Struggling automaker's brand strategy has been under microscope since York suggested killing both.
Brett Clanton Detroit News April 30, 2006
For General Motors Corp., it's the question that just won't go away: Why, if the company is getting smaller and keeps losing sales, does it still need eight vehicle brands in the U.S. market?
As part of a sweeping turnaround, GM has dropped the cost-cutting ax on nearly every other corner of its business, laying plans to close plants, cut thousands of jobs and pare health benefits for employees.
While it scrapped Oldsmobile in 2002 and killed off slow-selling models such as the Cadillac Eldorado, Buick Park Avenue and Pontiac Bonneville, GM has avoided the nuclear option for its other brands.
"We're totally happy with what we've got," GM Vice Chairman Bob Lutz said this month at the New York International Auto Show. "We're not going to add any (brands). But we're not going to remove any."
Critics say GM is clinging to the idea of being big, even though its U.S. market share has slipped from 45 percent in the early 1970s to 23.9 percent this year. In January, Jerome York - then an adviser to billionaire investor Kirk Kerkorian and now a GM board member - said GM should either sell or kill its Saab and Hummer brands as part of its turnaround.
Jay Spenchian, who became Saab USA's general manager last year, and Martin Walsh, who took over as Hummer's general manager March 1, said in separate interviews with The Detroit News that their divisions will play important roles in the turnaround of GM, which lost $10.6 billion in 2005.
The Swedish-born Saab brand - in which GM purchased a 50 percent stake in 1990, then bought outright in 2000 - remains a tiny player in the U.S. auto market and a profit disappointment, even after major investments by the automaker.
And Hummer, while profitable and growing, has a three-vehicle lineup that some say could be absorbed into one of GM's other brands at a savings of millions.
Spenchian and Walsh, who previously had key roles in the turnaround of GM's Cadillac brand, say they have been given a clear directive to grow the brands, and have been assured at the highest levels of the company that Saab and Hummer are going to remain part of the plan.
"Any questioning of Saab's future is over," Spenchian said.
The Saab brand received a boost in February when it unveiled the Aero X concept vehicle - a sleek coupe that evokes the brand's heritage as a former maker of jet planes.
Spenchian acknowledges the brand has been "consistently inconsistent" in both its marketing and vehicle offerings. But, he said, "what you're seeing now is a real dedication to moving forward."
GM recently added new models to the Saab lineup and aims to double the brand's U.S. sales to about 80,000 by 2010. As its main luxury brand in Europe, GM says Saab is also a key part of its growth plans in that region.
Experts say Saab needs to distinguish itself from other luxury makes.
"What are they trying to do? What is their mission?" said Tom Libby, senior director of industry analysis at J.D. Power and Associates' Power Information Network. "And that, to me, is fuzzy."
Saab in recent months launched a new advertising campaign that has raised its exposure and helped increase sales.
York, since joining the GM board in February, has gone from "negative to neutral" on Saab after performing an internal review of the brand, Lutz said.
And what about Hummer?
Walsh said he addressed its future right from the start. "Either the second or third day I was in the brand, I talked to Bob Lutz. And my first question to him was: Am I going to sell Hummer, or am I going to sell Hummers?"
Lutz's response, according to Walsh: "You're going to sell Hummers. We're not going to divest ourselves of the division."
Since then, Walsh said his task has been to determine where the brand can go from here. With a 175 percent increase in sales in the first three months of the year, new dealers coming online and brisk sales of the new H3 midsize SUV, Walsh said the brand's future is wide open.
"My job is mostly just to find out what the true potential of the brand is," he said. "At this point in time, no one is really sure."
But even with gas prices on the rise, the brawny truck brand has no plans to soften the image of its rugged, gas-thirsty vehicles, Walsh said. "Hummer is what it is," he said.
It was Lutz who first spurred speculation that GM may jettison a brand. At a presentation last spring to financial analysts in New York, the executive referred to both Pontiac and Buick as "damaged brands," comments he says were taken out of context. A few years ago, GM's money-losing Saturn brand also came close to joining Oldsmobile on the automotive scrapheap.
But now, as part of its North American turnaround, GM has a new brand strategy for all eight of its badges. GM is making Cadillac and Chevrolet its only full-line brands, while Saturn, Buick, Pontiac, GMC, Hummer and Saab will offer limited product lines and target specific markets, such as performance enthusiasts and professional-use trucks.
The plan is meant to improve the image of each brand and curb the practice of rebadging the same models for different brands.
But it's also an attempt to dispel what some of GM's more optimistic critics have said of the auto giant -- that, perhaps, it doesn't have too many divisions, just too little imagination.