If GM is going to stop its sliding market share, 2001 is the year, says Ron Zarrella, president of GM North America. The company has a raft of fresh product en route in the second half.
This is your first downturn in the auto industry. What do you need to do differently?
This is a very hard market to call. We're not sure we've got it called right yet. We got through the first quarter better than everybody expected. But everything we looked at suggested that we're defying gravity in the first quarter. We have taken a fairly conservative approach to planning the business for this year.
Our inventories are well down. They're down 107,000 units from where we finished in the first quarter and down within the range of where we normally try to operate. If the market comes in at 16 to 16.5 (million), where we're still projecting, we'll be able to operate the next three quarters on a pretty even keel.
One of the toughest things to deal with is the price competitiveness in the market. We've been through five years now of net price declines to consumers. The price consumers pay — price increases, less incentives — has been down five years in a row. It's going to be down again this year. The question is how much is it going to be down. It's down for us 1 percent in the first quarter — a big drop.
That's what the price is?
Our net price was down 1 percent in the first quarter. We don't have the industry numbers yet, so I don't have that.
That's comparing it to the previous quarter?
That's comparing it to the first quarter of last year.
If we're going to turn market share around, we need to be competitive in the market. The balance is an absolute belief that our products are pretty strong right now, particularly our truck products. We've got the best truck lineup in the business, and if we can be competitive from a price standpoint, we'll pick up market share in trucks. We're committed to do that.
It costs money. You balance the belief that this is the year (to) stabilize share with "I need to make a reasonable profit." We're committed to be competitive in the market.
The only way we can be competitive in the market is to be absolutely merciless on cost. We made the decision on Oldsmobile, and we made the commitment to reduce our work force, our salary work force, by 10 percent. That's tough to do. We're on track to do that, and we're looking at absolutely every element of cost on the business. You guys ran a story about canceling our dealer meeting in the fall. We're in a market where we've got to sell product. And we elected to take the money and put it in the market and be competitive and forego a meeting like that. Lots of those kinds of decisions need to be made as we go through this year. It's going to be a tough year, but we think we can have a reasonable year doing the right kind of things on cost, and, given the fact that we got an awful lot of strong product, that's yet to hit the market.
Have you drawn a line in the sand on market share?
I wouldn't say we've drawn a line in the sand. I think for the benefit of our own employees, the benefit of the impact with financial analysts, we've got to get this thing turned around, and we believe we've got the products to do that. We've got an enormous number of new products going in the market the second half of last year, this year, next year. If we're ever going to do it, it's going to happen now.
They are coming in the market at a time when there's a lot more competition on the truck side. Toyota is everywhere. And Nissan's coming on, too. Every time another one comes in, even if it's lousy, somebody loses share.
You look at some of their products. Our full-sized truck products are the benchmark in the industry right now. We're getting a premium for those products, and as long as that premium doesn't get too wide from the main competition, we'll pick up market share. We used the strength of those products, frankly, to manage our profitability last year, and we got very strong premiums for those products when we could have picked up a lot of market share. We've got a commitment not to do that this year. We're going to pick up market share with our large pickup trucks and our large sport-utilities.
You want to leave some money on the table?
If that's what it takes. We still get a premium for those products, and we're not going to let anybody run away from us in those products. And we gained three points of market share in those segments in the first quarter. And we will continue to do that for the rest of the year — be competitive in the market and figure how to take costs out of other parts of the business.
What about Oldsmobile? Do you inevitably take a hit when Oldsmobile finally goes away in terms of some lost buyers?
We believe we'll take a short-term hit. But we have fleet business with Oldsmobile that we can handle with our other products. We've got employee business with Oldsmobile that we won't likely lose to competitors. They'll move to other (GM) products. We've got a fairly high degree of dualing with other GM franchises. Where there's a dealer relationship with an Oldsmobile customer, that dealer can keep them in their franchise.
We've got some risks. We're trying to do very aggressive direct marketing to those customers so that risk is minimized. I expect in the short term there will be some risks, but it is a fraction of the total Oldsmobile volume that we have at risk. And in the little longer term, we believe that the money, the capital in engineering we would have spent to replace those Oldsmobile products, will allow us to shorten lifecycles in our other products. It will allow us to differentiate our other brands more. It will allow us to strengthen our other brands, and in the end that's going to provide for a stronger platform for building GM market share than what would have been the case if we had simply replaced those products.
Let's come back to products. What is happening with your channel strategy?
