"Good" GM: Maybe Not All That GoodBy Michelle Krebs June 29, 2009
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.
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.
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.
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'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.
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 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...
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'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.
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.
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'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.
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.
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.