Discuss Detroit Archives - Beginning January 2006 Lost in Transmission Previous Next
Top of pageBottom of page

Username: Mrjoshua

Post Number: 724
Registered: 03-2005
Posted From:
Posted on Wednesday, March 08, 2006 - 1:03 pm: Edit PostDelete PostMove Post (Moderator/Admin Only)

Lost in Transmission
Behind GM's Slide:
Bosses Misjudged
New Urban Tastes

Local Dealers, Managers Tried
Alerting Staid Bureaucracy;
Marketing Goes Off Course
Trying for a Revival in Miami
March 8, 2006; Page A1
The Wall Street Journal

In December, General Motors Corp. ran a series of ads across the U.S. showing Cadillacs being driven in snow. The decision to do so was made by the giant car maker's executives in Detroit, where on Christmas Day, temperatures hovered just above freezing.

The ads also ran in Miami, a vibrant car market where GM has bombed for the past 15 years. As Christmas dawned, temperatures there started climbing into the high 70s.

GM is struggling under a financial burden created by monumental pension and health-care obligations. But it's also having a hard time persuading Americans to buy its cars. One reason: GM's cumbersome and unresponsive bureaucracy, the one that ran the snow ads in Miami, has for years failed to connect with the tastes and expectations of consumers outside the company's Midwestern base.

In Miami, where no GM car is a top seller, GM started bilingual advertising much later than its rivals. Some of the ads it did run were duds. One wooed Miami's mostly Cuban-Hispanic population by showing a woman in a Mexican dress standing in front of the Alamo as GM Saturns raced around her. Another was built on the theme "Breakthrough" -- a word that doesn't have a direct Spanish translation.

In the late 1990s, years before GM's Cadillac Escalade became a hit, dealers in Miami suggested GM build such a luxury sport-utility vehicle. They were shot down by executives in Detroit who said it would never work. GM later went on to sell more than 400,000 of the luxury SUVs.

As a result, GM has a paltry 13.8% of the retail market in South Florida, a slide it is now trying to reverse. The problem is repeated in the U.S.'s rich, coastal metropolises where Japanese and European auto makers first set up dealerships in the 1970s and 1980s. There, overseas car makers exploited consumers' memories of GM's unreliable and unattractive mass-market vehicles.

In cities such as Boston and Los Angeles, GM is no longer a big employer and, unlike in the Midwest, relatively few people get employee or supplier deals or have personal ties to the company. In these towns, GM scores well below its national share of about 26%.

GM employs 325,000 people, almost as many as the population of Miami itself. At various times there have been as many as six layers of management between top executives in Detroit and those in the field. GM's general manager for the Southeast has 38 teams reporting to him, overseeing relations with the region's 1,400 dealers, among other things.

Lee Hawkins discusses how GM's unresponsive bureaucracy impacts the company's business.In addition to these geographic units, the company is divided along functional lines, with global groups overseeing areas such as marketing, product development and human resources. GM calls this "the Matrix." To explain how the two chains of command interact, GM has produced a chart that shows them overlapping in a pattern that resembles a basket weave.

It's a system that's confusing even to insiders, especially midlevel employees who often feel as if they have two bosses. Marketing ideas often get lost as they bounce between departments.

The design of GM's corporate headquarters, located in Detroit's Renaissance Center, reflects this bureaucratic inertia. Its four towers resemble massive, steel grain silos. To find colleagues in different departments, employees must sometimes take elevators to the ground floor and walk around an illuminated walkway to get to the other towers. New employees and contract workers get lost frequently.

"We are a large company and we are all working independently to make things happen," says Sonia Green, a GM marketing executive charged with helping revive the company's business in Miami. "Unfortunately, we all work in little silos."

Since the mid-1980s, GM's overall U.S. market share has fallen by about 15 percentage points. Last year, the company reported a loss of $8.6 billion, the bulk of which stems from its U.S. auto business. The company has said it plans to slash costs, including cutting 30,000 jobs in the next couple of years, and has sliced benefits for both union and nonunion employees.

