COMMENTARY: For Bailout Blueprint, GM, Ford Might Finally Burn Rubber on Underperforming Brands
November 26, 2008

By Bill Visnic

The plans the Detroit Three automakers are developing to submit on December 2 to Congress in justification for their entreated $25-billion federal loan probably are being more closely guarded than the manuscript for Sarah Palin's first book, but we can guess one aspect that seems certain to feature in the bailout blueprint of both Ford Motor Co. and General Motors Corp.: ditching some brands that have long dogged their ever-more-fragile bottom lines.

For at least a decade, critics have shouted down both GM and Ford for refusing to do what it now appears must be done -- stop supporting underperforming divisions.

Rumors howling in Detroit's November winds point to brand-burning as one of the primary ways the companies plan to demonstrate to Congress they will be able to sustain their operations in a U.S. auto market that is expected to be decidedly unkind for all of 2009 and possibly well into 2010.

For GM, that means a serious look is in order for Buick, GMC, Pontiac, Saab and Saturn. The ill-gotten Hummer division is for sale, but with no openly anxious takers and with some sources suggesting a quick fold is the likely outcome.

At Ford, the Mercury unit has been a black hole for decades and simply must go by any rational assessment.

The company has stressed it has faith in the Lincoln luxury division -- and it would be hard to suggest Ford forge ahead with no premium-market presence -- but in coldly clinical terms (the kind that might be necessary to mollify a Congress running on high-horsepower skepticism of Big Three management acumen), Lincoln doesn't work and hasn't since the 1960s.

Tough Choices That Really Aren't That Tough

Generations of GM management have whined the company's multidivisional structure is vibrant and productive. But the current financial and operational position of the company suggests current and past rationalizations for maintaining eight U.S. divisions are simply wrong. GM has squandered too much of its resources on maintaining a divisional configuration that cannot be supported by its diminished market share.

First to go should be Pontiac, the division that no longer has a singular brand image. The division once represented "rogue performance," but that's a fading memory even for the 60-somethings who understand Pontiac's history. Now, front-wheel-drive economy cars side-by-side with rorting, Australian-made quasi-sport sedans is a formula that summarizes Pontiac's long drop to the end of the hangman's rope, GM's most obvious victim of badge engineering masquerading as marketing.    

Equally ambiguous is Saturn's mission. Recent GM management frittered away the viable brand Saturn had developed, one based largely on the "no-hassle" sales experience and a certain cheap-but-unique cache with those who probably really wanted a Honda but couldn't bring themselves to desert the home team.

Saturn's current lineup is tragically composed of several singularly decent vehicles -- the Outlook and the Aura being the most notable -- all of which are badge-engineered versions of something Chevrolet already sells. Saturn was conceived solely for the reason the division was not to be like the rest of GM -- now that's a memory, so there's nothing going on at Saturn that Chevy can't be doing.

GMC: "Upscale" trucks. In this day and age, why?

Buick probably is the stickiest problem (apart from how to legally and affordably disassociate from the dealers invested in these brands). Proponents argue somebody has to have something to sell to the mobile-and-aging-gracefully demographic, which is a growing market. Buick probably should stay to handle it. Global architectures (read: badge-engineering for the iPod age) make Buick at least a passably defensible proposition.

GM has never done much right by Saab, never mind lamentations recently installed brand shepherds now really, really -- honestly! -- understand Saab. They don't.

If they did, they wouldn't have killed the hatchback body style and they wouldn't have started stuffing in chesty V6s to spin the front wheels when the power-dense turbocharged four-cylinders -- for which Saab has contributed one of any GM brands' few legitimate marketable distinctions -- were doing a fine job of it already.

The Swedish government might be more than passingly interested in bringing Saab home. With Saab sales in freefall and the brand tracking to sell less than 25,000 units in the U.S. this year, GM might tell Congress it's figuring out a plan to do just that.

Ford Minus Mercury = Who Cares?

Like Pontiac, Mercury once meant something. We guess.

But just as John McCain's Vietnam experience had nil resonance with a generation of voters who know Vietnam only as the place where Nike builds sweatship shoes, Mercury sits as a laughable anachronism in 2009 America. Ford might as well be throwing in a 78-rpm Benny Goodman album -- OK, cassette tape -- with each new Milan.

And as with Saturn, there's nothing in the Mercury store Ford isn't already selling, just at lower price points. The ongoing existence of Mercury in defiance of rational explanation is testimony to the hidebound Detroit-think that has earned the Big Three their reputation as the woolly mammoths of the business world. That anyone is spending time -- much less money -- marketing Mercury in the Internet age is tantamount to criminal negligence, so it's hard to imagine Ford will step up next month in Washington, D.C., with a business plan that includes this relic.

Lincoln is Ford's Buick. It might be argued that insisting Ford drop-kick Lincoln leaves the Dearborners defenseless in the luxe market. It also could be argued that with Lincoln, Ford is defenseless in the luxury market. There, we said it.

To maintain an upscale presence, Ford could ditch Lincoln and keep Volvo, with which many Ford models are deeply and perhaps now rather inconveniently cross-pollinated. Several Ford cars currently sit on Volvo platforms or modified versions of those platforms. All Volvos at least use Volvo-specific engines, making the potential for disentanglement from Ford somewhat less messy.

The situation comes to this: Lincoln or Volvo. There shouldn't be both; maybe not either. Ford paid almost $6.5 billion for Volvo and is unlikely to get anything approaching that figure now -- in the event anybody's buying.

Sweden may be buying if the alternative is watching Volvo sink with Ford. If a deal for Volvo can be made, Ford would be wise to make it. Unless a deal already is in the works, it's unlikely a Volvo sell-off would be part of Ford's "sustainability" proposal to Congress.

But that doesn't change the realities: Volvo sales have been declining since 2004 and will hit a 15-year low this year. Despite Volvo's rich heritage, if Ford is to survive it may have little choice but to say, "Vi ses" to Volvo for whatever price it can get.

Talking about shedding brands is easy. Actually doing so is all but impossible under current legal and financial constraints. If brand-paring is a central cost-saving strategy presented by the Big Three, it is a gambit that will happen only with more extraordinary intervention from the lawmakers who are consistently rewriting the nation's free-market rules. 

PHOTOS:

1. Woolly mammoth drawing. (Penn State Univ.)

2. Pontiac G3: This is a Pontiac -- how? (courtesy General Motors Corp.)

3. Saab product range has aged unacceptably under GM's watch. (courtesy General Motors Corp.)

4. Lincoln MKS: Nice enough. But not nice enough to really compete. (courtesy Ford Motor Co.)

Posted by Bill Visnic at 3:15 AM under Analysis , Business , Commentary , Ford , GM | Comments (9) | digg this | Seed Newsvine

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