Come now, you knew before reading it what the Mises folks would have to say about this. They are hard-right libertarians with a predictable stance, they can hardly be expected to be objective. And the language of the piece makes it sound more shrill than it does illuminating.
I've already shown here that Toyota and Nissan both have higher costs than does GM, so the costs per se are not the problem. It's pretty obvious from the revenue differential that it's in product where GM falls short.
The Mises guys have obviously not studied brand development, channel management or drivers of demand. They also seem to fail to understand that long-term reliability correlates directly with the level of engineering, or that the quality of the management team is generally the key driver for success or failure for any enterprise.
You can't really understand GM without studying the more successful high-volume automakers such at Toyota. The entire process of automaking is different at Toyota, from design to distribution, and GM misses on all cylinders in that regard. The health benefits don't explain why Toyota builds cars that customers want, while GM does not.
Or are you of the opinion that GM would be even WORSE off without the UAW contract issues?
I think that I've made it pretty clear that I'm not a big fan of the union. All things being equal, if I were in GM management, I'd prefer to not have a union. Unlike Rocky, I do not believe that the UAW would make Toyota a better company.
However, that does not mean that GM would be a successful company if it had no union. Companies don't become successful by paying employees low wages, but by selling products and services that people want. GM isn't selling products that people want, so they don't.
The union increases costs and creates constraints on the allocation of work, which does make operations more costly and complex. But businesses have all sorts of constraints -- regulations, access to capital, product sales cycles, development times, etc., etc. -- and have to work around them. The union is what it is, so you have to deal with it.
So at this point, it's just one management copout after another. When GM couldn't even sell 12,000 units of GTO's when Ford sold 160,000+ Mustangs, that has absolutely nothing to do with the union. The UAW built the Mustang and didn't build the GTO, yet look at what happened.
At this point, GM needs a few hit cars in mainstream segments in order to build back its reputation and create the basis for more retail sales. So far, the "strategy" has been hit-and-miss, built on acquiring more brands instead of trimming down and building the ones that they already have. If GM simply did that, the result would be a profitable company, but less profitable than what it could be without a union workforce.
Ford sold about 161,000 Mustangs, both largely without fleet sales.
You must not spend any time in the Hertz or Avis parking lots. They are packed with Mustangs.
To think that GM could barely move 11,000 of its retro coupe while Ford could hit the top ten is a pretty obvious hint that the GTO just didn't work.
The GTO's failed because it wasn't retro. It was a slightly modified Australian sports coupe. For what it was, not bad. The thing is, Aussies actually have open roads where you can drive cars like that. On the crowded US roads, specialty car buyers are more apt to put there money in look at me bling than in haul out speed.
...I believe the GTO stayed pretty close to the original in concept. The original GTO was based on the Tempest which looked like a pretty ordinary car in 1964. No way was the latest GTO designed to be "retro." It sure may have helped.
I more or less agree with that. More specifically, the nameplate and the price point did not match the car to which they were attached. A car like that should not have been named a GTO, and a GTO should not have looked like that. Dial in a much higher price in comparison to its most direct rivals, and you ended up with a loser.
The thing is, Aussies actually have open roads where you can drive cars like that.
Absolutely not the case. Australia has very few rural freeways (most major highways are two lane undivided highways), and has low speed limits all throughout the country (except in the Northern Territory, where almost nobody lives), including in isolated areas.
Adding to this, there is no shortage of speed cameras there, often set at very low tolerances. For example, in the state of Victoria, speed cameras have been set to go off at 3 km/h (less than 2 mph) over the posted limit. Definitely not a country to open up your engine, driving faster and getting away with it is definitely easier in the US.
You must not spend any time in the Hertz or Avis parking lots. They are packed with Mustangs.
According to Fleet Central, for the first half of MY 2005, 10.6% of Mustangs were sold to fleets. In comparison, the fleet sales for Impala, Malibu, Camry and Accord for the same period were 62.1%, 47.9%, 14.0% and 2.1%, respectively.
I don't have figures for the latter half of MY2005 or for MY2006, but the fleet number would have to had changed pretty drastically to brand the Mustang as a Hertz special.
>But is that more indicative of the state of our education system
Education only works with what it is given. The raw product determines the output. It's always amazing the criticism it takes from the Rush Limbaugh types.
>What can I say, I was raised and edgeumacated in Indiana. ?????
I think we're on more common ground than I had thought.
"Unlike Rocky, I do not believe that the UAW would make Toyota a better company."
Agreed. Although to be fair to the Rock, I don't recall him making the claim that the UAW would actually be good for Toyota; 99% of the time he discusses how the UAW is good for the employee with no regard to what the UAW cost the manufacturer (and ultimately, the consumer).
"However, that does not mean that GM would be a successful company if it had no union."
I agree with this as well. GM's has MANY problems (numbers of divisions, product strategy, etc.) to go with their issues with the UAW.
"The union is what it is, so you have to deal with it."
Yeah, I guess the UAW is part of that whole 'unlevel playing field' I keep hearing about. I find it ironic that some of those complaining the MOST about the 'unlevel playing field' are those contributing the most to the problem.
The whole Mustang vs. GTO thing, IMO, doesn't really have that much to do with the UAW at all (aren't there Unions in Australia as well?). For the record, I'll agree that the Mustang is a much better sales success for Ford than the GTO was for GM and there are numerous reasons. To be fair however, the GTO was NEVER intended to have anywhere NEAR the sales numbers of the Mustang. Perhaps management KNEW that they could never sell huge numbers of GTO's: I just think they missed their projections a bit (and were surprised by the reception the Mustang got). Perhaps they were expecting a replay of the T-bird's 'success'.
"So far, the "strategy" has been hit-and-miss, built on acquiring more brands instead of trimming down and building the ones that they already have. If GM simply did that, the result would be a profitable company, but less profitable than what it could be without a union workforce."
Yes. But this topic is NOT "What is wrong with GM". The topic is "UAW and Domestic Automakers". Whenever you (IMO) attempt to focus all your energy on downplaying problems with the UAW and attacking the myriad of problems with GM management, it seems (to me anyway) as though you are saying that the UAW isn't a problem.
Perhaps, instead of dwelling on GM's problems (which may or may not be shared by Ford/DCX), why not simply discuss (generically) the UAW and their relationship with automakers in general?
We already know that the UAW cost the manufacturer's a fair amount of money. So why not a simple cost/benefit discussion? In other words, what BENEFIT does a manufacturer gain by using Union labor? And ultimately, what benefit does the consumer gain since all costs (ALL COSTS) are ultimately born by the consumer?
Once again you are comparing Apples to Oranges. Corvette and Mustangs are continually produced name plates, whereas GTO is not; none of the Mustangs sold in 2005 are even in this league. The only Mustang comparable to the current GTO is the SVT Cobra. And how many were those sold in 2005? Zero or thereabouts. The last SVT Cobra was priced at $32k with 390hp, a car remarkably similar to GTO in price and hp, the two most important factors for pony cars. How many were sold each model year when they were on the market? 7200 on average according to Ford SVT. 14000 GTO a year is already double that of the Ford Mustang SVT Cobra, which was considered a very "hot" car in its own right.
Further proof that you have little knowledge of the auto industry. Calling GTO a retro coupe is quite astonishing even coming from you. I can only guess that you have never seen the car in person. All you care about is franticly regurgitating processed-meat commentaries. BTW, isn't it a bit inconsistent that you kept blaming GM management about discounting and unable to sell at retail price . . . yet at the same time holding forth 300 and Mustang as examples of success when both of them are much more heavily discounted than the GTO?? Even if you believe that Mustang and 300 are better cars than GTO (a point that I do not share), don't you see the facts on the ground would then dictate to you that car quality itself has less effect on discounting than the sheer supply/demand?? Oversupply thanks to inflexible union contracts is indeed the root cause of the brand equity dilution at the domestics.
I have no idea what that response has to do with the basic point: Sales did not hit projections.
