagen Golf mated to a compact BMW. The “1” comes equipped with either a 1.6L or 2.0L I4 gasoline engine, a gas 24V 3.0L V6, or a 2.0L four cylinder diesel that achieves a whopping 50 mpg fuel economy. Prices for the “1” start at just under $25,000 Equipment on the “1” is typical BMW with ABS and all the full luxury appointments. Clearly, the current “1” is not a stripped model as it features many of the amenities found on larger BMWs. In my opinion BMW must tread carefully in bringing a car of this size to the American market. Forget the hatchback and just go with the sedan with either a wagon and or a coupe being a possibility. Unlike the basic Mercedes models, the “1” may just be able to pull it off for BMW and allow the German automaker to sell a tiny BMW successfully in the U.S. Alternatively, BMW just may want to consider launching a separate brand, to retain the BMW mystique in the American market.

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GM Death Watch: It Ain’t Gonna Happen!

I have been enjoying reading the news these past few days, perhaps in a perverse sort of way. Pundits and prognosticators are all forecasting the pending doom of the world’s largest automaker as if the approaching layoffs and restructuring are signaling the venerable automaker’s end. Certainly, GM has some problems – big ones – but the company isn’t likely to go away or even file for bankruptcy. The news isn’t all that it seems to be on this subject either…GM will survive and likely thrive in the decades ahead.

Okay, I am not crazy. Could GM go away? Of course, as could any poorly managed company. Yes, executives are overpaid and so are union workers. There…I said it. GM has been taking it on the chin from Asian automakers for three decades now and their U.S. market share continues to dwindle. Still, it isn’t doomsday for the general. Far from it. Here are some things that I believe GM is attempting to do to as they restructure.

Reduced Legacy Costs – GM won an important battle with its unions to force workers and retirees to pony up more money for their share of rising healthcare costs. Before you cry “foul” most Americans are paying heavily for their health insurance, while most autoworkers pay little or nothing. Reportedly, GM’s legacy costs add $1500 to the price of every vehicle. Hardly a way for any company to compete, right?

Divisional Trimming – GM axed Oldsmobile and is, supposedly, looking at whether Pontiac or Buick should go next. Saturn looks safe, primarily because of the division’s excellent dealer network while Chevrolet is the household name for so many car owners and is, therefore, untouchable. Cadillac is once again doing well and is competing effectively against Mercedes, BMW, Lexus, and Infiniti. Cadillac easily outsells rival Lincoln more than 2 to 1.

Captive Imports – I mentioned in a related article that China’s Chery Automotive Company will be importing a line of vehicles to the US commencing in Summer 2007. With a starting price as low as $6995, there is no way that GM can compete with them. Neither can Ford, Toyota, Honda, or Nissan for that matter. So, what is the option? Import one or two ultra low priced lines of cars from Korea via the company’s Daewoo division. Currently, the $9995 Chevy Aveo is the low price king in the US. This Daewoo built model is being overhauled and the new model should arrive in the US in about one year. Expect the price to drop as GM prepares for Chery’s onslaught. Expect GM to pressure their unions for further give backs as American highways are soon flooded with cheap Chinese imports.

Operational Spread -- The US auto market is the most lucrative in the world. Expect GM to strengthen luxury brands including Cadillac and Hummer as many of these vehicles bring in profits of ten thousand dollars or more per vehicle. Gas prices are coming down and America’s thirst for profitable trucks and SUVs has hardly been quenched. Still, look for GM to do a few hybrids, add some more diesels, and continue researching hydrogen production.

Union members should be alarmed by all these looming changes. Cutbacks will happen but they will only be wider and deeper if union opposition remains so strong. Yes, the unions could kill off the general, but that would be suicide for the workers. Better to pick whatever battles you can win and hope for the best.

The general isn’t dead and it hardly is dying despite everything you read and hear [personally, I believe GM is beating the “we’re getting clobbered” drum to squeeze out more give backs from the unions]. Globalism is changing the way business is done and it would do all of us good to wake up to that fact…like it or not.

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GM: Solutions For Effective Change

I, like so many people who have been following General Motors’ fortunes for some time, am wondering what the company’s long term plan of action is in the face of historic losses, plant closings, and unrelenting and widening competition. No, I am not talking about GM’s global operations, rather I am talking about the North American fortunes of the world’s largest automaker. Quite frankly, the North American market is currently unprofitable for the company while GM holds its own, even thrives, in many markets beyond our borders. The following are some suggestions to help “The General” not only get back on its feet again, but to halt the bleeding in North America.

