Posted by: David Welch on November 28, 2008
The buzz in Detroit this holiday week is that General Motors will carve up its family of brands like a Thanksgiving turkey and cast away a few as dried bones. One report has GM ditching Pontiac, Saab and Hummer. Well, Hummer is on the for-sale block. That leaves Saab and Pontiac as possible disposables.
On his blog Brand New Day, my colleague David Kiley wonders how GM will get rid of these brands without paying a fortune to dealers. In the case of Pontiac and Saab, it may be fairly cheap, at least as buyout deals go. Many Pontiac dealers are already paired with Buick-GMC dealers. They won’t sue the company they rely on for Buicks and GMCs. Ditto Saab. A bunch of its dealers are paired with Cadillac already. When GM bought out Oldsmobile dealers a few years back, it cost the company $2 billion or so. Many of those dealers had stand-alone stores. GM based payoffs on recent sales volume. Since Saab and Pontiac don’t sell much volume and many dealers are paired up with another GM brand, it may not be that costly.
Since we’re on the subject, I’d throw one more GM brand in the scrap heap. GM should ditch Saturn. It’s been a long time since that brand had magic. With Internet shopping taking a lot of the dealer margin out of the sales process, Saturn has less of a selling proposition. In other ways, the brand actually carries baggage. When GM showed the Saturn Aura to consumers before launching the car a few years ago, it scored a 3.4 on a 4.0 sale. That was with no badge or brand. When viewed with a Saturn badge, it scored a 2.0. Even if Saturn still had equity, GM can’t afford to design and market cars for all of these brands, not with market share headed toward 20%. Plus, Saturn usually loses money, sometimes lots of money
GM may not be able to dump Saturn any time soon. Since its dealers stand alone, they would be costly to buy out. But if GM rides this storm out and gets back to profitability, it’s something the company will have to consider.