GM Was Right to Bet on Cadillac

In a survey just released by the University of Michigan, it appears that new owners just love their Lexies and their Caddies. Both brands tied at 89 on the American Customer Satisfaction Index, and that score was 5 points better than the industry average. That’s pretty good, don’t you think? Especially for a company just emerging from the tremors of bankruptcy.

Customer satisfaction for all Detroit brands grew from just over 81 last year to just below Asian automakers’ score of 84. European companies topped the ranking with 86. This year’s near-parity with Asian companies marks the closest the Detroit-based automakers have come to that group of rivals since outscoring them in 2000.

Cars like the CTS Sport Wagon (above), with lots of favorable reviews, are changing the public’s perceptions and moving the marque’s rankings. With the crossover/SUV/wagon categories more muddled than ever, the CTS-SW should be one of the segment’s coolest offerings (and the first American factory-built wagon for Cadillac).

In Europe, a new small sedan to be called the ATS is slated to replace the slow-selling BLS and is aimed at the BMW 3 Series market. So says Motor Authority. This entry-level Caddy is not just for Europe but for all markets.

More GM news: NPR reported this morning—too early by far for me to be fully compos mentis—that GM was going to recall laid-off workers and reopen plants, since current dealer inventory has dried up owing to Cash-for-Clunkers demand. I think I heard that right. Such news could drive a wealthy fool to fumble for his Blackberry and order up more cheap GM stock. Or, if he were sensible, go back to sleep.

Lordstown (Ohio) and Orion (Michigan) are among those plants slated to reopen. Mark LaNeve, a GM sales guy, reportedly said, “We’re adding 60,000 units to our production schedule.” The Truth About Cars had this comment:

And when Cash for Clunkers plays out and leaves a smoking crater where all those pulled-forward sales used to be? GM will go back to right-sizing, shift-cutting, inventory management, fire sales, channel stuffing and the other depressed-cycle tricks of the trade.

You betcha. And I’ll be back in bed. But that’s really a negative, smarmy view of things. If Cadillac continues its march and Chevy its rebuild, the good old General may yet survive.

Will GM make its mark through Cadillac? What other brands do you think show similar promise?

—jgoods

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Money and Cars, Drinking in Bars

Yesterday I watched Fritz Henderson, GM’s new CEO, on “Meet the Press.” Nice guy who skirted the tough questions and dropped no bombshells. But he made some news when he said that while bankruptcy wasn’t inevitable, “it would only be prudent” to prepare for it.

Here’s the nub of the problem:

GM must shrink $27.5 billion in debt that bondholders have been reluctant to exchange for equity, and $20.4 billion in obligations to a union-run health-care fund [VEBA]. Henderson also has said GM needs to cut more deeply than its planned 22 percent reduction in so-called structural costs in North America to $26.3 billion from 2007’s level.

That is a helluva lot of money, and the company has yet to present a viable business model for how they will operate in a new, restructured mode. Like Lehman Brothers, GM “is woven into a complex international web of suppliers and subsidiaries.”

From what I read, the bondholders are holding back, thinking they might get a better shake in bankruptcy (which is doubtful), and the union is at the table, reluctantly making more concessions. Even if the balance sheet gets cleaned up, what kind of restructuring will emerge?

Undoubtedly, we’ll see fewer brands—possibly only Cadillac and Chevrolet—fewer dealers (as tgriffith mentioned), a leaner, more focused supply chain, and lots of former employees spending more time in Detroit bars.

We’ll also see, perhaps, pressure on Ford to lean down to meet its new GM competition. It isn’t enough to sell off assets, as Ford has done. Remaking the auto industry in a new mode is not just a matter of balance sheets; it is giving birth to a new order of cars that people will want and confidently buy.

This means getting over most of the negative perceptions that have been created about GM over the years. It means honoring warranties (thus the Obama team’s proposal to backstop them). It also means, as Henderson indicated, a step-by-step approach to redeveloping public confidence in the brand(s), which can be achieved only by making desirable, quality cars.

All this is a very tall order, and now the government’s entry as majority owner further complicates matters…. Think I’ll go out for a drink.

Assuming that a “controlled” bankruptcy will occur, do you think a new GM can emerge?

—jgoods

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News from GM’s Hospital Ward

With Toyota’s report today that it will close its Japanese factories for 11 days (beyond the traditional 3-day closing), U.S. auto industry fans—if there are any left—still don’t have much to cheer about. Chrysler’s December sales dropped 53% from last year; GM’s, 31%; Ford’s, 32%. Toyota’s U.S. deliveries were down 37%.

It’s a 16-year low for the industry, with GM’s share the smallest in its home market since 1959. And this year looks to be worse, according to one analyst: “It’s a consumer confidence problem, and it’s worldwide.”

There was sporadic cheering, however, as the government granted aid to the company’s financing arm, GMAC. Hopes for loosening of credit for GM vehicles were somewhat undercut by the terms of the deal. GMAC loses its exclusive right to finance all of GM’s cars and trucks and must conclude all lease financing, too. So the cozy relationship ends, and both companies will have to find some of their business elsewhere. That may be a good thing.

Meanwhile, labor negotiations with the UAW got underway, with the union claiming President Bush was “demanding steeper and faster concessions from the UAW than from any other part of the industry.” Maybe so, but analysts think there is still more blood to be gotten from that stone.

Okay, now some good news: The new Cadillac SRX crossover was announced before the opening of the Detroit Auto Show, January 17. We think it looks pretty good, if a bit fussy on the exterior and a little too bezel-ish in the cockpit. Along with all kinds of electronic goodies, the SRX will be powered by a 3.0-liter V6 (260 hp/221 lb-ft, 6-speed), or a 2.8-liter turbo V6 (300 hp/295 lb-ft, 6-speed automatic). You’ll also find when you open the door that it has illuminating sill plates. It’s nice to know that GM never gives up on this kind of stuff.

What do you think about the new Cadillac SRX?

—jgoods

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