DETROIT (AdAge.com) -- If General Motors survives its cash-flow crisis, it will eliminate brands, cut nameplates and spend more marketing dollars per vehicle.
"It's really much better to have fewer brands, do it well and then market the hell out of them," said Vice Chairman Bob Lutz, who oversees product development.
The restructuring plan that GM proposed to Congress on Dec. 2 called for reducing the number of nameplates from 48 to 40 by 2012, cutting 1,750 dealers by 2012 and reviewing the Saab and Saturn brands.
White House officials today were discussing the possibility of using money from the Troubled Asset Relief Program to assist the automakers. Mr. Lutz made it clear in an interview last week that whatever happens, GM recognizes the need to shrink.
GM's Hummer brand is for sale. Mr. Lutz declined to indicate exactly what will happen to Saturn and Saab but said business as usual is not an option. "They're under strategic review," he said. That's the corporate code, Mr. Lutz said, for: "We realize they're not working, and something needs to be done."
By eliminating nameplates, the automaker can cut the cost of product development and marketing. For example, GM spent about $500 million to develop the Chevrolet Malibu car. Marketing the Malibu cost $200 million or $300 million, Mr. Lutz said.
The Saturn Aura car was developed from the same platform as the Malibu. Does GM need two versions of that same vehicle? "To do a unique version of a sedan that already exists, you're talking about three quarters of a billion dollars," Mr. Lutz said. "Reducing the number of nameplates is a way to save money."
The Malibu has been a commercial success, while the Aura "had a rough time getting started," Mr. Lutz noted. "Three years later, people are still saying 'What's an Aura?' "
In the first 11 months of 2008, GM sold 160,898 Malibus in the United States, but only 56,194 Auras.
The difference between the two cars is the marketing. Three years ago Saturn got a new lineup of vehicles, but GM's import-fighting brand did not get a big advertising budget. By contrast, GM spent as much as $300 million to market the Malibu, according to one estimate.
"Reducing the number of nameplates and putting your marketing money on the product is the way to go," Mr. Lutz said. "Nowadays, there's so much stuff out there and so many brands that nobody can keep track of it anymore."~ ~ ~
Jamie LaReau is General Motors reporter at Crain Publications' Automotive News.