R.I.P. Pontiac: Respects, but No Remorse

Pontiac has been dragging sand for more than a year. See my essay from March 2008:
The Pontiac Problem; What Would Sloan Do?

Unlike Buick, Cadillac and Chevrolet, Pontiac was not one of originally independent companies that William S. Durant amalgamated into General Motors between 1908 and 1918. Durant had collected nearly a dozen automobile truck and tractor brands, which Pierre du Pont whittled down in the crisis of 1921 to Cadillac, Buick, Olds, Oakland and Chevrolet (GMC represents the amalgamation of three truck brands).

Gaining control as CEO of GM in 1923, Alfred Sloan began to parse the middle three brands, which had been competing directly with one another. His objective was to shoehorn each into one of the five distinct price ranges identified in the Product Plan of 1921, which set General Motors’ – and the entire industry’s – policy until the recent past.

Read about how Pontiac was the key to GM’s early success: The Pontiac Problem; What Would Sloan Do?

Sloan’s problem was that Oakland, which had long been the weakest brand in the line, couldn’t compete in the second-lowest price range, which was a potentially high-volume segment, vital to the Product Plan’s strategic goal of weaning the mass market away from the dominant Ford Model T.

Sloan’s gambit was the beautifully-executed, Chevrolet-based 1926 Pontiac. It quickly eclipsed the “damaged” Oakland brand, but never embodied the ancestral brand value that helped Cadillac, Buick, Olds, and Chevrolet endure the Depression with strength and surge after World War II, when Pontiac became stale.

Precisely because 1950s GM senior management ignored Pontiac, it was able to rise again as the emblem of the 1960s Muscle Car era. That was a great run, but like a lot of high school football stars, Pontiac has never really grown up since then. At this point, the Camaro is all that’s needed to cover what’s left of the muscle segment, and Chevy and Buick make plenty of good sedans; Pontiac lives on fleet sales.

So, Pontiac doesn’t really doesn’t have a job any more, and failing to realize that is what cost Rick Wagoner his. Born not as a brand, but as a dispassionate market stratagem, Pontiac is now on the wrong side of GM’s imperative to be leaner, and needs to take the bullet. Winner? Buick gets the Solstice.

Where Pontiac came from and why it has no place left to go: The Pontiac Problem; What Would Sloan Do?

Send Me to Washington! (by car) VIDEO

Please click to check out my YouTube video proposing that I join the Automotive Task Force overseeing the auto industry restructuring.

I think I know as much about what’s right and wrong with Detroit as the Washington Wonks.

Please forward this to anyone you know in Washington and in the auto industry. Also, please post a response or comment, and Digg it to maximize the viewings.

Thanks!
<img src=”” alt=”To the Auto Industry Task Force” />

FiAT CHANCE: (Death with Dignity, Part II)

IN PART I OF THIS NEWSLETTER (THE PRACTICAL HISTORY OF CHRYSLER, AND WHY IT HAS REACHED ITS LOGICAL END), I DISCUSSED THE EVOLUTION OF CHRYSLER’S “CULTURE OF CRISIS” THAT HAS HELPED IT SURVIVE NUMEROUS BRUSHES WITH BANKRUPTCY. AS IF ON CUE, FIAT HAS ARRIVED TO UNTIE CHRYSLER FROM THE RAILS. BUT TODAY’S DOMESTIC AUTOMOBILE INDUSTRY NEEDS TO RATIONALIZE ITS EXISTENCE IN ACCORD WITH HARD REALITY, NOT A NOSTALGIC MIXTURE OF RACE GAS AND RED PAINT.

PART II: THE CHRYSLER-FIAT ALLIANCE: WHY DIDN’T YOU THINK OF THAT?

If there’s one thing that everyone eventually is forced to admit, it’s that you get what you pay for. Daimler and Cerberus have tried their hands at spinning Chrysler into gold, until the point where all they wanted was to untie the lead from around their necks. So who’s paying for Fiat’s “free” 35% of Chrysler?

