By Peter M. De Lorenzo
Detroit. Lost in the endless din of GM’s recall nightmare is the burgeoning realization that the upper management of the company is so buried in the machinations, logistical issues and political hand-wringing associated with the mess that another nightmare is gaining steam that may even have deeper implications for the company’s health in the future.
GM’s other nightmare? The company’s marketing function is crippled and in disarray, most evidenced by the plummeting performance of its Cadillac division.
GM’s luxury division is underperforming the market, and it’s a problem that is intensifying with each passing week. Cadillac ATS sales are down 20 percent and its ballyhooed ELR extended range electric vehicle is nothing short of a disaster, with around 300 cars sold to date. GM execs insist that volume was never the plan for the ELR, but that exclusivity was its game. Really? With 300 cars sold? As in, do they really expect us to sit there and buy that line of bullshit?
What are the reasons for the downward spiral of Cadillac sales? There are many, but in the ELR’s case it’s easy to see the problem, and that is that it costs too damn much. We just drove an ELR that stickered for $82,135, and that’s with a base price of $75,995. And even though we liked the car – a lot – it’s glaringly apparent that Cadillac’s pricing strategy is a complete miss. (See our “Quick Take” review in “On The Table” – WG.)
I’ve discussed this before, but the problem with Cadillac’s pricing strategy stems from the fact that Cadillac marketers are saddled with a depressing mix of overconfidence and arrogance.
The overconfidence originates from the fact that the True Believers in GM product development have done a superb job in bringing some outstanding Cadillacs to the market. It started with the latest V-Series entries developed a few years ago – especially the V-Series Coupe and Wagon – and it’s best exemplified by the superb new CTS, a thoroughly competitive entry that can go up against the best that the German luxury-performance stars from Audi, BMW and Mercedes-Benz can offer in its class, and do so successfully.
But somewhere along that journey of building positive product success, Cadillac marketing strategists lost track of reality in a big way. They confused glowing reviews about the products from the auto enthusiast media to automatically mean growing acceptance in the market from consumers.
Cadillac marketing strategists believe that since the brand has finally arrived in the eyes of the auto enthusiast media that it must be the same for the consumer public, and that they’re perfectly justified in pricing the cars at the steep end of their respective segments (cue the arrogance). Those two things never automatically go hand in hand, however, and it’s a fine line between charging what you think a product is worth as opposed to what the market will bear. Cadillac was bound to find that out the hard way.
The reality for Cadillac in the big picture scheme of things is that the brand is barely registering out in ConsumerVille. Yes, traditional Cadillac loyalists have been brought along to embrace the “new” Cadillac to a degree of success, and some import-oriented intenders have not only shopped but bought Cadillacs in their process of discovering the brand, but Cadillac remains merely an interesting choice that’s making some noise in the market and luring some – with the emphasis on some – consumers to its tent.
But that doesn’t translate into asking $80,000+ for the ELR, which is basically a two-seat luxury GT (it allegedly has room for four but who’s kidding whom?) that pales in comparison to the admittedly pricier but much more compelling Tesla Model S sedan. Make no mistake, I find the ELR to be a very attractive machine inside and out, but it should sticker for no more than $60,000, all-in. GM executives and Cadillac marketers don’t see it that way, however, and this ultra-aggressive pricing strategy for Cadillac is absolutely killing the brand’s opportunity to make inroads in the market.
When you aren’t really “there” in consumers’ eyes, you have to take the long view and undercut your competitors’ pricing so that you can eventually seed the brand in the market over time. This is something that Lexus did so brilliantly vis-a-vis the competition when the brand arrived here in the late 80s. And it’s a memo – and a lesson - that GM and Cadillac marketers missed, apparently.
The natural result of this madness? A big bunch of cash is being bandied about in order to help dealers move the ELR off of the lots, which will ultimately destroy resale and lead to the ELR fading away like a modern day Pontiac Fiero, relegated to GM’s museum of What Could Have Been (aka the scrap heap of broken dreams, piss-poor decisions and managerial incompetence).
And the other Cadillac models suffer from this egregiously aggressive pricing too. The problem is that GM can’t roll back sticker prices without decimating any chance for future resale and royally pissing-off its Cadillac customers (and dealers), so they’ve banished themselves to the Land of Customer Cash for the foreseeable future. Not exactly premium, is it?
It didn’t help that last week Cadillac’s sales chief, Bill Peffer – the third in two years, by the way - left the company. That would indicate that there’s a serious problem, no?
And what is the problem, exactly? Well, as anything to do with GM, it’s a long, sordid story. It started back when GM’s maliciously incompetent and reactionary former CEO – that now-legendary hack, Dan Akerson - began wreaking havoc on the company internally, while making decisions he was ill equipped for. Some of those decisions will manifest themselves to great negative effect for years to come, but one of the most glaring and immediately damaging actions was his complete decimation of the marketing function at GM.
Akerson decided that then Chief Marketing Officer Joel Ewanick was getting too much media attention – Captain Queeg absolutely despised anyone getting press besides him because, after all, it was his company damnit and he didn’t think anyone else was worthy to talk to the media – and jettisoned him from the company via trumped-up charges that proved to be complete fiction. Akerson’s purging of Ewanick came with the edict that there would be “no more ‘rock star’ CMOs” at the company, an edict that has been brainwashed into the current GM management team.
The problem was that the “no more ‘rock star’ CMOs” translated to no CMO at all, and GM marketing has remained rudderless without a genuine leader ever since.
Akerson’s reactionary, ill-informed management style resulted in another complete debacle when he plucked Bob Ferguson, GM’s chief lobbyist in Washington, from obscurity and decided that he was just the guy to head-up the Cadillac brand for its newly energized global push. The fact that Ferguson had no qualifications whatsoever was no deterrent to Akerson because remember, he viewed anyone with actual car experience at GM – no matter what the discipline – with suspicion and complete and utter disdain, because to him those “lifers” represented the “old” GM BDA (Before Dan Akerson) and that they were e-v-i-l personified and couldn’t be trusted.
So in effect, Cadillac, now one of GM’s two “pillar” brands after the bankruptcy – along with Chevrolet – and a crucial cog to GM’s future success and profitability, was entrusted to a complete marketing amateur on a whim.
Is it any wonder that chaos has ensued at Cadillac?
To compound matters even more, when the proverbial shit hit the fan with this recall mess, new CEO Mary Barra decided that the best place for Bob Ferguson was back where he belonged in the first place - in Washington where his true expertise lies - trying to help GM’s cause with the glittering array of stumblebum politicians who, armed with pitchforks, were after GM’s hide. Which left Cadillac with no brand leader whatsoever. Wonderful.
How is this all working out so far? Well, here is GM with the ability to spend almost $2.5 billion in marketing and advertising annually and they can’t seem to market their way out of a paper bag. In fact, no major corporation in automotive history has done so little with so much. And a company of GM’s size with no Chief Marketing Officer and no brand chief for one of its most important brands?
It’s a giant, heaping, steaming bowl of Not Good by any measure.
Will this situation improve anytime soon? That’s highly debatable, because remember, it has been brainwashed into the current GM management structure that they don’t need a CMO, which is idiotic and a complete travesty.
Does Mary Barra have any marketing expertise? No. Does Dan Amman? No. Does Mark Reuss? No. Does Alan Batey? Oh hell no. Yet GM’s management team seems to be perfectly comfortable to allow the company’s marketing function to wallow in indecision or even worse, piss-poor or non-decisions because their collective attention resides elsewhere.
The sad thing in all of this is that I’m not sure Ms. Barra has the inclination or can muster the energy needed to care at this point.
And that’s the High-Octane Truth for this week.