GM (GM) execs like to portray themselves as mere victims of history, caught between ballooning legacy costs and rising energy prices. Is it true?
GM VP Bob Lutz was brought in as a star hire in 2001, with big hopes for making the company more competitive. Well, the company has only lost market share since then, and their reliance on gas guzzlers has been brutal. But it’s not like Lutz didn’t see this coming. In 2005, he wrote a blog post calling the company’s SUV initiatives contrarian and bold in light of rising gas prices. With three years of hindsight, we wonder what he’d say about it now:
Most of you participants in the FastLane know by now that I get pretty fired up about conventional wisdom, particularly when it is wrong!
Well, it seems that ever since we announced we were bringing out our next generation full-size trucks and utilities, people seem to think it’s unwise. And, perhaps worse, even though those that have seen the vehicles have generally come away impressed, they often leave you with the impression that’s all we sell.
I’ll admit that on the surface it may seem incongruous to introduce vehicles like this, given today’s fuel prices. But, I have to tell you, these products still make a lot of sense. Let me explain.
We began developing these trucks three years ago when fuel prices were stable and historically low in real-dollar terms. Nevertheless, we made fuel economy an extremely high priority item, even back then.
This is one reason why we are still very confident of their success. In addition, we have a huge owner body, it’s a segment we think will level off at about 750,000, and we’re going to have the newest and best products out there, with substantial improvements in fuel economy. If you’re using our Displacement on Demand technology and you carefully manage when and how often you go on four cylinders, you can do better than the EPA ratings!
Let me make this clear: I don’t think anything exemplifies the state of our art today like our all-new full-size sport-utilities. We’ve made significant strides forward in exterior styling, interior refinement, vehicle dynamics, safety, quality and reliability.
And while we don’t expect to get a benefit from segment growth, we expect to grow share in the segment. That’s the plan. If your prior product has already been dominant in the market, with superb quality ratings, and you’ve got a hugely satisfied owner body, and you come out with the next generation with fuel economy over 20 mpg, you expect to do well.
And make no mistake: the new SUVs are a very important piece of our product portfolio, but these trucks are by no means the only piece of that product portfolio. They’re just one element of a full-line product assault on the marketplace, an assault that is not solely dependent upon body-on-frame trucks for success.
Our crossover strategy is clear proof of that.
Six years ago, we had none … and our share was, hence, zero. Now, we have six different models, and hold 15% share. Four years from now, we’ll have 14 crossovers, accounting for about 800,000 units annually, give or take, representing about 1 of every 5 GM vehicles sold.
At the Detroit auto show, you’ll see the first of our new family of midsize crossovers. And I think you’ll agree when you see it, it takes another big step toward top-of-segment status. This is not one where we’re merely entering the segment so GM will have an entry. This is one where we aimed to be the best.
They’ll have the spaciousness of fullsize SUVs, with more cargo and passenger flexibility, and better fuel economy than midsize SUVs. They’ll be precisely constructed, with a balance of ride and handling unsurpassed by any SUV. And they will be highly differentiated and have unique, beautiful designs.
So, there’s a little dose of unconventional wisdom for you. I’m looking forward to hearing your thoughts.
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