GM: An Inside Look

At General Motors (GM), they call it “the 60 days.” That's the window of time President Obama has given America’s biggest automaker to chart a bold new future - or declare bankruptcy.

Obama has set tough conditions that GM must meet by the end of May in order to get up to $25 billion in additional government aid. To show he means business, Obama also fired eight-year CEO Rick Wagoner. The new CEO, Fritz Henderson, must wring unprecedented concessions from unions and creditors, rapidly shrink the company, and convince buyers to stick with GM products. I spoke recently with Susan Docherty, North American Vice President responsible for the Buick, Pontiac, and GMC divisions, about what it’s like working for GM at the most precarious moment in its history. Excerpts:

You’re responsible for some of the “good” brands that GM plans to keep. How are you going about your job these days? Is it a crisis atmosphere, or does it somehow feel like business as usual? There isn’t anyone in our company treating this as business as usual. All of our employees listened to the president’s press conference [on March 30]. If Fritz says he’s giving a press conference, we all stop work and put on the TVs. Then we do a debrief and make sure everybody understands what the message is. We get it: We need to have a restructuring plan that goes faster and deeper.

How is this affecting your division? Even though the entire company is restructuring, we still need to be selling Buick, GMC and Pontiac vehicles. My job is to generate revenue for this company. I need to figure out how we get consumers back into showrooms and get rid of what I call the FUD factor: fear, uncertainty, and doubt. Companies going through restructuring can fall off a cliff if they don’t continue to focus on generating revenue.

The irony is, as we’re going through all this, our products have never been better.

Can you tell if the all the negative news has damaged your brands and driven away buyers? It’s too early to see if interest in our brands has dropped off completely from all the news. Obviously the economy is also keeping buyers away. The buyer behavior data come out quarterly, and we don’t have the first quarter’s data yet. But I don’t need to see any data to know that I need to get people back into the showrooms. We know that people need to know us, like us, trust us, and buy us.

Is there an acronym for that? K, L, T, B…. Geez, I don’t know. I’ll have to have a glass of wine and think about that one.

The real wake-up call for us was the Congressional hearings in December. It was very clear from the questions they asked, and also from the questions the press asked, that the perception of our company and our brands was at least a decade old. People don’t know the vehicles we are building today. Before this crisis, we’d talk about the improvements we were making and a lot of people wouldn’t hear us. We have a chance for potential buyers to hear us now. For as difficult as this is, shame on us if we don’t find opportunity in this crisis. It wouldn’t hurt if the general press gave us credit for the great products we’re building.

Well here’s a personal opinion. GM has made a lot of predictions in the past that haven’t come true. Market share gains, profit levels, there are all kinds of examples. As recently as a year ago GM was saying, ‘we need all 8 of our brands,’ while critics were saying you only need 4, and now GM has finally said, ‘okay, we only need 4, or 4.5.’ So in the press we don’t know what to believe. Is 4 brands the right number? A year from now will it only be 3 brands? Well let me say this. Fewer, better, faster, always wins against a multi-brand strategy. In 2005 we had eight Buicks. Now we have three. We got it.

Do you really need GMC and Pontiac if Chevrolet and Cadillac are such strong core brands? Aren’t GMC trucks mostly just copies of Chevy trucks? Chevy and Cadillac are global brands, and there are some consumers in the middle who are not interested in a volume brand like Chevrolet. It’s not for them. There are also customers who can afford a Cadillac but wouldn’t choose a luxury brand either. There is clearly a need for premium offerings above a volume brand but below luxury. So with Buick and GMC, we have products that can meet that consumer need. The architecture of good – better – best works.

As for GMC, all of our GMC products are profitable. Pontiac has nowhere near the margins of GMC. That’s why we need to refocus Pontiac. Fritz has said that every vehicle in our lineup needs to pay its own way and that’s what we intend to do.

Are you doing any contingency planning for a bankruptcy scenario? On March 31 we launched the Total Confidence promotion, which we tested with consumers. We told them, if you lose your job, we’ll cover 9 months of payments [up to $500 per month], and by the way we’ll cover your warranty. And instead of saying ‘what’s the catch,’ like they usually do, they said, ‘oh really?’ They loved that.