That is getting really lame, and goes to show that all you care about is media hype. Is hitting projection the latest standard for success? That problem is really easy to solve, you know, get a low projection! If GM management set the projection at 7200, like Ford did for SVT Mustang, would you then consider the GTO an astronomical success??
"Mustang 'looks' like the original Mustangs. I had two."
Cool.
I need to get some pics of my '66 GT Fastback up on my CarSpace page. I just got it back from the exhaust shop this morning (trying to get the original small exhaust trumpets mated up to a 2-1/4" system). It sure sounds sweet now! :shades:
Whenever you (IMO) attempt to focus all your energy on downplaying problems with the UAW and attacking the myriad of problems with GM management, it seems (to me anyway) as though you are saying that the UAW isn't a problem.
IMO, the problem with the topic is that it becomes a proxy for a political discussion about unions, with plenty of flagwaving by right-wing ideologues, rather than an analysis about whether the unions impact the actual ability of the companies to be successful. Hence, my emphasis on management as the problem, because on the list of problems, management is far higher up the ranking.
The union is a constraint on the expense side of the income statement, but it does not explain the more fundamental revenue problem. Companies produce revenues by selling products, which comes in turn by meeting customer wants, and until the US automakers address this equation aggressively, they will continue to sputter along.
In that sense, the union has become the next scapegoat in a long line of scapegoats that, if indulged, will continue to distract attention from the real solution to their problems. They need products that will make money, and who builds them doesn't count for much.
If forced to choose one party that is most responsible for what ails GM and Ford, management is clearly it. I think it's time to acknowledge that the success of the Big 3 was largely the result of having no competition until about thirty years ago, and their historic inability to compete has left them vulnerable in the face of new rivals. What we are seeing today is the end result of what happens to all sorts of oligopolies after they are forced to compete -- decades of fat laziness creates inaction, hostility, an inability to adapt and a reluctance to act in a time of crisis.
I don't have figures for the latter half of MY2005 or for MY2006, but the fleet number would have to changed pretty drastically to brand the Mustang as a Hertz special.
That's the problem with getting info through the rea-view mirror. Ford is actually showcasing a Hertz Special Mustang at auto shows. What do you think is really going on?? The first half of MY2005 is the first half of the first model year for Mustang. 10.6% is already higher than Accord and approaching that of Camry, which was approaching the end of its model cycle. What do you think the latter half of 2005 and 2006 show?? Do you have to wait till 8pm to find out that the sun indeed sets in the west??
I agree. I don't know where you've worked, but in my experience, those who make projections that fall short by such wide margins aren't usually heralded as great successes. If you're going to forecast data, you should be able to get somewhere near the ballpark, rather than three states away from the field.
Once again you are comparing Apples to Oranges.
By any standard, selling fewer than 14,000 units of any nameplate, aside from an exotic or highly-niched speciality car, is really bad. Toyota had no problem selling far more Scions, despite being an entirely new badge with entirely new nameplates, with no historical legacy from which to borrow as the GTO had.
Again, you are the consummate excusemaker for GM management, no matter how obvious the mistakes may be. Unless you're Rick Wagoner's mom, I can't see any rational reason why you'd be so quick so often to defend them at every turn.
"Ford is actually showcasing a Hertz Special Mustang at auto shows."
Yes - and I'd be willing to bet that when those 500 used Mustangs hit the market after a few months in the rental fleet, they'll bring HIGHER prices than brand new Mustang GT's.
What Ford is doing with the Hertz Special has ZERO to do with pumping up sales by selling to rental outlets and has everything to do with Marketing.
What Ford is doing with the Hertz Special has ZERO to do with pumping up sales by selling to rental outlets and has everything to do with Marketing.
Absolutely right. You can't compare a limited low-volume release intended to create buzz with the dumping of tens of thousands of cars at a discount in a brand-killing exercise. It's hard to believe that anyone could see a parallel between a smart PR move and a desperation move meant to dump product.
"...it becomes a proxy for a political discussion about unions, with plenty of flagwaving by right-wing ideologues..."
Yep. Like most things these days, a LOT of opinion topics eventually devolve into a political discussion. One could just as easily complain about incessant whining by left-wing ideologues. Just throwing that kind of language into the discussion doesn't do anybody any good.
But when the topic is UNIONS (and their relationship with automakers), it gets pretty darn hard to take a stance one way or the other without SOMEBODY interpreting it as simply the words of a reactionary ideologue of one stripe or another. Maybe (like having a Union), we should just learn to deal with it.
Yes, GM has problems. Yes, the UAW may (or may not) be their biggest problem. I'll even stipulate that the UAW ISN'T GM's biggest problem (since they appear to be in worse shape than Ford despite the same Union). Okay? But we aren't here to solve GM's overall problems. The topic is the UAW and Domestic Automakers.
To that end, I want to know WHAT do the Unions cost the Automakers and the consumer (in terms of higher wages/benefits, or contract language related to plant operations, etc. ) AND what benefits the UAW provides to the Automaker (and, ultimately, the consumer)?
Absolutely not the case. Australia has very few rural freeways (most major highways are two lane undivided highways), and has low speed limits all throughout the country (except in the Northern Territory, where almost nobody lives), including in isolated areas.
The speed limits I saw in the outback may not have been high, but I do not recall seeing many enforcement blokes about.
Definitely not a country to open up your engine, driving faster and getting away with it is definitely easier in the US.
You cannot speed when in Gridlock.
According to Fleet Central, for the first half of MY 2005, 10.6% of Mustangs were sold to fleets. In comparison, the fleet sales for Impala, Malibu, Camry and Accord for the same period were 62.1%, 47.9%, 14.0% and 2.1%, respectively.
First half 2005 figures are not going to be dispositive. Ford was still ramping up production then. I did not start noticing Mustangs in many rental locations until around October last year. Now they are on rental lots everywhere - along with that new Sonata.
You also need to distinguish rental from corporate fleet, imo. Corporations buy sedans for their salespeople for the most part. I imagine the Mustang fleet sales have a higher percentage to the rental companies than the sedans.
The disctinction is significant, because Cendant (parent company of Avis and Budget) and Hertz increasingly use buy back contracts where the manufacturer may be required to take the vehicle back after a period of time.
I want to know WHAT do the Unions cost the Automakers and the consumer (in terms of higher wages/benefits, or contract language related to plant operations, etc. )
But my point has been that in many ways, that's the wrong question to ask.
I'll use a non-automotive analogy to illustrate my point: Starbucks. Compared to its rivals, Starbucks has higher product costs, pays higher wages, offers benefits that other rivals do not even offer, and generally pays far higher rent than does its competitors.
On the surface, that sounds like a recipe for disaster, doesn't it? The beancounters amongst us would be tempted to increase profitability by finding lower rent locations, cutting wages, canning the benefits entirely, and reducing product costs.
But let's consider what would happen if those cuts were to happen. With lower rent comes lesser locations, which would reduce sales. Lower product quality would reduce sales further still. Lower wages and eliminated benefits would increase employee turnover and reduce the quality of customer service, because the quality of the labor pool would decline. A cost-cutting emphasis would probably not only reduce revenues, but it would actually make Starbucks unprofitable.
The key to its success is that Starbucks has educated customers to pay more for something than they otherwise would have, yielding higher margins despite the higher costs. Even if there is a cheaper option, many people will bypass that choice in favor of Starbucks, because the quality is consistent and the buying experience is positive. Starbucks also keeps a limited menu, which helps consumers to understand what it is about (if Starbucks began selling burgers, it would become unclear why they should go there), and which improves product quality because there are fewer things to screw up.
In the case of the US automakers, they probably don't get much bang-for-the-buck for the higher labor costs, but the cost reductions would not by themselves help to create more revenue or build brand loyalty. The branding factors that help companies such as Starbucks to charge premium prices do inure to strong competitors such as Toyota and Honda, but GM's brands probably actually hurt it. (Witness how the Corolla could be successful, while the near-identical Prizm built on the same line was not.)
