Five big product bets: GM's CEO banking on roll out of new trucks, crossovers and more Saturns
DAVE GUILFORD | Automotive News
DAVID SEDGWICK | Automotive News
Posted Date: 11/28/05
In mid-October, General Motors CEO Rick Wagoner unveiled cuts in UAW health care benefits. Last week he revealed plans to close eight factories by 2009.
It has been high corporate drama, but GM's long-term recovery requires sexy new products - and Wagoner knows it.
Last week he took pains to emphasize that GM must roll out hot products.
In fact, GM is pushing its chips onto the table. Next year it will spend $8 billion on global capital expenditures, a $1 billion increase. Nearly all of the increase will be spent on product development.
As GM sits down to play high-stakes poker next year, here are Wagoner's five big bets:
1. GM's big trucks will succeed.
GM will launch redesigned full-sized SUVs in the first quarter, followed by pickups in the fall.
The current generation of big trucks has been a profit machine for GM. As the products aged and gasoline prices soared, GM's truck profits declined.
The multibillion-dollar question: Has the recent run-up in gasoline prices rattled consumers permanently? In the past month or so, gasoline prices have fallen. Will consumers flock back to big trucks? Watch those sales numbers closely. They'll tell you a lot about GM's fortunes.
2. Saturn will thrive with a bigger lineup.
Last year Saturn sold a measly 212,017 cars and trucks, down 25.9 percent from its high-water mark in 1994. But GM isn't winding Saturn down - quite the opposite.
Next year GM expands Saturn's lineup with four new models.
The sporty Sky roadster will add a touch of excitement, and the Aura sedan's Euro-look exterior will give the bland brand some style. With a crossover and a hybrid SUV on the way, Saturn dealers hope to attract a crowd.
3. New crossovers will be big sellers.
With its emphasis on big trucks, GM missed the initial market shift to car-based crossovers. Now it's trying to catch up - with mixed results.
The versatile Chevrolet Equinox has done well, but the Cadillac SRX has required big discounts.
GM is placing a big bet on crossovers. Next year it will introduce the Saturn Outlook and GMC Acadia, followed by an as-yet-unnamed Buick in 2007.
Wagoner has great hopes for this segment. By 2009, GM expects to sell 800,000 crossovers a year, up from 281,627 last year. This is one segment where GM can legitimately aim for big sales gains.
4. GM can fix -- not kill -- its damaged brands.
In October, the average Buick dealership sold four new vehicles. That's abysmal.
The Lucerne sedan has enjoyed good reviews, but that's the only new product Buick gets until the crossover arrives in 2007.
Wagoner insists that Buick has a future, and he is coaxing dealers to group their Buick, Pontiac and GMC franchises under one roof. Now GM must create some products for them to sell.
GM has vowed to eliminate badge-engineered dogs like the Buick Terraza and Pontiac Montana SV6 minivans. We'll see whether Wagoner keeps this promise next year when GM introduces the first of a trio of crossovers for Pontiac, Buick and GMC.
5. GM can kick its addiction to incentives and embrace value pricing.
Wagoner is trying mightily to wean customers off incentives. The goal is laudable, but it's tough to go cold turkey.
After terrible sales in October, GM rolled out its Red Tag Event for the rest of the year.
Wagoner insists that the Red Tag Event is consistent with value pricing.
And, to be fair, no GM executive has ever suggested that the company could eliminate all incentives.
The trick is to introduce value pricing - and stick to it - on new vehicles that carry some cachet with customers. GM sells only a few vehicles, such as the Buick Lucerne, Pontiac Solstice and Chevrolet Corvette, without customer rebates. That's not enough.
Maybe Red Tag is just a normal year-end blowout. Watch what GM does in the first three months of 2006. If GM continues to load on incentives, it will be a bad sign for value pricing.