Special Holiday Programe --- G.M.
>> general motors’ slumping sales illustrate the fundamental problem facing theed world’s number one automaker. g.m. is losing customers to rivals. g.m.’s u.s. car and light truck sales from fallen nearly 7% in the past decade. by contrast, they’ve nearly doubled at toyota. greg miles spoke with experts and consumers about why g.m. cars aren’t selling.
>> power windows, power doors.
>> the fleming family shopped for two months to find a car for their 20-year-old son, their pick, a $13,000 toyota corolla. the phlegmings say they chose the car because of superior resale value, fuel efficiency and economy. she didn’t consider buying a car from general motors because of quality.
>> they slipped for too long and they’re going to have to earn it back and they won’t earn it back on me.
>> david cole, chairman of the center for automotive research, says g.m. is paying the price for the 1970’s, 1980’s and 1990’s when consumer complaints were common.
>> perception is really reality and if you don’t have a consumer considering your product, that’s a problem. i think g.m. and the other domestics get their fair share of the consumers that scheck them out but the impact of the history of 10 and 15 years ago, of relatively poor quality, is a problem.
>> cole says this today’s quality improvements with general motors is insignificant. a survey with j.d. power ranked two in quality. but j.d. power says many issues won’t change until the company becomes more consistent. four fell below average―saab, pontiac, saturn and chevy. the chevy cobalt got the lowest rate in 19 models for driver’s protection in side crashes. g.m. announced a recall of saturn sedans and wagons from 2000 to 2004 to fix defective brake lights and “consumer reports” says the hummer 2 has suffered from suspension problems and electrical malfunctions. the hummer brand finishes last in j.d. power quality rankings in 2003 and 2004, while improving this year. maryanne keller says g.m. faces a product crisis, one that can only be solved by selling cars that change consumer opinions about quality, design, style and fuel efficiency.
>> they have to prove to the consumer that their products are not just as good as a toyota but better than a toyota at the same price. g.m. is not winning the hearts and minds of the american public at the moment.
>> another reason for g.m.’s declining u.s. sales, the car’s style is increasingly important to consumers and g.m. is falling short. five of its eight brands were ranked below average in a j.d. power survey measuring appeal. that’s how much consumers like a car’s style, interior design, driving performance and other factors. they are pontiac, buick, saturn and g.m.c. that sells trucks and s.u.v.’s.
>> they don’t have the products with the nuance. a simple, important thing american customers are looking for. the nuance makes the difference between cars. it’s not enough to be pretty good.
>> take g.m.’s new buick la crosse, although the quality is above average, analysts criticize the large steering while and seat recliners and bland styling. several analysts say this makes the la crosse uncompetitive against cars such as the chrysler 300 sedan with sales 80% higher than the locross this year. because g.m. is spread thinly, experts say the company can’t support its brands. g.m. invested $13.5 billion in capital spending and r&d worldwide last year, less than the $17 billion spent by toyota in its fiscal year. g.m. has 89 models to support in the u.s. market while toyota has 26. g.m., for example, redesigns many s.u.v. models every six to seven years while toyota does it every four to five years.
>> the driver in front, passenger air bag.
>> to lure more consumers back to g.m. showrooms, the automaker will have to win back customers like the flemings who once owned a g.m. car and were unhappy with the quality. given what many consumers say about g.m., analysts say that could take years. g.m. responded in an email to points raised in the story and says the four brands with below-average quality ratings suffered because of new product launches. a spokesman writes, “that’s not an excuse. we are working hard to improve the quality of our new vehicles.” regarding consumer perception, g.m. says “we are well aware of the perception problems and have been making progress in educating consumers.” g.m. points out that the chevy cobalt received an acceptable rating from the insurance institute for highway safety. for sheer outsized styling, few cars come close to the 1959 cadillac el dorado with three carberators, grills in the front and back, and oh, though fins! cadillac became synonymous with luxury and is now a bright spot in the g.m. story. coming up next, how g.m. is rebuilding cadillac.
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Listen Special Holiday Programe --- G.M.
