[Dave@Moon]

This article is about 3 hours old as I post it here. Jerry Flint has been an outspoken critic of GM's products and planning for some time, but he's no nay-sayer. This is one of the most thought out analyses of Buick's future I've seen. Most either take sadistic pleasure in watching GM suffer, or cheer on the company as if they want to relive the glory days like the last 30 years didn't happen.

It's also one of the most disturbing analyses I've seen.

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Death By Starvation
by Jerry Flint, 06.14.05, 6:00 AM


NEW YORK - Just suppose a car company wanted to shut a division. Pretend for a moment that it is General Motors and the chief executive has decided to close down Buick. Would he hold a press conference and say this: "I want to announce that we are closing Buick. I admit that my management and my predecessor did a terrible job. The dealers are swell, but we couldn't come up with cars that people really wanted. So we're throwing in the sponge and are shutting down Buick over the next 12 months. Any questions?" You'll never hear that statement. Every dealer seems to have a son-in-law who is a lawyer, and they sue when their franchise becomes worthless.

When General Motors announced at the end of 2000 that it was killing Oldsmobile, it was most generous in its settlements with the dealers. Back in 1964, Studebaker announced it was shutting its car plant in South Bend, Ind. They were really exiting the car business. But Studebaker said it would keep assembling cars at a Canadian plant as long as people wanted them. I asked my good friends at Studebaker why keep Canada going? They explained that it was a legal strategy. By keeping production going in Canada, they could say they were offering cars, but when no one bought them, it wouldn't be their fault. They would then shut the Canadian plant because of lack of orders, and this would protect them against lawsuits. Sure enough, in two years the Canadian plant was shut. So there's a legal strategy. I recall how Plymouth was starved for product before it was killed a few years ago. Four cylinder cars, which should have been Plymouths, were called Chryslers. And look at what's going on with Buick: A vice chairman talks about "damaged" nameplates and hints it's possible that some could go. That means Buick.


A Buick-Pontiac-GMC truck dealer group is set up. The dealers are to sell all three makes. Thus, if Buick does go down, this dealer body can still sell the other brands. So dealers will have a tougher time winning lawsuits. The Zeta project for the rear-drive cars that everyone knows Buick needs was killed. And we hear that the Rendezvous sport utility vehicle, which currently accounts for 21% of Buick sales, is headed for the graveyard. GM just gave away $2 billion to get out of a bad deal it made a few years ago with Fiat. At nearly the same time, the official spin from GM's press machine is that the once-planned U.S. offshoots of the Zeta line were just too expensive. The truth is that Buick sales are already in a steep slide, and the division has killed far more models than it is adding. In the last year, it dropped the Park Avenue, Regal and Century sedans. The new Terraza minivan is on the endangered species list. Buick will probably sell 250,000 vehicles this year, which is be less than what Oldsmobile sold when it was given the death sentence. What's does Buick have to offer customers? The new Buick LaCrosse (replacing Regal and Century cars) came out last fall. It is a decent car, but fully loaded it stickers for $32,000 and is up against great competitors. Year-to-date, Buick sold 34,420 copies of the LaCrosse versus a total of 40,938 Regal and Century models in the same period last year. Coming this fall is a new larger car, called the Lucerne, which will replace the discontinued Park Avenue and the soon-to-be-discontinued LeSabre.



The Lucerne looks attractive, and it will offer a V-8 option. But my guess is that GM will overprice the Lucerne, a common GM practice on new models, and its sales won't match the two cars it's supposed to replace. Another issue: the Lucerne is front-wheel-drive but most luxury and near-luxury competitors have rear-wheel drive or all-wheel drive. So it's just hard to see where this car will stand out in combined showrooms that also sell Pontiacs and GMC vehicles. GM has excuse for everything. We've been told that the vice chairman's comments shouldn't be interpreted as a threat to Buick, and there's no plan to kill it; that a replacement for the Buick Rendezvous is coming, and that combined Buick-Pontiac GMC dealers are a good way to cut costs and to keep dealers from adding foreign brands. We're told that GM's new marketing strategy, designed to weed out look-alike vehicles and create unique lineups, will help make those combined dealerships a success. More cutbacks are also supposed to be the answer. In early June, GM Chief Executive Rick Wagoner announced additional plant closings are coming and a 25,000 reduction in its workforce (a sixth of GM's U.S. total--mostly by attrition) over the next three years.