GM is already in the process of reducing the influence of the union and reducing its costs, and that does make sense, particularly in the short run. But if you're going to emphasize cost reductions while ignoring revenue drivers, the problems will just continue but at a slower pace.
The union isn't really helping matters -- I don't see it adding value at all -- but we should ask ourselves why GM's workers even want a union. For the rank-and-file, it comes down to a fundamental mistrust of management, and given how management behaves, I don't blame them.
By the way, one reason that I mentioned Starbucks is that following a change in management and improved labor relations, Starbucks employees opted to de-unionize. The above-market wages and better treatment created loyalty to the new management team, and inspired enough trust among the workers that they came to see no need for their union. Workers aren't going to want to pay union dues if they come to see no reason for them, but that respect has to be earned.
The speed limits I saw in the outback may not have been high, but I do not recall seeing many enforcement blokes about.
But again, they rely very heavily on speed cameras for enforcement, not patrol cars or aircraft as is the case here. Even going a few klicks above the limit in the middle of nowhere can get you a ticket.
First half 2005 figures are not going to be dispositive.
I'm working with the data available, and I'd say it's pretty useful. For the first half of MY2005, Mustang sales totaled almost 74,000 units, which means that roughly 45% of the year's total sales had already occurred. Again, there would have to have been a radical shift between what happened since then for that fleet percentage to have grown significantly.
You also need to distinguish rental from corporate fleet, imo.
That's true. And on the whole, Ford does a better job than does GM in selling to corporate fleets, rather than the rental market, and Toyota outperforms both of them by a wide margin. But in the case of the Mustang, you're right -- over 90% of those fleet sales discussed above went to rental fleets -- but its overall rental sales were still far below those of many of the major domestic nameplates. (You can check Fleet Central to compare rental fleet sales as a percentage of total sales as you like.)
Mustang sales totaled almost 74,000 units, which means that roughly 45% of the year's total sales had already occurred. Again, there would have to have been a radical shift between what happened since then for that fleet percentage to have grown significantly.
Obviously, we are going to have to wait for the figures in print, but I think the Mustang to rentals will bump up significantly.
Ford spent the first half of '05 meeting the early order crowd. During that period, as I said before, there were almost no Mustangs in the rental fleets.
After Ford ramped up Mustang production, the big rental lots really wound up with a lot of Mustangs. Enough that the Mustang category is almost always available wherever I rent, while many other luxury or specialty vehicles are frequently not available for rental owing to limited supply and strong demand.
Snippet: The Aura's problem? It can be encapsulated in one eye-opening number - $175 million. Why is that number significant? $175 million is the amount of money Toyota is going to spend to launch the new Camry. If Saturn is lucky, they might get $50 million to launch the Aura - that is, if they're lucky
Regarding the Aura, does anyone know how many GM can build and expects to sell? I'd be shocked if GM has the capacity to build the Aura anywhere near the numbers of a Camry. Toyota will get their 400,000 units and the Aura will sell well too.
Most of the money involved in developing a new vehicle goes to developing the platform.
Unlike Toyota, which sells internationally under the Camry name, GM has multiple brands.
The Aura shares its Epsilon platform with the Chevy Malibu and Max, the Pontiac G6, Saab 9-3 and Sport Combi, and the Opel and Vauxhall Vectra (there may be a Holden Epsilon. I am uncertain on that point). In fact, the Aura is almost exactly the same as the Vectra.
If GM spent an additional 50 Million on the Aura, that would seem almost too generous, though I imagine there were US federal regulation issues which Opel may not have considered when it originally developed the Aura.
One of the things I like about the changes GM is making is that in the future, vehicle platforms with global reach such as the Epsilon, will be developed with all significant national regulations in mind. This will knock millions off engineering costs.
I agree GM should have started doing this earlier.
As for Aura numbers, I think GM would be delighted with anywhere over 70k with 150k being the highest it could ever hope. Saturn dealers are not high volume and there are not all that many of them. If the new Saturn product catches on, GM has some interesting plans to expand the size of existing dealers rather than opening that many new ones. The idea is to have fewer dealers covering more market space.
As for Aura numbers, I think GM would be delighted with anywhere over 70k with 150k
Those numbers are inline with what I was thinking.
I'm definitely looking forward to seeing one in person. It looks to have what it takes to be competitive vs. Toy/Hon/Nissan/VW etc. Just wish a manual was an option, but hey, I guess I can't have everything.
Unlike Toyota, which sells internationally under the Camry name, GM has multiple brands.
Which is precisely why GM should be consolidating and/or eliminating badges and nameplates. Toyota's marketing dollars get funneled into one nameplate, while GM would need to spend many times more than Toyota to promote its nameplates in the same way.
There really is no good reason to have a Malibu and a G6 and an Aura all being sold in the same market. The cars simply cannibalize each other, and none of them are provided with marketing budgets large enough to promote any of the three effectively. As it stands, two of them are already Avis Specials, so they have been forever tarnished, and GM will be left to inventing new naming conventions for these cars. (As this rate, GM is going to run out of new car names before it runs out of money.)
It would be vastly better for GM to have only one or perhaps two cars of a given type for a given market. It might even help if it simply punted on the various badge names, and simply labeled the American cars as GM's (except for the Cadillacs and for the fleet cars, the latter of which can be dumped as Buicks or something similar), the trucks as GMC's and badged the Euro Saturns as Opels, trying to hype the European heritage as part of the marketing.
Does anyone but for the occasional diehard really see a difference anymore between Buick, Pontiac and Chevy? Wouldn't people who want Corvettes still buy them if they were simply called "Corvette" without a Chevy badge? I see nothing but benefit from such a strategy.
Furthermore, what does that say about GM management's acumen in trying to acquire overseas production capacity instead of banging their collective heads against the immovable wall that is UAW in this country and try to make "hot" small cars here like you suggested?
The Soltice and Sky aren't hot small cars ? :P Both are union made and are all spoken for.
Agreed. Although to be fair to the Rock, I don't recall him making the claim that the UAW would actually be good for Toyota; 99% of the time he discusses how the UAW is good for the employee with no regard to what the UAW cost the manufacturer (and ultimately, the consumer).
Agree with most of it. However, I do take into consideration union restraints on employers and agree the UAW should of been more flexible then they are. The UAW like management is taking progressive steps for inprovement, and I would think you'd agree ? I believe a worker working for a multi-billion dollar corporation deserves a fair share of the pie for building a company. GM could fit the workers wages into the costs of vehicles, if they would build better vehicles and offer the consumer the best vehicle for his/hers money. When GM management doesn't offer the best, they have to discount many vehicles to the point they become loss's. Would you agree with me rorr ?
brightness, probably doesn't but I was wondering how you felt ? The UAW has to become more flexible if they want to survive and eventaully restructuring will save jobs, and make the company profit. It's a hard lesson learned, and with a global economy both the UAW and GM have no other alternative.
Yes, GM has problems. Yes, the UAW may (or may not) be their biggest problem. I'll even stipulate that the UAW ISN'T GM's biggest problem (since they appear to be in worse shape than Ford despite the same Union). Okay? But we aren't here to solve GM's overall problems. The topic is the UAW and Domestic Automakers.
Wow you already answered my question I was going to ask you.
I was going to ask how is Ford and Chrysler profitable with the same union and working conditions ?
There really is no good reason to have a Malibu and a G6 and an Aura all being sold in the same market. The cars simply cannibalize each other, and none of them are provided with marketing budgets large enough to promote any of the three effectively.
There's certainly no reason to have all of them as they currently are. (The Aura looks like it's more upmarket, but the Malibu and G6 are probably cross-shopped all the time. Now, if the G6 were more of a sports car, rather than a chevy with different body panels....)
Eliminating brands may not be feasable with the costs associated with franchises, but continuing to have a full lineup for every brand is pointless. I've heard speculation that some inside GM would like to try to combine dealerships for Pontiac, Buick, and GMC into single dealerships that sell all three nameplates, and narrow the brands to reduce overlap. Chadillac and Chevy would retain fairly full lineups, and Staurn would primarily import designs from Opel. They'd keep all their names (and the buyers who will only buy a _______) and would greatly reduce overlap.
