- The Washington Times - Thursday, June 3, 2004

In a recent column, I noted that South Korean automakers were a primary beneficiary of the demise of General Motors’ Oldsmobile division.

The production of the last Oldsmobile a few weeks ago, which marked the end of America’s oldest automotive brand, prompted me to ponder where Oldsmobile owners were going. To find an answer, I asked J.D. Power and Associates, the California marketing firm that conducts quality surveys, to analyze data collected from dealers on buy-trade transactions via its Power Information Network. The data showed the percentage of Olds owners trading in their vehicles on various other brands.

Obviously, Olds buyers, on the day the announcement was made in December 2000, that Oldsmobile was to eventually be no more, didn’t run out and sell or trade in their cars. In fact, GM took measures to reassure them by offering them longer warranties and ensuring they would, as Olds owners, be cared for by dealers of other GM brands. Over time, owners will be selling their Oldsmobiles or trading them in as they feel the need for a new vehicle, a process that will unfold over years.

Indeed, the data clearly showed Hyundai is gaining Oldsmobile owners at an increasingly greater rate than other brands. GM was keeping them in its fold in the early days after the announcement, but that percentage is declining. In fact, GM still holds the largest block of Olds owners, but the rate appears to be decreasing.

This analysis came on the heels of Hyundai’s soaring performance in the J.D. Power Initial Quality Survey, which asks more than 51,000 Americans about quality problems they’ve experienced during the first three months of owning their new vehicle. In the survey, Hyundai Motor America tied American Honda in problems — 102 problems per 100 vehicles — just below No. 1-ranked Toyota Motor Sales U.S.A., with 101 problems. (Last year, Hyundai was near the bottom with 143 problems.) It ranked seventh among all brands this year.

In any event, GM took exception to the trade-in analysis. So, in fairness, I’ll let the automaker have its say here.

John Smith, GM group vice president in charge of North America Vehicle Sales, Service and Marketing, wrote: “The central point of the article (Olds buyers turning to Hyundai by largest and increasing percentages) is wrong. … GM retained 57 percent of Oldsmobile owners according to the March-April 2001 data and 49 percent, according to the March-April 2004 data. We maintained the lead with a retention rate that was more than five times greater than that of our closest competitor, which in this case is Ford.”

He added: “In the 2004 timeframe, GM retained 49 percent, followed by Ford at 10.5 percent, then DaimlerChrysler at 9.6 percent and Toyota at 7.2 percent.

“Hyundai followed at that point with 6.4 percent and Honda, Nissan, Mazda, Mitsubishi, Volkswagen, Suzuki, Bavarian Motor Works, Isuzu followed, respectively.”

In my previous column, I interviewed a former Olds dealer in the Detroit area, who also sells Hyundai. George Glassman had made the point when I interviewed him four years ago about GM eliminating Oldsmobile that dealers would turn to other brands and become competitors with GM, a point he reinforced in a more recent interview.

Similarly, GM took exception to the analysis. “Car dealer diversification has been going on for some time, and in fact, in this specific case, the franchises mentioned were in Glassman’s portfolio prior to the announcement,” wrote GM’s John Smith. “In addition, the vast majority of Olds dealers remain GM dealers.

“For example, of the approximate 2,800 Olds dealers, 95 percent were already dualed with other GM franchises and those businesses continue on.”

Mr. Smith went on to say: “We have actively tried to help GM dealers acquire additional GM franchises as possible and in Glassman’s case, specifically, we have worked with him to expand his Saab franchise with a new state-of-the-art facility to expand his GM business. We have worked with each Oldsmobile dealer to help them through the Oldsmobile transition, and tried to ensure GM is represented by the very best dealers in the industry.

“At the end of the day, we understand that prosperous GM dealers, teamed with ‘gotta have’ product are the keys to our success.”

On that final point, GM and I agree.

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