GM Plays Brand Favorites

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Even if GM isn't shutting down its weak brands, the company is getting the message that the company has to start shifting resources to the divisions that have better consumer acceptance and bigger sales. The four core brands that GM identified in its restructuring plan to Congress when it applied for $18 billion in loans (the company got approval for $13.4 billion) represent 83% of its sales.

The weaker brands are already getting short shrift. At a recent strategy meeting, General Motors North America President Troy Clarke pointed out that last year the company spent $7 million marketing its Pontiac Vibe. That's one-tenth of what Toyota spent on advertising and marketing for the Corolla Matrix, which is a similar car built on the same assembly line at a joint venture plant in Fremont, Calif.

Short Shrift for the Swede

Saab is really the neglected child in the GM family. TNS says GM spent just $11 million on the Swedish brand during the first three quarters of 2008.

Expect more of the same this year. Chevrolet is launching the new Equinox and the Camaro muscle car. Both will get a lot of cash, so Chevy will enjoy another big year of marketing. Says Peper: quot;Our percentage of GM spending has gone up and will continue to."

GM is forced to prioritize its resources. Killing off a brand entirely is a painful and costly option. Since dealers commit their investment dollars to a franchise, ditching a brand typically results in costly lawsuits, unless the manufacturer phases out a brand over time and the dealers just walk away. Killing Oldsmobile, which GM began doing in 2001, cost the company about $2 billion.

The Pontiac Question

Plus, dumping a brand would mean losing its sales almost immediately. Take Pontiac. Even though it's a relatively small part of GM's sales, the division's G6 midsize car still sold 140,000 units last year. GM would have to quickly find a way to steer buyers into midsize cars sold by Chevrolet or even Saturn. So GM could just let the life cycle of the G6 run out and decide on a strategy later. In fact, most Pontiac dealers are now paired with Buick, which will sell a midsize car in a few years that essentially replaces the G6. Says Clarke: "Why not just let the remaining Pontiacs sell out and then make a decision?"

And that's how GM will eventually arrive at a more simple line of cars and brands. The company will build the core while letting the others slowly shrink. If it can find buyers for Saab, Saturn, and Hummer, it could exit more quickly. In the long run, Clarke says, GM will get from its current 78 different cars to about 40, sold within four brands.

"It will play out," Clarke says. "It's an absolute intention to get to four brands."

It just may happen at GM's glacial pace.

Welch is BusinessWeek's Detroit bureau chief.