File For Bankruptcy -- It is time to play hardball with recalcitrant unions and government authorities who don’t understand that GM is playing on an uneven field. Toyota, Honda, Nissan, and Hyundai all build cars in the U.S. None of them are saddled by huge legacy costs, i.e. health and pension benefits, local tax burdens, etc. Yes, GM negotiated their contracts in good faith, however the market has changed tremendously over the past several decades and is wholly unfavorable to the way GM has been doing business since then. In addition, GM often operates at a disadvantage in foreign markets as local laws limit their ability to effectively sell their vehicles.

Quit Building Small Cars -- All small cars built by GM should no longer be built in the U.S. This includes the Saturn ION and Chevrolet Cobalt. Instead, GM should rely on imports. By tapping its relationship with Daewoo of South Korea, GM can bring in enough cheaply made models to remain competitive and to give consumers affordable transportation under the Saturn, Chevrolet, and Pontiac nameplates. Use factories in Canada and the U.S. to build larger cars and trucks only. GM has been successfully selling the Chevy Aveo, a Daewoo model, and can easily sell other models at competitive prices. This practice would be especially wise as cheaply priced Chinese cars begin to hit the North American market in 2007.

Shore Up The Divisions Unlike some who think that GM has too many divisions, I disagree. Better to clarify your existing divisions than to go through the costly and negative closing of existing divisions. The Oldsmobile termination was a huge financial drain on the company and ended up fueling hostility against the company. Therefore, this is what I propose for GM:

1. Cadillac – GM’s luxury division is riding high and no changes need to be made. Keep producing distinguishable high quality luxury cars and Cadillac will continue to compete against the likes of Lexus, Mercedes, BMW, and Infiniti. Cadillac outsells Lincoln by more than 2 to 1 and the division performs well in all consumer quality and satisfaction surveys.

2. Buick – As the “near luxury” division for GM, Buick must create a viable alternative to Cadillac without sacrificing quality or confusing consumers. Bring back in a “halo” model like the Regal to show Buick’s youthful side.

3. Pontiac – Unless the Firebird returns, Pontiac’s performance image is gone for good. Pontiac needs this car and it must be different from the proposed Chevy Camaro. Besides Saab, Pontiac is the one division that needs the most work when it comes to reinventing itself.

4. Chevrolet – Keep up what you have, but rely on imports to fill the lower end of the market. Redo the Impala to help it compete successfully against the Chrysler 300, Toyota Camry, and Honda Accord. Yes, bring back the Camaro!

5. Saturn – Moving in the right direction, Saturn should chiefly sell cars that are Opel inspired. Give the car a more European flair and the division will succeed. The Sky is a knock out and the Opel inspired Aura is a vast improvement over the old “L” Series model. Keep the strong dealer network in place and Saturn will compete successfully against Hyundai, Honda, Toyota, Nissan, and others.

6. Saab – GM’s Swedish division is floundering and may be cut. Better yet, let the division sell upscale versions of Opel models and please do not throw out the Swedish touch: safety and durability. Unfortunately, GM hasn’t been as kind to its Swedish company as Ford has been to its Volvo subsidiary.

7. GMC – Between Chevy and GMC, no manufacturer sells more passengers trucks then this division. Likely, nothing will change, but coming out with a more capable small pick up truck would go along way in helping GMC and Chevy. Also, redo the Equinox to be a real battler against the Ford Escape and Toyota RAV4.

8. Hummer – GM’s niche division is the Hummer and little needs to be changed other than to add an H4, a compact Hummer. With the H4, give the division something to go with that can battle the Jeep Wrangler. Hummer will always be perceived as the company’s gas guzzling company, but it is also profitable for the corporation.

Personally, I do not want the bankruptcy route to be exercised as I know that so many suppliers would be left out in the cold, jobs lost, and goodwill would take a hit for at least the short term. Still, aggressive action – even beyond plant closings and layoffs – must be considered otherwise GM will be relegated to operating as a second rate player in North America while pursuing its fortunes abroad. In my opinion, neglecting the profitable North American market would be a shame and very costly.

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