In the past, General Motors truly was “general” in its product offerings, producing a wide-range of vehicles for just about every segment and niche out there. Now, things are different, with the latest GM strategy instead looking at each individual product’s immediate profitability as the determining factor in bringing it to market. The reasoning behind this is clear – future electric vehicles and autonomous vehicles.
Let’s briefly talk about how things used to be. In the past, the overarching GM strategy relied on offering the full gamut of vehicles, and although some of those vehicles would show a loss for the automaker, the strategic thinking was that it was more important to get buyers into a GM vehicle now in order to make money down the line.
Now, however, every model must either live or die on its own profit. This new GM strategy has resulted in the automaker exiting a number of segments recently, including the large luxury sedan segment (Buick LaCrosse, Cadillac CT6, Buick Regal, Buick Verano, Chevrolet Impala). The small car segment is also dwindling following the exit of the Chevrolet Cruze compact, while the Chevrolet Sonic is expected to exit in the near-term future as well.
The exceptions to this “profit or die” GM strategy are electric vehicles like the Chevrolet Bolt EV. And that leads us to the motivation behind the strategy’s implementation in the first place.
General Motors is currently spending billions of dollars to develop electric vehicles and autonomous vehicles, which seems to fly in the face of the “profit or die” GM strategy outlined above. However, the reasoning behind this is simple – GM wants to go it alone with EVs and AVs.
Cruise Origin autonomous vehicle
Essentially, GM is playing the long game with EV and AV technology, banking on predictions that they will become the determining factors to success in the auto industry of the future. As such, GM is spending heavily to develop the tech on its own, with funding coming from the lean, profit-generating vehicle portfolio we see today.
Granted, GM isn’t completely alone here, taking investments from SoftBank and partnering with Honda with regard to its AV and EV development. Nevertheless, the GM strategy still maintains the tech as belonging to General Motors. For example, Honda may have partnered with GM, but it will source GM’s EV platform and Ultium battery technology for future Honda vehicles.
GM EV platform
Critically, the “profit or die” GM strategy also applies to specific markets. If a market doesn’t make money, then GM is out. The automaker’s exit from Europe is one good example – after spending two decades striving to make a profit in Europe, and instead losing hundreds of millions per quarter, GM left. The same could be said for Australia, South Africa, and Thailand.
All told, GM is driving hard for the hoop when it comes to EVs and AVs. Whether or not it’ll pay off remains to be seen.
Comments
This may be the set up for the death of the Camaro. It is way below what it needs to be for profits.
The Mustang could soon follow.
And the Cadillac CT4 and CT5. I doubt they’ll make any money and be right behind the Camaro marching into the crematory.
Trouble is GM designs ‘em to be cheap to build and thus profitable but then buyers avoid them because of their obvious cheapness. I think the cheap interior and parts bin engines doomed the CT6 and those elements were no doubt put in place to make the car more profitable in theory.
With platform and engine sharing it *may* not. The Camaro may become a EV coupe in 10 years that rides on a RWD platform most otherwise is used by Cadillac EV models.
Mustang sales have a positive sales trend compared to the Camaro (I like the Camaro better but it is what it is) which could mean that the Mustang continues and the Camaro is discontinued a la 2002. Unless the Camaro becomes a successful EV which will take several years.
We’re already hearing about the NEXT Mustang, but all the rumors are the Camaro is dead. GM doesn’t build products people want, it puts out what IT wants and what its pathetic focus groups say or the bean counters allow. There is no “greatness” or excitement at GM any more… There are many other companies making segment leaders, GM just quits… no one wants to align themselves with a quitter…. unless Mary Barra quits and her posse, GM is IMO, doomed….
Hope this strategy applies to Mary Barra, too.
Yes, please. I liked Mary at first. Now I view her reign as being on par with Roger B. Smith’s devastating tenure.
More and more, she seems to be no more than the quota-hire she likely was in the first place.
I wonder if the first generation CR-V or first gen BMW M3 was profitable within 3 years. I wonder if Toyota made a profit on the first generation Prius within 3 years.
Because that’s how long GM gave the CT6 before GM decided to abandon the model. Except that car had a direct competitor in the same dealership the entire time it existed.
The GM car you love today may be canceled next year. They’ve even had very profitable and popular vehicles like the Astro and Trailblazer that were abandoned and never redesigned.
Cars like the Accord and RAV4 are popular because they are consistently competitive for generations. Those companies spent a lot of time and money developing those models and cultivating a loyal customer base.
member12
The Prius is an abomination. For this blasphemy Toyota has been smitten by the lord, and all it’s vehicles are slowly turning into gargoyles. The Prius should be destroyed, and all evidence of its existence should be wiped from automotive history.