The alliance supposedly augurs a slew of synergistic potentialities that no one noticed before they were conjured: Chrysler gets economical products and satisfies North America’s pining for Fiats; Meanwhile, Fiat gets to buff the top of its line with Chrysler truck platforms, and bestow Chrysler-badged products on a clamoring worldwide market. It all works out great on a napkin, but how about in the strategic context of today’s automobile industry? It seems like a good idea to ask questions such as these:

Does America want Fiats and Alfa Romeos?
Fiat left the U. S. in 1984 to taunts of “Fix It Again, Tony.” Its products were caricatures of European quirkiness and poor build quality. It’s true that in the 25 years since, the whole European automobile industry has transformed itself. But in the same period, the low-production cost Asian makers have taken over what will always be the “economy” car class in this country, while the VW Golf/Rabbit and Mini hold on to the small “premium” slice of Oddfellows who don’t buy more car at their first opportunity — but who will also never buy less. The lovable little Fiat Chink-O-chento might catch a wave during sorority pledge week, but the Mini is already known as The Italian Job to anyone who lives cute.

Today’s Fiat seems to make great cars – for Europe. In every generation, America responds to an economic crisis by embracing small hatchbacks – the basic characteristic of the Fiat lineup – until times get better, when they happily give up 5 mpg for mid-size roominess and a “normal” profile.

The presto answer to that “challenge” is Alfa Romeo. Lots of people (including me) like the idea of Alfa coming back to the U.S., after slinking away under its own cloud “only” 14 years ago. But Gottahavitism as a life-philosophy is over, and so how many premium import buyers are going to make it past the BMW, Mercedes, Audi, Lexus, Acura, Infiniti, and even Cadillac dealerships? Only the surviving remnants of a tiny, Alfisti community can be relied upon to buy in a down market where competition is more intense than ever.

Do Fiat/Alfa/Lancia/Maserati/Ferrari buyers want Chrysler-based trucks and crossovers?
Large SUVs are falling back into the utility category, but despite the economy and a probable upward trend in fuel prices, crossovers have become a permanent part of the landscape, and are de rigeur in any brand’s lineup. Still, the trend has peaked, and the current entries are girding to keep their corner of the shrinking turf. Are Chrysler’s crossover platforms refined enough to put say, a Lancia or a Maserati badge on? To play in Europe, they will need new exterior panels, new interior, and new powertrains – in particular a large, advanced diesel and appropriate transmission. In the desperate, show-me-the-money crash that always follows a Synergy high, will Fiat be forced to hitch a crossover behind Ferrari’s prancing horse? In North America, any Alfa crossover will have to face off directly against the BMW X5 and Audi Q7, as well as all the others, and will have a hard time overcoming customers’ impression that they might as well just buy a Jeep.

Are the home market dealers going to be able to sell their transatlantic ally’s products?
Chrysler has been trying for decades to sell cars and trucks in countries around the world, and except for a thirst for Jeep Grand Cherokees in the time before European manufacturers figured out how to make their own utilities, it has never really worked. Chrysler has never had the resources to make the many subtle but important changes that make a car broadly acceptable to a different culture.

There are a myriad of qualities and features in any car that seem brilliant in one market, but inexplicably dumb in another. In the 25 years that Fiat has been absent from North America, they have missed out on the continuous refinement of peculiar American tastes and the countless subtle accommodations that their future competitors have made to suit American’s continuously-changing idea of what kind of vehicle they want.

THERE ARE TOO MANY BRANDS AND NAMEPLATES IN THIS MARKET, NOT TOO FEW. THIS DEAL CORRECTLY VALUES TWO THINGS: HOW MUCH THE CHRYSLER CORPORATION (AS DISTINCT FROM JEEP AND MINIVAN) IS WORTH, AND WHAT FIAT AND ALFA WILL ADD TO THE NORTH AMERICAN MARKET. THE TAXPAYERS SHOULDN’T HAVE TO PAY ANY MORE THAN THAT.

