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Originally posted by The17sss The CEO thing is just a small piece of the issue, which I believe, if you read the whole post, is about more government control over private industry and squeezing our energy resources to create a market for the cars people refuse to buy. I never said the new CEO was inserted for the purpose of pandering to the UAW... however, it's not a coincidence that the UAW chief gets along a lot better with the new CEO, who by the way certainly won't have the freedom to do what he wants to do because ultimately, he'll be answering to the person who appointed him to that post... much the same as we are seeing of the CEO's who accepted TARP money. It's about a line being crossed from government into private industry that has never been crossed before. The people in charge at GM had very little freedom to operate as they felt was best as business men who actually know business because of garbage like the CAFE standards and all kinds of other government regulations put in place by people who don't know anything about cars, plus catering to the special interest environmentalists, combined with the unions. Wagner was responsible for the push to large SUV's and trucks, which made up the bulk of the profitibility... we can't forget that. He was basically forced into making vehilces via government regulations at a cost, not a profit, which didn't help his cause.

You not so subtly implied that the ceo was inserted to court the auto workers; that was pretty obvious to at least GHB and me.

When a company practically begs the government for billions to prevent bankrutpcy, I would say the government is a pretty significant stakeholder in the company and has a legitimate right to make demands just as management of hedge funds and pension funds regularly do. GM didn't have to ask for government money. When management begs for help it has to know that major strings will be attached. If you think of the government as the trustee of our investment in GM, one can argue that the government has a fiduciary duty to protect our investment just as any other trustee has the duty to protect the assets for the trust's beneficiaries. Since the entire purpose of the loan is to fix GM, the government can't simply liquidate the investment to protect the taxpayer's asset. As a result, the government must take other measures to protect our investment in GM. In this case, that measure was the removal of an ineffective leader. Regardless of all that, wagoner voluntarily stepped down, if I'm remembering correctly.


Wagoner was also instumental in the expansion of gmac and the fundamental shift towards a business model focused on financing rather than top quality manufacturing. As I wrote previously, the credit business should be complimentary. I know some people who worked at GM who used to say that the company still made cars so it could finace the purchases. That's a manufacturing company with poor management, plain and simple.

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Originally posted by jerZ07002 You honestly think that issue slipped by top management at GM, most of whom have mbas from Harvard and other ivy league business schools, and also slipped by their management consultants from mckinsey, most of whom also happen to have mbas from ivy league schools. Not likely - bradning is in the required curriculum of even the worst mba programs! The more likely scenario is that management thought the very profitable business of financing vehicle purchases was going to stay strong enough to keep stock price high until their stock options vested. They didn't anticipate the oil price spike this summer and the economic meltdown of the past few months. Prior to those events, they were making cars just reliable enough that people would purchase them with huge discounts. Those discounts were recovered over 3-6 years in the form of interest on loans, and interest and recovery value on leases. The government and GM know, and have known, for a while that there is a branding issue. The branding issue, however, was not so detrimental when credit was flowing and GM could unload vehicles at steep discounts.

It's not a matter of slipping through management. I am sure they are all well educated individuals. However branding is such a simple concept that a lot of businessman tend to overlook it. You can see it everywhere. If not, I can provide you with plenty of examples. Branding falls under the category of Marketing. Marketing is a creative field. MBAs for the most part are not very creative people. In fact they are quite the opposite. Sure MBAs take marketing courses, branding courses or whatever, but the bread and butter of and MBA is finance for the most part. MBA's tend to think with logic. So thinking with logic is what got most of GEs brand to where they are today. It's logical to build more models under the Saturn brand when you see the brand is booming. However, in marketing it doesn't make sense. You are destroying the brand completely because you are expanding it, which is exactly what they did. It's logical they say and they go with it!

I watched the CNBC special on GE and they were talking that their new model "Volt" was going to be their future. On the Volt, there was a big Chevy logo on it. When I look at that car, I don't get the sense that it will change anything in general just because it has that logo on it. Chevy as a brand stands for the opposite of what the Volt wants to portray. Chevy's are big cars that damage the environment. The Volt is an electric car that does not damage the environment. So you put the logo of a company that makes the most money with it's SUVs and you design a car that stands for the opposite.


So the Obama administration probably thinks the same as you do. It's a matter of building too much, giving too much credit or whatever. Too much money to their execs, whatever. We will need to fix that he says. We need to control it. Those are secondary things compared to this. They are in deeper shit with the credit crunch, but they were in deep shit longer before the credit crunch.

Having an MBA is worthless in creating powerful brands. Most powerful brands were created by people that did not have MBAs.

