May 21, 2005|By NEW YORK TIMES NEWS SERVICE
DETROIT - Facing its worst financial outlook in more than a decade, General Motors outlined a new product development and sales strategy this week, saying that from now on Chevrolet and Cadillac would be the company's only brands to offer a full lineup of vehicles.
That means GM's other six brands in the United States will focus on a narrower selection of segments. GMC and Hummer will continue to sell trucks while Pontiac, Saab and Saturn will focus mostly on cars and smaller SUVs, with Buick offering some of both.
The plan indicates that GM is trying to wean itself from what has been a highly criticized product development strategy of keeping costs down by developing the same basic vehicle for many of its brands. It also will likely mean consolidation of the company's more than 7,000 dealers.
"GMC, Pontiac, Buick, Saturn, Saab and Hummer can offer vehicles that are very specific rather than shipping millions of identical vehicles all over the world," said Mark R. LaNeve, GM's new marketing chief, according to a transcript of a speech he gave Thursday in New York. "Our complementary brands won't succeed as `little Chevrolets' or less-expensive Cadillacs. They have to be distinctive, differentiated products."
LaNeve also said GM would push to make more progress in a continuing effort to package Buick, Pontiac and GMC together under the same roof so that the three brands together can be positioned to offer vehicles that each individual brand can't.
That would prevent GM from shutting down another brand, as it did with Oldsmobile; there was concern among dealers that Buick and Pontiac were vulnerable after GM's vice chairman, Robert A. Lutz, referred to them as "damaged brands" at a conference in March. LaNeve quickly played down Lutz's remarks at the time and reiterated Thursday that all of GM's brands would survive.
"I get asked all the time, `Don't you really think you have too many brands?'" LaNeve said in an interview Thursday.
"We can't afford to have eight brands if we try to do what we did 20 years ago," he said, referring to the company's traditional effort to make every brand expansive in its offerings.
Taken to its conclusion, the company's plan suggests GM might push the United Automobile Workers to agree to close some plants, because the company is already producing significantly more cars and trucks than it can sell.
A recent Morgan Stanley report estimated that nearly half of GM's American production capacity either was idled or was used to make cars that were sold to rental companies, government fleets or employees and their friends and families.
GM closed its Southeast Baltimore assembly plant last week after 70 years.
"Forty-five percent of their capacity goes to low- or no-return segments," said Stephen J. Girsky, a Morgan Stanley analyst, who called the new strategy a "good idea."
"Instead of forcing yourself to provide a full line of product to all these brands, which is expensive and ends up producing mediocre stuff, you don't force each brand to be all things to all people."
The new brand strategy was first reported Thursday in The Detroit News. It comes on the heels of two months of bad news for GM. Last month, the company reported a $1.1 billion first-quarter loss, its largest quarterly loss in more than a decade.
On May 5, Standard & Poor's cut GM's debt rating to junk status for the first time, a substantial blow for one of corporate America's largest borrowers.
The company has had some good news this week; J.D. Power & Associates reported Wednesday that the company's cars and trucks had made significant gains in initial quality surveys of its customers, though Toyota still leads the surveys. Toyota and Nissan have been making rich profits while GM has struggled.