today, general motors has manufacturing operations in 32 countries and last year had sales of $193 billion. to put that into perspective, g.m. sales account for $1.66 of every 100 dollars that the u.s. economy generates, making it bigger than the economies of hong kong, thailand and argentina. g.m. sells more in a month than xerox sells in a year. when today’s baby boomers were children, one out of two cars came from general motors. today, it’s one out of four. profits are also declining. g.m. lost more than $1 billion in the first quarter, its worst performance in 13 years. g.m.’s share price down more than 10% year to date. it did rise to a three-month high following reports g.m. is pressing the united auto workers union for concessions on healthcare costs. yet, since 2000, the stock has lost more than half its value. g.m.’s market capitalization is $20 billion, the same as the gap, but the gap only had 1/10 of g.m. sales. the market cap of toyota is more than $130 billion. g.m.’s debt has soared to almost $300 billion and of that, just under $200 billion is now rated below investment grade, or what wall street calls junk. there’s also g.m.’s healthcare tab. with more than a million employees, retirees and dependents, it’s the largest private healthcare provider in the u.s. and this year g.m. projects costs will rise almost 8% to 5.6 billion. to be sure, general motors is not alone. ford motor recently cut its 2005 earnings forecast for the second time this year. ford says it may need to eliminate jobs and reduce other costs to stop the decline in profits. as for g.m., the company’s executives declined to appear on camera to talk about the overall problems and strategy, but sent an email detailing steps to improve product quality. chairman rick wagoner recently told g.m. shareholders, it’s time to act. he unveiled plans to close plants and get more use from others and to cut 25,000 jobs in the coming three years for an annual savings of $2.5 billion. g.m. rowland out a new sale incentive program, buy a car at the same price employees say. pay. it’s increased the number of shoppers by as much as 1/3 in some dealerships. general motors spent more than $4 billion to recast the cadillac. we’ll speak with the head of that division about what’s to come. we will hear from workers and investors and size up the competition. first, history about general motors and its place in america. carol massar visited suburban toledo, ohio, and the home of one of this nation’s oldest family-owned g.m. dealerships this is grandpa dunn who began it in 1909.
>> tom and jim dunn are the owners of dunn chevrolet and buick in oregon, ohio, a family-owned dealership dating back three generations. business soared following the september 11 attack when g.m. flooded the market with zero% finances deals. since then, sales from slowed.
>> business is on a flat curve. we’ve come from a high echelon and now we have to try to maintain that status and it’s tough.
>> the dunns are not alone. g.m. dealers across the country have reported sales declines in each of the past four months. the problem centers around g.m.’s product lineup. this, according to brock yates, automobile historian and editor-at-large of car and driver magazine.
>> the issue is product, product, product. and general motors has fallen behind over the last 30 years in terms of staying up with product.
>> that wasn’t always the case. when the dunn’s grandmother -- grandfather, charles, started the dealership in the early 1900’s, g.m. was a pioneer in the auto industry. by the 1930’s, the g.m. chairman set up a ladder for g.m.’s divisions with chevy at bottom and cadillac at the top. the goal was to build a car for every purse and purpose and to keep customers buying g.m. cars throughout their lifetimes. the strategy worked and business boomed. by the 1950’s, g.m. had about 50% of the u.s. market . but that started to change in the late 1960’s when g.m. expanded its product offering.
>> they began to dilute those brands to a point where cadillac had cheap cars and chevrolet had expensive cars and everybody in the middle so suddenly general motors is producing 89 different models, all of which are blurred in terms of product identity.
>> they had so many models, i think they couldn’t change the cars very often and then we got into not hardly changing the cars for 10 years. well, that’s the problem.
>> that’s not the only problem. g.m. is facing other challenges, including soaring healthcare and pension costs as well as fierce competition from german rivals mercedes and b.m.w. as well as asian automakers hyundai, nissan and toyota. general motors was unprepared for the invasion of foreign automakers.
>> very quietly, in the middle 1950’s, the japanese began to enter the market and were laughed off the table. general motors thought they couldn’t build cars. suddenly, by the mid 1980’s, they were assaulted on the top side by the germans and bottom side by the japanese and they didn’t know what to do and still don’t know what to do.
>> the dunns noticed the shift of foreign cars in the 1970’s, at a time when soaring gasoline prices drove up demand for fuel-efficient cars.
>> these automobiles were; much, much larger, just in size. and i think when the outside competitors came from overseas, they brought in a much smaller product and it kind of changed the landscape of the automobile industry.
>> g.m. tried to compete with its own line of exact cars, including the chevy chevette and buick skylark. in 1980 with the economy in recession, g.m. suffered its first financial loss since 1920, and last quarter, they posted a loss topping $1 billion. g.m. now has about 25% of the u.s. market . asian automakers, meantime, have increased their share to about 36%. as g.m.’s share of the market declines, so does the number of g.m. dealerships. the automaker has about 7500 dealerships in the u.s. compared to over 13,000 in 1970. yet the dunns stand by g.m. as the company trying to fix the problem.
>> i think the futures bright. i think we’re going through a problem area here, you know. there’s a hiccup in the road. but general motors will be there. we’re banking on it.
>> even so, tom’s 38-year-old son, greg, general manager of the dealership, is not ruling out of the possibility to expand beyond the g.m. brand.
>> i’m relatively sure there will be a dunn dealership here in 50 years.
>> whether or not it’s exclusive g.m.?
>> that’s up in the air.
>> what the dunns need and hope for are vehicles that will light up consumers and ring up the sales. coming next, meet the skeptics. we’ll speak to customers about what it would take to turn them into a buyer.
>> as a long-time family owner of g.m. cars, people say american cars are not as good but i was born and raised in cadillacs and they always worked well for me.
>> “consumer reports” tells you to look at toyota and lexus and honda.