But that’s the government covering the warranty, right? Right, but we’ve added it to Total Confidence. So it says, you have a “fully backed” 5-year/100,000 mile powertrain warranty. “Fully backed” means backed by the government.

Are you involved at all in the dealings with the government? I had tickets for my husband and I to go the Final Four. We have a 7 am meeting with [marketing chief] Mark LaNeve every other morning, and on the day we were supposed to leave for the Final Four, we got a request from the team in Washington that we needed to pull together a bunch of information for the President’s task force. By 8 am, I called my husband and said, ‘you need to find a friend to go with you.’ We worked for about 24 hours pulling all that together. That was one of several sleepless nights for my whole team.

This event is more than life-changing. There’s not anybody in the company who’s unaffected by this. We all know how serious this is.

What was your reaction when Rick Wagoner resigned? I was at the Detroit opera with my daughter and husband that Sunday afternoon, and I got a message on my handheld from Mark LaNeve saying the news is reporting that Rick is leaving the company. And I looked at my daughter and my husband and said, ‘I have to go.’ For many people at the company, the only CEO they’ve ever known is Rick Wagoner. It was a very emotional moment for the entire team.

The next communication came the next morning from President Obama at 11:00 in the morning on March 30. He clearly articulated what he wanted from us. We heard him when he said we need to go deeper and faster and we need a new report in 60 days. Then Fritz Henderson held his press conference, and he said that what we’ve provided is not good enough. We got together and made sure we communicated all this to everybody on our team. Then right after that we launched Total Confidence. I don’t think it even sunk in until later in the week that Rick was no longer with the company.

That week at GM was one of the weeks everybody who works here will remember. You know how certain things happen, and you always remember where you were when you first learned about it? That’s how it felt. Everybody at GM is going to remember where they were when they learned that Rick Wagoner was asked to resign.

Disclosure: no positions

Comments

[epeon:]

I do believe that this interview has put its finger on exactly what is wrong with marketing at GM. You can go back as far as Roger Smith and find the CEO saying, "trust us, our quality has vastly improved and is as good as the japanese now." Of course, that was never true.

Today, I believe GM's quality is better. Particularly on their newer designs. But, we have been hearing that same song and dance now for about thirty years. So, is it really any surprize that no one quite believes it?

I think GM is just going to have to hunker down like Ford and prove it. They are going to have slash costs, probably through a bankruptcy, cut prices and claw for every percentage of market share they can get. They need to look at the jap and korean car companies not as competitors, but as mortal enemies. That means they have to be absolutely relentless. Can they do this?

Apr 12 03:46 AM

[Taymere:]

Keep your chin up Susan Docherty, this too shall pass. Rick had to fall on his sword to provide political coverage for the upcoming bailout cash bonanza scheduled for sometime between now and the 60 day deadline.

And to everyone else BUY AMERICAN!!!!!!!!!!!!!!... Stand tall. Test drive a Cadillac CTS-V then tell me why you need a German car to look prestigious. I am a proud owner of a '79 Ford F-150 and and '84 Chevy Caprice. They are paid for, they work great and a fellow citizen got paid to make them. I also own GM bonds that I bought at 9 cents/$ and when that bailout bonanza goes down watch me step up to a Caddy CTS-V. Don't hate me, buy some GM bonds yourself.

Apr 12 04:16 AM

[babyray:]

Million dollar bonuses to AIG executives(The people who got us into this economic mess)!! Meanwhile the blue collar worker has to take a hit again and again and again and again and again!!

Apr 12 08:59 AM

[random walking:]

After bankruptcy, the non-automotive chunks of GM should be sold off to defence contractors and groups like Catapillar, and the automotive chunks should be sold off if possible or closed. There is no shortage of capacity in relation to demand for automotive products worldwide, and the weakest will not survive. Why insist that the weakest survive? GM's toxic culture has reduced all the automotive brands except for Corvette to negative in value. They will need to drink more wine (a requisite for thinking?) and go to many more Sunday afternoon concerts before that has sunk in. Rick Wagoner will receive little emotional consolation from his $20M parachute. In the long run, those who have family who worked at GM will not remember him fondly or make excusses for his firing. The end of GM will look a lot like the end of the Soviet Union from the perspective of history.

