California Autos Examiner

Monday, July 07, 2008

GM Division Rethink

GM Weighs More Layoffs, Sale of Brands -

I've often mused on what will befall GM over the next few years. Headlining the Wall Street Journal today is an article titled 'GM Weighs More Layoffs, Sale of Brands.'

Now, it's no secret that most people think that GM is overladen with brands. Hummer has been making news lately as a brand under careful review. It was also recently reported that the Saturn Aura has been delayed, leading to questions about that brand. The WSJ quotes an insider source that said the Aura was delayed while 'management reviews whether it makes sense to continue investing in the division.' I'm sorry to hear that Saturn is supposedly under review. I really like the current Saturn lineup, although it is very difficult for Saturn to make headway when Chevy gets a copy of Saturn's best models. I'd be very curious to see how the Astra would do at a Chevrolet dealership--I'm betting that it would selling much closer to its original sales targets. If Saturn did die, there wouldn't be much to save: the Aura has been bested by the Malibu, the Outlook will undoubtedly be stomped by the Traverse, Sky buyers would simply buy a Solstice, the Astra could be integrated as a hatch version of the Cobalt or G5 (ala Mazda3) and the Vue would be given to GMC. Of course, I think Saturn could still be saved by differentiating it with a stronger warranty or included maintenance.

Certainly the "stand alone" brands would be the easiest to cast off: Hummer, Saab and Saturn. Hummer is probably the most saleable and has the best chances of making it on its own. Saturn could be a buy for an automaker looking for a ready-made dealer network here in the States and the same is true to a lesser degree for Saab.

Would GM be stronger if it were only a two or three brand manufacturer? Yes, I think that would be the case. However, the costs associated with slimming down could be too much to bear. I'd tell Hummer "it's been real" and send them to the highest bidder and get a sense for interest in the Saturn and Saab dealer networks. Pontiac had a great RWD performance strategy before the oil shock, but now this brand may need some tweaking. GMC is also going to have to make some tough decisions as it sorts through its deadwood. I'm just not convinced that Buick can become relevant to younger buyers, but the Enclave is a great step in the right direction.

And so the market turns...I think GM definitely has to throw some brands into the water if for no other reason than to satisfy Wall Street. It's not going to be easy or inexpensive to do so, but if GM can get a handle on which divisions make sense going forward then it will all be for the better.

photo source: general motors

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