For General Motors, A Fond Good Bye! Here's Why
by Alf Nucifora
I am not a callous person. Those who know me well will attest to my hard-core, soft-centered, weepy liberal sensitivities. I'm a firm believer in fortunate man helping his less fortunate brother and sister, with the tax code as an acceptable facilitator. For that reason I can empathize with GM retirees who, after decades on hot, de-humanizing assembly line work, are about to lose, or see slashed, their pensions and health coverage benefits which at a $5.4 billion annual tab currently apply to 1.1 million workers, retirees and dependents in fifty states. But there are occasions where political correctness must be called on the mat, and this is one of them. GM is the cause of its own demise, and while successive managements must bear the brunt of the blame, rank-and-file employees cannot escape responsibility. Years of union intransigence and dictate, coupled with a spineless management response, have resulted in union contracts that protected manufacturing mistake and enhanced a sense of overpaid entitlement. As in all cases of egregious waste and abuse, the chickens eventually came home to roost, in this case in the form of impending bankruptcy. The decision, as journalist Daniel Akst notes "to buy short-term peace at the expense of long-term viability" has resulted in "the company paying a remarkable $74 an hour, including benefits and retiree costs, for its domestic factory workers".
Bravo for the boys at the top!
From a marketer's perch, the troubles begin with an in-bred, arrogant management structure that for decades hewed to a top-down, "we know best" auto industry mentality. It was this culture and operating philosophy that more than anything drove GM, and by extension, most of the Detroit brands at varying times, into the abyss. Today GM has seen its market share sink from 35% of the domestic market in 1992 to 25% today, and lose $1200 per vehicle versus Toyota, which averages $2000 in per vehicle profit. The litany of self-destructive, almost willful behavior includes:
- An assumption that size, speed, power, and a mushy driving characteristic would always remain the dominant desires of the American buyer, and that cheesy chrome and lurid velour finishes, direct from the 50's would remain the American consumer's style of choice. It represented a core belief that GM knew best and that "listening" was a reverse, unilateral process whereby consumers listened as the company told them what they would like.
- A willful ignoring of the emerging Boomer mindset of the 70's and 80's that demanded quality of assembly workmanship, tight tolerances in body fit, elegant, attractive exteriors, stylish, emotionally-compelling interiors, and air conditioners, windshield wipers and audio systems that actually worked, not to mention tight, European driving characteristics that felt the road and brought an actual thrill and enjoyment to the task of driving a car.
- A mediocrity of brand presence resulting from years of insipid, uninspiring automotive design at a time when Japanese and German manufacturers were creating consumer excitement by the hour. Every time I rent a GM car from a car rental agency I'm reminded of just how mediocre that image and performance remains, in comparison to the foreign-bred car I own and drive by choice.
- An arrogance that manifested itself to the consumer in a variety of different ways commencing with Bloomfield Hills-based management that prided itself on never actually driving a Japanese car or "shopping the competition" which it viewed with undisguised contempt, and extending to the dealer system that viewed the consumer as sucker-bait lacking in discrimination, knowledge or taste.
- An internal bureaucracy that prized process over results, powered new product development cycles at glacial speeds, encouraged little or no communication between essential corporate functions, particularly between marketing and engineering, and has favored bean counters whose enduring claim to fame has been a tin ear for marketing nuance in a consumer category that is driven by emotional appeal and marketing influence.
- A manufacturing process that acknowledged mistakes and flaws in the assembly stage and deliberately allowed for fixes to be made post-sale at the dealer level, a typical example of contempt for the consumer that typified company marketing strategy of the time.
- A reliance on the "crack cocaine" of rebates that has trained consumers, like zoo animals trained for daily feeding times, to line up for discounts, free financing and other emoluments that will inevitably appear at close of the model year.
- The refusal to shut down non-performing brands and lessen the confusion that arises from an outdated, socio-economic, "trade up" model that has been recognized by consumers as the confidence trick it is, given the cross-utilization of assembly plants, platforms and engines and resulting product and brand parity that can no longer be concealed with cosmetic shape-shifting and badging. Who can forget the Cadillac Cimarron fiasco?
- Brand strategies and communications, predominantly advertising, that are uninspired and that reveal a confusion, resignation and frustration that comes from years of misguided strategy and defeat. Even the recent success story, Cadillac, has got it only partly right. While brand resurgence is unquestioned, one cannot help noticing that the brand custodians still don't fully get it. Here is a brand presumably targeted to an upscale demographic, that is marketed as a chariot on steroids, angular features and garish badging calling attention to itself, in sharp contrast to the quiet elegance of a Mercedes-Benz or Lexus.
- An unwillingness to address the intrinsic weakness within the traditional family sedan sector and instead, propping up sales revenue and profitability by gorging on the profit-fat and unchallenged truck and SUV product lines. Until the Japanese took that business away as well, as everyone new they would.
- A failure to consistently read the tea leaves when it comes to shifting consumer trends and preferences. As consumers were sniffing around hybrids such as the Toyota Prius, GM was acquiring the obscene, over-the-top Hummer, hardly a prescient strategy to have in place as gas averages $2.50 per gallon and consumers are reminded daily of encroaching environmental concerns and global warming.
It's all over, bar the shouting
Take a bow Japan. You listened to the call of the customer. In the early days, you paid attention to all those misfits (today we call them early adopters) who tooled around in VW Beetles and sought refuge from the billowy behemoths and battleships that their parents drove. You did your research and heard what Detroit chose to tune out, that consumers wanted better quality and service, superior sound systems, tighter road feel, more leather and less velour, no cheap plastic or fake wood trim and a brand imagery that reflected restraint of style and economy of consumption. And you gave us German analogs with an acceptable price-value relationship. As we improved in financial status, you provided Lexus, Infiniti and Acura as logical badges to trade up to.
That's why foreign-heritage brands have won the hearts and minds of the American customer and why the Pontiac Vibe and Toyota Matrix are absolutely identical cars, manufactured at the same joint-venture West Coast plant on the same assembly line, yet the Matrix sells for $1500 more at retail because of the power of the Toyota brand. GM has to put $2000 into incentives for the Vibe and sell it for $500 less than the Matrix.
So enough of the weeping and gnashing of teeth. GM deserves what it got. Let them declare bankruptcy and go softly into the night joining the beached hulks of others like PanAm and Sears who have similarly suffered Darwinist decimation. And let those brands that respect the growing control of the consumer, take their place and prosper. That after all is American capitalism at its survival-of-the-fittest best. Anything less would be unpatriotic.