Apr 12 09:13 AM

[Miken:]

The amazing thing to me is even in the face of published data, people like this refuse to allow for the fact that, at least GM and Ford, have not only closed the gap, but are better than the Japanese.

Buick was recently named the most dependable brand by J. D. Powers, Ford was recently named best in initial quality by the same organization, Consumer Reports has REMOVED Camry's, Lexus' and Tundra from its automatic 'recommended' list due to engine sludge issues and numerous Tundra recalls (very embarrassing for CR who has long favored Toyota).

I'm afraid that too many people have the "my mind is made up, don't confuse me with facts" attitude for the domestics to make a very rapid recovery. It is too difficult for the elitists to admit they are wrong, and they end up looking silly to the rest of us.


On Apr 12 03:46 AM epeon wrote:

> I do believe that this interview has put its finger on exactly what
> is wrong with marketing at GM. You can go back as far as Roger Smith
> and find the CEO saying, "trust us, our quality has vastly improved
> and is as good as the japanese now." Of course, that was never true.
>
>
> Today, I believe GM's quality is better. Particularly on their newer
> designs. But, we have been hearing that same song and dance now
> for about thirty years. So, is it really any surprize that no one
> quite believes it?
>
> I think GM is just going to have to hunker down like Ford and prove
> it. They are going to have slash costs, probably through a bankruptcy,
> cut prices and claw for every percentage of market share they can
> get. They need to look at the jap and korean car companies not as
> competitors, but as mortal enemies. That means they have to be absolutely
> relentless. Can they do this?

Apr 12 09:44 AM

[bxdr56a:]

The problem is that there is too much capacity for the demand. GM , even with its improved quality, is no better than the Japanese. Once brand loyality is entrenched it is hard to undo without some major breakthrough. Patriotism and the greater good for the country may be the reasons to consider switching from Honda or Toyota to either a GM or Ford brand. The UAW , unfortunately, is the 4th company of this dilemna which has contributed to the Big 3 demise. By making them uncompetitive for many years the chickens have come home to roost in this economic downturn. The trend was already there ; the recession accelerated it. Despite my feelings about the UAW, I will try and purchase a US made car and I will use my stimulus check to buy something "made in America".

Apr 12 10:09 AM

[Paul Killinger:]

Susan,

I dearly hope you get to read this blog. Does GM have problems? Allow me to recount a few of the ways....

Take your trucks for example. You get to replace the transmission after about 75K miles of normal driving. Oh, and in case we didn't like that, you discontinued the manual versions entirely. And the $40K sticker-- now there's a real ticket to sustainability.

And what happened to the small trucks? They always sold well. So you decided to upsize them to become big ones. Did you ask us? Of course not, because you knew what we'd say about that.

And how about a hatchback Cobalt? No, we can't have that. Not enough money in them, and too many people might buy one instead of an Aztec.

Not to mention you discontinued dual-fueled (gas + CNG) models in the U.S. right when gas went to $4 a gallon. Another move of genius! After all, we wouldn't want buyers paying 50 cents a gallon for fuel now, would we?

The point is GM's problems aren't in the past. They're in the here and now, and you've finally run out of time to fix them.

Apr 12 10:35 AM

[Paul Killinger:]

And if by some stretch of the imagination you believe the $45K Volt with its $15K replaceable battery pack is going to be anything other than a curiosity, you're going to have a lot of time to think about that. When you and your co-workers are standing in the unemployment line, that is.

Apr 12 10:42 AM

[Paul Killinger:]

Simply put, price, utility and reliability sells cars. And if you do the latter two exceptionally well, as the Japanese have demonstrated, this can even help you improve the first.

Speaking of the Japanese, you're too young to recall, but once upon a time they bought our cars and took them apart to see how we built them. One could argue we should be doing the same thing today.

Of course all this is more difficult than it used to be. I've heard that you couldn't adapt quickly enough to build high mileage vehicles due to the myriad mandates imposed on you by the U.S. government. Well, then, you should have gone PUBLIC about it.

In the long run, what's more important than SELLING cars? Keeping your mouths shut and holding onto your jobs for a little while longer? I don't think so. Maybe we should ask your dealers (the ones left, that is) this question.

Apr 12 11:24 AM

[BobMichigan...:]

Paul,

We get it; you hate Americans and everything American. Your comments indicate your total cluelessness about the Auto industry.