One benefit of a doubt I’ll give is Omega wasn’t flexible for midsize cars, CUVs and (importantly) support a E/V powertrain. I’m certain VSS-R can do this hence the CT6 American cancellation, IMO CT6 should have stayed until the VSS-R replacement is available..
Member 12 and Guestt – nice going 73-1 and 25-0 could be a record?
I thought Omega WAS flexible? I know it was extremely complex but if it wasn’t flexible it should never have been approved in the first place. No one can build 1 car off a platform anymore? Vette is perhaps one exception. I’d say other makers can because they can make up the costs with other divisions and lines. Porsche is one example as its owned by VW Group. The 911 is a sole vehicle but I can think of few others…
I completely agree with you they should have kept it going and continued to make it better until the next platform. I would love to have seen a big coupe off Omega, the El Miraj or Eldorado, it would be in my garage. I do not want a CUV/SUV or 4 door, but a big comfortable coupe with a back seat for humans…
This is a pretty bold strategy for GM, and for that I commend them.
I just hope they don’t decide that North America isn’t profitable.
Shouldn’t Buick have already exited this market? Does this mean it’s about to?
Buick’s actually surprisingly profitable in the US. The Enclave prints money- they’re selling a Traverse for a higher price. Same thing with the Encore and new Encore GX. Plus, the infrastructure is already set up.
This isn’t new, it’s probably more consolidated but not new as GM pre-BK killed models to get out of deals, contracts and other profit eaters between the 80’s and 00’s.
One thing of concern is what is “profits”?. IIRC Bob Lutz mentioned it’s not how much the car or platform cost in one region but the total cost of the vehicle’s or/and platform program and calculate how much profit it generates after overhead. He noticed that’s how the Asian carmakers make money and tried to implement this at GM, don’t know how much progress he made on that front.
Another issue as someone somewhat pointed to is lack of being consistent. The Germans and Asians will continue to update vehicles and do improvement here and there but Americans let a car (and some CUVs) to sit years untouched, that’s got to change.
It’s almost a self fulfilling prophecy. After you kill all loss-makers, you then look at the least profitable cars and consider the ROI and start killing those. In the meantime, you release new cars that are loss-leaders in the short term. Your portfolio then becomes a war of attrition with so much turnover, you never become long term profitable. I seem to like the ‘old’ way better. I would agree that having a car that loses too much for the sake of getting people into a GM vehicle should be cut, but using the ROI as the main determining factor isn’t going to lead to much profitability either in the long term.
A future GM? Hmmm I would be spinning Corvette into spearheading a luxury brands division to be the beacon. Reassign Cadillac to the new Corvette Division; Cadillac is still a catchy name but suffers years as a laclustre design. It needs to be reborn as a ‘true cut above.’ Who is Cadillac trying to compete with?? Lincoln???; Certainly not the likes of BMW or Mercedes. There was a time when Cadillac DID have tighter specifications and dedicated Cadillac only components. Costly; you bet but customers will pay for real value.
Chevrolet should remain and build the everyday man’s cars but with a little more muscle and excitement.
I always liked Col Sam’s slogan for Buick; One Grade, Only the Best! That said it all and I would put that right up with Toyota’s Make Things Better. It’s a great rally cry and it’s relevent.
The Sloan marketing ladder is still valid; you could increase the spacing of the steps and remain true to it’s philosophy. There are far too many segments they are not even the market with product.
Above all; the product needs long term durability; allied divisions are some of the worst offenders and procrastinators.
That’s the way I see it.
So does that mean if you struggle you die? At some point in time every vehicle struggle so if you kill them off instead of improving them to make them more competitive pretty soon you got nothing to sell.
My question is if you are struggling to sell what you have and have lost customer confidence, what makes you think customers will come flocking back to you because your vehicle are all electric? Then there is the profitability thing. Most likely these electric will not make a profit from the start. So that shoots a hole in you make a profit theory.
Great comment. Does GM think they can sell a $200K CelestiKon EV Super Lux Car when they cannot build and sell 40-90K ICE vehicles folks “gotta have”. I suggest not. Doing the Lysol and the Cellulite EV will be a disaster for GM as they simply don’t know how to sell EV’s yet nor do that level of personalization or customization. At Porsche you can make your new 911 anything you want, a 1 of a kind, over at Bentley too, your Flying Spur can be 1 off, so VW Group has that know how. GM can’t build anything thats not in a package and the bean counters ruin it before its fully developed.
