GM Will Miss Bob Lutz

So I have ranted about Detroit car makers. Here was my basic point: the reason they are in terrible shape is that they are run by the wrong parts of the company. Management has been totally focused on running a huge organization and oh, yeah, every few minutes a car rolls off the assembly line.

Bob Lutz did an interview with Ad Age last week in which he says exactly this. His big accomplishment, according to him, was getting GM to focus on the product and to build cars people want to drive. Kind of scary, but he's right. That is an enormous accomplishment.

I don't think they are there yet, but perhaps closer than they have been in decades.

Saab Proves GM Doesn't Get Consumers

So my theory about Detroit is that they have struggled because they are not consumer focused companies. And probably haven't been in decades. Saab is a perfect example.

GM went looking for growth in the late 1990's like all the other car makers. With Saab they saw an opportunity. Unfortunately, what they saw was an opportunity for themselves. Here is what I mean.


Saab has been a quirky, little brand for years with lots of loyal Saab owners. (Disclosure: I owned three Saabs in the 90's.) The Saab loyalists loved the outsider personality of the brand. They loved the unusual, even odd, designs. They loved that their cars were quirky and considered it personality, part of the charm.

The big publicly known problem with Saabs was that they were mechanically challenged. To own a Saab was to know a mechanic on a first name basis. GM looked at Saab and said, hey we can solve their biggest problem. We can put in GM engines and share the chassis across different brands such as Subaru. It will create efficiency and reliability. We can also make the designs a little more mainstream and attract a broader consumer base once the mechanical reliability is improved. With Saab, they saw the opportunity to solve their own problem, excess manufacturing capacity.

But there was a problem with this approach. It isn't what the Saab owners wanted. The Saab consumers would not take mechanical perfection if it meant giving up the personality of their Saabs. And this is exactly what GM did.

GM put in GM engines and "redesigned" the 9-3, their base model to try and attract new, young buyers who have never purchased a Saab before. They were successful at first, but here is what has happened since then. Saab is now selling less than half the units they did in the first year of GM ownership. Saab loyalists have all but abandoned the brand and those new 9-3 buyers don't seem to be buying a second Saab.

So by creating an efficient (read as less costly to produce) product that appeals to a broader market, they managed to completely change the brand and misread the loyal customers that they inherited. Ford, in a rare example of consumer focus, understood that Volvo = safety and practicality. They have not changed the core brand values. (It still may not save them from being sold, but at least the brand is intact.) Saab used to equal interesting design and fun driving. Not so much any more.

GM made its initial investment in Saab in 1990 and took full control in 2000. US sales climbed to a record 47,914 in 2003. In 2008, they were down 31% through October. Last year, GM sold 9.55 million vehicles globally, making Saab a small, distracting brand with 125k units sold. Now it seems that Saab is on the block. Too bad. It didn't have to be like this. If Detroit understood brands and consumers, this might have been avoided.

Where Detroit Went Wrong

Here is my theory. The Big Three stopped being customer focused businesses decades ago.

Every company has a personality, which most of us call the "culture" of that company. And in every company there is one business function that really controls the company. For example, finance, manufacturing, marketing could all be the function that calls the final shots. At P&G it is marketing, at Fed Ex it is operations, at Citi it is finance. Most times this is unwritten, but understood by all.

So much of a company's culture is determined by the dominant function within the company. At the automakers, finance and manufacturing long ago became the dominant functions and ultimately drove the products that the company made. How else do you explain the Pontiac Aztec?

With perhaps the exception of their pick up trucks, the Big Three have not built cars that people really want in many, many years. Their quality is apparently equal to the other car makers now. So why don't we want to buy American cars? Because they weren't designed and built based on what we want. They were designed and built based on what the company wanted to build, the need to feed their large manufacturing operation busy, the need to pay their long term obligations. And to be clear, the dealers are not end consumers and depending upon their opinions is better than nothing, but no substitute for meeting consumers needs.

To be fair, I think Ford is now taking much more of a consumer focus and their CMO Jim Farley is their best chance at bringing the consumer's voice into the design and engineering studios.

If the U.S. automakers were consumer focused and not internally focused, their brand strategy would have made a whole lot more sense. What role does Buick play in their product portfolio? Why do they make the exact same model under the GM label and Chevy label? We all know it is exactly the same car/truck. So what is the point?

In recent years, realizing their products weren't meeting broad swaths of the market, Detroit began buying foreign automakers like Volvo, Saab and Hummer. But look what GM did to Saab. They tried to standardize their engines and platforms. The designs became more vanilla and units sold have dropped by almost half since GM purchased them.

Jim Farley and his comrades are the key to the Big Three's survival, with or without a large bailout package.

GM and Ford - Which Ad Strategy Is Right?

GM, primarily through its Chevy and GMC units, has been advertising heavily over the last week or so. They ads emphasize the (relative) fuel efficiency of its trucks and SUVs in one ad and then the fuel efficiency of their smaller models in another that has been in heavy rotation.

Ford meanwhile has been silent. And so it got me to wondering, what are the different strategies here? It is clear GM is trying to move inventory even in this challenging economy and spending heavily to try and do it. Ford seems to be keeping their powder dry. I am not sure what their plan is.

I think they announce earnings and a new company strategy Thursday, so I would expect to see move advertising from them after Thursday. I would not be against Jim Farley, the CMO at Ford. I am eager to see what comes next.