"Good" GM: Maybe Not All That Good

By Michelle Krebs June 29, 2009

GMC logo - 190.JPG By Bill Visnic

General Motors's Chapter 11 bankruptcy is winding its way toward completion -- perhaps even quicker than the lickety-split Chrysler bankruptcy restructuring. And everybody knows the plan, as it was with Chrysler, is to leverage the now-famous section 363 of the bankruptcy code to create a "good" GM that sallies forth with all of the company's best assets.

In addition to the numerous hard parts -- assembly plants, stamping facilities, powertrain- and other major component-making operations -- the "good" GM will comprise four major marketing divisions: Chevrolet, Cadillac, GMC and Buick.

Cadillac logo.jpg Chevy need make no excuses: it is the domestic counterpart of Toyota, a sales channel for unapologetically mainstream cars and trucks that remains one of the most effective brands on the planet. Chevrolet logo.jpg

But Buick, Cadillac and GMC? Be careful, "new" GM and Obama Administration Auto Industry Task Force: recent sales and market-share data compiled by Edmunds.com shows these brands may not be the rock-solid foundation for the leaner, meaner GM they've led the company's new taxpayer-owners to believe is coming.

On Tuesday, the bankruptcy judge hears the case for the "good" and "bad" GM. He is expected to rule shortly thereafter - perhaps within days - if the good assets can be sold into the new GM. He's expected to say yes.

So what's left then? Studying sales and market share data back to 1991, Edmunds data analysts paint a picture of GMC and Buick, in particular, as two struggling divisions, with Cadillac having its challenges as well.

2010 Buick Enclave - 200.JPG Buick Still On The Decline

The raw sales and market numbers are not kind for Buick, although GM executives insist the brand is profitable. Except for brief periods of minor fluctuation, the sales and market-share trendline for the old-folks division has declined as steadily as its owners' vision.

A look at Buick's sales volume shows a division selling more than a half-million cars every year in the 1991-94 period, with a peak of 546,836 in 1994. After that, Buick not only never regained sight of those heights, but just four years later its volume slid to less than 400,000 units.

The totals bounced around for a few years, but then plunged steadily to a meager 185,791 in 2007, a lowpoint if one charitably discounts the industry's dismal 2008, in which Buick sold just 137,197 vehicles -- barely a quarter of its volume in the mid-1990s.

buick_sales.gif

Source: Edmunds.com

Buick's market-share snapshot is the same: the division had endured a dropoff from its 4.4 percent share in 1991 to 2.8 percent by 1996, 1.8 percent by 2004 and 1 percent last year. Since 1991, Buick's market share fell in all but four years.

buick-market-share.gif

Source: Edmunds.com

Now that it is one of the four surviving "new GM" divisions, what about Buick's portion of the corporate market share? As Led Zeppelin said, the song remains the same: in 1991, Buick accounted for 12.2 percent of GM's total sales. By 1995, the number was in single digits and has slid consistently to last year's 4.6 percent of GM share.

By contrast, Chevrolet last year accounted for 60.5 percent of all GM sales.

GM executives point to the Buick Enclave as evidence that division can expand beyond the its older buyer base. Indeed, the Enclave has been a sensation, not only in terms of sales but also in attracting a younger demographic than the Buick norm. The Enclave has soared from accounting a third of Buick sales in 2007 to 45 percent in 2008. But Buick's vehicle line is skimpy with only three models, the Enclave crossover, the Lucerne sedan and the LaCrosse sedan, going on sale soon as a 2010 model and similar to the LaCrosse sold in in China.

buick-top-sellers.gif

Source: Edmunds.com

Buick also has been able to transfer the brand's Chinese magic to the U.S.; Buick now sells more vehicles in China than it does in the U.S., albeit not all of the same models.

For GMC, the '90s Were Fine, But...

2010 GMC Terrain - 200.JPG For GMC, the results are more positive than Buick's, thanks to the enormous impact of the pickup and SUV trend that started in the late '90s and only truly was laid to rest in the second half of last year.

But that was then and this is now. How will GMC, as solely a truck, SUV and crossover brand, fare in the new world order of stricter fuel-economy standards?

In fact, GMC mushed around in a 300,000- to 500,000-unit band from 1991 to 1998, then vaulted to more than a half-million sales for each of the next seven years, finally dipping once again to less than a half-million sales (456,565) in 2006.

