GM May Have to Drop GMC Brand

By Chris Haak

04.16.2009

gmc_logoBloomberg reported today that GM’s GMC brand, which sells trucks and crossovers, may be on the chopping block, along with the previously-confirmed-to-be-on-death-row Hummer, Saturn, and Saab.  GM’s most recent restructuring plan called for a focus on Chevrolet, Cadillac, and Buick as “core brands,” with GMC and Pontiac to be retained, but Pontiac becoming a “niche brand” with only a couple of models.

GMC is GM’s second bestselling brand, behind Chevrolet (albeit a distant second, with just 20% of Chevrolet’s sales).  In 2008, GM’s divisional sales played out like this:

Buick:  137,197
Cadillac:  161,159
Chevrolet:  1,790,519
     Chevrolet trucks:  979,286
     Chevrolet cars:  811,233
GMC trucks:  361,739
Hummer:  27,485
Pontiac:  246,659
Saab:  21,368
Saturn:  188,004

TOTAL:  2,914,819

It’s easy to see why it makes sense to kill Hummer and Saab (48,853 sales combined, while Chevrolet sold 54,058 Suburbans alone).  Cutting their losses on Saturn also makes sense, because that’s the third-smallest sales volume in the lineup and has nearly all standalone dealers and a more flexible franchise agreement that makes it easier to terminate the brand.  On top of that, Saturn has zero completely unique products.  Every product that Saturn sells is available elsewhere at another GM brand:

Saturn Astra = Chevrolet Cobalt, Pontiac G5
Saturn Aura = Chevrolet Malibu, Pontiac G6
Saturn Outlook = Buick Enclave, Chevrolet Traverse, GMC Acadia
Saturn Sky = Pontiac Solstice
Saturn Vue = Chevrolet Equinox, GMC Terrain

GMC’s lineup, of course, has similar overlap issues – but it’s no guarantee that buyers who prefer the GMC Sierra variant of the Silverado will automatically buy a Silverado.  Very few Oldsmobile buyers moved to Buick or Pontiac when Oldsmobile was closed in 2004; instead, they bought Toyotas (among other brands).

The obvious implication of this news is that, bankruptcy or not, GM will be significantly smaller next year than it was in 2008 or 2009.  Taking away the sales of GMC, Pontiac, Saturn, Saab, and Hummer hacks off 865,944 units from GM’s 2008 sales in one fell swoop.  Assuming that Chevrolet, Cadillac, and Buick sales volumes remain flat (they won’t), that leaves 2,088,875 units.  But since Chevrolet, Cadillac, and Buick sales are down 48.4% year to date, chop another 50% (roughly) off of the 2,088,875 number, and you’re close to a million units.

Pontiac has little reason to continue its existence, either.  Only the G8 and the Toyota-engineered Vibe not available elsewhere in the GM family, although Saturn’s impending demise leaves the Solstice as a slow-selling orphan that wouldn’t have made its second generation anyway.

In terms of plants, GM was already over capacity before the auto industry armageddon hit.  With the newly-slimmed company down to roughly a third of its 2008 sales volume potentially as early as 2010 (depending on the timing of a GMC/Pontiac closure/sale and the disposition of Hummer/Saab/Saturn), it’s not hard to see that thousands more people will lose their jobs.  If GM can shrink its capacity fast enough (frankly, with so many plants that are already under capacity losing many of the models that they build, I don’t see how it’s possible), GM would have eliminated nearly all of its overlapping models immediately.  However, it also would lose most of the ability to amortize development over multiple models that further platform sharing would do.  For example, if only Chevrolet and Cadillac are left standing, the Malibu is on its own platform, the Cobalt and HHR share a platform, the Cruze is on a new version of the Cobalt/HHR platform, the Camaro has its own platform, the Impala has its own platform, the Traverse has its own platform, etc.

Without GMC’s and Pontiac’s volume, I can’t see how GM will have enough cash flow to make its debt payments without either serious concessions from bondholders (which they are resisting right now) or Chapter 11 bankruptcy protection.

This should be an interesting 45 days.

COPYRIGHT Autosavant – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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8 Comments

  1. Everyone (including GMC buyers) knows that a GMC is simply a tarted up Chevy. The smart thing to do would be to drop the GMC marque, and retain the GMC label as an appearance/options/performance package on select Chevy Trucks and SUVs.

    The problem with killing GMC as a brand is the dealer network. GMC primarilly exists so that Pontiac/Buick/GMC dealers have trucks to sell on their lots. If the dealers loose both GMC and Buick they are going to be unhappy to say the least. Converting the dealerships to Chevy/Pontiac dealerships may or may not be feasable, I’m guessing the local Chevy dealership wouldn’t be too keen on that.

