Car Guys vs. Bean Counters - Bob Lutz [102]
At some point, starting in about 2005, and looking at the amount of money the “legacy costs” would siphon away, advertising budgets began to be progressively cut back.The argument was that the smaller sums would be adequate if the advertising could be “more effective,” and while there is nothing too wrong with that view, the fact was that our presence in print, on TV, and on the radio began to fall below the levels needed for public awareness. When you launch a Saturn Aura midsize sedan, and it is named “Car of the Year” by a jury of fifty North American auto journalists, and in 2009, the public is still asking “a Saturn what?” you know you haven’t spent enough.
It’s true that if you took the budget’s revenues and costs as gospel, we could not afford more advertising. But the derisory levels of advertising begat lower revenue which, in turn, dictated ever lower advertising budgets.We were trapped in a vicious circle. I would have busted out and started spending in the belief that the revenue would grow fast enough to offset it. It might have been a colossal mistake, but the way we were going, we were like the mythical bird that flies in ever smaller circles until it disappears into its own rear end.
Earlier, I would most likely have cancelled the so-called “Alliance Strategy,” whereby GM owned minority shares in Isuzu, Suzuki, Fuji Heavy (Subaru), and, for a time, Fiat. Not being present when it was conceived, I never really heard a coherent explanation of why we would benefit from owning portions of other automobile companies, especially when there was precious little to be gained from “product synergies.” Importing Japanese cars and rebadging them with domestic GM nameplates had stopped being profitable years ago, and there was really no way that we would share meaningful amounts of product with Subaru or Fiat.
Yes, we benefited in diesel engines from both Isuzu and Fiat, and there were countless other small benefits along the way, but nothing to justify the management distraction, the constant effort to make the Alliance Strategy look smart, not to mention the very costly penalty GM had to pay to back away from our Fiat commitment.
As stated earlier, I liked the Saab cars themselves but not how we were permitting Saab to continue as a money-losing, quasiindependent entity. I would have thoroughly consolidated it into GM Europe and eliminated all of the unique fixed costs associated with the brand. In 2006, I was a strong advocate for the brand’s sale to whomever, but the general consensus was that it could be “made profitable,” a perennial hope that never materialized. Love the brand or not (and I do), from a business perspective, GM should never have purchased it. In retrospect, I see not one single scrap of evidence that GM ever benefited in the least from the ownership of Saab.
When Rick Wagoner was focused on buying the ultrabankrupt Korean carmaker Daewoo, I was afraid we were purchasing another bottomless pit to be filled with money, although the purchase price was ridiculously low and involved next to no cash. I was concerned over our intent to own a minority piece (again!) of yet another Asian car producer, and this one was in the most abysmal financial state possible. If I had been CEO, it might well have been impossible to convince me that this was a smart move. And