Lagging Behind

In Miami, GM is in third place, behind Toyota Motor Corp. and Ford Motor Co. Toyota began tailoring marketing to Hispanics in the 1980s. Ford started similar efforts in Florida and California about 15 years ago. None of GM's vehicles are among the top 15 vehicles registered in the greater Miami area, according to J.D. Power's Power Information Network. Miami's most popular car is Honda Motor Co.'s Accord.

On a recent Friday night in front of Nobu, a trendy Japanese restaurant located in South Beach Miami's exclusive Shore Club Hotel, Miami residents were driving to the valet entrance and down Collins Avenue. Lexuses, Mercedes-Benzes and Porsches were everywhere, and there wasn't a GM vehicle in sight.

GM cars that sell well in Miami tend to be low volume, such as the Hummer H3 and Pontiac Solstice sports car. Only 5,490 Solstices have been sold since the car was launched in August 2005.

In an interview last year, GM Chief Executive Rick Wagoner said it was critical that GM halt its two-decade-long slide in big coastal cities such as Miami. "We have a very specific strategy to address these markets, one by one, East and West," said Mr. Wagoner, who doubles as the head of GM's North American auto operations.

As for the company's complex structure, he made few apologies, arguing that a global auto maker needs such a "matrix"-style organization. "People really have trouble because they want to know who's in charge," Mr. Wagoner said. "And the answer is going to be, increasingly: It depends."

Through a spokesman, Mr. Wagoner declined to be interviewed for this article. GM released a written statement instead, in which Mr. Wagoner praised GM's dealer network and product lineup and reiterated the company's intention to focus on these key markets. "We are pleased with the initial results from our efforts, and encouraged about the prospects for even more success," he said.

In early 2005, Mr. Wagoner flew to Miami for a "state of the business" briefing from a group of regional marketing managers. The presentation showed how GM lost about 11 percentage points of market share among Hispanics in South Florida between 1990 and 2000, even as the local Hispanic population grew to encompass 60% of Miami's population.

"It took you five years to see the decline?" Mr. Wagoner said, recalls Ms. Green, the GM marketing executive who was also visiting Miami at the time. There was silence in the room. "He was pretty harsh," she says.

What some executives in the room didn't say was that many people locally held Detroit responsible for the company's collapse in Miami. Local dealers and managers saw the decline firsthand but say their appeals to Detroit for help fell on deaf ears, a problem that was repeated across the country.

In the past, "we didn't have access to them, nor did they want access to us," says Lynn Thompson of Thompson Sales Co., Springfield, Mo. "It was: 'We're running this company, we know what to do and we don't want your input." Now, Mr. Thompson says, things have improved: "They'll take some of our ideas and some of them they won't, but they'll ask."

It wasn't until 1995 that any of GM's divisions thought about advertising directly to Hispanics. Their early efforts were clumsy -- such as the Saturn ad set at the Alamo. The ad missed the mark because Mexicans comprise only about 4% of Miami's Hispanic population. GM says it set the ad at the Alamo simply because the woman, who owned a Saturn, lived near the historic landmark in San Antonio.

In the late 1990s, Cadillac's national dealer council, which was then headed by Miami dealer Ed Williamson, asked GM to build a luxury Cadillac SUV to compete with growing sales of Land Rovers and Ford's Lincoln brands. Miami's dealers could see the popularity of these hulking vehicles among urban buyers.

But at GM headquarters, the idea of a Cadillac SUV was dismissed. "Only a small number of luxury SUVs over $40,000 are sold," Ron Zarrella, then president of GM North America, told The Wall Street Journal in 1997. "We'd never make any money on it." Later that year, GM executive John Smith, then Cadillac's general manager, said, "we'd be the last one out in the market. ... That just isn't right for Cadillac."