Our first preference, where you can make an economically viable point, is stand-alone Chevy, Cadillac, Pontiac-GMC and stand-alone Buick. We still do roughly 35 to 40 percent of our volume through stand-alone Buick dealers. Buick has a pretty strong franchise.
We have a stronger economic proposition for a dealer when you put Pontiac-GMC and Buick together. That's the mainstream direction. We ought to be able to maintain stand-alone Chevy dealers with the volume and product line that Chevy has. We have an enormous commitment to Cadillac. We're going to spend $4 billion over about a three-year period to put out some just absolutely dynamite products for Cadillac. We're committed to make the Cadillac business stronger. We're committed to increase the volume of the Cadillac business and to make it a competitor with Mercedes, BMW, Lexus.
From a channel strategy, we're planning our products on the basis of the lineup that I just described. That's the mainstream direction.
Our direction in metro areas is stand-alone Chevy, stand-alone Cadillac. Where it doesn't make economic sense to have a stand-alone Cadillac, we'll dual with Saab, Pontiac, Buick and GMC
Has that gone far enough where you can start looking at Pontiac and Buick and start eliminating overlap in their product line?
You'll see that. We've got too many mid-sized cars today. You look at our mid-sized car lineup, and we have more than we need. With the next generation of those products you'll see us starting to tailor that lineup to have fewer brands where we can do more volume, more differentiated and targeted at more specific customers, than we're able to do with the last generation of those products.
I'm not sure I follow that. You're going to have more other kinds of vehicles.
If you look at numbers, in 1994 to 1995, we had roughly 105 models. With Oldsmobile out, we will operate in the range of 65 to 70 models.
How do you define model?
Body styles, I'm talking. If there is a Grand Am coupe and sedan, that's two models.
But trim levels are not models?
No, but we'll have fewer trim levels. (We'll have a) fairly significant reduction in the number of models as we define them. That will allow us to replace them faster. It will allow us to differentiate them from each other more. It will allow us to have more innovation, and if the whole thing works, the volume per model will be higher.
I was out at the design center. One of your designers looked back when GM had 60 percent of the market — it had exactly that percentage of the models in the market, too.
There's a theory that's been put forward called the discounted entry theory. It was actually developed by a guy named Dave Brown. Dave is a very bright, analytical planner who built this model and suggested that the more differentiated entries you had, the higher your share would be. The problem is that the marginal gain beyond a certain point for all those entries gets so small as to be economically not viable. We're at a point of trying to pick the spot beyond which increased entries to get more share doesn't make economic sense. For us, with the brands we have, we think that range is somewhere in the 65 to 70 range.
What are the market share ramifications of that strategy?
We're not going to get back 60 percent market share; we're not even going to try. If we can operate around 30 percent of market share, plus or minus a point, in a 16.5 market, we'll make a lot of money.
There is a report that Saturn had been given an ultimatum that if the Vue sport wagon didn't sell well, Saturn wouldn't get the redesigned S and L series.
I've heard that, I don't know where, but it's absolutely not accurate. The S and L series is way down the road.
The Delta Township plant outside of Lansing has been delayed, and my understanding is that the Lambda platform is going to go in there now as opposed to the Epsilon platform, and that this is a front-wheel-drive truck platform, perhaps a minivan.
That would be making news, and I can't do that. We haven't announced what's going on.
Can I assume the plant wasn't delayed for economic reasons alone? Was it a change with models?
Frankly, it was some rescheming of our product portfolio. The decision that was taken will allow us to save quite a bit of capital by switching some products around. At this point I don't want to say. It was not done because the market slowed down; it was done because of an opportunity to save a lot of capital.
The Grand River plant in Lansing — the first vehicle in there is the Catera replacement (CVS). Do you have room for other vehicles there? When do you expect to see the plant at full capacity, and what might go in there?
What will go in there is the CVS, the replacement for the Seville, the luxury activity vehicle, and, we're not sure but, likely one other product that may go to another brand.
In what timeframe do you think that will happen?
The time frame for the Cadillac — we can start up the CVS late this year and, basically, we've got an entry coming out every year on the year.
These are all rear drive?
In the post energy crisis era, is rear drive now de rigueur for luxury cars?
We've made a decision that for Cadillac to compete with what's generally recognized as the premium global brands — all those premium global brands are rear-drive. That's why we made the decision.
Because rear drive is superior?
