THE AUTOEXTREMIST

March 18, 2009

GM's "duck and cover" strategy falls flat.

By Peter M. DeLorenzo

Detroit. In trying to convince the Obama administration that it is worthy of the billions of dollars in additional loans in question by Washington’s March 31 deadline (now termed as an “arbitrary” date by Obama’s troops), General Motors has been on a slash-and-burn offensive within the company to save dollars wherever it can, and in doing so has made some highly questionable decisions that could severely impact the company’s ability to compete when the economy starts moving again.

The evidence?

GM has reduced its marketing offensive to “deal” advertising at a time when the American consumer needs more. Much more. And with the constant din in the national media along the lines that GM deserves to die, consumers need to know “Why GM?” and they need to know now. They need to understand where GM has been, i.e., what the company has meant to this country over the last 100 years and the essential role it has played in America’s economic and strategic success, where it is now – what it’s doing to get better and oh, by the way, tout the excellent, highly-rated products on dealer lots right now – and where it’s going, as in, what does GM’s future look like beyond the Chevrolet Volt?

While GM going “dark” in the media and missing out on major PR opportunities out of deference to the Washington politicos must have seemed like a good idea down at the RenCen, it’s not playing out in a good way by any stretch of the imagination.

But there’s more to GM’s “duck-and-cover” mode than just marketing and PR missteps, because its “cut at all costs” mentality is now costing it product advantages that could have been keys to the company’s future success.

The most egregious example of GM’s misguided thinking? It has postponed its new, highly-efficient, light truck diesel engine (one of the most technically advanced engines from any manufacturer in the last ten years), which was originally scheduled to begin production next fall. This postponement will cost GM at least one year (the time it takes from a “go” decision to get the program up and running again) in a market where genuine product advantages are extremely hard to come by. GM also postponed the Cadillac CTS Coupe by a year, a can’t-miss product “hit” and exactly the kind of car it needs in-market asap. Not Good.

And this is just the stuff we’re hearing about today. There are rumblings from within GM that the cutting has gone absolutely off the deep end, with everything from silly, inconsequential, “cover your ass”-type sacrifices being made by executives running scared to blatant product planning screw-ups that threaten to squander all the hard-won gains that have occurred in the Lutzian era, and in turn threaten the company’s fundamental competitiveness in the future. (Read how GM’s “slash-and-burn” cost-cutting offensive may affect GM Racing in this week’s “Fumes” – ed.)

Which brings me to GM’s move last week of not taking the interim $2 billion in government funds. All of the cost-cutting going on within GM since January 1 has been geared to send a message to the Obama administration that the company is making meaningful progress in their “downsizing” efforts and that with additional funding from the government they will be poised to be a reconfigured and reinvigorated company. And that’s why last week’s maneuver was no last-minute decision or happy accident. But there was more to GM’s motivation than just that.

It’s no secret that GM has been seething about the fact that Ford has been able to put some serious distance between itself and GM (not to mention Chrysler) in terms of creating a more favorable public image by not taking government money. As a matter of fact, Ford has gotten meaningful positive feedback from both consumers and Washington politicos alike for its stance, and this has rankled GM to no end. So GM’s move last week was clearly calculated to blunt some of the PR hay that Ford has made by its campaign to distance itself from “The Old Detroit Two.”

Whether or not it really matters in the giant scheme of things is debatable.

What does matter is the fact that GM has apparently chosen to ignore one of the oldest adages in this business - or any business, for that matter - and that is that you can’t “cut” your way to prosperity.

“Duck and cover” does not constitute a marketing or PR strategy, or an advertising strategy, for that matter. And it certainly doesn’t qualify as a strategically sound technique for product planning.

The bottom line in all of this is that GM needs three things more than anything else right now, and they are:

1. Outstanding products that prove to anyone who would bother to look beyond the negative headlines that the company indeed deserves to exist;

2. The collective corporate backbone to be able to say to anyone in the Obama administration - or to any of its critics too - that it is willing to go to the mat to protect the essential product programs that will ensure its long-term viability and competitiveness, even if it means not looking as financially “rosy” on March 31.

And 3. Just as important, the guts to say what needs to be said without cowering in fear that they might offend some faction “out there” in the media or in Washington.

GM’s “duck-and-cover” offensive has swung the pendulum too far in the wrong direction, and the consequences of its actions could have far-reaching effects.

Will cooler heads prevail so that some of these product and image missteps get put back on track and on time?

At this point it’s the biggest “wait and see” of the year.

Thanks for listening.

See a special live webcast event hosted by Autoline Detroit's John McElroy with The Autoextremist himself, Peter De Lorenzo, along with auto industry veteran Jason Vines this Thursday evening, March 26, at 6:30PM EDT at www.autolinedetroit.tv. Tune in to see "the bare-knuckled, unvarnished, high-octane truth" and expect a no-holds-barred discussion about what's going on in the industry right now, along with anything else that pops up in our minds. You can chat with us "live" too. Again, that's Autoline Live this Thursday evening, March 26, at 6:30PM EDT at www.autolinedetroit.tv. Click here for a preview!