GM Plays Brand Favorites

Most of the marketing money and new vehicles are going to Chevrolet, Cadillac, Buick, and GMC, while weaker brands starve

By David Welch

Ask a General Motors (GM) executive about the company's plans to wind down four of its eight vehicle brands, and the answers are circumspect. Saturn could be sold, but GM hasn't given a firm answer. Hummer is for sale and Saab might be, if there is a buyer. Pontiac will still exist, but maybe selling just a couple of cars at Buick-GMC showrooms.

Even if GM can't bring itself to part with these brand weaklings, it is expressing its intentions in other ways. The company's four "core" brands, which aren't under strategic review—Chevrolet, Cadillac, Buick, and GMC—are getting the lion's share of new cars and marketing cash. And GM will continue to spend more to market those four core brands than it does the four that are under review.

"Over time, the strategy is to focus our resources on the core brands," says Mark LaNeve, GM's vice-president of North American sales and marketing. "Those four brands will get higher spending. It's clear that we can't afford the kind of product and marketing investment that eight brands need."

The Chosen Few

Just look at what GM showed off at the Detroit auto show this week. Chevy had its new Equinox crossover SUV that goes on sale this spring, along with the seven-passenger Orlando crossover and Spark subcompact that will hit the market in 2011. There was also a new Buick LaCrosse sedan and Cadillac SRX.

Hummer, Saab, Saturn, and Pontiac, on the other hand, had nothing new to show.

Also, last year Chevy got a windfall of marketing cash. GM spent $454 million on marketing and advertising in the U.S. during the first nine months of 2008—more than the $386 million that Toyota (TM) spent on its namesake brand, according to New York-based TNS Media Intelligence. One big reason Chevrolet outspent Toyota, says Chevy General Manager Ed Peper, is that the company devoted a lot of money to the launch of its Malibu sedan. So the overall Chevy budget was unusually large, Peper says. During the same period, Pontiac got just $83 million, and Saturn spent $127 million on marketing.

It worked for Chevy. The division spent almost $170 million in the first nine months of last year marketing the Malibu. The car's sales grew 50% in '08. It struck a chord with car buyers after it replaced an outgoing model that was seen as an also-ran. And it chalked up that gain even though the new Malibu's sticker price was $4,000 higher than that of the old Malibu.

"We have seen the excellent result GM has gotten with an excellent effort on Malibu," says Eric Noble, president of The CarLab, an auto industry consulting firm based in Orange, Calif.

Eight Is More Than Enough

In the past, GM typically plowed money into one or two brands at a time, while the other siblings were left to fend off competition with too few new products and slack marketing. In the early 1990s, for instance, it shorted Oldsmobile while investing in the new Saturn brand. But later in the '90s GM spent heavily on an ultimately futile effort to save Olds, and left Saturn bereft of new vehicles. And since 2001, GM has launched a $4 billion effort to rebuild Cadillac, and spent a decent chunk on some new Buicks, while Pontiac and Saab have gone without.

What's different now is that management is acknowledging it can't support eight brands and is focusing resources more intently on the four divisions that it thinks will be survivors. "GM can't afford to send all eight kids to college," says Noble. "GM is better served spending a dollar on Chevrolet than it is Pontiac."