Will things get fouled up, again?


GM's remaining problems stem from a broken product strategy. Sloan's "car for every pocketbook" has been criticized as out of date, but in reality GM has not followed his Mantra in any form since the '60s. Instead each division has increasingly targeted the same mass market, at the same prices. GM today more closely resembles the product mess Sloan observed in the early years of GM following the acquisition of the Chevy and Scripps-Booth businesses. In some respects it's even worse. At least in 1921 Buick and Cadillac had profitable businesses selling premium and super-premium sedans, whereas today both have fallen into the midmarket with the bulk of sales from cars barely more expensive than similar Chevrolets. Attempts at "marketing" similar cars at similar prices to different customers has cost the company at least two divisions (one can argue whether the others had any place in any strategy). What's more GM's current strategy is to win sales by offering the cheapest models in a targeted segment—typically offering large as competition for midsize, and midsize for compact. All this has done is erode profits, brand value and competiveness. Not only does this compressed pricing structure lead to unsupportable overlap, but in some cases the same division will offer more than one product in the same price or size segment. Is it really sensible to sell the Pontiac G8 at a lower price then than the Pontiac G6 with the same engine? GM in the late 20th Century created a pricing legacy that can't easily be broken (loyal buyers used to buying a new Buick every few years are alarmed at even the current, modest attempts to elevate prices beyond their reach), but if GM is to become competitive, a pricing strategy that clearly separates each brand's offerings must be re-established.

Cadillac must return to selling, as Sloan put it, "the highest quality at a price consistent with a volume that would make a substantial business." One could argue that is at a level competing with Bentley, and not as it is at present, with Acura. But even if we target Mercedes, BMW and Audi, that means one midsize sedan (not two), at a price starting at around $45K, not $35 K as it is at present. This allows both a more expensive, better equipped LaCrosse at a price point more closely aligned with the Acura TL and Lexus ES350, and a compact Cadillac aimed squarely at the 3-series and E-Class.

GM's fouled up pricing strategy effects not only brads, but product development. For example GM markets the Equinox as a compact crossover, aimed at the Escape, RAV4 and CR-V, when in reality it is the same size and very nearly the same price as the Edge, Highlander, and Pilot. As a result midsize buyers are told they should not even consider it, and if they do will find it lacks the interior space of other midsize offerings. Compact buyers on the other hand will recognize instantly that it is a much bigger vehicle, and many will not even bother to consider its advantages in economy and space. They want a compact, and the Equinox is clearly not. Unfortunately the company's North American operation is riddled with such problems. It is not a question of whether it will get fouled up again, but when it will ever be unfouled.


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