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No. of Recommendations: 3
Eighteen months ago I wrote this post on how I would fix GM if I were king for a day:

http://boards.fool.com/Message.asp?mid=22589384&sort=username

I wanted to revisit my recommendations and where GM is on them:

How Does General Motors Execute Moving Forward

Here is the Milligram46 plan for rapid improvement and a long term plan for profitability, and retention of market share.

1) Increase R&D spending three fold to $25 BILLION US annually. Increase in R&D will reap long term benefits in five to ten years. Many GM platforms can benefit from short term improvements with the addition of 5-speed transmission and increased usage of their newest generation of power plants based on the Epsilon chassis.


Where are we at. Well GM isn't spending $25 billion on R&D but they have dramatically increased their R&D spending, and the results are already showing. I mentioned that many GM platforms would benefit from simple changes by diving into the parts bin. The Impala and Monte Carlo are now powered by 3.5, 3.9, and 5.3 engines instead of the extremely reliable yet ancient 3.8 engine. The Cadillac 3.6L VVT engine is now found in the LaCrosse and the Northstar V8 is under the hood of the Lucerne. The Aura also gets the 3.5 and the 3.6 engines as well as GMs new 6-speed semi-automatic tranny that the press absolutely loves.

GRADE: C+

2) Introduce Displacement On Demand (DoD) presently found on the Pontiac Grand Prix GXP 5.3L Vortec V-8 into their truck line up. This would have a noticeable impact on highway EPA, improve CAFE numbers, keep truck and large SUV buyers in the fold and give some real teeth. The 5.3L V-8 can be built for FFV standards and can be built to meet ULEV standards without sacrificing power. GM should push these points hard as these are marketing hot buttons.

Wow! DoD, or as GM calls it AFM is on the GMT900 platform vehicles. 300 plus horsepower and the best fuel economy of fullsize trucks and SUVs in the country. FFV also on those same engines to get the ULEV nod and GM is HAMMERING this point home. Benefits? Well the Tahoe outsold its 2005 numbers in 2006 under the spectre of higher fuel costs AND going up against Employee Pricing for All numbers. The Silverado, Motor Trend 2007 Truck of the Year and North American truck of the year. The hybrid will be out next year with the same 300 plus horsepower, full offroad and towing capability and minivan mileage. Wow.

GRADE: A

3) Stand behind the improvements in quality. General Motors should show a real commitment to their quality improvements. Simply adding longer warranties on certain products like the Cobalt is not enough. The way dealers are compensated for warranty work needs to be changed to make this viable and for long term survival. Short term the dealers would be hurt, long term the benefits would be huge. General Motors should start with Buick, due to it's long term and short term quality numbers going back five years and introduce a 4/50 to 5/60 bumper-to-bumper program standard. Not as an incentive but across the line. This point should me marketed, HARD, with the message being quality, quality, quality and we believe in that quality.

Wow! Almost scary on this one. GM started with Buick and then expanded to every vehicle in the line up with exception to the Z06 Corvette of having 5/100 powertrain warranty - Buick and Cadillac also have 4/50 bumper-to-bumper. This says, "we believe," and is another marketing point. Also, as I noted dealers are finding it harder to sell extended warranties, but the longer term benefits of changing perceptions IMHO is more vital to long term survival.

GRADE: A-

4) Fire the marketing weasel that came up with this employee pricing for all campaign. This is an incredibly bad campaign. This does not say we have faith in our vehicles, in my mind, it says the opposite. Deep discounting and factory incentives are not the way to play. If GM is going to do deep discounting on a fulltime basis then roll the prices of the cars back to reflect reality and end the incentives. $3,500 rebates, employee pricing, and 0.0% interest say, “we're desperate,” it does not say, “we believe.”

Well, I don't know if anyone got fired or not, but GM is largely standing firm on we're not using deep rebates to move product. The results of this is GM is making more money on each unit they're selling. On the Impala, over 10% more per vehicle, on vehicles like the Tahoe almost 20% more per vehicle.