___________________
Vernato

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Originally posted by Kapedano It's not a matter of slipping through management. I am sure they are all well educated individuals. However branding is such a simple concept that a lot of businessman tend to overlook it. You can see it everywhere. If not, I can provide you with plenty of examples. Branding falls under the category of Marketing. Marketing is a creative field. MBAs for the most part are not very creative people. In fact they are quite the opposite. Sure MBAs take marketing courses, branding courses or whatever, but the bread and butter of and MBA is finance for the most part. MBA's tend to think with logic. So thinking with logic is what got most of GEs brand to where they are today. It's logical to build more models under the Saturn brand when you see the brand is booming. However, in marketing it doesn't make sense. You are destroying the brand completely because you are expanding it, which is exactly what they did. It's logical they say and they go with it! I watched the CNBC special on GE and they were talking that their new model "Volt" was going to be their future. On the Volt, there was a big Chevy logo on it. When I look at that car, I don't get the sense that it will change anything in general just because it has that logo on it. Chevy as a brand stands for the opposite of what the Volt wants to portray. Chevy's are big cars that damage the environment. The Volt is an electric car that does not damage the environment. So you put the logo of a company that makes the most money with it's SUVs and you design a car that stands for the opposite. So the Obama administration probably thinks the same as you do. It's a matter of building too much, giving too much credit or whatever. Too much money to their execs, whatever. We will need to fix that he says. We need to control it. Those are secondary things compared to this. They are in deeper shit with the credit crunch, but they were in deep shit longer before the credit crunch. Having an MBA is worthless in creating powerful brands. Most powerful brands were created by people that did not have MBAs.

This issue simply didn't go unnoticed. In addition to the Big 3 managing their own brands; GM, Ford, and Chrysler pay companies like McKinsey, Boston Consulting, etc... millions of dollars in consulting fees to manage these issues along with all the other issues they have. At the end of the day, whether specific changes directly focusing on branding (which is inaccurate because almost every business decision affects the brand) comes down to a cost benefit analysis: when keeping a practice constant with little modification in the near term earns X dollars today with 5% growth expected for the foreseeable future, does it pay to invest 500 million in capital expenditures for Y dollars of income with Z% growth expected for the foreseeable future? Many times not doing anything dramatic is the easiest answer becasue the result is easily quantifiable. Projections are inherently flawed because the data is imperfect, so decision makers will rely on the more solid data set.

I'm sure GM has heard pitches from just about every consulting firm about fixing the brand:

http://www.mckinsey.com/practices/m...es/branding.asp

The issue was raised, but it was ignored. Executives at major corporations for the most part are not marketing minds. These consulting firms are hired for the most part because executives have something to show to their shareholders. In other words to cover their asses. For the most part, anything dealing with long term branding is ignored just because it's not logical. It doesn't make sense on a financial level. If you study great brands, you will notice that it takes years to build them. You have to hammer the message until the people get it.

Do you know what Chevys slogan is? "An American Revolution"

Are you fucking kidding me? What revolution? How does define a brand?

All I am saying is that the problem is so simple that people are messing their minds trying to figure out what the real problem is.

The financial worries come as a result because the product is not marketable. It doesn't stand for anything. It's not the other way around.

Ford is in the same hole. If you look closely at their marketing campaigns, you will notice that they have at least 3 different slogans. How are people suppose to remember that? How are they positioning themselves and making themselves stand out?

___________________
Vernato

quote:

Originally posted by Kapedano The issue was raised, but it was ignored. Executives at major corporations for the most part are not marketing minds. These consulting firms are hired for the most part because executives have something to show to their shareholders. In other words to cover their asses. For the most part, anything dealing with long term branding is ignored just because it's not logical. It doesn't make sense on a financial level. If you study great brands, you will notice that it takes years to build them. You have to hammer the message until the people get it. Do you know what Chevys slogan is? "An American Revolution" Are you fucking kidding me? What revolution? How does define a brand? All I am saying is that the problem is so simple that people are messing their minds trying to figure out what the real problem is. The financial worries come as a result because the product is not marketable. It doesn't stand for anything. It's not the other way around. Ford is in the same hole. If you look closely at their marketing campaigns, you will notice that they have at least 3 different slogans. How are people suppose to remember that? How are they positioning themselves and making themselves stand out?

Did they drop the ball - absolutely! However, as you finally conceded, management didn't let branding slip past unnoticed. Management was ineffective because they focused on a line of business that should have been complimentary - financing. GMAC was more important to GM than was the auto manufacturing division. As stupid as that sounds, it was true. Financing had a much higher margin than manufacturing (which is the case in almost all industries). There is a good article in Harpers about the shift of capital in the US away from low margin manufacturing to high margin banking. It was the same thing. As long as financing drove higher margins, it would receive a larger share of management's time and the corporation's capital (based on an asset percentage basis). How much do you think it costs to capitalize a financing company? I'm sure it's in the billions! Billions that could have went to research and design for better cars. In sum, management didn't focus enough on the fact that their cars serviced their loans. They were certainly cognizant of that fact, however, they felt that deep discounts could support sales while interest charges could recover the discounts and earn the profits. As long as profits persisted at the financing units the need to drastically retool their product line was diminished.

link to the article (read it if you can find it for free. it's rather good - i disagree with some points, but nevertheless it's worth a read):

http://www.harpers.org/archive/2009/04/0082450

Last edited by jerZ07002 on Apr-08-2009 at 05:04