My Plan to Fix the GM Brand
If I had the ear of Fritz, the new CEO this is (mostly) what I’d tell him:
1) Go into chapter 11 with the financial support the government is willing to give you. Reorganize very quickly. Critics of this option say no one will buy cars from a company in chapter 11. I disagree. Consumers put their lives in the hands of bankrupt airlines all the time. Consumers bought flat screen TVs from Circuit City knowing they were going out of business forever, and still eat at Vicorp’s Village Inn Restaurants. Thanks to the airlines, chapter 11 isn’t such a bad word anymore.
2) Spin-off the GM Service Parts Operation (GM SPO) and the Goodwrench brand. Buying a car is different than getting pancakes and eggs at Village Inn I admit, so GM needs to give consumers an extra bit of assurance. No matter what happens to GM customers want to feel confident they can get parts and service in the future. Spinning off this division will immediately help increase consumer confidence in Goodwrench by removing some of its direct connection to GM. A great suitor or partner for Goodwrench/SPO would be Wal-Mart. They are experts in distribution and warehousing, have a nationwide truck fleet, and also have a vehicle service division to boot (another option would be to sell it directly to the dealers). To industry insiders this may seem like an unnecessary step since service and parts remain available for all kinds of vehicle brands that went away. However, it gives the consumer that little extra assurance that if GM or their local dealer goes belly-up someone else they trust can fill the void with their warranty. It would also give GM an infusion of cash if they could sell it.
Now is a good time to start advertising the Goodwrench brand again (I say bring back Mr. Goodwrench. Put him back to work). Research shows consumer feel reassured when they see communications from a company in distress or during a crisis. Brand communications from Goodwrench would help increase consumer confidence similar to how it is helping consumers feel reassurance about bank brands that are advertising right now .
3) Become really transparent. This has been a huge struggle for automakers. GM’s new CEO said that he will be very transparent over the next 60 days by holding a lot of news conferences. That isn’t the standard for transparency anymore. How about multiple public and private online forums with top executive participation to start? Some private forums for dealers and suppliers, some public forums for car buyers and owners. Participation, honesty, and answers from top brass are a must. Creating a more intimate dialogue with the public is how GM is going to rebuild trust with consumers.
4) Eliminate product duplication. Not brands. Keep all the brands except Saturn. It was a great experiment. Saturn is easily forgettable, and has very little brand equity compared to the rest of the GM brands that have stood the test of time.
I’m not going to fault GM for focusing and building great trucks. It’s what consumers were buying up until 2 years ago. They were the first with an electric car; no one would buy it, and they have taken some risks with their small cars that didn’t pay-off. The problem with their current vehicle line-up is that their small car designs stink (although some better stuff is in the pipeline), and they still are not creating enough differentiation among their vehicle brands. This is especially true when it comes to Pontiac. Pontiac is about performance and sportiness. It has no business selling minivans, cute SUVs, or re-badged Chevy Aveos. Buick doesn’t need more than three product lines. Cadillac doesn’t need a version of the Chevy Avalanche. This product replication is expensive, and ultimately denigrates the emotional symbolism and image consumers give to their vehicles. Why would a Pontiac G8 or Solstice driver want to be associated with a brand that makes the cheesy G3 (Chevy Aveo)?
Chevrolet Beat Concept
5) Develop a contract with America (ala Newt or when Saturn entered the market…they had a cause we could all get behind). This will help the public see GM as real people that we’d like to buy a car from, rather than 5 glass buildings on the crumbling Detroit water front. GM should acknowledge they are using taxpayer money to get out of the mess. In return for our generosity commit to doing the following three things for the country:
A) Commit to help reduce America’s dependence on foreign oil by building the world’s most efficient vehicles and reinvesting in R&D.
B) Fix customer service issues by becoming transparent, accessible, and developing a consumer dialogue (look to Dell for a case on this). Ask for more customer input into your service and processes like Starbucks did with MyStarbucksIdea.com
C) Help lead the economy back to prosperity by becoming a new model for American manufacturing. A new model that puts American ingenuity to work and is about being more proactive, hyper-efficient, green, nimble, and collaborative in nature.
Author
GM should see this as an opportunity not to catch Toyota, but rather to leap-frog them. This is an opportunity to turn the page on the last 25 years of diminishing market share, plant closings, and decreasing profits. The economy is going through a re-birth so why not GM too?
Here’s a better idea. Let’s eliminate half of the profitable GM brands, replace them with cars that American’s (for the most part) don’t want. This would then allow the government to artificially price fix a gallon of gasoline (lets say $4 per gallon) so that we WILL want those cars. The extra gasoline taxes then could be spread out to the auto unions for increased dues and benefits. Wait, wait Brendan – here’s the campaign!: Adopt an Auto Union Worker! We could get Sally Struthers to do the pitch – with your purchase of this GM vehicle you can support…. For only the cost of 10,000 venti latte’s…. When your GM car breaks down don’t be sad – be happy to know your keeping America working. Oh and then we need the testimonials – ‘I haven’t been at work in over two years and only receive $75,000 a year from the pension fund’ – I mean really, who could resist THAT.
Greg, someone called my office today from the UAW wanting your home address. Hope you don’t mind that I gave it out.
I couldn’t resist my urge to respond since this subject strikes close to home for me. I feel that some of the observations in the blog make sense, others are off base.