GRADE: B-

5) Bring the war home to the Japanese. A lot can be learned by upstart Hyundai. They were perceived to be a mark of real crap, unsafe, poor quality, junk. The 2005 V6 Sonata is one of the most reliable cars on the road. The 2006 Sonata actually looks good, comes with features people really want, 235 HP under the hood, gets 30 MPG, and is backed by a limited 10/100 warranty. GM can meet or beat all of this with the parts they have in the bin now – direct comparison, especially going after Volkswagen, Nissan, and Mazda who all suffer from very low product quality numbers is key.

Two words. Saturn Aura. And the press is standing up and noticing. Being picked as North American car of the year over the Toyota Camry and Honda Fit was HUGE HUGE HUGE for General Motors and making people stand up and notice. Think it's not deserved. Go to a Saturn dealer and look at the XR Aura for yourself - you will be stunned. STUNNED - I was stunned, and it is a tremendous amount of car for $24K. Oh ya, with the 5/100 - a page right from Hyundai, but there needs to be more models - judge and jury still out.

GRADE: C

6) What can the rest of GM learn from Cadillac? Stody advertising and deep discounts don't sell [sic] Cadillac cars first of all. When is the last time you saw a Cadillac ad proclaiming rebates and special financing. Grandpa isn't listening to Led Zeppelin, but that is the message – quality, reliability, and hey, we can stand up to the imports on their turf and make them take notice. The formula WORKS on much harder to please, demanding, luxury car buyers.

GM is just starting to turn the curve on this. They are advertising the 5/100 warranty as their standing behind the product, and they are touting quality as part of their GMT900 messaging. However Saturn and Buick advertising in particular remains really weak. Pontiac advertising has passion -- but still misses the mark.

GRADE: C-

7) Consolidate branding and marketing. GM's multiple brands, multiple businesses has resulted in a blob of 150 Web sites, 63 call centers, 23 databases, and dealers with their own communication tools and databases. This just by design has led to massive amounts of unintentional replication of marketing efforts. Deloitte Research indicated that with all this duplication of efforts 34% of current or potential General Motors customers received multiple pieces of marketing materials. There were huge lost opportunities for cross-sell, add ons, services, and up sell along with customer confusion. Consolidation would include:

Absolutely no progress IMHO has been made here - which is a shame.

GRADE: F

a) Leaving Saab as an independent brand

I know this is controversial but remember, Saab isn't a US brand, it is a GLOBAL brand. GM has gotten some major goodness from Saab, just sit in an Aura or G6 to get a feel of what exactly they've gotten. The Aura in particular has been a HUGE benefactor of the Saab union. Ya, the sales SUCK, the residuals SUCK, but it is a global brand with major R&D benefit.

GRADE: C-

b) Ending the GMC Truck nameplate and integrating the product lineup into the Chevrolet brand. GMC higher quality trim levels could live on under the Denali label within the Chevrolet family.

Hasn't happened - still feel it should happen.

GRADE: F

c) Make Pontiac a true performance brand. General Motors is on its way to doing this but vehicles like the weak selling SV6 and Aztek would be dropped from the lineup completely (in my world the Torrent wouldn't see the light of day). Nameplates like the Bonneville, Grand Prix, and GTO would live on in V-8 and forced induction models with bread and butter options to drive buyers into the showroom.

http://www.deloitte.com/dtt/cda/doc/content/StanfordGMCase.PDF


Well I nailed this one. The Aztek and SV6 are both gone, thank God. Pontiac is moving squarely back into being THE performance brand for General Motors and the future G8, GTO, and Grand Prix replacements are all clear indicators of this. There is major buzz about the up coming Holden based Grand Prix, with 368 HP under the hood (suspected) and BMW styling the maligned brand is well on its way to a Cadillac style resurgence by moving into the performance direction. I'm still not crazy about the Torrent being part of the brand. Oh ya, and lets not forget the Solstice and the Solstice GXP.

GRADE: B

d) Roll Buick into Chevrolet and Cadillac and end the brand.

Nope, hasn't happened and with the Lexus level quality Enclave around the corner, the Lucerne outselling the problem plagued Toyota Avalon, then maybe, just maybe I was wrong here. Yes, Buick sales were down in 2006 but that lag wasn't because of car sales, but truck sales (read minivans and SUVs) which are not the next phase of the Buick overhaul. Like Pontiac, I'm sensing that a Cadillac style resurgence is coming here.

