GM’s New Brand Realignment Strategy Is a Lemon

In an attempt to fix its brand issues, General Motors (GM)is realigning its eight major brands into four distinct “channels”; the idea is to address GM’s brand woes by managing the brands within each channel from a sales, marketing and advertising perspective.

From the WSJ:

General Motors Corp. moved to bring its eight vehicle brands into closer alignment, organizing them into four groups headed by an executive fully responsible for sales, marketing and advertising.

In the most significant part of the change, the auto maker named former Nissan Motor Co. (NSANY) executive Mark McNabb to oversee its Cadillac, Hummer and Saab divisions in North America. The formation of a "premium channel" for GM's three upscale brands is likely to spur the formation of more dealerships carrying all three brands under one roof -- something the auto maker has already been doing with its Buick, Pontiac and GMC brands.

Over time Cadillac, Hummer and Saab dealer networks "will evolve into something like" Buick, Pontiac and GMC, said Mark LaNeve, GM's head of North American sales and marketing.

The problem with this strategy is that shifting the brands around into four groups and then aligning the dealers around them doesn’t really address GM’s brand issues. The problem with GM’s brands isn’t a function of dealer alignment and how they’re sold, it’s how the brands are perceived and the nature of the underlying product.

Shifting the same products around into different buckets won’t fix the brand problems without massive product changes, dropping some brands, eliminating the overlaps, etc. In fact, one could argue that siloed brand management is the source of GM’s problems in the first place.

Consumers who currently own an Audi, BMW, Lexus or Mercedes aren’t going to run out and buy Saabs because Saabs are offered at Cadillac dealerships, but they will buy Saabs if the product improves and/or their perception of the brand changes. The issue isn’t where Saabs are sold its how the consumer views them in comparison to the competition. GM’s focus needs to be on eliminating product overlaps, product improvement, re-positioning brands in the minds of the consumer, etc, not placing the same struggling products in different dealerships or within different sales channels.

Assuming for a second that some brands aren’t getting enough attention with respect to sales and marketing within the current structure, this new approach will pay “some” dividends. However the long-term solution still has to be one where GM decides which brands it will keep long-term, and then focuses on repositioning those brands in the minds of consumers.

Disclosure: at the time of publishing the Author had no position in BMW, Daimler AG, General Motors, Toyota or Volkswagen AG.

Comments

[Doug Korthof]

So GM's problems are that their product is crappy, and people know it!

GM had a winning product, the EV1, a cult following, fan club, and a green "halo", but threw it all away, even selling control of the NiMH battery patents to Chevron and crushing each and every NiMH EV1.

Now, GM pays the price: people perceive them as shlocksters, and they have a point.

[Carguy67]

With GM, the hits just keep on coming. Mark Laneve, Sr. VP in charge of North America, has been put in an impossible postion by past executives, most specifically G. Richard Wagoner. While everyone within GM is busy pinning medals on Wagoner's chest for his "crisis management", they miss the indisputable fact that he lead them down these paths of disaster in the first place! With the imports further entrenching themselves, the North American business continues to erode at breathtaking speed.

Why you ask?

Simply put, the "GM machine" produced a "Stepford" executive like Wagoner, a smart finance man, but completely flawed "car guy" who was/is out of touch with human market indicators. He simply didn't (and really still doesn't) have a handle on what would be a smart choice vs. what would be a safe choice of design, interior styling, or content (Onstar aside) over the last 15-20 years.

Moreover, he continues to employ, recruit and promote uninspired leadership throughout his company. Until Bob Lutz, but that simply wasn't and isn't enough to change a completely dysfuntional culture within the company.

Unfortunately, the costly errors do not stop there. Saturn, Subaru, Isuzu, Fiat, the Pontiac Aztek, the Cadillac SRX, the GMC XUV and countless other drastic miscalculations and bad investments have cost GM BILLIONS (Maybe as much as $40-50 billion!) over his tenure. One should ask, is he simply the only one who "wants" the job he has? Is Fritz Henderson the next anointed? If so, can he pull this ox out the ditch?

Some of the answers seem simple. Stop the duplication of product within the bulging (Overloaded) brand portfolio, stop waiting for the ship to dock and make more tough decisions (Sell off Saturn and Saab already!).

An outside Chairman and CEO would have little personal equity investment in the current mistakes and therefore should, theoretically, be able to make quicker and smarter choices. Simply knowing where the skeletons are is not reason enought to continue the Bataan Death March toward a 15-18% market share for GM in North America.

Shareholders, dealers and loyal customer deserve better than they have gotten the last 2 decades, and Rick Wagoner has been the single most influential strand connecting those decades of disaster.

It is quite simply time for real change, and shifting resources to China and other emerging markets only "offsets" the ills, but does not correct them.

[Maxxam]

It is all about good product which G.M. STILL does not seem to understand. Lets put it in the simplest of terms: Design and build a product that encompasses all the important touch points that car buyers are really looking for (perception of quality, world class NVH, true reliability, etc, etc). In other words, products that DON'T belong in rental fleets!!

And G.M., please get a clue - sell off Saab and focus on Saturn as the 'green' brand first (with a plug-in hybrid, etc). Doesn’t the ‘Green Line’ already have a head start?

A hybrid Tahoe?!? What a colossal waste of resources. We'll see just how dismally those will sell & how their resale value will tank. Would anyone touch a Tahoe with that powertrain once it is out of warranty??