I tried posting here earlier, but where it went????
Anyways, I own 2 Buicks, and I think Buick has a good position between Pontiac and Cadillac, at least that's how I see it.
To me, Saturn has always been GM's version of Honda, but I see a lot of SAAB working into their look...boring to me.
Chevy's always been more of a entry class, to me, with fully optioned models coming close to a base/mid Buick.
Cadillac, the domestic, "I've arrived" cars...I know they went "cheap" for a while, but have been climbing back up the status ladder.
Pontiac, sportier/classier, I'd love to see them compete with Mazda and Nissan, but not as a copycat, but an American Styled, performance oriented line...
I saw a white Impala SS/V8, dual exhaust, version...Looked pretty Bad @ss!!Sounded good too, he was really driving it!...here in Pigeon Forge, on vacation...
I love the wife's 2003 Rendezvous, it functions flawlessly, just some appearance issues, like: chrome blistering and peeling(not clear-cote)from brake dust, I guess...also some clear wearing off the black trim on the pillars and the dark gray-rear bumper. I would love to see a more modern looking HUD than the "green" DOS looking display...it looks more at home on an '80's Pontiac.

Oh yeah, the 3.4L is too low on torque for this vehicle, it must downshift WAYYYY too much to accelerate, and it hangs in lower gears WAYYY past peak power...I'd love to have a 3800 in this baby, maybe the 3.5L fares better..???

 

This entire post is GM Thinking Extreme -- Sell at a loss and make it up on volume :P -- basically the textbook for losing $10 Billion a year.

GM could afford "value" when they had a 30% marketshare ... and there's no way that's happening again any time soon. Right now they've got undesirable cars that sell poorly at low profit per unit. With their structural costs, that's the fastlane to bankruptcy. GM must get desirability and ASPs up if they're planning on surviving.

I even agree that Buick and Pontiac would ideally just go away. But realistically, that's not going to happen. Badge Engineering is alive and well ... the key is doing it right, and that means creating some breathing room between Chevy and Cadillac.

Guess you didn't do so hot in Reading 101. I said they should bring in a luxury car under the CTS, not sell less cars. And it doesn't matter if they sell it through Cadillac or another one of their largely useless divisions -- to a large degree Caddy is succeeding at the expense of Buick and even Pontiac.

I guess I haven't inhaled enough paint fumes

 

Well, it looks like you're a Grand Prix Guy, but realistically I think the current Grand Prix position could be covered with the right Impala and a sport package.

I think the right large sport sedan (like say the rumored RWD G8) could start at $27K instead of $21 for the GP, and would give Pontiac a lot more brand-identity than the current model.

 

The 2 series seems much closer to the E36 3 series coupes to me.

 

Their problems are based around fixed costs.

Either you make more cars or the fixed cost allotment per vehicle goes up.

In GM's case, labor and healthcare and pensions behave like fixed costs because of the commitments that have been made to retirees and employees (Jobs Bank anyone???). These fixed costs HAVE TO be paid

Here's the math:

GM has fixed costs of $1,000,000 - again, these costs HAVE TO be paid.

If GM sells 1000 cars, then $1000 is added to the price of the car to cover fixed costs.

If GM sells 500 cars, then $2000 is added to the price of every car to cover fixed costs.

Toyota, on the other hand, doesn't have these fixed costs, so their business conditions are different and they are not under the same pressure. They can afford to lay back and sell fewer cars simply because of the difference in fixed costs.

GM can't.

What you call "Sell at a loss and make it up on volume" is actually "cover the fixed costs or we're in huge trouble".

Wagoner's approach so far is the most effective way to reduce this burden - buyouts relieve the fixed cost issue (somewhat), and keep cranking out cars.

No matter how smart outsiders claim to be (dubious at best...), their solutions center around glib comments like "sell them for more" or "have a more desireable product", the mere mention of which belies their ignorance.

Making FEWER cars forces GM into an untenable position much faster than making more of them - which is precisely why they went into incentives to move the iron.

BTW - your assumption that Cadillacs and Chevrolets lose money is false.


Sweeping generalization.

GM has two divisions in North America (GMC basically IS Chevrolet) that are making a killing, and three that are crippled (plus two that don't make a difference either way - Saab and Hummer - because they're too small). Those three divisions have no real identity and a limited place in the market.

Your solution to raise prices on the CTS and slot in a BLS (or whatever) in North America merely exacerbates the problem.

A lower cost, lower value Cadillac provides no solution. It makes the purchase decision even worse for Buick and Pontiac ('Why buy a Buick when you can get a Cadillac??').

BLS makes sense in Europe for two reasons - open capacity in Russelsheim and the European fascination with small cars. Lansing and Cadillac don't have either of these issues. The SRX and STS take up the capacity left over in the plant from CTS - and does it at a higher price point and margin than BLS would, AND Cadillac's forumla is winning right now in North America - they're #1 for a REASON.

http://www.forbes.com/2005/12/09/lux...12feat_ls.html


This belies a COMPLETE lack of understanding of fixed costs. The fast way to bankruptcy is a lack of cash flow to pay those fixed costs... cash flow = MOVE THE IRON, and lots of it.


