Readers to GM: Fix the products, cut the costs

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What's good for General Motors? Fix its products and designs, consolidate divisions, take out costs and focus on value rather than price.

That's the advice of respondents to last week's AdAge.com survey question, "Can GM be saved?" A slim majority of the 1,137 participants-54%-voted yes. But in their view, it will require an extreme makeover, Detroit edition.

"Consolidation is the key for GM-consolidate products, divisions and marketing programs," said Marc Salzo, a supply chain program manager with IBM Corp. in Southbury, Conn.

But skeptics said GMmay be too arrogant and insular to change. "GMseems doomed to carry on and sink into the same swamp that swallowed Penn Central and the buggy whip industry,"said Greg Zerovnik, a consultant with the Fielding Graduate Institute in Upland, Calif.

GM this month warned of slumping sales and slashed its 2005 profit forecast, sending the stock to its lowest point in 12 years. It's still the biggest automaker-at a high cost. GM gave buyers $17 billion in discount incentives last year, estimates Edmunds.com, on top of the $5.1 billion GM reported it spent on global advertising.

Heavy discounting hurts GM's brand image. But survey respondents see marketing and advertising as symptoms of the real problem: mediocre product. Survey participants mentioned "advertising" just 20 times. Bigger issues: "Product" (83 mentions), "quality" (43), "design" (32).

"Marketing can't change the fact that GM mostly builds cars people don't want," said Bob Kraus, consultant with IPR Corp., a Maynard, Mass., market-research provider.

STRATEGY

But respondents offered solutions that, pieced together, could add up to a winning strategy: Bet on bold design; continue to improve quality but back it up with the industry's best warranty; shrink the company; deliver appealing product that will sell at a higher price and better hold its value, even if that means lower unit sales. "GM needs to stop worrying about market share and start worrying about profitability," said Aaron McRae, a student at Walsh College in suburban Detroit. "A smaller, leaner GM that builds cars based on the customer's needs and has better control over labor costs would be the answer."

Who will save the day? Several respondents singled out fabled car product and design champion Bob Lutz, 73, lured to GM four years ago as vice chairman. "Unleash Bob Lutz," said John Palmer, principal at Agincourt Consulting, Chevy Chase, Md.

Two respondents nominated a new GM boss: "Two words: Carlos Ghosn," said an anonymous respondent who claimed to be a senior VP at a GM ad agency in Detroit. "[Chairman-CEO Richard] Wagoner is a brilliant bean counter. The Lutz `lift' has left. He's too old and he's [the] only guy. GM needs a purging at the top and a huge re-emphasis on design. Nissan did it. So can GM, with the right leadership and emphasis." Mr. Ghosn in May will become president-CEO at Renault after leading the turnaround of Renault-controlled Nissan.

For now, GM is stuck following the product leaders. It pays the price. "A lack of innovation results in less word of mouth, which results in less market interest, resulting in lost sales to competitors who do innovate," said Jeff Wasden, VP-worldwide marketing at Melaleuca, a wellness products marketer in Idaho Falls, Idaho.

If product is the key, marketing needs to be part of the solution. "GM must refocus its advertising away from price and incentives and concentrate on value and quality," said Ryan Nathan, associate at management consultancy Booz Allen Hamilton. "Value is not a discount or a low payment, but something that is highly correlated with quality: total cost of ownership." GM, he said, needs to convince buyers that total cost of ownership for GM vehicles-price plus cost of upkeep minus trade-in value-is below that of rivals. Said Mr. Nathan: "Marketing must focus on `A great car for a great value,' not, `Buy today and we will give you $5,000 off."'

Respondents said Cadillac's product and image turnaround shows GM can change. But many said GM needs to simplify the organization, eliminating overlapping models and killing a few divisions. "Maybe it's time to limit the number of vehicles marketed under each name plate and focus on building a customer niche for each division," said Tom Hernandez, VP-marketing at SpecificMedia, an Irvine, Calif., online marketing firm. Fielding Graduate Institute's Mr. Zerovnik noted that worked once before-when GM chief Alfred P. Sloan established the ladder of GM brands in the early 20th century.

Next week's question: "Is switching from a TV upfront market to one that resembles a stock market the answer?" To submit your answer, go to AdAge.com QwikFIND aao29v

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