I like the comment about the Aztek. Pull your head out of your anus and figure out that model has not been made in years.

I have owned or leased 6 Chevy Trucks over the last 20 years and have never had a bit of transmission problems, you are full of it. Why don't you talk about your Toyota engine full of sludge? Or maybe its poor fuel economy and lack of power compared to a Chevy?

CNG was discontinued at GM after FIRES. Your Oil baron buddy does not mention that, or all the money he has in CNG futures.

And random, what non automotive parts of GM do you imagine are still there? Get a clue and do some research before you crap out your mouth like Paul.

Epeon, when will dopes like you figure out that hanging on to market share and bankruptcies are mutually exclusive.

Most of you need to get on a boat and go live in a country you don't hate, if they would ever have you.

Apr 12 12:43 PM

[buick owner:]

On Apr 12 09:13 AM random walking wrote:

> After bankruptcy, the non-automotive chunks of GM should be sold
> off to defence contractors and groups like Catapillar, and the automotive
> chunks should be sold off if possible or closed. There is no shortage
> of capacity in relation to demand for automotive products worldwide,
> and the weakest will not survive. Why insist that the weakest survive?
> GM's toxic culture has reduced all the automotive brands except for
> Corvette to negative in value. They will need to drink more wine
> (a requisite for thinking?) and go to many more Sunday afternoon
> concerts before that has sunk in. Rick Wagoner will receive little
> emotional consolation from his $20M parachute. In the long run, those
> who have family who worked at GM will not remember him fondly or
> make excusses for his firing. The end of GM will look a lot like
> the end of the Soviet Union from the perspective of history

you hit the nail on the head. have a glass of wine, typical of what an exec. from GM would have to say. they ought to fire her also if that is the mentality of people like her who make decisions. people i know who own camrys or honda have no trouble with their cars, they last for 7 to 8 years, over 100,000 miles and still go strong. buy GM and they fall apart at 40,000 miles. I own a buick and also own stocks and bonds, lost all my money with them and i will probably will buy lexus the next time. as for Mr. Waggoner his title at GM should not have been ceo. but Mr. BS for all the line of bull he shoved at us for so many years and what is he giving back. good bye gm.

Apr 12 01:40 PM

[buick owner:]

On Apr 12 04:16 AM Taymere wrote:

> Keep your chin up Susan Docherty, this too shall pass. Rick had to
> fall on his sword to provide political coverage for the upcoming
> bailout cash bonanza scheduled for sometime between now and the 60
> day deadline.
>
> And to everyone else BUY AMERICAN!!!!!!!!!!!!!!... Stand tall. Test
> drive a Cadillac CTS-V then tell me why you need a German car to
> look prestigious. I am a proud owner of a '79 Ford F-150 and and
> '84 Chevy Caprice. They are paid for, they work great and a fellow
> citizen got paid to make them. I also own GM bonds that I bought
> at 9 cents/$ and when that bailout bonanza goes down watch me step
> up to a Caddy CTS-V. Don't hate me, buy some GM bonds yourself

i own the bonds also. sorry we will both be broke. after the execs take theirs, we will be left with the paper it is printed on.

Apr 12 01:48 PM

[TheCarCzar:]

Your blog speaks for a lot of us. Good luck to everyone!


On Apr 12 10:09 AM bxdr56a wrote:

> The problem is that there is too much capacity for the demand. GM
> , even with its improved quality, is no better than the Japanese.
> Once brand loyality is entrenched it is hard to undo without some
> major breakthrough. Patriotism and the greater good for the country
> may be the reasons to consider switching from Honda or Toyota to
> either a GM or Ford brand. The UAW , unfortunately, is the 4th company
> of this dilemna which has contributed to the Big 3 demise. By making
> them uncompetitive for many years the chickens have come home to
> roost in this economic downturn. The trend was already there ; the
> recession accelerated it. Despite my feelings about the UAW, I will
> try and purchase a US made car and I will use my stimulus check to
> buy something "made in America".

Apr 12 04:34 PM

[chronic fat...:]

Have a glass of wine and think about it?

Had to cancel a trip to see the Final Four?

Got called out of the Detroit Opera?