Buick sells twice as many vehicles in the U.S. than Saab sells globally, but GM seems more interested in keeping Saab alive --with rebadged Subarus and Chevys--than in saving Buick. If there is any Buick leadership, I can't find it. One previous head of Buick went off to sell hardware, another left to sell cheesecake. Through all the recent strife, I am not aware of a single Buick man standing up, holding a press conference or making any fighting statement about saving the division. I remember a few years ago, when the leadership at Ford was determined to kill Mercury, it was starving it of product while officially denying there was a plot to kill it. Fortunately William Clay Ford Jr. stepped in, tossed out the Ford chief executive and, among other things, ordered that Mercury be saved. Mercury sales are now climbing. Buick was the rock upon which General Motors was founded, the first part of what became the greatest automaker in the world. It has loyal customers and excellent dealers. Maybe GM's leaders do not plan to kill Buick, but if they aren't, they are giving a misleading impression.

[imported_jscheib]

Just a thought I have - while Studebaker said they would keep building in Canada, Buick can also say they are still building cars, only this time it seems it will be in China, where the "badge" is doing quite well, I believe.

John

[Centurion]

Dave, I must agree completely with Jerry Flint on this one, and "starvation" is exactly what's happend for the last ten or more years. When Bob Lutz refers to Buick as a "damaged brand", I want to respond that it is precisely because GM management has failed to invest in new product for Buick. It is, in fact, a credit to the brand that Buick sales held up for as long as they have.

So, what's GM's solution to the "damaged brand"? Apparently, it is to further starve it for product.

I remain convinced that the right, class-leading products would completely change Buick's sales picture. The brand has great potential and many loyal customers. Whether GM management recognizes this is subject to debate. In many respects, management seems to have given up.

[6219_Rules]

This is truly amazing. I never realised just how indifferent and perverse this industry was. I am not sure it 'became' this way...and to lose Oldsmobile, the oldest contiguous marque, was bad enough, but to even consider losing Buick because the management are simply too involved in their own pockets with no apparent concern for the foundation marque of GM, is almost beyond my understanding. Buick has always been a solid car. And today, they were touting how JD Powers is rating Buick so high, especially the new Lacrosse. It verges on the disgusting. And to think they may flush Buick and keep the flayling Saab alive. Given this pattern, Cadillac may be next. The XLR is not selling well, and I wonder just what will survive the next 5 years.
One thing is certain, the leaders of GM will retire with a very healthy sum for killing one of the best over all car companies in the world.

I hope not. But hope these days carries very little weight.

[Skyking]

Did anyone ever stop and think, that maybe they're (GM management) in bed with the Japanese? I often wonder, anything can happen in these greedy days........

[6219_Rules]

Sounds like a bad anime comic to me. <img src="http://forums.aaca.org/images/graemlins/laugh.gif" alt="" />

Sorry...couldn't resist.

Actually I think it more likely GM is in bed with the Chinese? Consider THAT for a moment. <img src="http://forums.aaca.org/images/graemlins/confused.gif" alt="" /> <img src="http://forums.aaca.org/images/graemlins/frown.gif" alt="" />

[Dave@Moon]

Quote:

Did anyone ever stop and think, that maybe they're (GM management) in bed with the Japanese? I often wonder, anything can happen in these greedy days........

They'd be in bed with the Borg if they thought it'd buy them bigger stock dividends. Chances are that if you can think of it, they've put out "feelers" for it to see if they can make a buck.

Now if they could only make a car that'd make them a buck.

[Reatta Man]

The rumors around Detroit about GM and Buick have been floating around for some time, and probably will continue.

However, I think a case can be made that the real target should be GMC. Consider cancelling GMC, or Chevy trucks, and make all GM trucks under one name and here's what you get:

* You SHUT UP Ford! They have been claiming for years that they sell more trucks than anyone. Yet the stats show that GMC truck sales + Chevy truck sales are almost ALWAYS higher than Ford. Shutting up Ford's bragging war has to be worth some sales.

* You standardize the parts numbering system and parts inventory. Everybody knows that a GMC is 99.5% Chevy, and vice-versa. So why maintain two systems? You want to sell GM trucks at a store OTHER than Chevy? Simple; make Chevy Trucks a seperate brand, much the same way Volvo has a car dealership network and a seperate network for Volvo trucks. Ditto for Mercedes trucks. Chrysler did this for years with Imperial; many people don't know that Imperial WAS a seperate division for years and not a Chrysler model.

* You COULD build a truck that a Buick, Saturn or Pontiac dealer would be proud to sell, with the level of luxury, practicality or sportiness you think of in a Buick, Saturn or Pontiac. Think it's not practical? Think Lincoln Mark LT trucks. Yeah, I know they got it wrong with the Blackwood, but it looks as if they have it right this time. You also get the opportunity to do it RIGHT from the start, (can you say LEXUS?) including incorporating any new or promising technology, such as LPG or hybrid technology.

So, GM, if you are reading, and can admit that there MAY be someone out there that has a different and better perspective on things, LEAVE BUICK ALONE!