The union isn't really helping matters -- I don't see it adding value at all -- but we should ask ourselves why GM's workers even want a union. For the rank-and-file, it comes down to a fundamental mistrust of management, and given how management behaves, I don't blame them.
Mistrust? Such as asking the employees to take pay or benefits cuts when the company is taking a hit financially? How rude. Last time I checked, businesses are there to make profits. The employees are there for the company, not the other way around. If you are providing something that the company needs for a decent rate, they will not send you to the unemployment line. If you provide what the 18 year old kid can do for half as much, then the company is stupid to keep you. It is up to you to build up your skills to make yourself secure in your job while not demanding so much that they don't feel it is worth keeping you.
I doubt GM disagrees with your point about too many brands in theory.
The problem is getting rid of brands.
Dealers are independent businesses. Money makers historically, they have managed to influence state law makers, who in turn have authored legislation to protect them from having manufacturers sever their franchises. Even something simple like switching, say, Pontiac/Buick/GMC dealer to a Chevrolet dealer would be very difficult in most cases, owing to overlapping districts.
As the experience with Oldsmobile shows, it is not impossible to kill brands. But it is time consuming, expensive, and difficult to manage from a PR perspective. State regulations such as these are one of the reasons the US is usually less than 15th or so when rating the most competitive business climate. State legsilatures are forcing existing companies to use 50 year old models, allowing newer companies - usually foreign as it happens - to adopt more nimble modern models. Odd and shortsighted. In other words, politics as usual.
Two-seater sports cars probably were not what Socala had in mind when he suggested GM should focus its effort on making good entry-level small cars to get the first-time buyers in the door. In any case, if GTO with 14k units at $32k each, i.e. nearly half a billion dollars in revenue, for the first year, is considered a failure, there's very little chance Solstice or Sky would achieve much success by that benchmark. Miata only sells about 15-20k units in a year, and it has the Solstice/Sky twin beat in every review so far . . . and the bloody car only sells for around $18k! It would take nearly 30k units to achieve half a billion dollar revenue. Of course, the media hype can call whatever a success or failure they want; they are not the ones footing the bills.
I agree. I don't know where you've worked, but in my experience, those who make projections that fall short by such wide margins aren't usually heralded as great successes. If you're going to forecast data, you should be able to get somewhere near the ballpark, rather than three states away from the field.
Projections are given for all kinds of reasons. Many projects in life would not even get started without wildly optimistic projections. The initial projection was made when gas was $1.2/gal and the US car market in a boom. By the time the car was introduced, gas was over $2/gal. More importantly, it's an experiment on holding the price line and rejuvinate brands; if GM can steadifastly hold the price line with this experiment, GTO may just be the first model in a long time that Pontiac is able to sell at anything close to retail price . . . something you have been screaming about GM should do.
By any standard, selling fewer than 14,000 units of any nameplate, aside from an exotic or highly-niched speciality car, is really bad. Toyota had no problem selling far more Scions, despite being an entirely new badge with entirely new nameplates, with no historical legacy from which to borrow as the GTO had.
How do you classify a 400hp car except for calling it a highly-niched specialty car? How many car models do you know that have 400hp or more? There is only one car from Ford that has 400hp or more, that's the Ford GT at $150k, sold in a few hundred units a year. There is not a single car model from Toyota that develops 400hp in the 2005 lineup, or the 2004 lineup, or even right now in any Toyota dealership. There is not a single model in the Nissan lineup either, nor Honda. BMW has exactly one model, the M5, at $80k, sold in a few thousand units each year. Get a clue now?? It's sheer lunacy to compare GTO to Scion, an entry level car. The funny thing is that GTO actually outsold Lexus IS in 2005, which actually is in the same price bracket but in a much more popular market segment.
Again, you are the consummate excusemaker for GM management, no matter how obvious the mistakes may be. Unless you're Rick Wagoner's mom, I can't see any rational reason why you'd be so quick so often to defend them at every turn.
That's because you are either ignorant or irrational or both. The GM management is not given $20 billion to build a brand new car company. They are given an existing car company to manage. All the suggestions and critics that you have proffered (when they are not self-conflictory) are so far off the wall (they are not even on the target board, much less anywhere near the bulls eye), one has to wonder how little you know about the auto industry anyway.
Interesting reference to Starbucks. I hope you know that Starbucks is very much anti-union. The ditractors claim Starbucks pay poverty wages . . . somewhere between minimum wage and slightly above it, like $8/hr. If that's what you mean by high wage and benefits in exchange for flexible work arrangement (ie. free of union labor contracts), I'm pretty sure you'd have the support of GM management . . . the problem though is of course how exactly do you plan on convincing the union die-hards not only to give up their union but also to accept $5.50-$8/hr at the same time :-) Oh, I get it, if the management can't convince the union to take it lying down, it must be management's fault, too.
I'm working with the data available, and I'd say it's pretty useful. For the first half of MY2005, Mustang sales totaled almost 74,000 units, which means that roughly 45% of the year's total sales had already occurred. Again, there would have to have been a radical shift between what happened since then for that fleet percentage to have grown significantly.
What you are missing is that most fleet sales take place towards the end of the model year. 2005 was also Mustang's first model year, so you are talking about the first half of the first model year. Of course discounting and fleet sale ratio is low during that period . . . things change rapidly as models age. For what it's worth, GTO fleet sales was near-zero in its first year, and probably still is today. Of course, that's not entirely a fair comparison either because GTO is a specialty car, unlike the rental fleet Mustangs.
His Opinion is nothing short of something I would read from Mein Kampf and offer no objective opinion.
Care to give an example?? Mises, Hayek and their followers are about as far from Mein Kampf followers as it gets. In fact, the most important political commentary from Hayek, The Road to Serfdom, is very much put together as an antidote to National Socialism. An illustrated abridged version can be found on mises.org: http://www.mises.org/TRTS.htm
On the other hand, some of your earlier writings on Japanese copying etc. could have been taken straight out of Mein Kampf, if you ever really read the book yourself.
It's hard to believe that anyone could see a parallel between a smart PR move and a desperation move meant to dump product.
What is exactly the purpose of that PR move?? To encourage Hertz rentals, especially rental of (regular) Mustangs, which are soon to flood the Hertz fleet. Smart move or not, the whole marketting message is that it's somehow cool now to rent a Hertz, especially a Hertz Mustang. What more is there to it?
Two-seater sports cars probably were not what Socala had in mind when he suggested GM should focus its effort on making good entry-level small cars to get the first-time buyers in the door.
You apparently didn't read #806, when I noted:
If you observe all of the car companies that have been successful in their efforts to grow in the US as full-service automakers, they have all started with compacts that competed on price, added some sort of sporty car to bring some positive attention and flash, and then worked their way up to higher-priced luxury cars once they had built their credibility. If GM completely abandoned the car market, they'd have a hard time getting back to it, in my opinion.
I would think that they would simply be better off by focusing their energies on building one great car in each segment, instead of three or four mediocre similar ones that don't impress anyone. They need a few home-run products that will improve their image and reputation with retail customers, and create the basis for new brand loyalty.
The Solstice would be a good car for GM if it helped to serve as an image leader that could bring buyers to other cars in the GM lineup.
I know that you aren't much for quantitative data, but here's a math exercise for you:
18,000 units of Solstice to be built for MY 2006 divided by 4,517,000 vehicles sold in the US by GM last year equals Solstice providing about 4/10ths of one percent of GM's US sales
If you think that a car selling 18,000 units is going to pull GM from the brink of extinction, you are kidding yourself. That is why GM needs to ALSO build competitive mainstream vehicles that could generate mainstream levels of retail sales (i.e. 150,000-300,000 units) in order to make money for the company and to bring customers back to something aside from the occasional niche product.