GM did an about-face after Ford's Lincoln replaced Cadillac as the U.S.'s top-selling luxury brand. GM rushed out the Escalade, which became a massive hit, and to the surprise of GM, a status symbol among rap stars. The vehicle got made only after Mr. Smith made an end run around his boss, Mr. Zarrella, and appealed to GM's then chairman.

Mr. Smith, who now heads global product development for all of GM, says he initially played down the idea because he knew it could get killed. Mr. Zarrella, who is now chairman and CEO of Bausch & Lomb, declines to comment.

"There were lots of things [GM] wouldn't talk to us about," Mr. Williamson recalls. "We'd do all these things and get the engineers in to talk about what we could to make the cars better, but it was like hitting a brick wall." Mr. Williamson says he is now more confident about GM's prospects in part because of his access to top executives.

Feeling shut off from the GM executives in Detroit, some Miami dealers started pooling their advertising dollars to buy bilingual ads tailored to the Miami market. But a 1999 reorganization designed to centralize the company's sales and marketing operations killed this local dealer spending and provoked a firestorm. GM executives in Detroit quickly recognized the mistake, but it took two years for them to reinstate the groups.

"That move clearly adversely affected us in Miami and every other top 50 market for that five-year period," says GM's Mr. Smith, a 37-year veteran of the company.

Image Makeover

GM has charged Ms. Green, the marketing executive, with rebuilding the company's image and sales among South Florida's Hispanic population. Her official title is director of diversity, marketing and sales for South Florida. A previous job was helping Avon Products Inc. sell better to Hispanics.

At GM, one of Ms. Green's first jobs was persuading the company to use in Miami something trendier than Cadillac's advertising theme song, Led Zeppelin's "Rock and Roll," which was a hit in the early 1970s.

"We never thought that Led Zeppelin was appropriate," Ms. Green said. "There are a lot of things that may not be appropriate in Miami." GM still uses the song for its national ads.

Instead, Ms. Green lined up Daddy Yankee, a Puerto Rican recording artist known as "The King of Reggaeton," to do a series of bilingual commercials for the launch of the Chevrolet Cobalt, a trendy compact. Reggaeton, a hot phenomenon, is a fusion of Caribbean and dance music.

When she met with her GM counterparts to plan the campaign, Ms. Green learned that few of her colleagues had heard of Daddy Yankee, a platinum-selling artist. She says no one had considered using GM's coup as a promotional tool to create some buzz around the campaign. When she played some Reggaeton for local dealers, Ms. Green says the reaction was poor. Latin "music all sounds the same to them," she says.

GM encourages dealers to attend seminars designed to make them more effective selling to Hispanic and black consumers. Because many immigrant Hispanic families like to bring their entire family to the showroom, dealers are urged to keep multiple chairs in offices that are used to finalize vehicle sales.

The bilingual advertising effort still occasionally runs into trouble. Last year, after Cadillac chose "Breakthrough" as the theme of its advertising campaign, it discovered there's no comparable word for it in Spanish. Accent Marketing of Coral Gables, Fla., a Hispanic marketing firm that works for GM, instead developed an ad in which a herd of bulls in the Spanish town of Pamplona are chased by a Cadillac Escalade. The tagline: "Avanza!" meaning "advance."

David Borchelt, general manager of the Southeast region, says GM's retail sales volume in South Florida rose 8.4% in 2005, compared with the year earlier, mostly due to newly launched GM vehicles.

GM managers in Miami say they are feeling optimistic, in part because they can now talk directly to Detroit. "The whole organization is flatter than it used to be," says Doug Stevens, a sales manager in GM's Southeast region who has worked for GM for 32 years. "When I started out, there was no chance that I would have talked to the CEO or the vice president of sales and marketing."

Write to Lee Hawkins Jr. at lee.hawkins@wsj.com
Top of pageBottom of page

Username: Jjaba

Post Number: 3249
Registered: 11-2003
Posted From:
Posted on Thursday, March 09, 2006 - 2:28 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

Excellent article; GM sounds like FEMA.
GM, a huge overbloated bureaucracy.
Can we say, "OUTTATOUCH?"

