Badges? GM Needs No Stinkin' Badges!

A dip in its stock price is not a good enough reason to put GM on a death watch, but a brain-dead move from the exec team might be.

Starting in 2006 GM plans to affix chrome "GM" badges across its diverse product line. The idea is that GM suffers because so many people do not know GM builds both Caddies and Saturns, Saabs and Hummers. Color me nuts, but I doubt your basic Hummer driver wants to be reminded that a Chevy Cobalt is corporate kin. GM seems to be trying to scrape some prestige off its popular models and affix it to the slow-selling disappointments like the Pontiac G6. Both sounds bad and has a bad track record.

This stunt has been tried before by corporate big thinkers. Shortly after a down-on-its-luck Harley-Davidson was merged in 1969 with American Machine and Foundry (AMF), noted maker of bowling balls and sports gear, AMF logos turned up on Harleys. The bike maker's reputation tanked and build-quality slipped and didn't start to recover until Harley's eagle logo "flew alone" after the company severed its ties to AMF in 1981.

British Leyland also tried something similar in the 1970s in an attempt to unite its polyglot Austin, Morris, MG, Rover, Triumph, Jaguar, and LandRover stable. It did not work then either.

There is just no getting around the fact that GM needs to trim its product line, lose or merge several divisions, and actually build vehicles people want to drive. If it still can.

Comments

[MP]

None of your suggestions address the real issue facing GM, which is how to deal with the staggering pension and healthcare costs related to overly generous contracts negotiated by GM. It wouldn't surprise me if in a few years we see "Bush Agrees to Massive GM Bailout Plan".

[SR]

I'm sure prospective Saab owners will be thrilled by the idea of having "GM" stamped on their vehicles.

[Vanya]

Fine, it's not GM's biggest problem. But Jeff is right that it's a very stupid idea. I am quite sure that Saab owners in particular are not going to be attracted to a GM badge. That will spell the end of the Saab brand, which GM is doing its best to kill anyway.

[dot]

Well, there goes my idea of ever buying a Saab... oh well.

[saw-whet]

Man, I was just about to set a $25 target to buy 100 shares. I think I'll set a lower target. Anybody think it will go to $23?

I bought Ford at $11 never thinking it would go to $9.50. But GM and F have had sell stamped all over them for years. This has got to be the time to buy.

[Brian]

Saab . . . wha? I thought they built those in Sweden. Many good things come from Sweden, like the Nord Lead keyboard, and ABBA. Not a good idea.

[Twba]

GM already killed Oldsmobile. Which division should be next on the hit list?

[Evan Williams]

Saab's death rattle were those awful "state of independence" commercials. Hey, you, buy a Saab and you're an individual---you and thousands of other people who bought the exact same model with the exact same specs and exact same details. But, yeah, um, "individual".

Honestly, my opinion of Saab, even if nothing changed in their entire product line, plummetted when I first saw that they were a GM product. Just like when Daimler and Chrysler got together...there's something unsettling about paying $85,000 for a luxury car that was made by the same company that pumps out the "Town and Country".

[Twba]

GM builds a great car that many people want to drive. Unfortunately, few can afford to purchase a 54,000 dollar Corvette convertible.

[Evan Williams]

Given the repair and maintenence costs on the vette, I'd not like to have anything to do with it.

And, even then, it's not like Corvettes are all too forthcoming with their manufacturer. For awhile, when I was a kid, I didn't even know who made the Corvette. Look at it, and you might see an embossed chevy logo, but Chevy really tries to market the Vette as a stand-alone---as opposed to most of their cars, which say CHEVY in 5 different places.

[The Wine Commonsewer]

"if it can"

I'm old enough to remember when a Chevy was a good car. Not quite old enough to remember when the phrase "the Cadillac of....." meant something, but that is a telling enough tale.

[PintofStout]

Did Ford ruin Jaguar when they started makin' them? I've heard said (by obvious "Ford-guys") that the quality of the Jag improved with Ford. I guess not so with GM, or is it just an image problem? Too snooty to associate with "those other cars" [turns up nose]?

[PintofStout]

BTW, I agree that a badge is a bad idea. It is like image and reputation redistribution.

[Warren]

I'll agree that the problems plaguing GM are varied and difficult. However, General Motors vehicles still stand head and shoulders over Ford and Chrysler as far as dependability/maintenance/resale-value. While some models like the Vette do indeed stand apart from their parent co, identifying the whole line as GM products may in fact promote recognition that all the most reliable cars and trucks are all built by the General.