The ride dynamics are different. The performance characteristics are different. As we move Cadillac to a more sport sedan direction, this will give it a feel and a set of ride dynamics that we don't have today.
Oldsmobile has a really nice lineup of cars and trucks, but a lot of people said you repelled older buyers. If you want a bench seat and shifter on the column, forget it. How do you make the same conversion at Cadillac?
I think Cadillac is quite different. One of the problems with Oldsmobile was that it was almost a direct overlap with Buick. For most of the vehicles that Oldsmobile used to have in its lineup, it was a very high second choice with Buick.
We tried to go in a direction with Oldsmobile and tried to attract a set of customers that GM wasn't tracking with its other brands. That's a different kind of deal. When you look at a product like the Escalade, which has an average age now of 45 and a whole different demographic, and the strength of the Cadillac brand, we think we can compete for the kind of buyers that go to BMW and Mercedes and Lexus.
I'll tell you an interesting story. At the L.A. auto show, we had a Hollywood party where you invite celebrities and movie extras and beautiful people on the West Coast. We did it for the introduction of the Escalade and the Escalade EXT. I was out there standing next to a group of these young people. Some young guy comes up to me and says, "What do you do? Do you have anything to do with this Cadillac?" I said, "Yes, a little to do with it." He says to me, "You know what? This is for me. My father drives a Lexus, and my mother drives a BMW. Those are their cars. This is for me. Cadillac is for me."
What do you do with the Fleetwood buyer?
The big issue is what we do with the DeVille buyers. And that's going to be a hard decision. We learned some things from Oldsmobile. We learned we've got an enormously loyal customer base.
A lot of your DeVille buyers think it's too small.
We're doing OK with it. It has an enormously loyal customer base. It drives a lot of the economics at Cadillac. It's pretty profitable. We need to be careful with the next DeVille. We haven't made all those decisions yet on where to take the next DeVille.
So it might not have the full look of the Evoq-styled cars?
We will move closer to it. If you look at the styling of the DeVille today, it kind of evolved from where it was. We're going to have to be very careful about how far we evolve the next one. Is it going to look like the Evoq? No. The question is, where is the line where you keep that loyal base of customers?
Are you planning on blowing off some of those older customers?
You're going to try and make something for the traditional Cadillac guy?
The key is what we do with the Cadillac brand. I think one of the mistakes we made with Oldsmobile is we disowned the Oldsmobile brand. When the Aurora came out in 1994, it was completely disassociated with Oldsmobile, so there was this kind of simply half-hearted attempt to walk away from the Oldsmobile brand. You can't hide from that. It sold in Oldsmobile dealerships — there's an association with the brand — and we tried to hide from that. I wouldn't do that again. I wouldn't let the company do that again. We have an enormous commitment to Cadillac product. We have a huge amount of money going in there. Some of the best product we've ever done. It will just blow you away. I'm so excited about Cadillac product. We need to make the Cadillac brand cool again.
Is that part of the reason for returning to some of the divisional advertising?
You have the GM brand, you have the divisional brand and you have product brands. You would support product brands in a way that was consistent with the umbrella you wanted to build for the divisional brands. I think we've done that very effectively with Chevy trucks over the years. There is a long-lasting "Like a Rock" umbrella over all the Chevy trucks. It's been consistent with that positioning for the Chevy truck divisional brand. To a lesser degree, we've tried to do that with Pontiac.
Maybe the best example today is GMC and what we've done with the authentic professional-grade umbrella advertising for GMC. Every one of those ads talks about a specific product and specific product benefits. We hope (it) will register and build the authentic and professional-grade positioning of GMC.
Now, the fact is, we don't have a resource-unconstrained world. I can't spend all the money I would like to spend on advertising. A couple years ago we called in the chairmen of all of our ad agencies. We asked them to write a white paper. Given the constrained-resource world, what's the best way to build our divisional brands and our individual brands. We had the chairman of IPG, umbrella organization over McCann. We had the chairman of McCann, chairman of DMB&B and the chairman of Leo Burnett. We asked them to write a white paper. It was actually done when Phil Guarascio was still here. Phil and I had dinner with them all. Every one of them said what we ought to be doing in a resource-constrained world is vehicle brand advertising under a division umbrella. We're going to move in that direction. GMC is the latest example of that. We're going to see Pontiac moving more in that direction. We think we've got it with Chevy trucks. We're moving in that direction with Chevy cars. That's the direction we're going to hit.