As it stands now, I seriously doubt that very many people who want a Solstice are going to be drawn to the G6, anymore than the Corvette does much to sell Malibus. Given the choice between developing a car that could sell 300,000 to young people who will eventually buy another car, and selling 18,000 units to a few Miata buyers, I'd go for the former in a heartbeat. For a company at the edge of a cliff, that's just basic common sense.
If you think that a car selling 18,000 units is going to pull GM from the brink of extinction, you are kidding yourself.
That's exactly that I was pointing out to Rock. A low-volume two-seater was not the "small car" that you were talking about.
Given the choice between developing a car that could sell 300,000 to young people who will eventually buy another car, and selling 18,000 units to a few Miata buyers, I'd go for the former in a heartbeat. For a company at the edge of a cliff, that's just basic common sense.
Except you are lacking the common sense that the choice you are suggesting was never there. Solstice is an exercise in GM parts bin, costing perhaps a couple hundred million. Developing a car that can compete against Civic head-on cost something like $5 billion; that's how much it cost Honda to R&D and tool up for each generation of Civic in the past decade. There's more than an order of magnitude difference. BTW, I'm very good at math, and you can keep your insults to yourself, considering your own track record with numbers.
As the experience with Oldsmobile shows, it is not impossible to kill brands. But it is time consuming, expensive, and difficult to manage from a PR perspective.
That's true, and certainly not an easy choice. But as memory serves, the payout to Olds dealers amounted to something in the range of $500 million, just a fraction of the cost of the aforementioned failed FIAT blowout.
Hence my point above: that $4.4 billion could have paid for the entire brand restructuring, provided marketing dollars for a few killer cars and helped to beef up the R&D budget even further. The remaining brands could have been strenghened and made more competitive.
With the company in contraction, management has no choice but to budget its limited resources and time, and to channel them toward efforts that can be most effective. Supporting all these badges just creates brand confusion among consumers, and imposes a bureaucracy that sucks up time and scarce dollars that could be focused on R&D and marketing.
With the sell-off of GMAC reducing future revenues, I wonder if it's already too late for the brand building exercise. Perhaps the next step will be for GM to raise cash by selling off whole sales groups, such as Opel/Vauxhall or Holden.
What is exactly the purpose of that PR move?? To encourage Hertz rentals, especially rental of (regular) Mustangs, which are soon to flood the Hertz fleet.
Yawn. No, it's a way to get a few glitzy cars on the roads, and to generate a bit of excitement among middle-class renters who will talk up the car amongst their friends and associates, and possibly help to create a bit of buzz to sell regular Mustangs or perhaps other Fords to retail customers.
It's cheap marketing. The cars will be rented for a time, then repurchased by Ford, at which point they can be sold off as collector's cars at retail. (The Shelby name and its limited edition status will help to command a premium price.) Pretty much a no-brainer, there isn't much reason why they shouldn't do it, and it is obviously not comparable to dumping Impalas by the thousands into regular rental fleets.
Comments
I've already shown here that Toyota and Nissan both have higher costs than does GM, so the costs per se are not the problem. It's pretty obvious from the revenue differential that it's in product where GM falls short.
The Mises guys have obviously not studied brand development, channel management or drivers of demand. They also seem to fail to understand that long-term reliability correlates directly with the level of engineering, or that the quality of the management team is generally the key driver for success or failure for any enterprise.
You can't really understand GM without studying the more successful high-volume automakers such at Toyota. The entire process of automaking is different at Toyota, from design to distribution, and GM misses on all cylinders in that regard. The health benefits don't explain why Toyota builds cars that customers want, while GM does not.
The point is that having the UAW certainly does NOT make their situation better.
Or are you of the opinion that GM would be even WORSE off without the UAW contract issues?
I think that I've made it pretty clear that I'm not a big fan of the union. All things being equal, if I were in GM management, I'd prefer to not have a union. Unlike Rocky, I do not believe that the UAW would make Toyota a better company.
However, that does not mean that GM would be a successful company if it had no union. Companies don't become successful by paying employees low wages, but by selling products and services that people want. GM isn't selling products that people want, so they don't.
The union increases costs and creates constraints on the allocation of work, which does make operations more costly and complex. But businesses have all sorts of constraints -- regulations, access to capital, product sales cycles, development times, etc., etc. -- and have to work around them. The union is what it is, so you have to deal with it.
So at this point, it's just one management copout after another. When GM couldn't even sell 12,000 units of GTO's when Ford sold 160,000+ Mustangs, that has absolutely nothing to do with the union. The UAW built the Mustang and didn't build the GTO, yet look at what happened.
At this point, GM needs a few hit cars in mainstream segments in order to build back its reputation and create the basis for more retail sales. So far, the "strategy" has been hit-and-miss, built on acquiring more brands instead of trimming down and building the ones that they already have. If GM simply did that, the result would be a profitable company, but less profitable than what it could be without a union workforce.
You must not spend any time in the Hertz or Avis parking lots. They are packed with Mustangs.
To think that GM could barely move 11,000 of its retro coupe while Ford could hit the top ten is a pretty obvious hint that the GTO just didn't work.
The GTO's failed because it wasn't retro. It was a slightly modified Australian sports coupe. For what it was, not bad. The thing is, Aussies actually have open roads where you can drive cars like that. On the crowded US roads, specialty car buyers are more apt to put there money in look at me bling than in haul out speed.
I more or less agree with that. More specifically, the nameplate and the price point did not match the car to which they were attached. A car like that should not have been named a GTO, and a GTO should not have looked like that. Dial in a much higher price in comparison to its most direct rivals, and you ended up with a loser.
The thing is, Aussies actually have open roads where you can drive cars like that.
Absolutely not the case. Australia has very few rural freeways (most major highways are two lane undivided highways), and has low speed limits all throughout the country (except in the Northern Territory, where almost nobody lives), including in isolated areas.
Adding to this, there is no shortage of speed cameras there, often set at very low tolerances. For example, in the state of Victoria, speed cameras have been set to go off at 3 km/h (less than 2 mph) over the posted limit. Definitely not a country to open up your engine, driving faster and getting away with it is definitely easier in the US.
You must not spend any time in the Hertz or Avis parking lots. They are packed with Mustangs.
According to Fleet Central, for the first half of MY 2005, 10.6% of Mustangs were sold to fleets. In comparison, the fleet sales for Impala, Malibu, Camry and Accord for the same period were 62.1%, 47.9%, 14.0% and 2.1%, respectively.
I don't have figures for the latter half of MY2005 or for MY2006, but the fleet number would have to had changed pretty drastically to brand the Mustang as a Hertz special.
Education only works with what it is given. The raw product determines the output. It's always amazing the criticism it takes from the Rush Limbaugh types.
>What can I say, I was raised and edgeumacated in Indiana.
?????
2014 Malibu 2LT, 2015 Cruze 2LT,
"Unlike Rocky, I do not believe that the UAW would make Toyota a better company."
Agreed. Although to be fair to the Rock, I don't recall him making the claim that the UAW would actually be good for Toyota; 99% of the time he discusses how the UAW is good for the employee with no regard to what the UAW cost the manufacturer (and ultimately, the consumer).
"However, that does not mean that GM would be a successful company if it had no union."
I agree with this as well. GM's has MANY problems (numbers of divisions, product strategy, etc.) to go with their issues with the UAW.
"The union is what it is, so you have to deal with it."
Yeah, I guess the UAW is part of that whole 'unlevel playing field' I keep hearing about. I find it ironic that some of those complaining the MOST about the 'unlevel playing field' are those contributing the most to the problem.
The whole Mustang vs. GTO thing, IMO, doesn't really have that much to do with the UAW at all (aren't there Unions in Australia as well?). For the record, I'll agree that the Mustang is a much better sales success for Ford than the GTO was for GM and there are numerous reasons. To be fair however, the GTO was NEVER intended to have anywhere NEAR the sales numbers of the Mustang. Perhaps management KNEW that they could never sell huge numbers of GTO's: I just think they missed their projections a bit (and were surprised by the reception the Mustang got). Perhaps they were expecting a replay of the T-bird's 'success'.
