What GM Can Learn from BMW, Honda and Toyota

Includes: GM, HMC, TM
by: Wall Street Weather

Physicists have long attempted to figure out how to combine unrelated and incompatible theories into a single unified theory or message to understand the universe.

For GM to rebirth itself and rise like the phoenix out of the ashes of bankruptcy will require the automaker to come up with its own unified message that neatly sums up what the GM brand is. Otherwise GM will be forever drowning in a black hole filled with red ink.

The only positive piece of information garnered from GM’s news conference yesterday was that bankruptcy has forced GM to concentrate on fewer new models. CEO Fritz Henderson remarked that instead of delivering 15 new mediocre models of which 4 or 5 might be successful, GM must now be limited to 4 or 5 new models that all must succeed. Henderson was eager to tout GM’s few success stories such as the Chevy Malibu and Cadillac CTS, but neglected to tell the public what they should expect in terms of GM as a whole. Will GM become small and focused enough so that every product can be made a success?

Henderson’s reflation theme moved the bond market today but failed to bring GM closer to conveying a unified message of who the “new GM” is. GM is signaling that gas prices will inflate as the economy recovers, driving consumer behavior toward more energy efficient vehicles. Yet GM has chosen to retain the GMC truck brand as part of the “new GM.” How do three SUV brands (Chevy, GMC, and Cadillac) convey a unified message of fuel efficiency in the new GM?

As an example of what I mean, what message does BMW’s slogan “the ultimate driving machine” conjure up? Perhaps their cars handle like they’re on rails. How about Toyota (NYSE:TM) quality or Honda’s (NYSE:HMC) very low emission cars? These automakers have created a unified message that is embedded in their product characteristics that customers can count on, from their lowest priced to most expensive models.

Henderson believes that the launch of the new Camaro will create a “halo effect” of excitement that will entice people into Chevy showrooms. But that is the same attitude GM took with the G8 which instead of generating a halo, was overshadowed by the mediocrity of the rest of the Pontiac line. But Fritz Henderson would probably ignore this example since Pontiac is part of the “old GM” to be shed in bankruptcy.

GM touting this brand and that model is part of the formula that brought what was once the world’s largest manufacturer into bankruptcy court today. Management never took heed when Ross Perot told GM two decades ago that “you have to be the best at something.” No car company can have unrelated and incompatible messages that can be all things to all customers. The closest unified message GM currently has could be summed up as “everything mediocre.” And mediocrity – particularly in bankruptcy – is not going to whet the customer’s appetite for the General’s products.

In other words, if you can’t get 10 out of 10 people to tell you what it means to buy a GM vehicle, then GM is still lost in space.

Related Posts:

Analysis of the Detroit Automakers: Part I, Part II, Part III; Rick Wagoner; Fritz Henderson.

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