  2. Great point about the dealerships, Mark – I meant to mention that in the article but it slipped my mind.

    Where does the demise of Pontiac and GMC leave the BPG channel for GM? Buick’s puny lineup of two cars (one of which is outdated – the Lucerne) and a crossover isn’t anywhere near enough to sustain a dealership that had previously sold the entire Pontiac and GMC lineups as well. Extrapolating the 2008 sales numbers in the post above and assuming that every BPG dealer sold in the same proportions (which they would do, on average), Buick made up just 17.9% of BPG volume, GMC made up 47.2%, and Pontiac made up 34.9%. Removing 82.1% of a hypothetical dealer’s volume is a good way to drive them out of business, which quite possibly is part of the plan.

  3. Great article. GM has had too many brands and too much overlap in their product lines for too long. It’s a shame it took the brink of bankruptcy to get them to trim their brands. Although the death of Oldsmobile caused such an uprising among owners and GM fans, GM should have followed up with discontinuing or consolidating additional brands shortly there after. Now they are left scrambling to make drastic (albeit necessary) changes all at once.

    One question for you: Do you think having various brands sharing the same platform leads to a better product?

  4. Tim H., to answer your last question, I would argue that it depends. If development resources are diverted away from making a platform inherently better just so that additional brand variants can be made, then it’s harming the quality of the products. Think of it this way – do the Malibu, G6, and Aura target different buyer demographics? I don’t really think they do. The Malibu, as the newest of the three, is generally regarded as the best as well. Imagine how much better the Malibu could have been (not to mention coming to market earlier) had GM not wasted its time building the G6 and Aura before it. Put another way, if it cost $100 million (just pulling that number out of thin air) to turn the G6 into the Aura, wouldn’t that $100 million have been better spent on the Malibu by adding a rear center armrest and navigation, or otherwise making a very good car an excellent car. Finally, the other problem with having the overlapping models is that Toyota can market just the Camry in this segment, while GM has to spend the time and money marketing three Epsilon vehicles. The result? Toyota sells more Camrys than GM sells G6s, Malibus, and Auras combined because it’s more effective to spend $600 million (again, hypothetical number) promoting a single vehicle (Camry) than spending $300 million on the Malibu, $150 million on the Aura, and $150 million on the G6. Spending all that money on a single model gets it heard above all of the advertising noise out there, while the smaller spends make the cars fall off buyers’ radar screens quickly.

    It can be good if the models do not overlap, like the Camaro sharing most of the G8’s platform. The Camaro never would have had a business case (and even the business case it does have is dubious in my mind) if GM didn’t already have a well-engineered RWD large car platform in the stable to use as a starting point.

    Platform sharing done right reduces costs. Done wrong (various products competing against each other, wasting marketing resources, etc.), it increases costs.

  5. Agreed! Having brands competing against each other makes no sense. Especially when the consumer sees no difference between them. I’m curious what the sales breakdown by model is in the GMC line. My gut feeling is recently the Acadia is near the top while the Sierra and Yukon/XL are second and third. To me the main reason someone would buy a Sierra or Yukon is for a Denali. But for 2009 the LTZ Suburban/Tahoe/Avalanche are available with heated/cooled seats and a 6-speed tranny. In 2007 and 2008 these two features were reserved for Escalade’s and Denali’s. So the distinction between the brands are blurring more and more.

  6. 2008 sales results for GMC:

    Sierra: 168,544
    Acadia: 66,440
    Yukon: 39,064
    Yukon XL: 26,404
    Envoy: 23,876
    Savana: 22,437
    Canyon: 14,974

  7. When the new Malibu launched I read a quote from a GM manager or executive who said it was something like version 3.0 (with G6 being 1.0 and the Aura being 2.0).

    I was really surprised he’d state that in public — if that’s the case, why are they still selling older (essentially inferior) versions? Especially the G6. Either GM should’ve updated it (which, of course, would simply bring it into even more direct competition with the Aura/Malibu) or killed it, but they didn’t have the stomach or resources to do either, and instead it continues to languish as a non-descript fleet car, which does nothing to rehabilitate GM’s image.

  8. GM needs to catch up to the modern automotive retail environment. Like Toyota, Honda, and Nissan, all they need is an everyperson brand, like Chevy, and a luxury brand like Cadillac. This is where GM will eventually be, it may as well do it now rather than draging it out like it has been draging change out for the last 20 years. Unforetunately, bankrupcy is the best means to this end.
    Toyota sells more Camrys than all of Buick and Pontiac sales combined. Do you think it could be the product?

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