Wednesday, November 30, 2005

GM: You Call That Good Management?

by Tom Bozzo

Between 2002 and 2004, GM net profits totaled $9.2 billion.

If the new Buick Passat Lucerne doesn't succeed, Buick will be at risk of going the way of Oldsmobile — the average dealer sold four cars in October, according to AutoWeek. The Passat body style actually looks OK stretched to land-yacht dimentions, a foot longer than the Accord and more than half a foot longer even than the Cadillac STS. That, at least, bodes well for a hypothetical larger VW that's a little less ambitious than the soon-to-be-late Phaeton.

The portholes are silly, though, even if GM Vice Chairman and product czar Robert Lutz supposedly was inspired by the Maserati Quattroporte.

The question, though, is why with the future of a decades-old (if distressed) brand on the line, GM saddled the thing with the latest rendition of its 40-plus-year-old corporate V6 and a four-speed automatic, when at least five forward gears are de rigueur for the segment, to motivate the Lucerne's two-ton mass. Granted, barring a huge demographic shift, typical Lucerne buyers won't actually need acceleration or gears above, maybe, second. But ceding 50 HP and fuel economy to the Accord V-6 should just be embarrassing.

So one might think that GM's management would have been wise to have spent a couple of those billions developing a contemporary powertrain to make its bread-and-butter sedans and crossovers stand out in large but crowded market segments.

(Adding to the irony, GM's Hyrdamatic division sells modern automatic transmissions to BMW.)
Ultimately, GM management is to blame for all of GM's problems. I agree with the ideas in your post. I also think though that management is to blame for ceding to the interests of unions without fully realizing the long-term effects. I don't think that a better powertrain would solve those problems, but might have bought more time - just like the suv gravy train, as you call it, did.

BTW, in the 2004 fiscal year, Toyota profits were $10.2 billion, more than for the three-year period for GM. And Toyota was smaller than GM. Toyota's 2004 profit was more than the big three's combined. I imagine 2005 will be even more dramatic.
We actually don't disagree that much here. While I focus on powertrains (their biggest deficiency in their mass-market cars), the bigger picture is that they have things like style and performance lightly scattered through the product lines -- I actually like the rwd Cadillac sedans, for instance -- when the competitors deliver throughout the product lineup. If they took $2000 off their average incentive (which would still leave them well above Honda/Toyota levels), it would add billions to their bottom line.

While other manufacturers have indeed been more profitable, in the prime SUV gravy train years, GM was swimming in cash flow. No doubt, 2005 will be a rough year.
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