- The Washington Times - Friday, February 16, 2001


It's played well on Wall Street, but chalk up General Motors' decision to kill off its struggling Oldsmobile Division as an opportunity missed.
Late last year, GM announced it would phase out Olds over the next three years, putting an end to a 6-year campaign to remake the division into an import-fighter aimed at younger buyers.
The effort began with the launch of the Aurora sedan in 1995 and culminated with the debut of such models as the Intrigue in 1996 and Alero in 1998.
The cars widely are considered among the best GM offers, and they were beginning to make a mark with their target audience. Olds says the average age of its customers has dropped nearly 10 years since 1996 to 50.7-years-old. The average age of Alero buyer s is even younger, at 42.8 years.
But overall, Olds' sales have continued to plunge. Once good for more than a million units per year, Olds dealers have been struggling to top the 280,000-unit mark. Deliveries for the division fell 17.9% in the last year alone.
"We repositioned Olds to sell to a different set of customers," says GM North American President Ronald L. Zarrella. "That was starting to work. There were lots of positive demographics just not enough of them."
By most accounts, killing off the 103-year-old brand was a tough but prudent action. Olds had been losing money GM won't say how much for years. The automaker took a $939 million earnings hit in the fourth quarter of 2000 just to rid itself of the problem division.
Stock analysts applauded the move as a sign GM CEO Rick Wagoner was ready to make the difficult decisions. But here's the rub. Oldsmobile isn't an anomaly within GM. Many of its problems aging buyer demographics, high production and marketing costs and too many dealers, among others are shared across division lines. They're some of the same deficiencies that have eroded Cadillac's standing in the luxury car market, chipped four points off Chevrolet's market share since 1990 and cast doubt on the future of Buick.
GM says killing Olds will help it direct product development and financial resources to other more profitable and promising divisions. Certainly that's true in the short term. And it's hard to argue that GM doesn't have too many divisions.
But jettisoning Oldsmobile fails to get at the root of the problem. And in the end it won't save GM. What's being missed is the chance to take a clean-sheet approach to the division, using it as a laboratory to resolve broader companywide issues.
Unless GM figures out how to pare down its overgrown dealer network, add luster to its existing brands, make competitive products at competitive prices and draw in younger buyers, the automaker may be doomed to repeat the Oldsmobile experience again and again.
Former Olds General Manager John D. Rock sums it up best: "If every time you get in a tough spot you give up, pretty soon nothing is left."
WARD'S AUTOMOTIVE REPORTS

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