General Motors: Marketing vs. Engineering

Technical improvements were left to Chrysler; tight 3 speed automatics, torsion bar suspension, alternators. Ultimately foreign marques, especially BMW and Honda, gained the upper hand.

When the silly 1960's Volkswagen bug made market share inroads, the Generals answer was to copy it. Never mind that the bug had been mostly unchanged since Hitler commissioned it in 1939.

The result was the rear engine, air-cooled, VW knock-off Corvair, with a 37/63 rear-heavy weight distribution.

Ralph Nader, who was set to blast the industry, included a whole chapter on the unstable Corvair in his 1965 book "Unsafe at Any Speed."

I'd say that was the watershed year for GM.

As a result of the de-emphasis on product, GM grew into a complacent financial and marketing bureaucracy. They built the plush, but technically backward cars they wanted to sell, and then decided how much ad budget was needed to push them.

Even with the threat of bankruptcy looming, many of the Generals 2007 product offerings carry obsolescent technology; engines with pushrod cam-in-block valve trains, transmissions one or two gear ratios short, interior plastics reminiscent of the 1970's.

Clean diesels, hybrids, plug in electrics, fuel cells, highway-of-the-future safety advances? Let Honda do it.

Marketing Dominates GM

Marketing reigned supreme, creating an insular, arrogant corporate culture, run by experts of the marketing and financial realms who lacked feeling for the auto industry. Executives who have this are called "car guys."

A caste structure hardened over the years; critical design and engineering talent were slighted, sales and finance personnel dominated management.

This was not confined to the corporate campus, dealerships echoed the culture; "If my car's bigger than your car, it means I'm better than you."

I hope the ascendancy of BMW, Lexus, Acura, and Infiniti has finally proven this concept (big hat, no cattle) a fallacy.

Eventually the "F&I" aspect (finance and insurance, the back room at the dealership, where the real transaction takes place) dominated the company, with GMAC, the lending side of the business, the only moneymaker.

With foreign brands rapidly eroding market share, a crisis became evident. Bigger ad budgets failed to deliver the expected results. Detroit had become a dinosaur mired in a tar pit. Their answer was to create the two-income family sport utility vehicle craze.

Yeah, just take an existing frame rail pickup truck chassis and stack on an old motor and drive train. Add plenty of cosmetic options, marketing will do the rest.

Ads depicted these fatsos conquering alpine summits with computer generated virtual boulders flying from their so-obviously-not-off-road tires.

Was I the only one who felt insulted?

General Motors Death Watch

In 2006, GM's US sales fell almost 9% to about 4 million units, down from 4.5 million in 2005.

When did they get their first clue? General Motors has seen steadily eroding market share since the early 1970s.

Debate raged in the financial press about the (remote) possibility of bankruptcy, a blog called "General Motors Death Watch" logged millions of page views, and phrases like "General Morons" and "Corporal Motors" were bandied about.

But as the iceberg appeared out of darkness, the General seemed to recognize the need for a course change.

Chairman/CEO Richard Wagoner, a typical finance guy, won accolades for bringing aboard car guy Robert Lutz as product development czar.

The appointment of product man Bob Lutz at the rank of Vice Chairman sent the signal that the company was ready to adapt to survive, that product could become paramount.

Mr Lutz, with a career history of successful products, was associated with the idea that only quality products focused on consumer demand had a chance to rescue GM. For this simple insight, Bob Lutz is considered a genius in Detroit.

I think it may be too late. The bureaucratic inertia is substantial.

Too Many Brands

For starters, the Sloan stepping stone marketing model, based on a series of very similar sedans, has been obsolete for decades.

GM is essentially a holding company that manages a portfolio of weak brands, and ill-advised acquisitions, many of which overlap.

Toyota/Lexus and Honda/Acura are doing pretty good with just two marques each.

Yes, Chevy and Cadillac are strong enough to survive. Saturn is being upgraded and cross-platformed with Opel and Chevrolet.

And Hummer is just strong enough for a spin off if times get tough like they are at Ford.

But Pontiac, Buick, GMC, and Saab survive primarily through inertia.

The debacle (dealer lawsuits) which ensued when Oldsmobile was eliminated taught management to move carefully, weaning customers and dealers from a brand rather than just swinging the axe.

It looks like Pontiac and Buick are getting fewer new models and investment, giving dealerships time to consolidate.

Saturn has been called the "Canary in the GM Coal Mine", the one to watch to judge the success of the General's turnaround plan.

As GM's sales dropped 8.7% last year, Saturn, with refurbished products, sold 6% more vehicles.

A recent tour of Houston dealerships found experienced sales personnel and management at Saturn. At some other GM outlets, salesperson turnover and inexperience was evident.

GM's market share may fall as low as 20% eventually, despite encouraging sales early in 2007. The company has made real progress in the product area, but still must successfully buy out union workers and shrink the dealer network.

News-Blog Updates for GM

11/07/07 GM Posts Record $39 Billion 3rd Quarter Loss

10/23/07 General Motors Sets Global Sales Record 3rd Quarter 2007

10/19/07 GM Responds to Shrinking Pickup Market, Cuts 2nd Shift