With Cadillac, at least initially, you'll see much more of an emphasis on the Cadillac brand because we need to make the Cadillac brand cool again. We need to make it OK for the right kind of customers to consider Cadillac. In the television advertising you saw some bridge advertising that leverages Cadillac's heritage. It's called dreams. That is directionally where we'll move with Cadillac. That is just a bridge, not a new campaign. And we'll use television to establish this emotional connection between desire, Cadillac customers and the product.
Do you have to skip a generation — pass the baby boomers? Or are you going for the baby boomers?
I think the evidence that we don't have to do that is what's happening with the Escalade. The Escalade is hot, hot product. It is white-hot. When you look at the types of customers that are buying Escalades — the demographic of those customers, the age of those customers — that would suggest that with the right product, you've got an opportunity to do the right kind of marketing and establish the right kind of emotional customer connection with the brand and the product and not skip a generation.
Can you sell a baby boomer a passenger car called the Cadillac?
Yes, I think we can.
Cadillac is trying to define itself as more premium luxury, higher end luxury than it has in the past. Is that accurate?
I wouldn't describe it that way. The way we think about Cadillac positioning is art and science, and that really emanates from Cadillac's history and heritage. If Cadillac was absolutely the dominant luxury player, it had two things. It had avant-garde styling. When you saw Cadillac coming down the road, you knew it was a Cadillac. First with big fins. First with big, egg-crate grille frames from headlight to headlight. The first with big cones on the front bumpers. It was avant-garde. Also, the latest automotive technology showed up on Cadillacs first. Those two things.
One Saturday, I had the ad agency put together a reel. It was five hours of Cadillac advertising. The first ad that Cadillac ever made in the 1950s up through the '90s. When you look at advertising through the '50s, '60s, '70s and into the 80s, very early '80s, you knew what the Cadillac brand was. It focused on avant-garde styling. It focused on technology, and it was all done in a very aspirational way with an almost emotional aspirational connection to customers, to buyers.
You can see in the '80s and '90s they've moved off of that. They start talking about fuel-efficient Cadillacs. They start talking about things in ads that had nothing to do with where the Cadillac brand was. They start comparing themselves with imports such as Mercedes. If you're the dominant player, you're No. 1. You don't have to compare yourself with anybody. What we need to do right now is a contemporization of that position, of that avant-garde styling and latest technology. We talk about it in terms of art and science. We need a contemporization of that idea for today's customer. That's where we're going.
A year ago, you and Ford got into a race to see who could improve mileage on sport-utilities the most. How committed are you to that? If you say, "I'll give you 30 more horsepower or an extra 1½ miles per gallon," doesn't the buyer always take the horsepower?
You don't have to make that tradeoff. Buyers won't trade off performance and functionality, and, sometimes, functionality is defined as size. They don't trade that off for fuel economy. The key is, how do you give them all that performance, all that functionality and size and better fuel economy? That's really where we are trying to go here. You're right, they won't make the tradeoff. In the end, you have to give customers what they want. We plan to move a fairly high percentage of our large sport-utilities to all-aluminum engines. We've got a technology called cylinder deactivation, which we'll put in the market within a couple of years on our large truck platform. It has quite a substantial impact on fuel economy. That's coming to market.
What about fuel cells? Are you seriously into the gasoline reformer technology?
The reformation question with fuel cells is, can you get it done at gas stations — which is what we prefer — or do you have to do it on board? It is a lot more complicated and a lot more expensive if you have to do it on board. We're working with companies like BP (Amoco) to look at the options for reformation at the fuel pump and how you store the hydrogen on the vehicle. How you store it safely and in enough quantities so that you have an effective range. There's an awful lot of basic research going on with hydrogen storage. We're actually partnering with some universities.
Do you think that within the next decade fuel cells will be a significant contributor to environmental progress?
I think fuel cells will be commercially viable in the next decade. We've got a pretty big effort in our fuel cell development. I don't want to go into detail other than to say that we're really pretty encouraged with the progress being made in the efficiency in size and cost of fuel cells. It's happening faster than we might have thought. We still have a long way to go. And the first application will likely be in stationary power distribution. We'll learn a lot from that, and we'll be able to parlay that into operating fuel cells in vehicles that people can actually afford.
Do you care if people perceive you as the environmental leader?
Jack Smith has a saying: Deeds, not words. We've got an enormous commitment toward significant improvement in fuel efficiency. We've got the most fuel-efficient trucks in the market today. We're very highly committed to it. Would we like to be recognized as the environmental leader? In the end, advertising and public relations is not going to make you the environmental leader. Delivering the right kinds of products to the market will make you the environmental leader. We'll concentrate there.