Seriously I think GM is really doomed…
I would be willing to bet if each division was given free reins to design engineer and build their vehicles without cooperate restraints the majority of their vehicles would be profitable within three years. Sure the initial cost might be high but if you want to make long term progress you sometimes have to make short term sacrifice. There is an old saying it takes money to make money. You cant cheap your way into success. Spend the money now to reap the rewards later. Sadly that is not the GM way and hasn’t been for way too long. I am a big GM fan but more so an American fan. During my life time I have way too many American company die off.
If they want to play that gaem then each vehicle should have access to it’s profit stream for advertising. That would be smart so they don’t do it.
GM constantly confounds itself, and especially it’s customers, with the ever shifting sands of it’s decision makers. There have been some classically designed and engineered vehicles over the years that were just given up on for one ridiculous reason or another in total disregard for building a broad and loyal customer base. GM is killing itself one nut and bolt at a time with no nod or care of it’s history or place in the world….for the sake of making something as cheap as possible and charging the consumer the bill coming and going. Planned obsolescence for example. Sadly, I have witnessed plummeting quality with every GM purchase over the years and believe the current plan of eliminating cars across the line for the sake of cookie-cutter look a like, little soulless SUV’s is a huge tactical error. As much as I hate to think it, I may move on to Toyota next time around…at least they still care about their customers and building a quality product.
So you think SUVs are soulless? Obviously you haven’t ever driven a Toyota sedan. Good luck with that.
GMC Fan,
You couldn’t have missed my point any more than you did. I’m a long time GM loyalist with many purchases under my belt. GM has been a part of my family for decades but, facts are facts. GM quality control has been in a downward spiral for quite some time with the company pretty much ignoring loyal owners for years. Compare a 10 year old Camry to the same vintage Malibu/Regal, etc,…it’s embarrassing really. Go drive any of the Lexus sedans and you’ll see plenty of “soul”. I’m no rah-rah for any of the Toyota’s of the world and I sincerely want GM as a whole to succeed. Just build American cars with style, presence, and reasonable engineering that doesn’t screw the consumer, and most Americans will beat a path to the front door of every dealership. I could name many mistakes over the years but one of the biggest is surrendering to the Koreans, Japanese, and Europeans, the sedan and coupe market. The last Impala/Lucerne will prove a big negative to abandon I believe.
Great comment! And they have done exactly that, surrendered segments, market share, etc… I suggest its heavy labor costs but there is no energy or excitement at GM any longer, just yes men behind Typhoid Mary…
Once again it seems that GM contradicts itself, wasn’t the Impala even in the latter years the best selling large sedan in it’s segment? The others GM offerings were not but the fact that they were all from the same plant doomed them as a group not the individual model profits. The Bolt has been a looser from day one but since its fits their current agenda it lives despite the fact it’s outsold by practically every vehicle GM has killed over the last couple years. GM is it’s own worst enemy because of perception(80’s-90’s), consistent cheapness(interior plastics), poor decision making(avalanche, CT6, cruze) ,and horrible marketing(volt, SS, regal) even when they have a winner.
This strategy is now used by Hyundai/Kia and is really visible. GM products looks almost the same – in fact modified Chevys – the same cheap parts (steering wheels, knobs, cheap plastic, zero hybrid technology, just only one full digital cluster in new Escalade etc.), badge engineering is for GM best and maybe last song.
This is the new GM. Don’t compete to make brands more competitive, just quit and adopt new talking points for the future.
Don’t worry like I’ve stated in previous posts, the current management is banking on their exit packages in 2-3 years when all the EV’s are due. So they have no real stake in the game other than to maintain the status quo….and move on like their predecessors.
GM should Merge with Nissan. It makes sense.
GM’s lineup is filled with profitable models
Nissan’s lineup is filled with unprofitable models.
Together they would have every segment covered.
Except even GM is in better shape than Nissan….
I would put a monkey in charge before Mary Bara. What the hell has she done well yet? She would not know design if it bit her on her frumpy ass and sweater combo.
bubbaq
It’s an Election year, all the good monkeys are running for office. The rest are playing armchair CEO while under stay at home orders.
The Trunk Monkey could get the job done right. 😉
Making money shouldn’t be a four letter word.
As for GM and its mainstream sedan strategy, if the plan is to stay with Malibu, keep its cost structure similar to Cruze, and then be able to build and sell them to a broader/bigger product segment, and at a profit, then I’m all in.
As for lux sedans and CT4/5, GM should probably do the same as Cruze/Malibu, but be sure to keep the quality/design/materials commensurate with the competition, and just build the CT5. Make a satisfactory profit, meet the needs of lux buyers, etc. (Keep in mind that both BMW and MB can’t figure out how to sell a sedan either…)
Finally, as for GM’s overall strategy of building vehicles that each stand on their own, you can’t argue with the success of all their trucks, SUV’s, and CUV’s.