GRADE: C+

e) Fire the designers over at Saturn and inject some real life into the industrial design. Adopt the Saturn style of doing business across all of the non-luxury brands within the GM family.

Wow - another huge turn. The SKY and the Aura and the coming Outlook are all indications that the folks at Saturn are doing things right. REALLY right.

GRADE: A-

Sidebar: My biggest frustration is that General Motors has all the pieces in place. If they could build cars like the Malibu and LaCrosse and sell and service them like a Saturn dealer, warranty them like a Cobalt, and scream to the world, hey, this what we are doing – I believe a lot of their problems would melt away.

And we're starting to see this.

GRADE: C+

8) Safety, price, incentives, and reliability is not everything. There is an emotion, a passion in ownership for many buyers, the “X” factor of automotive marketing. Mazda and Nissan in particular “get this,” Volkswagen use to get this but has really dropped the ball. Again, sadly, the parts are right there in the bins to build more inspiring vehicles. It isn't heavy lifting. Why not install the Comp G suspension components on a Grand Prix GT as an option package? Why not offer the 6.0L Vortec on the Silverado lineup, the Suburban, Tahoe and/or Avalanche? Not all the chances GM took were disasters, the Avalanche for all it's plastic and negativity at launch has been a huge success meeting expectations that most in the press laughed at. The Solstice has genuine character, the Saab 9-7 does also, Cadillac and their “V” power under 5.0 second line up has caught the attention of everyone, including the folks in Germany. Again, the parts of the equation when you look at the puzzle are there – they just aren't executing across the board.

The 275 HP Buick Lucerne, the Cadillac powered Saturn Aura, the SS Impala and Monte Carlo, the direct injection turbocharged SKY and Solstice, and yes, that 6.0L V8 has found its way into the GMT900 line up, and AFM will be on the engine next model year. It's not perfect, but the direction is right.

GRADE: B-

9) OnStar is a great idea, but again, poor marketing based around the “fire extinguisher close,” is not the solution. The OnStar telematics systems is an expensive option and with for most consumers a low perceived value and concerns about intrusion on privacy. In car DVD navigation has replaced the most premium of OnStar features, XM Radio with traffic on demand replaces the next coolest feature and so you're left with an expensive cell phone with emergency services options. It's nice, but there isn't any data that I can find that supports it sells cars. Instead of putting OnStar in every vehicle long term (like the Aveo buyer is going to want the $695 pinch, cripes that almost 10% of a new base Aveo!) buyers will see real tangibles in improved interior quality, better sound insulation, and slightly improved interior industrial design. This goes back to increased spending on R&D.

Nope, they're still plugging the crap out of OnStar but it is still optional on some models, despite the prior claim it would be standard on all 2007 models. Its a step in the right direction, and OnStar is cool (saved my bacon on New Years Eve when I was lost and the DGF was VERY impressed with the service) but I think that the value proposition is very thin, and will only get thinner over time.

GRADE: D

10) General Motors needs to work very closely with the UAW on key issues of retirement benefits, health benefits, and working conditions. UAW leadership should be afforded a closer look at the real issues facing General Motors and the growing long term impact. I am not a proponent of slashing benefits and pay as a road to improved success. General Motors should never be in the position of running Wal-Mart style feel good, “hey, we're good for the economy and we care, honest really we do ads,” to deal with negative perception. Treating employees fairly and the concepts of a good wage for good work should not be tossed aside. Investors should not loose sight of the fact that at the end of the day, a lot of the quality improvement seen over the last decade has been on the backs of the auto worker putting these vehicles together and working on the sub-assemblies. But the UAW has to understand that an effective, viable plan over the next 5 to 10 years to reduce costs and slowly wean workers onto a more reasonable, yet livable program is needed. This is probably the biggest wild card in the whole return to profitability.

Still a struggle with no good answers, but I hope with Ford and Chrysler now having problems (lets face it, Chrysler is going to be announcing factory shut downs and layoffs in 2007) the UAW is going to HAVE to come to the table with something - or their power will continue to crumble.

GRADE: D+

===============================================

So overall, I think GM has done a solid job of executing on many of the pieces I felt they needed to address to improve their situations, but work remains to be done.

GRADE: B-
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