Monday, March 09, 2009

GM and Chrysler

I fail to understand how it is that GM and Chrysler are at near catastrophe levels and am begging for handouts at the feet of government. Why are they not just filing for bankruptcy? How is it that Ford has managed to avoid having to beg for money? I’ve thought about this a little bit and have come to the conclusion that both GM and Chrysler just have too many cars to sell. It’s all about choice.

For example, Honda sells just a few models. Three sizes of car (if you count the hybrids), two sizes of SUV, one minivan, and one truck. GM has four car divisions: Cadillac, Chevy, Buick, and Pontiac. What about Saturn? I don’t consider them in the same vein, but I will get to that later. Each of those divisions has multiple models of car at varying price points with varying features. Simply put, most of the cars sold in the Chevy, Buick, and Pontiac divisions are the same except for some sheet metal and badges. There are Minivans and SUVs sold in three out of the four divisions (none in Pontiac). And the Chevy and GMC truck divisions are the only ones that sell trucks and large vans. Saturn sells cars, minivans, and SUVs out of its division, the only one to do all three. Pontiac seems to be a division devoted to young people only, while Chevy appeals across the age spectrum. Buick and Cadillac are supposed to be upscale cars with the Buicks seemingly for a more senior crowd.

Chrysler seems to be in the same boat. They dropped the Plymouth brand years ago because no one really could tell the difference between Plymouth cars, Dodge cars, and Chrysler cars. Smart move then. Chrysler seems to be the luxe division with cars, SUVs, and minivans. Dodge seems to be in the middle of the road with cars, SUVs, minivans, and trucks. Then there’s Jeeps, which are only SUV.

Ford seems to have solved the choice problem by limiting their divisions somewhat. They still have a lot of overlap between Ford and Mercury with cars and some of their smaller SUVs, but they have squarely placed all of the luxury models in the Lincoln division and the majority of their trucks in the Ford division (still trying to understand the Lincoln Blackwood…weird).

Anyhoo, here’s what I think GM should do:

1. Stop playing around with my taxpayer money and file for Chapter 13. We all know you can still operate, so do it. If an airline can do it and I can still board the plane maintained by that airline and get to where I need to go safely, then it should work for you. Clean the slate with the unions and start over. If they are interested in supporting your business and getting back market share by building great cars, then they’ll negotiate. Right now, their labor rates are unsustainable. If they aren’t willing to negotiate, start advertising for employees. Give the employee a reason to want to come help make a great car.
2. Stop making so many freaking cars! Drop the Pontiac nameplate for cars, minivans, and SUVs. Drop the Buick nameplate completely. Stick anything that could be considered a “crossover” vehicle into Pontiac. Make the crossover the “high tech innovation” line. Drop the GMC Brand of pickup trucks and SUVs. Put GMC on large trucks and semi’s only. Leave pickup trucks in the Chevy division where you will also make a “value line” of sedans, SUVs, and minivans. Cadillac will be your lux division with their unique cars and SUVs. Retain nameplates for limited edition cars like the Corvette, Camaro, and TransAm and produce them in moderate numbers or produce a model line every so often and make them unique enough for the model line to sell out. Retain the Saturn division for small cars and sedans. Stop trying to produce econocars like the Aveo to compete with the other econocars in the Saturn division. Niche vehicles should be carefully marketed between divisions so as not to compete with each other.
3. Adopt a marketplace style of sales model. Publish the costs of the vehicle on a central website and allow customers to pick from a small number of trim levels for that model (3 at the most). If a customer is intent upon loading up extras on a standard Chevy sedan, offer them the ability to compare online against a loaded vehicle from the lux model line. The packages can then be updated at the dealer should the customer wish to add something that isn’t part of the package. That cost is predetermined between the dealer and the manufacturer.
4. Give all vehicles a 100,000 mile powertrain warranty.
5. Stop financing vehicles at the dealership. Let banks to their thing. If you want to buy a bank to use nationwide, fine. You can also let local dealers establish a relationship with a local bank. Let the customer know how much they are going to spend before they even walk into a dealership. The dealership is going to make most of their money on extras and repairs with moderate sales kickbacks from the manufacturer to cover the cost of salespeople and management. The achievement model is the same as before. The more models you sell, the more money you make. Salespeople will need to be knowledgeable about the cars for questions, comparisons, and to help finalize the sale. No more “dancing” with various people in order to get your car. Even if you walked into a dealer without first browsing the online marketplace, you still should be able to start and finish with the salesperson. The only other people that should get involved would be a cashier or finance manager and on rare occasions, the sales manager. CARMAX seems to have done a real good job making the sales process more simplified. Even they aren’t perfect though.

Chrysler is in a similar pickle, but not quite as bad as GM. Based on experience, I’d never buy a Dodge or Chrysler car again. I’d put all my minivans out as Chryslers, stop building SUVs in either Chrysler or Dodge nameplate (leave SUVs to Jeep), and put 80% of the cars in as Dodges. Only the lux cars would be Chrysler. Import the new “A” class Benz as the Dodge compact car. Crossovers would be left to Dodge in a similar path as Pontiac.

Either that or just pick up the mess and fold.


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