Top of pageBottom of page

Username: Mrjoshua

Post Number: 726
Registered: 03-2005
Posted From:
Posted on Thursday, March 09, 2006 - 10:09 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I thought this was especially interesting and symbolic of GM's problems:

"The design of GM's corporate headquarters, located in Detroit's Renaissance Center, reflects this bureaucratic inertia. Its four towers resemble massive, steel grain silos. To find colleagues in different departments, employees must sometimes take elevators to the ground floor and walk around an illuminated walkway to get to the other towers. New employees and contract workers get lost frequently.

"'We are a large company and we are all working independently to make things happen,' says Sonia Green, a GM marketing executive charged with helping revive the company's business in Miami. 'Unfortunately, we all work in little silos.'"

I like walking around in the RenCen but admit that I've gotten lost and feel as if I'm on the set of Battlestar Galactica.
Top of pageBottom of page

Username: Pffft

Post Number: 817
Registered: 12-2003
Posted From:
Posted on Thursday, March 09, 2006 - 10:31 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

I love what GM's done to the Ren Cen but yeah....it seems like an impossible set-up to communicate well. Whose idea was it to leave the New Center anyway? They could have renovated that building..
Top of pageBottom of page

Username: Rustic

Post Number: 2159
Registered: 10-2003
Posted From:
Posted on Thursday, March 09, 2006 - 11:21 am: Edit PostDelete PostMove Post (Moderator/Admin Only)

As to GM's problems cited re the Escalade, it is kind of a damned if you do damned if you don't senario. In fact re the Escalade they were (1) sorta following the Toyota model of letting another company (in this case Ford) roll the dice with a new model line (the large Luxo Sport ute), (2) improved on it sucessfully, (3) vacuumed up market share, (4) grew the market with a "must have" HIGH margin vehicle and (5) brought a younger demographic to a geriatric brand in Cadillac (perhaps at the expense of Chevy and GMC but anyway ...). Maybe it was executed a little clumsily and given it's sucess it would have been better in hindsight to crank 'em out a bit earlier, but compare the Escalade to, say the Toyota Previa ... of all the things to properly criticize GM for the Escalade seems to be pretty far down the list.

With the jobs bank outlined in an earlier thread, GM was also emulating the Toyota model of lifetime workers (this time without apparent success). Ironicly, at the same time GM was copying Toyota of Japan, Toyota was modifing it's model emulating GM NA and building new apparently lower wage factories in the US instead of clustering them around their mfg sites with older experienced workers.

In another example of a damned do/dont senario how many other articles have ya read about GM that cite the fact that GM keeps building behemoths like 10mpg Escalades as somehow being out of touch as to what consumers want and passing off pimped-up versions of basically 25 old platforms. (Consider futher the fundamental weirdness of Miami car dealers (flat, tropical, crowded, urbanized, sprawling Miami) clamoring CORRECTLY for gigantic 50K$ AWD LUXO SUVs -- that is indicative of a really upside down bizzarre market.)

Further the damned if you do damned if you don't senario applies to the analogy to the RenCen. Had GM still been located in it's historic HQ with satellite offices scattered around SE michigan that would likely be cited as an example of an inefficient ossified corporate culture. Had GM built a massive modern corporate campus in TN, or CA, or Va or even in MI, THAT would have been cited as wasteful extravagance for a company destined to rapidly contract (cw with Visteon). The move to the RenCen was IMO brilliant on GM's part" (1) they INSTANTLY got a flashy building for LITERALLY pennies on the dollar, (2) they cut their cord with their historic legacy and relationship with Detroit and got applauded for it and (3) they positioned themselves well should they need to contract further. Brilliant.

Add Your Message Here
Posting is currently disabled in this topic. Contact your discussion moderator for more information.