By almost any measure, not a bad run. But the lights at GM's "upscale" pickup and SUV division seem to be dimming quickly, short-circuited by rapidly shifting consumer tastes. In 2007, GMC's volume rebounded slightly to 484,744, but last year endured a plunge to 361,739 -- a sales-volume low the division hasn't seen since 1992.

gmc-sales.gif

Source: Edmunds.com

GMC's market share, meanwhile, has worked in a longstanding band between 1991's 2.3 percent to a high of 3.5 percent in 2004. But last year's 2.7 percent share was GMC's third-worst performance since 1991. And there is little chance for near-term recovery. Through May this year, GMC's market share was 2.4 percent; if that figure holds, it will be the division's worst performance since 1991.

gmc-market-share.gif

Source: Edmunds.com

Maybe in approving GMC as a part of the new GM, the car czars were looking at the division's portion of corporate market share -- a metric that shows GMC to be a formidable contributor.

In 1991, GMC accounted for just 6.4 percent of GM's total sales. GMC hit double-digits in 1999 and by 2004 accounted for 12.4 percent of GM's sales, nearly double the 1991 figure. And in 2007, GMC peaked at 12.7 percent of GM's total sales.

Every model in GMC's line is a truck, SUV or crossover shared with Chevrolet, and in some cases, other GM brands. The GMC Sierra pickup accounts for 32 percent of the brand's sales, an even larger share than its higher-volume twin, the Silverado, represents in Chevrolet's line. The GMC Acadia, virtually identical to the Buick Enclave and Chevrolet Traverse, accounts for about a quarter of GMC's sales. GMC is now adding the Terrain crossover, twin to the Chevrolet Equinox and cousin to the Cadillac SRX, as its entry-level vehicle.

gmc-top-sellers.gif

Source: Edmunds.com

2009 Cadillac CTS - 210.JPG The Fall, Rise and Fall of Cadillac

Thanks to GM's almost religious product-development focus -- and a synchronized big-dollar investment -- to revive its luxury-car division, Cadillac did indeed pull itself up from a decade of doldrums that started in 1995, when it slid to less than 200,000 units, and didn't end until 2002, when Cadillac just missed clawing back to that threshold.

Cadillac started to climb again, peaking at 235,002 sales in 2005 -- its best year dating to the 1991 starting year of the Edmunds.com analysts' data review -- but has declined every year since, including an outsize plunge to just 161,159 units last year.

cadillac-sales.gif

Source: Edmunds.com

Cadillac's trajectory seems to have flattened along with the truck and SUV market, as the once white-hot Escalade has frozen and perhaps exposed Cadillac as a division with one trick pony, the entry-level CTS. The fact that the ancient, front-wheel-drive DTS full-sizer is the division's second-bestseller should trouble anyone arguing Cadillac truly is competitive with European and Japanese luxury marques.

And despite all the investments and high-profile marketing, Cadillac's market share has been lifeless, a reflection of its continuing inability to deal with the increasing number of luxury and near-luxury nameplates entering the market.

cadillac-market-share.gif

Source: Edmunds.com

In 1991, Cadillac's market share was 1.7 percent, eroding steadily to 1 percent by 2001. The division fought back to a peak of 1.4 percent from 2004-2006 (likely due to the Escalade's impact, not to mention a brief popularity flash for the DTS fullsizer). But Caddy's market share is fading again, to 1.2 percent last year and 1 percent through May of this year.

cadillac-top-sellers.gif

Source: Edmunds.com

Transitions Within Transitions

Numbers don't tell the entire story of GM's evolution over the past 18 years, but they do provide a thought-provoking snapshot of how its surviving divisions have performed not only through the company's nearly two-decade transition -- one that hosted a steady erosion of market share -- but also through several significant market epochs as well.

Based on the performance timeframe of this Edmunds.com data analysis, is the new GM really poised for success?

Any absolute answer is speculation, particularly considering the likelihood of a sputtering and volatile U.S. market for the foreseeable future.

But the indicators point to a Buick that has to find a strategy to reverse a decades-long slide, a GMC that, if it is to remain true to its hefty-truck heritage, is in discord with the market direction and a Cadillac that has yet to develop a successful and mature model range.

Maybe a workable formula for a new GM. Or maybe another whistlestop on the express track to the eventual downsizing many analysts say is inevitable: a GM consisting of Chevrolet and Cadillac.

