(4 of 5)
GM could solve a lot of its problems by producing fewer cars with more distinctive differences. Since it's so costly for GM to close factories, the company has been reluctant to cut capacity, allowing vehicles to pile up almost regardless of demand and forcing GM dealers to lure shoppers with huge incentives like discounts, rebates and supercheap financing. Moreover, some of GM's models get lost in the vast fleet, which offers more than 55 models of cars, trucks and SUVs. Want a four-door sedan? Pick from 10 different models, including offerings from Cadillac, Chevy, Saturn and Saab. Industry analysts have long argued that GM needs to eliminate slow-selling models if not entire brands such as Pontiac or Buick, which even GM vice chairman Robert Lutz has described as "damaged." Overall Wagoner is cutting North American capacity 30% over the next three years, figuring that GM dealers can profitably sell 4.2 million vehicles annually. (GM is on track to sell more cars overseas than in North America for the first time this year.) But some analysts think that's overly optimistic, since foreign competitors are coming on strong.
Wagoner's strategy assumes that GM makes cars and trucks that consumers covet for their merits, which, aside from a few hot models like the new Chevy HHR, hasn't been the case. Lutz, in charge of adding zing to GM's lineup, has earned mixed reviews. While some of his babies, like the new Pontiac Solstice, have been lauded by critics, others, such as the revived Pontiac GTO, have flopped. "GM's return to prosperity depends on it offering products that consumers find attractive," says union boss Gettelfinger. Translation: it's all about designing better cars, and don't expect big concessions from the union.
One casualty of GM's lackluster sales will be a Saturn plant in Spring Hill, Tenn., where production of the Ion small car is ending in 2006. Saturn was intended to represent the dynamic, new GM. Workers agreed to salaries in lieu of hourly wages and overtime, and consumers were promised an enjoyable showroom experience (no haggling) and funky, fun cars appealing to young shoppers. Yet 14 years after the first models rolled off the line, Saturn's sales are floundering, and such signature design elements as plastic side panels have been ridiculed for looking cheap. GM is now investing heavily in the brand and is contractually bound to produce another Saturn car in Spring Hill.
But it's a bad omen for GM that the company must rely on red-tag sales and other gimmicks to move the metal, despite great strides in vehicle quality. Buick may be a stodgy brand, but in recent years it has edged Toyota in quality surveys, suggesting that if shoppers can get over Buick's grandfatherly image, they actually enjoy its wheels. "GM is building some of the best-quality cars in its history," notes industry consultant Ron Harbour. Now Wagoner has to make those cars sell--be it with edgier design, more sophisticated marketing or a combination of both, taking a cue from the revival of Cadillac.