Again, how in the world does a BLS - or any other vehicle slotted in underneath a CTS (which will have to go up in price radically to make room for it) - create breathing room between Cadillac and Chevrolet????

Furthermore, raise CTS $10,000 and STS has to go up $10,000 to get out it's way, and DTS has to go up too - DTS's start right at about $42,000.

Rasing CTS's price $10,000, and every other car in Cadillac's line-up along with it and slotting in a lower-margin car underneath makes ZERO sense.



Don't knock it until you try it - it might help your pitiable understanding of manufacturing economics.

 

BTW, Flo...

Here's your introduction to fixed costs based on healthcare:

"GM, once described by a Wall Street analyst as a hospital that makes cars on the side, is the largest private buyer of health care in the United States, covering 1.1 million people, 530,000 of whom are age 60 or older. Last year, as it lost $10.6 billion, GM spent $5.3 billion on health care, with $1.9 billion of that spent on prescription drugs."

GM sold 9.18 million vehicles in 2005, meaning that for every vehicle built, $577 was spent on healthcare ALONE. Not labor AND healthcare, JUST healthcare.

Now, let's say GM sells only 9,000,000 vehicles in 2006, and healthcare stays the same (it'll go up, btw...).

That raises the cost per vehicle - every vehicle - by over $11. Nobody did anything different either... except make 180,000 less cars & trucks.

That's just healthcare... labor at GM truly behaves like a fixed cost also... then you've got tooling and capital amoritization... leases for real estate... decrease in economies of scale for raw materials... etc.. etc... etc...

 

Yup, that's the plan. The only problem is that it does not work. Theory runs head-on into reality. Here's the correct math:

GM has fixed costs of $1,000,000

GM plans to sell 1000 cars at 1500 markup - $1000 covers the fixed cost, $500 profit

But! Sales are only on track for 500 cars -- a $250,000 loss!

So they discount the cars by $500 in order to meet the 1000 car target and break even ... except then they miss the target and lose money anyway.

That's the reality of GM.

Toyota models sell better than GM's competition, even though they are more expensive. That's primarily because they "aim high" and their vehicles have more content and a much greater desirablity factor, and consumers are therefore willing pay much more for them than equivilant GMs and buy them in greater numbers! There's nothing about this plan that's exclusive to Toyota/Honda -- If GM matched their content/desirablity level, I strongly believe their sales would go UP, not down.

Now, let me ask you what's your plan? How does GM increase sales to make the manufacturing economics work without increasing the cars content and therefore price?

They can lean on the unions and cut fixed costs all they want, but effecitvely this just gives them more room to rebate their undesirable cars and aim even lower. Sorry, that's the recipe for swirling down the drain, which is exactly what is happening.

It's a debatable plan, but it's more realistic than "Shut Down Buick".

 

OK, let's magically make that $577 go away. Does that sell any more Impalas? No.

Of course GM's strucutral costs are a huge problem for them -- but the fundemental problem is the product and how it's positioned and priced.

Now, those fixed costs aren't going to magically go away -- GM is always going to have high structural costs, so the onus on them is to build a business that can support it. Giving away vehicles with huge discounts has been proven not to work. You tell me what will work. Pretending everything is hunky-dory with GM's manufacturing economics is just plain delusional

 

Im with you.

His point in this thread seems to be, "It would be nice if it this was better but if we change it, then it will be different."

 

So - are these theoretical vehicles "equivalent", or do they "have more content"? Please pick one or the other, and then restate your argument.

Simple economics does indeed dictate that merely increasing the price of a product without offering more features will result in decreased demand, and it is indeed reality that GM cannot afford to run its plants at reduced capacity.

 

But if that $577 is invested into new and better product then the next generation can have more/better features and sell better. Look at the big/long term picture.

 

That doesen't help the original thread problem at all. A better Buick is still less of a value then a better Chevy and less desirable then a better Caddy.

 

The economics of consumer products isn't that simple. Marketing and perception play a much bigger role than a pure price/feature analysis. As an example, I offer you the midsized family car market.

But that ignores my argument that they should be adding more features. The knocks on GM's products (cheap dashboards, 4 gear transmissions, old engines, etc) are all the direct result of the "value pricing" strategy.

Accepted -- Sub the word "competing" for "equivalent".

That might be true, but short of Chapter 11 or FDR coming back from the dead to socialize medicine, those costs ain't entirely going away. So GM has to figure out a marketing strategy that will get back that $577 (and more) on the sales side.

 

I think Buick should simply concentrate on beating Lexus in every department at every price point. I mean cars that are noticably superior to the consumer. Attractive cars with quiet ride, fine interior appointments, and quality components.

 

Not sure I follow you on this one. This is like saying you are going to take the money from the family's health insurence money and purchase an exercise machine. It's not going to do anything to help if someone in the family falls down the stairs and breaks an arm.

That $577 is a fixed cost, and is going to go up in the event the economy sours and less cars are sold, steel prices go up and there's less profit per car, or if oil continues upwards, and everything from the cost of materials to the cost of running machinary to the cost of delivery all jump.... not to mention the change in buying habits towards smaller, cheaper, and generally far less profitable vehicles.

Bottom line is you aren't going to gamble money designated your fixed costs.... especially if over 1 million people are dependent on it. You are going to use existing savings along with a chunk of your income as investment.