[zero]

GM has a tradition of killing their fun cars. From the day they were asked by congress why they were in auto racing when there was a fuel crisis they have been the pansy automaker of the world. They nearly killed the Corvette in the late 70's. They recently kill the Camaro, it was dying of bad design and engineering anyway. In the 80's when the Fiero was about to become a real sports car they killed it. It was on the way to be one of the first aluminum unibody cars ever built. The Aztec was the ugliest POS ever made. The G6 is confused with the Mazda 6 which is a far superior car. All of their products are plagued with bad build quality and bad engineering from a maintenance point of view. There is some hope with cars like the Cobalt and Solstice but because of the GM track record of killing off potentially good cars sports car enthusiasts are taking a wait and see stance. GM has some interesting products oversees in their Opel and Vauxhall lines but they have taken a very conservative "lowest common denominator" attitude for their American market. This move is just another example of that.

[Russ D]

GM already killed Oldsmobile. Which division should be next on the hit list?

Buick

http://money.cnn.com/2005/03/29/Autos/buick_pontiac_future/

[Russ D]

This is the funniest thing in the article:

"Research tells us that many of our most outstanding segment-leading vehicles are not associated by the customer to be part of the GM portfolio..."

So you want to scare the buyers away?

[Mo]

TWC,
"The Cadillac of...." still exists as a phrase, except the Cadillac of cars hasn't been Caddy in a while.

When I was in college, the Sunday when freshmen at BU moved in was called Cadillac Sunday because back in the day, that was what most of the rich parents drove their kids to school in. One of my friends quipped, you know we should really get around to updating it to Benz or Lexus Sunday.

[Dan H.]

GM's problem is that they aren't building distinctive cars. American automakers have always survived foreign competition by making uniquely American cars - powerful, bold, in-your-face kind of cars. If you wanted plain, you could buy a Corolla or a Camry.

When auto companies stop being run by car guys and begin to be controlled by bean counters, this tends to happen. Take the Pontiac GTO. On paper, this is a killer car. 400 HP, independent rear suspension, awesome interior, good driving dynamics. But they put the hardware in a nondescript egg-shaped sedan body because they could save money doing so. And now they can't give the things away.

In the meantime, you can now get a Honda Accord with close to 300 HP. If you want nondescript performance, the foreign cars eat domestics for breakfast.

Look at the few domestic successes of the past few years, and a pattern emerges: The Chrysler 300. The Ford Mustang. The new Cadillac line. These are bold, compelling vehicles that look fantastic sitting still. They're uniquely American in look. And unlike the old Muscle Cars, they have the sophisticated chassis to run with the best cars out there. They distinguish themselves in the marketplace, and as a result they are flying off of dealer's lots. Ford recently ramped up production of the Mustang from 110,000 per year to 180,000, because demand is so great. The Chrysler 300 is a huge hit, and you can see them everywhere.

GM has nothing similar outside the Cadillac line. Their cars are simply boring. They don't have marquee vehicles, or enthusiast vehicles that get them the kind of free press something like the Ford Shelby GT500 is getting. They're bland, and if you want bland, the Asians do it better.

[abc]

Cadillac is, once again, the "Cadillac of cars". I can't think of a sedan more appealing than the CTS-V and, though I could afford pretty much any car in the world, I'm buying my wife the new Cadillac convertible for her anniversary present. It's beautiful, reliable, and FAST!

[Chuck]

We have a (leased) Saab now. It has been in the shop 9 or 10 times over the past three years for various minor problems. One more year on the lease, and then I will never touch another one, GM tag or no.

[Deus ex Machina]

Just like when Daimler and Chrysler got together...there's something unsettling about paying $85,000 for a luxury car that was made by the same company that pumps out the "Town and Country".

I could never get over the fact that Porsche and Volkswagon were made by the same people.

[Xrlq]

Color me nuts, but I doubt your basic Hummer driver wants to be reminded that a Chevy Cobalt is corporate kin.

No, but the Chevy Cobalt driver probably does like that reminder. I have to admit that whenever I park my Chevy Tahoe next to someone else's G[i]M[mi]C[k] Yukon, I get a nice, tingly feeling knowing that the only difference between my SUV and his is that he paid about $10,000 too much.

[Mark B.]

There's no doubt that GM needs to get rid of divisions (it can probably get by with 2 or 3), reduce fixed costs and streamline - product identification is hardly the problem here. The biggest problem they face, however, has nothing to do with their product lines - it's the fact that the company's financial health depends on peddling mortgages. GMAC (General Motors Acceptance Corporation, the finance arm of the organization, is one of the biggest issuers of ABS paper in the country and generated almost all of GM's profit margin in 2004. This means that GMC's management has in effect gambled the future of their company on the continuation of the credit finance bubble. When the housing mania begins to collapse, as it inevitably will, GM is going to be in deep, deep trouble, no matter how good their cars are.

[Rick Barton]

GM spends more on medical costs than it does on steel. BTW, I predict its stock price is going down to under $20. Don't short the stock or buy puts based solely on my prediction...like anyone would.

[Jamie]

A dip in the stock price might not spell the end, but a 400 basis point jump in their yields might. They were trading like distressed debt on Friday. These are supposed to be investment grade bonds, but the auto trader at JP Morgan said he hadn't seen anything like this "since Enron"