What’s wrong with General Motors.

May 1, 2005

What happened to General Motors happens to all companies, even yours. New products, new technologies and new distribution channels cause brands to become unfocused over time. And you can’t build

a powerful brand by being all things to everybody.

The minivan, the sport-utility vehicle, hybrid vehicles, four-wheel drive and a host of other automotive innovations were hailed by GM because they promised to broaden the market and increase sales.

Choice, isn’t that what consumers want? So a prospect walking into a Chevrolet dealership is overwhelmed by choice. Small cars, big cars, cheap cars, expensive cars, sports cars, trucks, you name it, Chevrolet has it.

Every person walking into a Chevy dealership will find something “for every purse and purpose,” to reprise an old General Motors slogan.

The problem is not inside the showroom, be it a Saturn, Chevrolet, Pontiac, Buick or Cadillac showroom. The problem is outside the showroom, inside the mind of the prospect.

If the prospect wants a cheap car, he or she heads to Hyundai or Kia.

• A well-built car? Toyota.

• A sport-utility vehicle? Jeep.

• A minivan? Chrysler.

• A car that’s fun to drive? BMW.

• A car that’s safe to drive? Volvo.

• A small car? Volkswagen.

• An expensive car? Lexus.

• A prestigious car? Mercedes-Benz.

• A sports car? Porsche.

• A truck? GMC.

Of course, the two leading brands, Chevrolet and Ford, continue to sell millions of cars and trucks a year. But these are weak brands propped up by three factors.

1. There are far more Chevrolet and Ford cars on the highways than any other brand. When an owner of one these cars decides to trade it in, his or her first thought is to buy another of the same make. Why? Maybe the hope of a better trade-in allowance. Or a good relationship with a sales person. Or the dealership happens to be close by.

2. There are far more Chevrolet and Ford dealerships than any other brand.

Chevrolet has 4,147 franchises. Ford, 3,808 franchises. Toyota has only 1,209. Not surprisingly, the average Toyota dealer sells more than twice as many cars and trucks as the average Chevrolet dealer.

3. There are far higher incentives available at Chevrolet and Ford dealerships. In a recent month, the average General Motors dealer was offering an incentive of $3,858 per vehicle. Ford, $3,410 per vehicle. And all the Japanese car makers combined, $929 per vehicle.

For those of you who think it’s advertising and advertising alone that builds brands, you should know that General Motors has been the largest advertiser in the U.S. for the last seven years in a row. In 2003, for example, GM spent $3.4 billion on advertising.

To grasp the gravity of the GM situation, look at the stock market. On April 1, General Motors had a market capitalization of $16.6 billion. That same day, investors valued Yahoo! at $47.0 billion, almost three times as much.

Yahoo? General Motors is the third largest corporation in America with sales last year of $193.5 billion. As a GM chairman once said, “What’s good for General Motors is good for America.”

I agree. Who invented the concept of marketing? Americans. Who invented the concept of branding? Americans. All over the world, on any day of the week, you’ll find American speakers talking to foreign business people about advertising, marketing and branding. (I should know. This month I’ll be in Norway, Sweden and Chile.)

The General Motors situation is embarrassing to me personally. Here is a company that hired Robert Lutz (a former Chrysler and Ford executive) to put pizzazz into the design and function of GM cars. And he has. There’s nothing wrong with the cars. It’s the branding that’s all wrong.

When GM had half of the U.S. automobile market, it also had a finely tuned branding strategy. Chevrolet was their entry level car. And then you moved up the ladder to Pontiac, Oldsmobile, Buick and Cadillac.

Except for Cadillac, today’s GM branding ladder goes nowhere. Moving from Chevrolet to Pontiac to Buick is essentially a sideways move. The three brands are all competing with the same portfolio of cars.

(Years ago, Pontiac was the Pepsi-Cola of cars. A brand focused on the younger generation. You would have thought, would you not, that GM would have given its youth-oriented car, the Corvette, to Pontiac instead of Chevrolet.)

What is GM’s entry level car? Saturn or Chevrolet? The answer is both. Not a good strategy.

Years ago, I was invited to visit Buick where I was taken through the design studio. “What are they doing over there?” I asked.

“They’re designing our entry-level Buick,” someone said.

“Your entry-level Buick,” I replied, “is Chevrolet.”

What could General Motors do? Here are some of the steps I would take.

1. Reduce the competition between Saturn and Chevrolet by making Saturn a cheap car, perhaps built in Korea.

2. Reduce the competition between Chevrolet and Buick by phasing out all the expensive Chevrolets (as well as the cheap Buicks.)

3. Make Corvette a separate brand with its own dealer network. (As time goes on, and categories diverge, companies should have more brands, not fewer.)

4. Make Pontiac a youth-oriented brand. Hire only Pontiac designers who were born and brought up in Southern California.

5. Sell no Cadillacs for less than $50,000. And then gradually increase quality and prices. A prestige car needs a prestige price.

6. Long-term, make GMC the corporation’s major truck brand. But start by giving the brand a better name.

What’s wrong with General Motors? It’s not an advertising problem. As a matter of fact, there are no advertising problems. There are only marketing problems, some of which can be solved by advertising.

General Motors has a marketing problem of enormous proportions.