WASHINGTON -- The prospect of General Motors Corp. dumping some of its legendary brands may please investors, but the auto maker will have to make peace first with David Penske, and thousands like him.
Mr. Penske owns a Chevy dealership in suburban Philadelphia and is a partner with his son, Geoff, in a GMC-Buick dealership in nearby Lancaster, Pa. The Penskes are among nearly 7,000 GM dealers across the United States, who will bitterly fight any move by the beleaguered auto maker to cull its lineup of brands.
"I would be very, very, very disappointed, if that's what it came to," Mr. Penske said, pausing between each word for emphasis.
"That's not going to sit very well with dealers who have put time, effort and money into these franchises."
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After years of resisting, GM executives are looking anew at the idea of rationalizing the company's crowded roster of eight brands - part of a sweeping rethinking of its North American strategy, according to The Wall Street Journal. Executives are expected to brief GM directors on its brand strategy, along with a plan to cut thousands more white-collar jobs, at a board meeting in early August, the newspaper reported.
GM has already put the gas-guzzling Hummer line on the block. Analysts speculate that Buick, Saturn and Saab could be next.
But like everything the shrinking auto behemoth does these days, nothing comes easy. Getting rid of brands could prove a lot more complicated than it looks, and not just because of the vast dealer networks.
"Wrong or right, it's expensive," remarked David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
GM's manufacturing and distribution operations are so tightly integrated that it would be tough to hive off Buick, Pontiac or even Saturn from the rest of the company.
"They are so tightly integrated that they can't separate one from the other," Mr. Cole explained. "It may cost more than it's really worth."
Buick, Pontiac and GMC make up a single division. Their power trains are often built in the same plants, if not the cars themselves.
The Buick Enclave, GMC Acadia and Saturn Outlook are built at the same plant in Lansing, Mich.
The key, Mr. Cole said, is making sure that plants are operating efficiently and at full capacity, regardless of how many brands they produce.
Other analysts, however, argue that GM could raise some cash by selling Saturn or Saab and direct its limited design budget into making fewer, higher-quality vehicles.
GM has already even discovered that shedding the Hummer isn't easy. The H3 model, for example, is based on the same architecture as the Chevy Colorado and GMC Canyon.
"Right now there is wild speculation going on," Mr. Cole said. "Some of it is probably real. A lot of it is probably fantasy. We are in a dramatically fast-changing period for this industry."
The dealers are another problem. GM faced a rash of lawsuits from dealers earlier this decade when it scrapped the Oldsmobile line, and a defection of loyal customers to other car makers. Some GM executives still regard that decision as a blunder.
"I hear Buick and I hear Saturn and I hear Saab," said Mr. Penske, the dealer. "There's GMC Truck and Pontiac mixed in there. Where are they going to be?"
And yet doing nothing is also not an option. Sales fell 8 per cent in June, and analysts said the money-losing company may need to raise as much $15-billion (U.S.) in the coming months to stay in business.
Virtually all of GM's brands have lost market share this decade (Cadillac is among the few to have bucked the trend).
Its competitors seem to have decided that less is more. Ford Motor Co. has just two main brands now, after selling Jaguar and Land Rover.
It is reportedly considering a sale of Volvo, and Mercury is on life support.
Toyota Motor Corp., which is competing strongly with GM for market share, has three brands (Toyota, Lexus and Scion) and roughly 1,200 dealers, compared with 7,000 for GM.
GM's largest brands are Chevy, which accounted for 59 per cent of its U.S. sales last year, GMC at 13 per cent and Pontiac with 9.4 per cent. The other five brands account for less than 20 per cent and none has more than 7 per cent.
GM's brands are a relic of an era when Detroit auto makers dominated the North American landscape, gobbling up smaller rivals.
That has all changed today. Their market shares are shrinking, but much of their infrastructure remains frozen in time - too many dealers, too many plants and too many employees.
GENERAL MOTORS (GM)
Close: $10.24 (U.S.), up 12¢
Brands on the run
% change in General Motors vehicle deliveries from June 2007-June 2008
SATURN: -12.8%
CADILLAC: -13.9%
CHEVROLET: -14.2%
PONTIAC: -15.7%
GMC: -24.1%
BUICK: -41.7%
SAAB: -57.1%
HUMMER: -59.3%