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rsholland says: 6:34 AM, 06.29.09

I think the only way GMC can survive long term is for Chevy Truck and GMC to split the products, so that they don't compete with one another. By that I mean for Chevy to handle pickups, chassis-cabs and full-size vans, while GMC handle SUVs and crossovers; or vice-versa. Otherwise they will continue to step on one another's toes, which will eventually lead to the end of GMC.

As to Buick, that's a tough one. Maybe they become a China-only brand? I don't see them succeeding here in North America long term.

pafromfl says: 6:51 AM, 06.29.09

What is missing from this report is Pontiac sales figures. I suspect Pontiac was killed because of corporate infighting rather than logic. Buick should have been cut instead of Pontiac. Buick and Cadillac occupy the same expensive niche, and Buick buyers are becoming extinct. The Buick badge could be retained in China and slapped on Cadillac and/or Holden models. After the death of Oldsmobile, Pontiac was the only option for those who wanted an affordable car that was sportier and slightly more upscale than a Chevy. Cadillac is becoming sporty, but at a price point that drives buyers to consider Acura, Lexus, Infiniti, BMW, etc. The increasingly popular Pontiac G8 offered affordable performance in a family-sized car. Finally, GMC should focus on large commercial trucks and leave consumer trucks to Chevy and Cadillac.

guacamojo says: 7:39 AM, 06.29.09

It seems to me that GM could be well-served by segmenting into something like:

Chevy: Consumer mainstream
Cadillac: Consumer luxury
GMC: Commercial trucks/vans

Where is Buick? China, maybe. I agree with rsholland that it sounds like it could probably survive as a China-only brand. Certainly it doesn't seem to have any traction in North America, except perhaps among certain AARP members with fond memories of the old brand, like Zenith.

I beg to differ with pafromfl about Pontiac, though. For a "performance" division, Pontiac was pretty poor. What are GM's signature performance cars? Corvette? Camaro? The CTS-V is a great car, though niche. Until the G8, there wasn't much to be excited about in Pontiac's stable. I hope they'll give it a new front fascia so it can live on as a Chevy.

For too many years, Pontiac has meant "Extra Plastic." No thanks, time to go.

sprocketboy says: 8:16 AM, 06.29.09

And these are supposed to be the divisions that will save the new General Motors? This is really grim.

iskch says: 8:33 AM, 06.29.09

Good review. I think this rebuilding process is going to flop big time. GM is going to carry extra baggage in the form of Buick & GMC. More waste of marketing, consulting, financing etc for two brands that no longer mean anything for the great majority of buyers.

billddrummer says: 12:46 PM, 06.29.09

If GMC and Buick are both profitable, it may be because the divisions don't recognize the costs for engineering and R & D since their models spring from existing Chevy platforms.

And perhaps the way to profitability is to limit the number of models you have, not expand them. Look what happened to Toyota when their model count bloomed.

I'd like to know exactly how much Chevrolet is spending on product development for Buick and GMC. But it would probably be impossible without sitting in the controller's office.

I'm presuming that Chevy supports product development because the GMC and Buick platforms have strikingly similar representation in the Chevrolet model lineup.

fulcrumb says: 7:26 PM, 06.29.09

In North America, Chevrolet. Cadillac. Period.

greenpony says: 7:50 PM, 06.29.09

Agreed. Chevrolet & Cadillac. No more.

optikat says: 8:15 PM, 06.29.09

I agree with the above statements,,,doesn't make sense.

The Chevrolet name says cheap

Buick says I'm a lot older than I look (a lot older than even an Oldsmobile owner)

Cadillac says I have too much money

GMC says I'm an energy hog.

Pontiac says fun

If it were me I'd have kept Chevy, Cadillac, Saturn or Pontiac.
GMC trucks should be sold by Chevy. I never understood the difference anyway.
Buick is a dead brand walking...

I had a friend a year or two ago who tried to buy a new Cadillac...just like ha has every couple years for the last few decades. The dealership told him they couldn't get him a loan because GMAC was no longer doing loans and they couldn't get him a lease but if he wanted to buy his 2 year old car they could make him a deal. He couldn't understand why GM wouldn't sell him a new CTS. Not a mystery to me why they are heading south fast.

GM has had a death wish for decades even back during the early to mid 80s when they tried to convince a Car and Driver editor to tell their dealers that the problem wasn't their cars but was instead customer perception rather than build quality...the editor refused and then wrote about it in the magazine. He predicted GM's demise if they didn't change their attitude and get themselves into gear...a safe prediction...even then

I didn't leave GM...they left me...

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