"So far, the "strategy" has been hit-and-miss, built on acquiring more brands instead of trimming down and building the ones that they already have. If GM simply did that, the result would be a profitable company, but less profitable than what it could be without a union workforce."
Yes. But this topic is NOT "What is wrong with GM". The topic is "UAW and Domestic Automakers". Whenever you (IMO) attempt to focus all your energy on downplaying problems with the UAW and attacking the myriad of problems with GM management, it seems (to me anyway) as though you are saying that the UAW isn't a problem.
Perhaps, instead of dwelling on GM's problems (which may or may not be shared by Ford/DCX), why not simply discuss (generically) the UAW and their relationship with automakers in general?
We already know that the UAW cost the manufacturer's a fair amount of money. So why not a simple cost/benefit discussion? In other words, what BENEFIT does a manufacturer gain by using Union labor? And ultimately, what benefit does the consumer gain since all costs (ALL COSTS) are ultimately born by the consumer?
GTO didn't look like original GTOs that I recall and consider the prime product.
It's simple as that.
2014 Malibu 2LT, 2015 Cruze 2LT,
Further proof that you have little knowledge of the auto industry. Calling GTO a retro coupe is quite astonishing even coming from you. I can only guess that you have never seen the car in person. All you care about is franticly regurgitating processed-meat commentaries. BTW, isn't it a bit inconsistent that you kept blaming GM management about discounting and unable to sell at retail price . . . yet at the same time holding forth 300 and Mustang as examples of success when both of them are much more heavily discounted than the GTO?? Even if you believe that Mustang and 300 are better cars than GTO (a point that I do not share), don't you see the facts on the ground would then dictate to you that car quality itself has less effect on discounting than the sheer supply/demand?? Oversupply thanks to inflexible union contracts is indeed the root cause of the brand equity dilution at the domestics.
I have no idea what that response has to do with the basic point: Sales did not hit projections.
That is getting really lame, and goes to show that all you care about is media hype. Is hitting projection the latest standard for success? That problem is really easy to solve, you know, get a low projection! If GM management set the projection at 7200, like Ford did for SVT Mustang, would you then consider the GTO an astronomical success??
Cool.
I need to get some pics of my '66 GT Fastback up on my CarSpace page. I just got it back from the exhaust shop this morning (trying to get the original small exhaust trumpets mated up to a 2-1/4" system). It sure sounds sweet now! :shades:
IMO, the problem with the topic is that it becomes a proxy for a political discussion about unions, with plenty of flagwaving by right-wing ideologues, rather than an analysis about whether the unions impact the actual ability of the companies to be successful. Hence, my emphasis on management as the problem, because on the list of problems, management is far higher up the ranking.
The union is a constraint on the expense side of the income statement, but it does not explain the more fundamental revenue problem. Companies produce revenues by selling products, which comes in turn by meeting customer wants, and until the US automakers address this equation aggressively, they will continue to sputter along.
In that sense, the union has become the next scapegoat in a long line of scapegoats that, if indulged, will continue to distract attention from the real solution to their problems. They need products that will make money, and who builds them doesn't count for much.
If forced to choose one party that is most responsible for what ails GM and Ford, management is clearly it. I think it's time to acknowledge that the success of the Big 3 was largely the result of having no competition until about thirty years ago, and their historic inability to compete has left them vulnerable in the face of new rivals. What we are seeing today is the end result of what happens to all sorts of oligopolies after they are forced to compete -- decades of fat laziness creates inaction, hostility, an inability to adapt and a reluctance to act in a time of crisis.
That's the problem with getting info through the rea-view mirror. Ford is actually showcasing a Hertz Special Mustang at auto shows. What do you think is really going on?? The first half of MY2005 is the first half of the first model year for Mustang. 10.6% is already higher than Accord and approaching that of Camry, which was approaching the end of its model cycle. What do you think the latter half of 2005 and 2006 show?? Do you have to wait till 8pm to find out that the sun indeed sets in the west??
I agree. I don't know where you've worked, but in my experience, those who make projections that fall short by such wide margins aren't usually heralded as great successes. If you're going to forecast data, you should be able to get somewhere near the ballpark, rather than three states away from the field.
Once again you are comparing Apples to Oranges.
By any standard, selling fewer than 14,000 units of any nameplate, aside from an exotic or highly-niched speciality car, is really bad. Toyota had no problem selling far more Scions, despite being an entirely new badge with entirely new nameplates, with no historical legacy from which to borrow as the GTO had.
Again, you are the consummate excusemaker for GM management, no matter how obvious the mistakes may be. Unless you're Rick Wagoner's mom, I can't see any rational reason why you'd be so quick so often to defend them at every turn.
"Ford is actually showcasing a Hertz Special Mustang at auto shows."
Yes - and I'd be willing to bet that when those 500 used Mustangs hit the market after a few months in the rental fleet, they'll bring HIGHER prices than brand new Mustang GT's.
What Ford is doing with the Hertz Special has ZERO to do with pumping up sales by selling to rental outlets and has everything to do with Marketing.
Absolutely right. You can't compare a limited low-volume release intended to create buzz with the dumping of tens of thousands of cars at a discount in a brand-killing exercise. It's hard to believe that anyone could see a parallel between a smart PR move and a desperation move meant to dump product.
Yep. Like most things these days, a LOT of opinion topics eventually devolve into a political discussion. One could just as easily complain about incessant whining by left-wing ideologues. Just throwing that kind of language into the discussion doesn't do anybody any good.
But when the topic is UNIONS (and their relationship with automakers), it gets pretty darn hard to take a stance one way or the other without SOMEBODY interpreting it as simply the words of a reactionary ideologue of one stripe or another. Maybe (like having a Union), we should just learn to deal with it.
Yes, GM has problems. Yes, the UAW may (or may not) be their biggest problem. I'll even stipulate that the UAW ISN'T GM's biggest problem (since they appear to be in worse shape than Ford despite the same Union). Okay? But we aren't here to solve GM's overall problems. The topic is the UAW and Domestic Automakers.
To that end, I want to know WHAT do the Unions cost the Automakers and the consumer (in terms of higher wages/benefits, or contract language related to plant operations, etc. ) AND what benefits the UAW provides to the Automaker (and, ultimately, the consumer)?
The speed limits I saw in the outback may not have been high, but I do not recall seeing many enforcement blokes about.
Definitely not a country to open up your engine, driving faster and getting away with it is definitely easier in the US.
You cannot speed when in Gridlock.
According to Fleet Central, for the first half of MY 2005, 10.6% of Mustangs were sold to fleets. In comparison, the fleet sales for Impala, Malibu, Camry and Accord for the same period were 62.1%, 47.9%, 14.0% and 2.1%, respectively.
First half 2005 figures are not going to be dispositive. Ford was still ramping up production then. I did not start noticing Mustangs in many rental locations until around October last year. Now they are on rental lots everywhere - along with that new Sonata.
You also need to distinguish rental from corporate fleet, imo. Corporations buy sedans for their salespeople for the most part. I imagine the Mustang fleet sales have a higher percentage to the rental companies than the sedans.
The disctinction is significant, because Cendant (parent company of Avis and Budget) and Hertz increasingly use buy back contracts where the manufacturer may be required to take the vehicle back after a period of time.
Actually, given the right's opinion about unions, I imagine they do would prefer to see GM and Ford go under.
But my point has been that in many ways, that's the wrong question to ask.
I'll use a non-automotive analogy to illustrate my point: Starbucks. Compared to its rivals, Starbucks has higher product costs, pays higher wages, offers benefits that other rivals do not even offer, and generally pays far higher rent than does its competitors.
On the surface, that sounds like a recipe for disaster, doesn't it? The beancounters amongst us would be tempted to increase profitability by finding lower rent locations, cutting wages, canning the benefits entirely, and reducing product costs.