To be critical for a moment, take the Buick Rendezvous. Lexus has had an RX 300 for three years. Now, Toyota has the Highlander version. Acura has an MDX. You're a day late and a dollar short.
None of them can seat seven.
Is that the unique selling proposition for the Rendezvous?
The USP is that it has tremendous value for what we are charging and more seating, capability and functionality than anything out there. Do we wish we had it two years ago? Sure, we do. But we think we've got a winner with the Rendezvous. We've talked about innovation and putting innovative products in the market. Look at the Avalanche. We think the Avalanche is going to be an absolute home run.
Agreed, but 100,000 is a lot.
There are folks who think 100,000 is the top end of what we do, and there are other folks who think it's the bottom end of what we do. If we do 100,000, I'll be happy. If we do 80,000, we'll have quite a nice business and make a lot of money off the Avalanche. But it's a very innovative product.
What do you do to fix Aztek? People keep saying it was priced too high. What do you do about that?
We've lowered the price and we've sold 3,000 in March and 3,000 again in April. Now we can make a little money with where we are right now. The 3,000 in March and April were an annualized rate of about 35,000. It's not where we had hoped. We had hoped to sell 50,000 to 60,000. We'll keep trying to build it. We got an enormous pop from the "Survivor" (TV show) association. We need to make it a cult car.
As you try to do these new-category vehicles, is there a lesson to take away?
I think the lesson is that they are not all going to work. We're taking some risks. If you're going to be innovative, you're going to take some risks. We're going to have some that are going to work exceptionally well. We'll have others that we took some risk on but didn't quite work the way we wanted it to. When we ran clinics on the Aztec, there were a lot of people who just hated it. They thought it was a ridiculous idea and not particularly good-looking. Other people thought it was just terrific. But I'm glad I can say we did it, and we'll learn from it as opposed to being in a position that we certainly would have been in three or four years ago, saying we're not taking the risk. We need to take a helluva lot more risks if we're going to turn around our market share. We're committed to do that.
Is there something that has changed in the economics of the business that allows GM to make things profitable in 40,000 or 60,000 or 80,000 units?
The thing that changes the most is component leverage. Basically, the Aztek is built on our van platform. There's an awful lot of commonality between the Aztek and our vans. That helps. At 35,000 units will we make a lot of money? No. We won't lose a lot. We can make the business work at that level. Not what we'd hoped. The Avalanche has about 85 percent common parts between the Chevy pickup and the Suburban. We can make a lot of money on the Avalanche if we sell 100,000. We can make money at 50,000. It's all about part leveraging; it's all about capital efficiency.
Does $2 per gallon of gas make any difference in what the American consumer buys? Will $3, $4 or $5?
Two dollars per gallon of gasoline is going to have some impact on the very low end of the market, where you get strictly payment buyers and they are looking at how much disposable income they have every month. Can I really afford to buy this new car given that gas is that high? It will have some impact on the very low end of the market. There's been a suggestion that it will have an impact on vehicles that have lower fuel economy. If you're going to pay $40,000 for a Suburban, $300 to $400 per year in incremental operating costs is not going to change that.
Would $3 or $4 make a difference? How do you plan for that ?
We don't think it's going to get to $3. The fundamentals are not there to get it to $3. The rise that you are seeing in gas prices now is a function of refinery capacity. As long as oil companies think they can make money by adding capacity, they are going to do that. We expect that's going to happen. We don't think we'll see $3 per gallon gasoline in the U.S.
Are diesels discussed in the plan anywhere?
Quite a bit.
Beyond a large pickup truck?
Yes. In performance of diesels, as you see in Europe, they are getting a lot more refined than what American consumers have perceived with their diesel experience in the past. If you look at the regulatory environment, diesels have to get a lot cleaner than they are today. There's some technology that has to happen to make diesels a bigger part of the American market.
Does the stigma against diesels get overcome when fuel is $2 and $3?
The stigma against diesels can get overcome by great diesel engines, by great diesel product.
Are any in the plan?
We're talking about it a lot.
Delta small cars: Are they going to be brought over from Europe similar to the European models — in the way that Focus was brought over by Ford?
We think the styling direction of the Opel Astra would fit very well in this market. So you will likely see an awful lot of commonality in the styling cues of the vehicles. At this point, that probably is as much as I can say.