Let them keep selling the Rendezvous. If you want to kill the ugly duckling Aztec that never came close to turning into a swan, fine. But pack up the machines and equipment and move them from Mexico back to Michigan, Ohio, Texas, California, or any state in the U.S. and let some AMERICANS get back to work building the car that makes up 21% of Buick sales! If you can't afford to hire (overpaid) UAW workers, then move it to a right-to-work state, announce that GM is hiring 2,000 workers at $14-17 per hour and see how many thousands of people show up. I know because that is EXACTLY what Toyota is doing here in San Antonio.

And, oh, one more thing, GM. Start making cars with exciting interiors! Your cars stink because the interiors look as if someone strapped a big firecracker to a can of grey or tan paint, and splattered the same color all over everything inside the car! EVERYTHING is the same color! Just before the idiots in the glass asylum in Detroit cancelled the Park Avenue Ultra, it actually looked GOOD! Chrome! Wood! Accenting colors!

Does anyone really think GM will return to profitability by selling FEWER cars and trucks?

Joe

[Matt Harwood]

Crap, I promised myself I would never express an opinion on this board after some recent unpleasantness here, but I don't think trying to make a profit by losing less money is a sustainable business model...

GM is doing what it should have done a decade ago--consolidate models and redefine their brands into segments that are discernable by the buying public. Not every division has to be all things to all people. I know I've said this here before, and it's still true today: there's no reason the Chevy dealers should have to compete with Pontiac dealers and Buick dealers and Saturn dealers in addition to the rest of the cut-throat market. Why spread finite marketing dollars among a bunch of look-alike products with different brand messages? Why spread finite R&D dollars among 4 brands with different identities--all you get is a watered-down also-ran product that "almost" works for each brand, but isn't exactly what any of them need. Like Joe said, if GMC and Chevy were one, they'd sell A LOT more trucks than Ford. But they're separate because of a stupid branding exercise, so they don't and they can't.

Look at those new GM minivans--mediocre in every sense of the word, and none with anything unique for their brands (the Chevy isn't appreciably cheaper, and the Buick isn't notably more luxurious). Remember how certain they were that Oldsmobile customers would migrate to Buick and Pontiac dealers? Didn't happen--they went to Toyota and Honda and Hyundai and...

If there's a market for 500,000 GM minivans, I'm guessing that they'll sell 500,000 GM minivans no matter whose badge is on the grille (they're putting "GM" badges on everything anyway, which only demonstrates that they don't know what they're doing--are they trying to make each brand unique or create a single brand called "GM"?!?). The buying public isn't stupid enough to believe that the Buick really is better than the Chevy in any tangible way if they look exactly the same and use all the same parts. Why cannibalize your own sales (well, actually, I know why, but it doesn't make any money)? Consolidating models just makes good business sense.

Joe's exactly right: the only real solution is building better vehicles that people will buy at market value. Most everyone but GM has finally figured that out and is doing something about it. Instead, GM thinks they can discount their way out of it and make it up with volume. How much do you think they're making by giving cars away at employee-discount prices? Add in some cheap financing, a big rebate, and, well, you can see that it isn't really about making money.

Those factories have to keep pumping out cars, even if there aren't any buyers for them. Like I said, you can't make money by simply trying to lose less (that's exactly how losing gamblers think, that sooner or later things just have to change). I think making more money per car should be more important than trying to sell more cars at a break-even point (or, god forbid, at a loss). Volume is a double-edged sword that only helps you if you're actually making a profit on every unit you sell. If you're losing money on every unit, selling more will only make the ship sink faster. Think about it.

And the 25,000 workers who are going to lose their jobs isn't really a big deal. It's mostly PR spin to make it look like GM is doing something pro-active about the problem (seen their stock price lately?). 25,000 people is actually about how many GM expects to lose through attrition over the next 3 years anyway; they're just acting like it's something special when it's really just business as usual. Hope the shareholders are enjoying the show.

[Dave@Moon]

Quote:

25,000 people is actually about how many GM expects to lose through attrition over the next 3 years anyway; they're just acting like it's something special when it's really just business as usual.

No, not even close.

Business as usual would mean replacing those workers, presuming that they actually are lost through attrition. Rick Wagoner was careful not to use the word "layoff" and made sure he did use the word "attrition" purely to make it sound better. In the world beyond looking good for the shareholders, there are going to massive layoffs (at least inside the U.S.).

He did have to admit out loud that there were going to be multiple assembly and component plant closings in the near term. That's hard to do by "attrition". So's losing 1/6th of your domestic workforce in less than 3 years (even if this were just an emergency hiring freeze).

If this is "business as usual" for GM, it's already over.