But let's consider what would happen if those cuts were to happen. With lower rent comes lesser locations, which would reduce sales. Lower product quality would reduce sales further still. Lower wages and eliminated benefits would increase employee turnover and reduce the quality of customer service, because the quality of the labor pool would decline. A cost-cutting emphasis would probably not only reduce revenues, but it would actually make Starbucks unprofitable.
The key to its success is that Starbucks has educated customers to pay more for something than they otherwise would have, yielding higher margins despite the higher costs. Even if there is a cheaper option, many people will bypass that choice in favor of Starbucks, because the quality is consistent and the buying experience is positive. Starbucks also keeps a limited menu, which helps consumers to understand what it is about (if Starbucks began selling burgers, it would become unclear why they should go there), and which improves product quality because there are fewer things to screw up.
In the case of the US automakers, they probably don't get much bang-for-the-buck for the higher labor costs, but the cost reductions would not by themselves help to create more revenue or build brand loyalty. The branding factors that help companies such as Starbucks to charge premium prices do inure to strong competitors such as Toyota and Honda, but GM's brands probably actually hurt it. (Witness how the Corolla could be successful, while the near-identical Prizm built on the same line was not.)
GM is already in the process of reducing the influence of the union and reducing its costs, and that does make sense, particularly in the short run. But if you're going to emphasize cost reductions while ignoring revenue drivers, the problems will just continue but at a slower pace.
The union isn't really helping matters -- I don't see it adding value at all -- but we should ask ourselves why GM's workers even want a union. For the rank-and-file, it comes down to a fundamental mistrust of management, and given how management behaves, I don't blame them.
By the way, one reason that I mentioned Starbucks is that following a change in management and improved labor relations, Starbucks employees opted to de-unionize. The above-market wages and better treatment created loyalty to the new management team, and inspired enough trust among the workers that they came to see no need for their union. Workers aren't going to want to pay union dues if they come to see no reason for them, but that respect has to be earned.
But again, they rely very heavily on speed cameras for enforcement, not patrol cars or aircraft as is the case here. Even going a few klicks above the limit in the middle of nowhere can get you a ticket.
First half 2005 figures are not going to be dispositive.
I'm working with the data available, and I'd say it's pretty useful. For the first half of MY2005, Mustang sales totaled almost 74,000 units, which means that roughly 45% of the year's total sales had already occurred. Again, there would have to have been a radical shift between what happened since then for that fleet percentage to have grown significantly.
You also need to distinguish rental from corporate fleet, imo.
That's true. And on the whole, Ford does a better job than does GM in selling to corporate fleets, rather than the rental market, and Toyota outperforms both of them by a wide margin. But in the case of the Mustang, you're right -- over 90% of those fleet sales discussed above went to rental fleets -- but its overall rental sales were still far below those of many of the major domestic nameplates. (You can check Fleet Central to compare rental fleet sales as a percentage of total sales as you like.)
Obviously, we are going to have to wait for the figures in print, but I think the Mustang to rentals will bump up significantly.
Ford spent the first half of '05 meeting the early order crowd. During that period, as I said before, there were almost no Mustangs in the rental fleets.
After Ford ramped up Mustang production, the big rental lots really wound up with a lot of Mustangs. Enough that the Mustang category is almost always available wherever I rent, while many other luxury or specialty vehicles are frequently not available for rental owing to limited supply and strong demand.
Snippet: The Aura's problem? It can be encapsulated in one eye-opening number - $175 million. Why is that number significant? $175 million is the amount of money Toyota is going to spend to launch the new Camry. If Saturn is lucky, they might get $50 million to launch the Aura - that is, if they're lucky
read more on the blog.
Most of the money involved in developing a new vehicle goes to developing the platform.
Unlike Toyota, which sells internationally under the Camry name, GM has multiple brands.
The Aura shares its Epsilon platform with the Chevy Malibu and Max, the Pontiac G6, Saab 9-3 and Sport Combi, and the Opel and Vauxhall Vectra (there may be a Holden Epsilon. I am uncertain on that point). In fact, the Aura is almost exactly the same as the Vectra.
If GM spent an additional 50 Million on the Aura, that would seem almost too generous, though I imagine there were US federal regulation issues which Opel may not have considered when it originally developed the Aura.
One of the things I like about the changes GM is making is that in the future, vehicle platforms with global reach such as the Epsilon, will be developed with all significant national regulations in mind. This will knock millions off engineering costs.
I agree GM should have started doing this earlier.
As for Aura numbers, I think GM would be delighted with anywhere over 70k with 150k being the highest it could ever hope. Saturn dealers are not high volume and there are not all that many of them. If the new Saturn product catches on, GM has some interesting plans to expand the size of existing dealers rather than opening that many new ones. The idea is to have fewer dealers covering more market space.
Those numbers are inline with what I was thinking.
I'm definitely looking forward to seeing one in person. It looks to have what it takes to be competitive vs. Toy/Hon/Nissan/VW etc. Just wish a manual was an option, but hey, I guess I can't have everything.
Which is precisely why GM should be consolidating and/or eliminating badges and nameplates. Toyota's marketing dollars get funneled into one nameplate, while GM would need to spend many times more than Toyota to promote its nameplates in the same way.
There really is no good reason to have a Malibu and a G6 and an Aura all being sold in the same market. The cars simply cannibalize each other, and none of them are provided with marketing budgets large enough to promote any of the three effectively. As it stands, two of them are already Avis Specials, so they have been forever tarnished, and GM will be left to inventing new naming conventions for these cars. (As this rate, GM is going to run out of new car names before it runs out of money.)
It would be vastly better for GM to have only one or perhaps two cars of a given type for a given market. It might even help if it simply punted on the various badge names, and simply labeled the American cars as GM's (except for the Cadillacs and for the fleet cars, the latter of which can be dumped as Buicks or something similar), the trucks as GMC's and badged the Euro Saturns as Opels, trying to hype the European heritage as part of the marketing.
Does anyone but for the occasional diehard really see a difference anymore between Buick, Pontiac and Chevy? Wouldn't people who want Corvettes still buy them if they were simply called "Corvette" without a Chevy badge? I see nothing but benefit from such a strategy.
New Balance in the Good Ol' US of A.
Rocky
The Soltice and Sky aren't hot small cars ? :P Both are union made and are all spoken for.
Rocky
His Opinion is nothing short of something I would read from Mein Kampf and offer no objective opinion.
Rocky
Agree with most of it. However, I do take into consideration union restraints on employers and agree the UAW should of been more flexible then they are. The UAW like management is taking progressive steps for inprovement, and I would think you'd agree ? I believe a worker working for a multi-billion dollar corporation deserves a fair share of the pie for building a company. GM could fit the workers wages into the costs of vehicles, if they would build better vehicles and offer the consumer the best vehicle for his/hers money.
brightness, probably doesn't but I was wondering how you felt ? The UAW has to become more flexible if they want to survive and eventaully restructuring will save jobs, and make the company profit. It's a hard lesson learned, and with a global economy both the UAW and GM have no other alternative.
Rocky
Wow you already answered my question I was going to ask you.
I was going to ask how is Ford and Chrysler profitable with the same union and working conditions ?
You answered my question
Rocky
You are right on all points in my book.
Rocky
Rocky
There's certainly no reason to have all of them as they currently are. (The Aura looks like it's more upmarket, but the Malibu and G6 are probably cross-shopped all the time. Now, if the G6 were more of a sports car, rather than a chevy with different body panels....)
Eliminating brands may not be feasable with the costs associated with franchises, but continuing to have a full lineup for every brand is pointless. I've heard speculation that some inside GM would like to try to combine dealerships for Pontiac, Buick, and GMC into single dealerships that sell all three nameplates, and narrow the brands to reduce overlap. Chadillac and Chevy would retain fairly full lineups, and Staurn would primarily import designs from Opel. They'd keep all their names (and the buyers who will only buy a _______) and would greatly reduce overlap.
