GM: Still Making the Same Mistakes
Has GM learned nothing? The "introduction" of the Chevy Volt this week
shows the company has no idea how car sales really work
By Ed Wallace
It was almost painful to watch new General Motors CEO Fritz Henderson's
live Webcam meeting this past Tuesday. On top of the company's recent
problems—a growing negative perception by the American public and years
of financial losses, culminating in bankruptcy—it is sadly obvious that
no one now in charge at GM understands how car sales really work. What
GM desperately needs is for satisfied impulse buyers to become
evangelists for its products, or the company will never get close to
reliving its glory days.
That statement is not a slight against the many superior products GM has
introduced in recent years or the products it plans to bring to the
market in the near future. It's just that these guys so clearly know
nothing about how to improve GM's perception problem—and this is the
There's a fundamental rule of a successful business: "underpromise and
overdeliver." That concept has been around since the Studebaker Brothers
were building wagons for the Civil War. After the war ended, they
codified their business ethic in Studebaker's motto: "Always give a
little more than you promise." Nothing better sums up GM's wrongheaded
thinking than its execs' promise that the company will return to
technological superiority once they finally bring the new Chevrolet Volt
GM's Self-Smearing Image
First GM mounted a PR campaign proclaiming that its top priority is to
alter how the public thinks of GM and its technological prowess. That's
a dangerous position to take, particularly since GM has bragged that its
new electric car, the Chevy Volt, would be able to travel 40 miles
before the onboard generator kicks in to take over the propulsion and
therefore the Volt will be rated around 230 miles to the gallon.
Now why would GM give the public the Volt's maximum range? That's only
going to set the public up for disappointment, because some buyers,
through their own driving habits, will likely not get that promised 40
miles before the generator kicks in. They'll complain about it, too. GM
should have said that the Volt will get a minimum of 30 miles on the
battery pack, which would still be the industry's best. That way, people
who got more mileage than that would brag to all of their friends—and
anyone who stopped them on the street to ask about the Volt—that they
were "getting far better than the 30 miles promised." And that would
spread positive news about GM's accomplishment. Instead, GM has once
again set itself up to have the audience participation go the opposite
No one really knows how the Volt will respond to real-world driving. Bob
Lutz told me 18 months ago that GM was having to design all new radio
systems, air conditioning, power steering pump, wipers, and so on for
the Volt, because in an electric car these systems are all powered
directly by the battery.
Additionally, lead-footed drivers will end up draining its battery
quickly. I'm reminded of the eight-hour lithium ion battery in my
Macintosh laptop. If you turn it on and let it sit idle, eight hours
isn't much of a problem. But if you actually use the computer, that
battery drains at twice the claimed rate.
Second, execs originally voiced their belief publicly that this
electric-hybrid vehicle could possibly be brought to market with a
window sticker price around $30,000. Now it's $40,000 and climbing.
This, too, made GM's best and brightest look as if they don't know how
to price and manufacture their vehicles. And third, the angular,
high-tech design that graced the Volt they hauled around to auto
shows—which did strongly engage the public's attention—is not going to
be the Volt's final exterior design. So GM has misfired on all three
points, meaning it's made three promises that it can't keep.
GM's Turnaround: Always Four Years Out
The worst mistake is that by the time the Chevy Volt comes to market it
won't be the all new and potentially most exciting introduction of 2010.
And it needs to be, to attract the techno-impulse buyers—or those who
could become mobile evangelists for GM. Why won't it be knocking socks
off? Because by the time dealerships actually receive their Volts, the
impulse buyers will have been seeing the vehicle for almost three years.
To GM's most cherished buyer demographic, the Volt will be old news by
the time the first one hits the streets.
GM should know better; in the 1980s the Chevrolet Lumina minivan was
called the "most introduced" vehicle in America. GM started using photos
of that unique minivan almost four years before actually having them
available to sell. Again, by the time it came out it was old news, not
something new and exciting. GM made the same mistake with its SSR pickup
truck: The impulse buyers couldn't acquire one when their passions were
high and by the time they could, years later, the mood had left them.
When we learned that Toyota (TM) had created the first modern hybrid
electric with its Prius, the word leaked out mere months before it went
on sale in Japan—and no pictures were available.
Note to GM: If you really want impulse buyers, you raise their emotions
when they can actually purchase something. Asking them to hold on to
that excitement for three or four years demonstrates a profound
ignorance about how excitement for new automotive products can be
transitory at best.
Please, Bid Our Cars Down
The other issue that GM's Henderson made official is that GM and its
California dealers will try selling their new vehicles on the popular
Web auction site, eBay (EBAY). Now GM's executives are proving they
don't even understand how auctions work—that is, assuming you plan on
getting maximum money for your product.
Over a month ago, when GM let it be known it might try to auction its
vehicles online and eBay said it knew nothing about it, a quick search
found a number of new GM products already being peddled online,
including its redesigned 2010 Chevy Equinox crossover. That was
embarrassing, to say the least: Bids were coming in nowhere near the
price that would be required to actually purchase one of those vehicles.
Assuming there were any bids at all. Many bidders, on the other hand,
were offering top dollar for the popular new Camaro.
Second Note to GM: When you have products that are hot and desirable and
whose inventory is extremely limited, that situation will drive the
price up in an auction. When you try to auction a mass-produced vehicle
whose production levels are going to exceed customer demand, auctions
will drive the prices down; in effect, you are intentionally diminishing
the value of your own product with the public.
People who have either purchased or sold new automobiles know that
sometimes it takes hours of negotiation to get an offer that returns
even a minimal profit to the dealer. Online auctions will not suddenly
make wary consumers offer so much money on the vehicle that it sells
As for the salespeople, does GM think they are going to take hours and
hours to sell customers on the features and benefits of a vehicle, then
be totally cut out of the potential to make a living because, instead of
returning to the dealership, the buyer tries to get a super deal at
eBay? Well, those cars are not going to be sold at a loss online.
Therefore many frustrated customers, realizing they can't buy the GM
product at 50˘ on the dollar at eBay, will simply go to another brand of
vehicle and negotiate another purchase elsewhere.
Moreover, because its concept of selling cars that have fixed costs at
auction will die on arrival, GM will have given itself another black eye
with the public.
Ask Your Experts!
Fifty years ago when new models came out, they were delivered to
dealerships hidden under wraps, and the tarps came off only when
dealerships had their new model year open house the third week of each
September. The secrecy excited the public and packed showrooms every
year; even those that didn't buy wanted to be the first to see what was
new. Too bad the new guys haven't had time to brush up on GM's many past
successes; but even more recently, they've learned nothing from watching
Japan. By playing their cards close to the vest, the Japanese maximize
the excitement, surprise, and delight among both buyers and sellers.
GM, you introduce cars far too long before they can be bought. You make
promises you can't keep. And then, instead of building value and driving
margins up to where GM returns to profitability, you're once again
diminishing how customers view your products by constantly finding ways
to drive the prices down.
It's clear that you guys have no idea how customers go about selecting
and purchasing a new vehicle. You continue to act like you think that if
you simplify the selling process, people will return to the flock. True,
people want a "deal" when they buy a new car. But more important, they
want to buy something exceptional. Today, GM has many exceptional
products, the best in their history. The automotive selling process,
done right, has little to do with negotiation: It has everything to do
with building value in the vehicle.
Your best dealers know how it's done. You should listen to them.