Freed of contract and dealer franchise constraints, the CEO tries building cars that buyers want
For much of the past quarter-century, senior managers at General Motors (GM) spent a lot of their time worrying about almost everything but their customers. The automaker's cars were sometimes designed to fit the capabilities of its manufacturing plants, or simply to give its dealers something to sell. Its heavy debt load and rising health-care costs meant it had to be managed to maximize cash, rather than the long-term equity of its brands. And GM's labor contracts all but prohibited layoffs—even if car buyers didn't want the heavily discounted products those surplus workers churned out.
No longer. GM's 2009 bankruptcy and subsequent restructuring allowed it to shed many of the contractual and financial obligations that weighed it down. That's given new Chief Executive Officer Daniel F. Akerson a window to do something radical, at least by GM standards: focus on customers. The automaker is free to design cars that appeal to consumers. It can restrain production to get better pricing. And the slimmed-down company now has money to crank out new models faster and expand the advertising it puts behind them. Akerson "talks about this being a rare opportunity and the fact that we have momentum," says Joel Ewanick, GM's newly named global chief marketing officer, a position 102-year-old GM has never had. "Dan finds it very important that we become consumer-centric and make the company more of a marketing organization."
Akerson's first major change since finishing GM's initial public offering in November has been elevating marketing within management. Most significantly, he put Ewanick, who earlier in his career made a name for himself building Hyundai's brand in the U.S., on GM's executive committee with a new mandate: bring a consumer point of view into GM's product planning and strategic decisions.
"The importance of marketing is radically different within GM than it was under past leadership," says James N. Hall, principal of consulting firm 2953 Analytics. "Before, marketing was not involved in product decisions. It was 'here's your car, go and sell it.' "
Akerson's move was more than just another reshuffling at a company that has gone through four CEOs in less than two years. The former telecom executive and private equity partner is trying to get historically inward-looking GM to find more effective ways to talk to consumers and to accommodate their input before making decisions. Building cars people want to buy rather than what it needs to sell is a huge turnabout for GM. "We want to eliminate insularity," Akerson told analysts on Jan. 11. "We have to benchmark off the competition, not what we see from an internal perspective."
Akerson has been telling his staff that the time is particularly opportune for big change at GM because the automaker's profits are finally rising, and some new models, such as the Chevy Equinox and Cadillac SRX, have become hits. GM in 2010 logged its first profit in six years. The company's overall market share is down because the company hasn't recouped all of the customers it lost by shedding its Hummer, Pontiac, Saab, and Saturn lines. But its four remaining brands—Chevrolet, Buick, Cadillac, and GMC—grabbed 19 percent of the U.S. car market last year, up from a combined 17.2 percent in 2009.
GM still has a long way to go. Only 23 percent of U.S. car shoppers even considered the Chevrolet brand, which accounts for 70 percent of GM sales, according to a survey done in late 2010 by market researcher Strategic Vision. The brand has been stuck around that mark for five years. Despite being dogged by quality problems, Toyota (TM) gets nearly twice that level of consideration from shoppers. And Hyundai has tripled its consideration percentage to 17 percent since 2005, in part a result of Ewanick's work there.
Part of Ewanick's new job is to get consumer feedback from his staff and bring it to the product team. He had GM cars sent to events in 24 cities to collect direct consumer feedback. And Ewanick has been known to talk to customers in focus groups about GM's products. Using that feedback, he advised design chief Ed Welburn that some future models might need bolder styling to grab attention among today's buyers. In other models, especially Buicks, he wants to push GM upscale with more creature comforts in the vehicles' interiors.
Ewanick prodded GM to declare Buick a luxury brand. Until he arrived, it was positioned as "near luxury" in the U.S., placing it beneath Cadillac in a hierarchy that was created by legendary Chairman Alfred P. Sloan in the 1930s. So now Buick is assigned the task of competing against Lexus with understated luxury, while Cadillac goes up against Audi and BMW with bolder design and more responsive handling. "Consumers don't want 'near'-anything," Ewanick says. "They don't want to buy a compromise."
Akerson, who ran long-distance company MCI when it introduced its trendsetting Friends & Family Plan marketing program, enjoys discussing the auto giant's marketing and meets with Ewanick to review ads. The GM chief, for example, vetoed some of the violent boxing footage in an early version of a commercial GM ran over the Thanksgiving holiday on concerns that some shots of a prizefighter being knocked down and then struggling up from the mat might be too intense for female viewers.
For a GM still struggling to gain its footing, the immediate challenge will be getting new products to market faster. The company in the past year has moved as many as 20 future models ahead of their original production schedules. It plans on fast-tracking even more, says Karl-Friedrich Stracke, GM's global vice-president of engineering. Still, the automaker has few new models scheduled for the next two years, while rival Ford (F) has several in the works. For a company seeking a second chance with consumers, a shortage of new cars could make for a tough revival.
The bottom line: General Motors' restructuring, which reduced labor and operating costs, has left it better able to concentrate on consumers and marketing.