When do you people work? You're sitting around waiting for data to come in before you can do your job? Why don't you go down to a dealership and talk to potential customers? Or call your current customers and ask them how they perceive the company? My GM stock is worthless now, but what ticks me off is that my conscience wouldn't allow me to accept payment for doing a job as poorly as these execs are doing it. It's robbery.

Apr 12 04:48 PM

[jjones:]

I'm turning in a leased Caddy SRX this week. I have talked to every dealer in the state, but have no way to keep another Caddy in the gararge without an increase in my payment of over 50%. Loved my Caddy, (my 4th) simply the best car ever!!! Quality was perfect! I am picking up a very nice Mercedes 4-matic this week. Lease payment was $10/month more than I was paying. Never really liked MB, but I may feel differently in a few years. Feel sorry for the GM guys, but not enough to spend 50% more.

J. Jones
Denver

Apr 12 06:53 PM

[DavidR:]

Once upon a time, GM and Ford had strong captive finance arms. They extended credit for entry level cars to people who otherwise could not buy them, first time buyers, young buyers, and sometimes, irresponsible buyers. This drove sales numbers. First time buyers beat the living daylights out of cars. Often times, people with poor credit have poor credit because they flat earned it, and they take care of their possessions like they take care of their credit. If you had taken this same profile of people, and put them into Toyotas and Hondas, those cars would not have held up to that kind of flogging either. So is it the car brand that had bad quality, or the way it was used? Many people today get their impressions of automotive quality from rental cars and used cars. Is that a fair comparison? Rental cars also get beat to heck. You can't rent a Honda Accord, so how would you know how a Malibu really compares to your Accord? Let your precious Honda live at the airport for 20,000 miles and then compare it to a new Malibu. Which one will feel like the better car then?

I have a turn around plan that will actually fix the US auto industry. Step one: Instead of rebates, take the $3500 average incentive spent per car and use it to buy any car that has over 100,000 miles on the odometer and crush it, not a tax credit, use the manufactures rebate, and eliminate all other incentive spending. No new purchase necessary. Just bring in your old beater and walk away with the check. Worn out used cars do more to damage the image of an auto brand than any thing else on earth. Step two: fund all US automaker employee retirement accounts, both domestic and transplant with a $1000 tax per new car sold. That's right, it removes the legacy cost from the long time builders, and transfers it evenly to all automakers. No more cost advantage to some new Chinese start up auto plant that doesn't have any retirees. Evens playing field. Step three: Turn Pontiac into the GM rental car brand. They can keep selling rebadged Chevy's, but not retail. That way you can never again compare the cheap interior of an LS Malibu to the very nice interior of an LTZ Malibu. You'd have the Pontiac Rental with the cheap interior, sell them all in white too. If they're smart, they wouldn't even have a GM badge on them. Basically, just pass a law that to be certified for sale as a rental car, it cannot be available to the public as a retail car. Finally, you have to stabilize the cost of fuel. But instead of taxing the oil profits, how about eliminating them? We just nationalize the sale and distribution of gasoline. No brands, no gimics, just gasoline, kind of like the post office. Same price in every state. Kind of like a publicly owned utility company. It works for electricity, why not gasoline? Consumption too high? With electricity, you get rolling black outs, with gasoline, remember rationing? If you don't use your allotment, you can sell it to someone else, kind of like trading carbon credits. Radical? Maybe. I prefer to call it "thinking outside of the box". But predictable fuel costs, and predictable supply will drive consumers to make transportation choices that can be planned for by the manufactures. If you are only allotted 60 gallons of gasoline per driver per month, you won't buy a Hummer. If you don't need your 60 gallons of gasoline, you can sell your excess to some NBA star who wants to pay you for them.

Apr 12 08:05 PM

[IndyRN:]

GM needs to get serious and forget about Pontiac being their "niche division". They don't even know if they can make it with their bread & butter divisions and they're talking about Pontiac offering 1, maybe two models. I say dump the division that spawned the Aztek. Good Riddance! And why keep GMC? That division may show a profit but, overall, GM needs to cut their divisions to a more manageble, more profitable number. I see that as being Chevrolet - entry level, performance, and trucks - light and heavy; Cadillac - flagship luxury; and Buick - everything in between. If they're going to stay in business they need to keep the good stuff and get rid of all the dead weight.

Apr 13 12:13 AM