Thursday, November 13, 2008

GM Needs More Than Bailout Money

Question from an American taxpayer. “After we cough up our tax dollars to bail out GM, will we subsequently be required by Federal law to buy GM cars?” because that’s the only way to save this pitiable and dysfunctional company. The problems like poor economy, unpredictable gas prices, and diminished disposable income are only secondary reasons for the lagging auto sales at GM. The fundamental problem is the perceived second-rate nature of the vehicles coming off the GM assembly line, and the failure of the GM marketing people to lock in clear customer targets. Here are some examples.

The GM flagship offering, the Corvette— so identifiable that it requires no television or media advertising— has a body style that’s basically unchanged since the middle years of the Clinton administration. Each year, the new Corvette comes to market with ever more powerful engines packaged in the same old body. I, personally, have six close friends with modern Corvettes who tell me they would trade up to a brand new model to get a snazzy new body style, but who are unwilling to trade their 180 MPH vehicle for one that goes 210 MPH in a land where the speed limit is 75. My six friends are, admittedly, a very small customer sample, but the marketing people with the larger customer samples are the ones who are about to go out of business, so their proven insights are not exactly stellar.

There was a time when the Cadillac brand was the darling of the country club set, and was driven by affluent people with retirement-swollen bankrolls. The modern Cadillac customer still has a fat bankroll, but he also has saggy ass pants, and after buying his Escalade with cash, he routinely has the windows replaced with smoked glass. As a high-end customer demographic, this doesn’t exactly attract a lot of new buyers wanting to emulate the image.

Then there’s the Volt, the car that will save the company— or so they say. Anyway, that’s their story, and they’re sticking to it. Readers of this blog have read a lot from me about the Volt, so I won’t drive over the same old road on this topic. Suffice it to say that the hype has gone on so long that there’s no way the Volt, if and when it comes to market, can ever live up to the expectations. Moreover, prospective Volt customers are keenly aware that there is unlikely to be an infrastructure of GM service departments in five or ten years when the Volt starts to need some mechanical attention. People still remember the lessons from the 1930s, learned the hard way by Hupmobile and Whippet owners— you don’t want to buy the last car from a dead company.

We hear a lot about the idea of firing most of the incompetent and overpaid GM top brass as a prerequisite for giving bailout money to the dying car giant. If we’re placing blame for GM’s failure by looking for revenge, I personally believe that everyone would be better served by firing the strategic marketing team, as well as the styling department people who did their bidding. More than money, GM needs imagination and new ideas.

Also see: “Why The Merger With Chrysler Can’t Save GM” (11/3/2008) and “It’s The Infrastructure, Stupid” (7/31/2008)

No comments: