Mega-Loss Forces GM to Rationalize Auto Brands

23 May 2005

Less than a month after reporting a Q1 deficit of $1.1 billion (€843.95m; £573.96m), its worst quarterly loss in more than a dozen years, General Motors is to slash the clutter of disparate brands rolling off its production lines.

The globe's largest automaker (by sales) announced on Friday a new product development and sales strategy that would all but eliminate the overlapping of brands between one marque and another.

From now on only the Chevrolet and Cadillac marques will offer a full line-up of vehicles. Hummer and GMC will sell only trucks, while Pontiac, Saab and Saturn will focus primarily on cars and smaller SUV's. Buick will vend a limited range of both types.

Explains new GM marketing honcho Mark LaNeve: "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. Our complementary brands won't succeed as 'Little Chevrolets' or less-expensive Cadillacs. They have to be distinctive, differentiated products."

He continued: "I get asked all the time, 'don't you really think you have too many [marques]?' We can't afford to have eight [marques] if we try to do what we did twenty years ago," he said - a reference to GM's traditional effort to make every marque a family of brand offerings, each appealing to different market segments.

"We can have eight [marques], if six of them have very tight [brand] portfolios," he added.

Analysts approved LaNeve's thinking. "Forty-five percent of [GM's] capacity goes to low- or no-return segments," opines Morgan Stanley's Stephen Girsky. He hailed the new strategy a "good idea" and one that didn't "force each brand to be all things to all people".

It seems too that GM has finally got real about its place in the global auto firmament: "Japan Inc has passed GM," LaNeve concedes in a reference to the all conquering Toyota and its compatriots. "That chapter has been written. We really feel now that GM is the underdog. That's the reality, that's our mindset."

Data sourced from New York Times; additional content by WARC staff