Rocky
Mistrust? Such as asking the employees to take pay or benefits cuts when the company is taking a hit financially? How rude. Last time I checked, businesses are there to make profits. The employees are there for the company, not the other way around. If you are providing something that the company needs for a decent rate, they will not send you to the unemployment line. If you provide what the 18 year old kid can do for half as much, then the company is stupid to keep you. It is up to you to build up your skills to make yourself secure in your job while not demanding so much that they don't feel it is worth keeping you.
Until an illegal person in the country comes to do it at much, much less.
2014 Malibu 2LT, 2015 Cruze 2LT,
The problem is getting rid of brands.
Dealers are independent businesses. Money makers historically, they have managed to influence state law makers, who in turn have authored legislation to protect them from having manufacturers sever their franchises. Even something simple like switching, say, Pontiac/Buick/GMC dealer to a Chevrolet dealer would be very difficult in most cases, owing to overlapping districts.
As the experience with Oldsmobile shows, it is not impossible to kill brands. But it is time consuming, expensive, and difficult to manage from a PR perspective. State regulations such as these are one of the reasons the US is usually less than 15th or so when rating the most competitive business climate. State legsilatures are forcing existing companies to use 50 year old models, allowing newer companies - usually foreign as it happens - to adopt more nimble modern models. Odd and shortsighted. In other words, politics as usual.
Projections are given for all kinds of reasons. Many projects in life would not even get started without wildly optimistic projections. The initial projection was made when gas was $1.2/gal and the US car market in a boom. By the time the car was introduced, gas was over $2/gal. More importantly, it's an experiment on holding the price line and rejuvinate brands; if GM can steadifastly hold the price line with this experiment, GTO may just be the first model in a long time that Pontiac is able to sell at anything close to retail price . . . something you have been screaming about GM should do.
By any standard, selling fewer than 14,000 units of any nameplate, aside from an exotic or highly-niched speciality car, is really bad. Toyota had no problem selling far more Scions, despite being an entirely new badge with entirely new nameplates, with no historical legacy from which to borrow as the GTO had.
How do you classify a 400hp car except for calling it a highly-niched specialty car? How many car models do you know that have 400hp or more? There is only one car from Ford that has 400hp or more, that's the Ford GT at $150k, sold in a few hundred units a year. There is not a single car model from Toyota that develops 400hp in the 2005 lineup, or the 2004 lineup, or even right now in any Toyota dealership. There is not a single model in the Nissan lineup either, nor Honda. BMW has exactly one model, the M5, at $80k, sold in a few thousand units each year. Get a clue now?? It's sheer lunacy to compare GTO to Scion, an entry level car. The funny thing is that GTO actually outsold Lexus IS in 2005, which actually is in the same price bracket but in a much more popular market segment.
Again, you are the consummate excusemaker for GM management, no matter how obvious the mistakes may be. Unless you're Rick Wagoner's mom, I can't see any rational reason why you'd be so quick so often to defend them at every turn.
That's because you are either ignorant or irrational or both. The GM management is not given $20 billion to build a brand new car company. They are given an existing car company to manage. All the suggestions and critics that you have proffered (when they are not self-conflictory) are so far off the wall (they are not even on the target board, much less anywhere near the bulls eye), one has to wonder how little you know about the auto industry anyway.
What you are missing is that most fleet sales take place towards the end of the model year. 2005 was also Mustang's first model year, so you are talking about the first half of the first model year. Of course discounting and fleet sale ratio is low during that period . . . things change rapidly as models age. For what it's worth, GTO fleet sales was near-zero in its first year, and probably still is today. Of course, that's not entirely a fair comparison either because GTO is a specialty car, unlike the rental fleet Mustangs.
Care to give an example?? Mises, Hayek and their followers are about as far from Mein Kampf followers as it gets. In fact, the most important political commentary from Hayek, The Road to Serfdom, is very much put together as an antidote to National Socialism. An illustrated abridged version can be found on mises.org: http://www.mises.org/TRTS.htm
On the other hand, some of your earlier writings on Japanese copying etc. could have been taken straight out of Mein Kampf, if you ever really read the book yourself.
What is exactly the purpose of that PR move?? To encourage Hertz rentals, especially rental of (regular) Mustangs, which are soon to flood the Hertz fleet. Smart move or not, the whole marketting message is that it's somehow cool now to rent a Hertz, especially a Hertz Mustang. What more is there to it?
You apparently didn't read #806, when I noted:
If you observe all of the car companies that have been successful in their efforts to grow in the US as full-service automakers, they have all started with compacts that competed on price, added some sort of sporty car to bring some positive attention and flash, and then worked their way up to higher-priced luxury cars once they had built their credibility. If GM completely abandoned the car market, they'd have a hard time getting back to it, in my opinion.
I would think that they would simply be better off by focusing their energies on building one great car in each segment, instead of three or four mediocre similar ones that don't impress anyone. They need a few home-run products that will improve their image and reputation with retail customers, and create the basis for new brand loyalty.
The Solstice would be a good car for GM if it helped to serve as an image leader that could bring buyers to other cars in the GM lineup.
I know that you aren't much for quantitative data, but here's a math exercise for you:
18,000 units of Solstice to be built for MY 2006
divided by
4,517,000 vehicles sold in the US by GM last year
equals
Solstice providing about 4/10ths of one percent of GM's US sales
If you think that a car selling 18,000 units is going to pull GM from the brink of extinction, you are kidding yourself. That is why GM needs to ALSO build competitive mainstream vehicles that could generate mainstream levels of retail sales (i.e. 150,000-300,000 units) in order to make money for the company and to bring customers back to something aside from the occasional niche product.
As it stands now, I seriously doubt that very many people who want a Solstice are going to be drawn to the G6, anymore than the Corvette does much to sell Malibus. Given the choice between developing a car that could sell 300,000 to young people who will eventually buy another car, and selling 18,000 units to a few Miata buyers, I'd go for the former in a heartbeat. For a company at the edge of a cliff, that's just basic common sense.
That's exactly that I was pointing out to Rock. A low-volume two-seater was not the "small car" that you were talking about.
Given the choice between developing a car that could sell 300,000 to young people who will eventually buy another car, and selling 18,000 units to a few Miata buyers, I'd go for the former in a heartbeat. For a company at the edge of a cliff, that's just basic common sense.
Except you are lacking the common sense that the choice you are suggesting was never there. Solstice is an exercise in GM parts bin, costing perhaps a couple hundred million. Developing a car that can compete against Civic head-on cost something like $5 billion; that's how much it cost Honda to R&D and tool up for each generation of Civic in the past decade. There's more than an order of magnitude difference. BTW, I'm very good at math, and you can keep your insults to yourself, considering your own track record with numbers.
That's true, and certainly not an easy choice. But as memory serves, the payout to Olds dealers amounted to something in the range of $500 million, just a fraction of the cost of the aforementioned failed FIAT blowout.
Hence my point above: that $4.4 billion could have paid for the entire brand restructuring, provided marketing dollars for a few killer cars and helped to beef up the R&D budget even further. The remaining brands could have been strenghened and made more competitive.
With the company in contraction, management has no choice but to budget its limited resources and time, and to channel them toward efforts that can be most effective. Supporting all these badges just creates brand confusion among consumers, and imposes a bureaucracy that sucks up time and scarce dollars that could be focused on R&D and marketing.
With the sell-off of GMAC reducing future revenues, I wonder if it's already too late for the brand building exercise. Perhaps the next step will be for GM to raise cash by selling off whole sales groups, such as Opel/Vauxhall or Holden.
Yawn. No, it's a way to get a few glitzy cars on the roads, and to generate a bit of excitement among middle-class renters who will talk up the car amongst their friends and associates, and possibly help to create a bit of buzz to sell regular Mustangs or perhaps other Fords to retail customers.
It's cheap marketing. The cars will be rented for a time, then repurchased by Ford, at which point they can be sold off as collector's cars at retail. (The Shelby name and its limited edition status will help to command a premium price.) Pretty much a no-brainer, there isn't much reason why they shouldn't do it, and it is obviously not comparable to dumping Impalas by the thousands into regular rental fleets.