(c)2009 Joshua Davidson

Death with Dignity: The practical history of Chrysler, and why it has reached its logical end – Part I

WHILE IT HAS PUT MANY EXCITING PRODUCTS INTO THE MARKET IN ITS 85-YEAR HISTORY, CHRYSLER CORPORATION HAS ALWAYS EXCELLED IN PARTICULAR AT SELLING ITSELF. FOR THE THIRD TIME IN 10 YEARS, CHRYSLER HAS ATTRACTED A NEW PARTNER TO DANCE WITH, FIAT. BUT IT’S TIME TO ACCEPT THE FACT THAT THE MUSIC HAS STOPPED PLAYING. PART I: CHRYSLER, A GREAT AMERICAN ENTERPRISE In 1924, Walter P. Chrysler made a stir with his new car during the New York Automobile Exposition by placing it in the lobby of the nearby Commodore hotel, where he could buttonhole the journalists and financiers without the distraction of the other makes on the Exposition floor. But good as the car itself was, what Walter P. was selling was his management of the successful Buick brand until 1920, and the prospect that his new Chrysler Corporation would emulate GM’s success. Walter P. got the investment to put the Chrysler B-70 into production.

Beyond Viability: Conceiving a GM strategic identity for the 21st Century

(c)2009 Joshua Davidson

 

Viability is only the first step in General Motors’ marathon to save its position as one of the world’s leading automobile manufacturers. Long-term success demands a visionary strategy implemented through forward-looking policies, which together will express a 21^st Century strategic identity for General Motors.

 

In approaching a 21^st Century strategic identity, GM should consider its history as the world’s most dynamic industrial company for nearly four decades. Most historical analysis concentrates on the mistakes GM has made since the 1970s, and attributes them to the policies established in the 1920s. While those policies’ obsolescence did indeed fail to meet the dramatic changes that arose five decades after their conception, the fault lies preponderantly in the failure since 1958 to effectively act from established principles of policy creation and recreation – one element of a solid core of timeless enterprise principles originally developed by GM, and which endure as the framework for successful business around the world.

 

Unquestionably, it is imperative to keep a spotlight on past mistakes and guard against their repetition. But focus on avoiding its past failures has also prevented GM from appreciating its own historical success, and obscures the philosophy from where that success originated. Indeed, the great value of GM’s history is less in ensuring vigilance against past mistakes than in illustrating the principles that fueled GM’s success through such volatile times as the Great Depression.

 

General Motors is unique in having the history of its long success captured in Alfred Sloan’s universally admired memoir, My Years with General Motors. While the details of GM’s advance are fascinating as history, the true value of Sloan’s book to GM’s future is its crystallization of the techniques for creating a current culture of enterprise. In explaining how he and his colleagues approached General Motors’ emergence from its 1920 existential crisis, Sloan writes:

 

“Thus [we] took the opportunity that comes rarely in the initial stage of a business, to stand back and review aims and deal with the matters at hand, both in particular and with a considerable degree of generalization. It was not going to be easy to get willing agreement on specific and immediate issues … I believe it was for this reason that we first idealized the problem.  We started not with the actual corporation but with a model of a corporation for which we said we would state policy standards.”

 

From that perspective evolved the strategies and policies that catapulted GM from a near-bankrupt also-ran in the 1920 automobile industry to its undisputed leader, characterized by these durable principles:

 

·         Consenting to Creativity within the organization

o        Mass-marketing the genius of Kettering and Earl

o        Shaping dissent into initiative

·         Arranging an integrated line of products

o        Products that mean something individually and in relation to one another

o        The product line as competitive advantage

·         Creating event-proof policy

o        Aligning efficiency with market demands

o        Responding to circumstances, not acting on them

 

·         Rendering a service to the community of customers

o        Escaping the “Transaction trap”

o        Industrial efficiency serving individual expectations

 

·         Devising a current concept of the global automobile industry

o        What distinguishes GM from other manufacturers?

o        Approaching the market through value, not price

 

In the current crucible, GM must appreciate that it is once again at that rare “initial stage of a business,” and that management is newly obliged to “stand back and review aims.” The Plan for Viability should properly focus on freeing GM from government support for its survival over the next several years. But for that plan to work even in the short-term, GM must project a long-term basis for succeeding in a new era, and in the face of changes yet to come.

 

Examining the strategies of the past for this purpose doesn’t portend their resurrection; looking through them as a lens into the conception, implementation and evolution of successful enterprise philosophy provides a singular resource in devising a 21^st Century strategic identity that will propel General Motors in a new, lasting era of success.