Here’s my opinion:
Point 1 – I Disagree b/c I think you are trying to equate apples and oranges. I’m not suggesting than nobody will buy an automobile from a bankrupt company, but it will most certainly hurt their sales in an already challenged selling environment. My premise is that people will be less likely to purchase a car from a bankrupt manufacturer b/c they believe the quality of their product will diminish and there will not be a going concern around to honor the warranty on their purchase. Drawing a comparison to a bankrupt airline is not appropriate because in the case of airlines you are purchasing a service (a flying taxi) vs. a long-lived asset. You use an airline to get from point to point, and after the conclusion of your trip your relationship is over if you choose it to be. Circuit City is a retailer, not a manufacturer. Result – buying a TV from Circuit City has no impact on the buyer’s warranty of their product (unless they purchased a supplemental warranty, which are still often times insured by a 3rd party vendor with a kickback to the retailer). Village Inn Restaurant is truly no comparison – it’s a $10 throwaway meal so I won’t even begin to compare. If an “organized” bankruptcy is the proposed solution, a better supplement to that may be to deposit cash or equivalents (not company stock) into a third party trust to cover all of the projected warranty obligations. This could also be used as a marketing tactic to make consumers feel more at ease that there will be someone around to pay for their car service. However, that adds additional complexity under creditor’s rights laws as well.
Point 2 – I mostly agree, however I doubt it will raise any cash at all. GM should just look to offload this b/c it’s a distraction and not a core competency. Think Delphi from 10-15 years ago. Once again, there will be challenges. The capital markets have zero appetite to fund a transaction of this nature. Most recently, look at how Cerberus has been crushed by Chrysler and last I checked, Delphi was in bankruptcy protection. Do you really think Wal-Mart has an appetite to absorb that kind of risk? What is their upside? Does GM provide a guarantee that all replacement parts will be purchased from Wal-Mart? What is the price structure? GM would likely just have to give away these divisions and more likely have to pay someone to take them.
Point 3 – Transparency seems to be the latest business buzzword along with “Bailout.” Companies need to be more transparent about their bailouts…what the does that even mean anyway? It seems to me that in a roundabout way you are saying that consumers won’t buy GM because they don’t understand how their invested tax dollars in these companies are being utilized. Well, I would argue that the average taxpayer/consumer (since we are grouping them together) only cares about “bailouts” with two very broad-stroked brushes and not much in between. One, they generally aren’t in favor of paying for others mistakes and second, they want to know what is the bottom-line impact to their personal financial status. If anyone were interested in hearing the details of how GM intended to use the taxpayer money (which was essentially to use is it as a working capital bridge), then they were allowed to attend the congressional hearing or tune into CSPAN, or in at least GM’s case, visit their website. There was a link on their homepage. It’s also published testimony under the Freedom of Information Act. I think the desired outcome of being more “transparent” needs to be more clearly defined.
Point 4 – I agree. They do need to eliminate product duplication and, in cases where there is no brand differentiation or awareness, eliminate brands too. I am from Detroit; I know the difference between a Chevy Silverado and a GMC Sierra. I know the difference between a Chevy Tahoe and a GMC Yukon. But does anyone else care that much which badge is plastered on their car? If you don’t like the Tahoe fully-loaded and it’s not “pimped out” enough for you then buy an Escalade. There is only a need for two brands, maybe three – Entry-level (maybe, but not so in my opinion), Mainstream, and Premium/Luxury. This could be all consolidated into Chevy and Cadillac. Someone has yet to define what is the value of Buick/Pontiac brands? Is Buick luxury? If so, then why have a Cadillac brand? Is Pontiac performance? Then why the Corvette and Camaro branded under the Chevy name badge?
Point 5 – I agree in the general sense that GM needs to reconnect with the consumer, but I believe the idea of American Company for Americans is a quickly becoming an obsolete gesture. GM is a publicly traded company. Last I checked anyone could own shares in GM not just Americans. Same goes for Toyota, and BMW and Daimler AG. GM just so happens to have a headquarters in Detroit and has some manufacturing facilities based in the U.S. Well so does Toyota and Honda. You get my point. I agree they should acknowledge they are receiving taxpayer loans (remember at this point the U.S. Government is a creditor, not an Equity holder) and I think they should report on their progress of repayment of those loans on a quarterly basis, but I also believe all companies receiving government subsidies should be required to report as such.
Point 5A – From an altruistic standpoint, this sounds great but it will never happen. They will not alienate their customer base rooted in the oil & gas industries plus we currently don’t have a tax structure that incentivizes business to reinvest in energy efficiency…yet.
Point 5B – There’s that word again, Transparent…
Point 5C – Ok, once again this sounds good on paper. What about legacy costs? Who picks up the tab on those? What exactly is the “new model” for American manufacturing in a globalized economy? Do we pay employees a “living wage” in America and apply extensive tariffs on goods imported from “cheap” labor countries? Do we close off our borders to foreign imports in general? Do we buy we keep printing dollars at such a level that we deflate our own currency to the point where it’s cheaper for other countries to pay us to build their stuff? Do we demand year after year that our manufacturing employees take wage/benefit cuts until the companies are at the “ultimate” level-playing field with their competition? Maybe $100/month or so compensation for the average worker is a good number? It’s a vicious deflationary cycle. I don’t pretend to have the answer, nor am I a proponent of socialism. However, it seems to me that the prudent answer would be to foster an environment of innovation that leads to demand for newer high-skilled manufacturing jobs that you can’t immediately be outsourced to cheap labor countries. That’s easier said than done though. We definitely have our work cut out for us as a nation.
Not trying to rain on your parade, I think we need everyone’s input in order to turn this thing around…cheers!
Roger. This is why you are my accountant. I’ll debate and explain “transparency” over a brew with you later. Bring back Mr. Goodwrench? Yes or No?
Bring him back, Amen brother!