1/1/2002 | 3 MINUTE READ

On The Indusry: The Return of GM

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What’s happening at America’s largest car maker—General Motors?


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What’s happening at America’s largest car maker—General Motors? With its North American market share slipping and recent lackluster new model launches, what prompted GM to spring into action and finally take charge of their sagging North American operations?

In a word–revolution. And Rick Wagoner is waving the banner of a new General Motors. After the devastating effects of September 11th, GM initiated a war of its own–an incentive offensive against all of its North American rivals. The 0% financing incentive push has pinned down a fragile Ford and a decimated DaimlerChrysler into a game of “catch-up.” With Japanese and Korean OEMs gaining ground in GM’s home market, the company has decided to grab market share while Ford and DaimlerChrysler experience severe financial difficulties.


Product Czar Continues the Revolution

In addition, the recent hiring of Bob Lutz as “product development czar” was a major coup. Armed with a mandate to revamp GM’s tepid product lineup, Lutz is methodically reviewing GM’s new generation vehicles and is determined to reshape and recast these new vehicle platforms, a skill he honed to perfection at Chrysler Corporation. Unfortunately, the full effect of this effort won’t be felt until 2005/2006 at the earliest.


Brand Marketing Shifting

General Motor’s infatuation with brand marketing also has taken a hit. With the departure of Ron Zarella, GM’s strategy of marketing vehicles like Procter & Gamble markets Pampers diapers has failed. The current brand management structure will be altered to focus on providing designs that distinct consumer groups want. Expect more brand management hiring recruitment from Ford, DaimlerChrysler and European vehicle manufacturers, less from Whirlpool, Procter & Gamble and Bausch & Lomb.


European Design Influence Fades

For the past 20 years, GM has been obsessed with the European design expertise within its Opel operations. After numerous North American design failures (can you say Catera?), the company finally realizes that Opel isn’t a premium European design studio like Bertone, Pininnfarina, et al. North American consumer’s tastes differ greatly from that of European consumers. GM is expected to continue to aggressive recruitment of top European and American vehicle designers.

With numerous initiatives underway at GM, what can we expect out of the new GM? Providata Automotive offers the following projected market developments for General Motors:

  • Incorporation of Daewoo models into GM’s North American small car platform strategy and eventual elimination of Daewoo dealerships in the U.S. market. GM has watched Hyundai, Kia and Daewoo establish a solid foothold in the U.S. small car segment. Through the acquisition of Daewoo, the small car segment situation improves considerably.
  • The Lutz effect could happen sooner than many expect. A total design review and product rationalization could scrap “ho-hum” mediocre products in the “close to production” pipeline. The new off-the-drawing board models would hit until 2005-2006 at the earliest. Expect GM to revive the Camaro/Firebird and introduce new sportier mid-size models during the 2005-2010 timeframe.
  • GM’s purchasing organization will extend its gaze to Southeast Asia, Eastern Europe, Latin America, India and China for new suppliers to counteract the consolidating North American supplier industry. GM’s purchasing leverage has been decreased through the continuing merger & acquisition activity in the supplier community. In addition, the Covisint trade exchange is taking much longer to implement than expected.
  • The General Motors-Delphi Automotive relationship will cool due to GM’s aggressive purchasing policies and Delphi’s desire to lessen its dependency on its former parent company. According to its own SEC 10-K form, Delphi wants to achieve 50% non-GM business by 2005. The GM-Delphi relationship will always be a very strong one, just less co-dependent in the future.
  • GM’s Asian strategy brings together the resources of Fuji Heavy Industries (Subaru), Isuzu and Daewoo in a market-by-market, focused attack on attaining its 10% goal of the Asia-Pacific light-vehicle market. GM executives have been recently strengthening these ties and discussing deeper stakes in these Asian vehicle manufacturers.
  • The GM-Fiat alliance will lead to a full-fledged merger between the two auto giants during the next 5 years. Consolidation of the global automotive vehicle manufacturing industry and increasing competitive pressures in Europe will lead to the addition of Fiat as a GM entity within the next few years. Expect many co-branded Opel/Fiat vehicles in the latter part of this decade.