“This new GM strategy has resulted in the automaker exiting – large luxury sedan segment (Buick LaCrosse, Cadillac CT6, Buick Regal, Buick Verano, Chevrolet Impala). The small car segment – Chevrolet Cruze compact, Chevrolet Sonic ”
First of all, I seriously doubt GM was losing money on the large FWD vehicles that had been in production for quite a while, so their discontinuation couldn’t have been part of this strategy. Same goes for the Cruze and Sonic, those platforms I seriously doubt were money losers.
Second: GM has higher costs due to labor vs the transplants. The exact same vehicle made by Toyota, Honda, Hyundai, here in the USA costs GM more to make. So in order to make them, GM makes them with less value, crappy plastics, etc… so they can increase profits. But the vehicles aren’t as competitive in the market with the crappy interiors, etc… so they lose share. This is what GM experience in the 90’s and early 00’s that brought on the bankruptcy.
In order for GM to be successful and GROW every single vehicle MUST be segment leading . That said GM only appears to want to be profitable so I believe they will continue to shrink, exit more segments and global markets until they are acquired for the niche they will occupy. Not sure which niche that will be….
I seriously believe they were losing money on all those vehicles in your first point. You provided a good reason in your second point.
If the cars were making them money, they wouldn’t have been canceled. If the plants they were building them in were profitable, they wouldn’t close them.
Of course they want to be profitable.
If you look back when they killed Pontiac++ while they were still selling about 250K+ cars per year, those weren’t money losers they killed Olds, Pont and Saturn to right size the company. I am confident they made money on the large cars but saw it as a shrinking segment so they exited it, closed the expensive, old plants to focus on a market where they saw greater oppty. So the vehicles probably made money but long term that market was vanishing. The other thing in the right size is development $$ for each brand. Cut the brands = redirect funds to other opptys and save resources.
GM should be making huge money as 90% of their vehicles are on 2 platforms and they have a few others that will be dying soon. Trucks and CUV’s are where the market is which means anything other than those 2 types we can look somewhere other than GM. (and EV’s… rumored to be coming…someday).
I guess I’m a dreamer from days gone by. I long for the Colonnade Coupes from the 70’s, the 80’s Coupes and “REAL” Cadillac’s like the dead CT6. Equinox, etc… are just pathetic..IMO
It is long pass due that Barra should have been walked out and replaced by a younger and less expensive CEO.
It’s time for GM to admit they’re better at automotive marketing than manufacturing.
Good call, except their Marketing is abysmal… they do nothing well and lead in zero categories. Not a single GM vehicle is considered “Class Leading” with the possible exception of the Vette which is really , now, in its own class… Luther has it right, MB has been an utter disaster for GM..
Here is some insight for you. The fact is GM has again proven they simply don’t have it and their team doesn’t know how to do it! Abandoning markets and segments is a short term quasi win; the question is how many more markets and segments can they abandon. They have been losing market share since the 80’s!!
Bloody Mary needs to go; she just can’t seem to drive the company in an upwards momentum. Along with her she should take a lot of the old guard design and engineering heads that just aren’t cutting it. Their designs are still boring and laclustre While product durability lags behind everybody in the industry, Lada excluded.. In short. They lack pride and promote incompetence through organizational nepetism. The key objective of each Executive is to get their kids/family on the Cash for Life Program! One of the problems has always been that you can be pretty well guaranteed that within 2 years you or I will be moved on…. And not because of our greatness and savvy.
Promotions seldom have anything to do with an individuals accomplishments, or lack of but more so sucking ass and riding on someone’s coat tails. GM execs get more recognition for being good on their feet than what they’ve accomplished: and that is the sad reality.
20 years ago I said GM will not exist the way we knew it to be and that has in fact happened. 20 years from now GM simply won’t exist. Bloody Mary could go down as the last sat Chairman of General Motors.
Bulls Eye and Bravo. I wish it was the total opposite, but the trend is you are 100% correct…
Will GM keep going with constant name changes for their vehicles? Chevelle becomes Malibu. Every full size Chevy becomes an Impala? Roadmaster becomes Electra, Century becomes LaCrosse, Special becomes a compact with a Skylark trim that them becomes the main line, eventually becoming a Century., which in the past was a Special with the Roadmaster engine…
If they’d keep names on types of cars and models for more than a few years, there’d be some brand knowledge among the buying public. Meantime, the Camry has been Camry for… 30 years? Same for the Altima and Maxima. Subaru has had Legacy and Outback forever. People know what they are.
Go to the top bar on this site, drop down Chevrolet, and count the model names. It’s crazy!