The Finch Formerly Known As Gold

23 July 2005

Stinking badges

Robert Farago at The Truth About Cars has been running a series called GM Death Watch, and one recurring theme throughout has been the bloated number of brand names the General is trying to support. Oldsmobile, of course, is gone, and Buick and Pontiac are being stripped back to niche levels — neither will offer a full top-to-bottom line of vehicles — but, says Farago, this isn't enough:

[T]here is no way on God's green earth that GM can make eight — count 'em: eight — carmaking divisions fire on all cylinders all at the same time. Even if one or two members of GM's portfolio suddenly become wildly successful — a fair proposition given the law of averages — the others will take the resources generated and piss them away. There will always be a crisis somewhere in The General's ranks. It's a no-win situation.

Need proof? Look overseas. GM's European operations posted a $37m profit. It's not great, but a profit beats a loss every time. So why is GM Europe floating while its US parent flounders? European labor costs are worse than America's, and governmental taxation and regulation is on the far side of burdensome. But GM Europe doesn't sell eight different brands. Vauxhall [UK] is a single strong brand with a coherent message and worthy products. Ditto Opel on the Continent. These companies have focus.

There is no question that GM needs, for instance, the upcoming Solstice. But it's a waste of time and effort to sell it as a Pontiac, in light of the fact that they're also going to try to move a version of it at Saturn stores. Assuming there's a market for, say, a quarter-million of these little darbs per year, it makes no financial sense to build 150,000 with one badge and 100,000 with a different badge unless they're absolutely identical otherwise (cf. Dodge/Plymouth Neon); the money it takes to differentiate one from the other cuts severely into the take.

Not that Ford is doing so hot either, but Ford only has to support three domestic brands, and while Mercury is otherwise hard to justify, I suspect not many dealers could survive on Lincoln alone, especially since Lincoln has ceded the top of the domestic market to Cadillac.

Posted at 8:00 AM to Driver's Seat