Is there any possibility that the entry-level vehicles for Chevy and Pontiac would be noncars — some kind of sport utility or wagon?
If you look at the Vibe, we expect that to take a big part of the entry-level market for Pontiac.
Would that eventually push the Sunfire out?
It might. It is not determined yet.
Would the same thing happen with the Cavalier?
In the timeframe we're talking about here, there's an awful big market for three-box sedans. There's too much volume for us to walk away from that. Now, we'll have variants off of that product. We'll look at a three-door hatch. We'll look at a monocab off that platform. It'll have to be styling that moves it away from just a small minivan.
Three months ago, you vowed to capture share at the bottom end of the market. What have you done?
No. I didn't say that. I said that we'd introduce over a period of time seven entries that would be targeted at entry buyers. The first would be the Vue, which will be out later this year. The Vibe goes to the heart of that market. We'll do some things with the next small truck, which is not until 2003. It will be youth-oriented. We've got the new Saturn small car next year.
Now, in the interim, if you look at Cavalier business, we actually sold more than Focus in the first quarter.
There's a lot of money on them.
In total, there's no more money than last year; it's just being spent in different ways. There's some good marketing going on in Cavalier there.
It's being spent in cash.
Yes, but in some unique ways — some promotional combinations.
You've hired a lot of outside designers. Does this give us a sense of what we can look for in Wayne Cherry's replacement?
Most of the hiring we have done has been young, avant-garde designers. It's fun to go other there. This is about as much of an in-your-face group of people as you'll ever want to see. I have to give Wayne credit. He has brought in an enormous amount of talent at the vehicle-designer level. It is starting to come through on the concept vehicles.
I wouldn't take it as we've got Wayne's successor.
Do you feel any pressure to increase market share or else? You are on the hot seat.
I don't think of it as increasing market share or else. For the good of the employees, for the positive momentum it needs to create in the company, yes, I feel a lot of pressure to increase market share. Not because I'm afraid of losing my job but because it's the right thing to do.
Toyota and Nissan are in the big-truck business. Even if Nissan executes it badly, it will sell some. Are we going to see reduced share by you in the big pickup and sport-utility market?
The way to stay ahead of that is to keep innovating, to go where they are not. We've got a strong dealer base for those products and a very loyal customer base for those products. It's hard to pull away Silverado customers. It's the toughest part of the market to conquest. With the innovation of the Avalance, you stay ahead.
Have you made up with the dealers? They were real peeved with you a year ago.
I'm trying real hard. I spend a lot of time in the field, visiting dealers. It is better in my perception. People don't like change; it's uncomfortable. Some of the changes didn't work. Some weren't very smart. In the end, I think our business is better off now than it was five years ago. Our cost structure is lower.
We have a sense of where our brands need to go. We're no longer at the bottom of the NADA dealer survey. Some of that is a function of what we've done. Some of that is what Ford and Chrysler have done to themselves, but it feels good not to be at the bottom.
Have you changed your view of the utility of dealers?
This perception that, frankly, you guys liked to write about, that I didn't think we needed dealers, that was never the case. I will personally be a little more reluctant to jump on the next big thing. OK? What's the next big thing? We had public companies gobbling up our best dealers and a fear that pretty soon we'd lose control of our franchises. That didn't happen.
The next big thing was that 80 percent of customers would buy their vehicles over the Internet. That's not going to happen.
If there is one thing I've learned, it's that we have a symbiotic relationship with dealers. We can provide something together that alternative ways of distributing products to customers can't. We need to help dealers create more value for the business they've got. And in doing that we'll create more value for General Motors and General Motors' shareholders.
Has your perception of the Internet changed?
Real companies will derive real value from the Internet in two ways: the speed with which things will happen and stickier relations with customers. Those dealers who think this will go away, we have an obligation to show them how much value will be created here.
After seeing a couple of divisional general managers change recently, are you concerned about how that position is structured?
It is a very important position. When I came into the company, and we reorganized around brand management, all the buzz was brand management. We had disenfranchised the sales side. Then we put the five strong guys (regional general managers in Thousand Oaks, Calif.; Naperville, Ill.; Irving, Texas; Atlanta; and Purchase, N.Y.) out in the regions. We looked at shifting resources to the regions. And we disenfranchised the marketing side. We need to get it back in balance. Those marketing positions are the keepers of the keys to the divisional brands. We're looking at that. I don't see any big organizational changes. But some of the decision rights need to get back in balance.