Always the curmudgeon, the Phalanx offers advice to the world’s largest automaker.

This week, General Motors, announced that it was selling its stake in Japanese truck maker, Isuzu. To call Isuzu a truck maker is the height of irony. The company sells two products in the US market, both of which are little more than rebranded Chevrolets. According to officials with GM, the $300 million sale of Isuzu was necessary to finance the company’s North American turnaround.

GM continues to reel from intense competition and a product line that has been lackluster in many respects with some notable exceptions, particularly Cadillac. GM like fellow Detroit automaker Ford, has failed to adapt in the rapidly evolving auto market. In the 1980s and 90s, the firm failed to capitalize on the need for increased automation to hold down costs, attributable in many ways to the yoke of big labor, and today the company has been slow to embrace new design concepts and develop new technologies. Whereas Toyota and Honda, for example, have accelerated production of small and hybrid cars to offset high fuel costs, GM remains dependent on truck and SUV sales. And while GM’s products certainly are every bit as reliable as their Japanese counterparts many simply don’t connect with consumers either due to product confusion, saturation or poor marketing.

GM has made some improvements, but as the world’s largest automaker, it is far too slow to adapt and must become more nimble like its foreign competitors. Toyota, for example can design develop and produce a new concept within 1 year’s time, something GM simply cannot due, perhaps there are too many cooks in the kitchen. GM clearly has the capability; its Cadillac division has been completely revamped gaining in both market share and in youthful appeal. Today, Mercedes Benz is seen more as the luxury brand for the Geritol set, where as this was once Cadillac’s domain.

GM should exploit this Cadillac experience and heed the lessons of other successful business revivals. Two examples include: Chrysler and Apple Computer. Chrysler, unlike Ford and GM has been gaining market share in recent years as it continues to develop products that connect with the customer. Chrysler’s innovation has enhanced its marketing potential and its bottom line. Apple Computer, like Chrysler has followed a similar path working to develop products that appeal to the market and eliminating dead weight. In the Mid 1990s, Apple sold dozens of computer products, which only confused potential customers, today the company has dispensed with the dead weight and streamlined its product offerings.

This was a strategy Chrysler also followed when dissolving the Eagle and Plymouth brands. GM must do the same. GM simply produces far too many vehicles that serve only to cannibalize the various GM divisions, while exhausting valuable resources. GM should radically streamline its product offerings and eliminate certain divisions. First to go should be GMC, whose entire product line is Chevrolet with a different moniker. Saturn, the once noble experiment, should also be dissolved. Pontiac and Chevrolet should merge with overlapping products eliminated, leaving GM with 3 solid North American brands: Chevrolet (for moderately priced cars, heavy and light duty trucks and SUVs), Buick (for mid-level luxury sedans and SUVs) and Cadillac (for high end luxury vehicles). Other niche brands, like Hummer (which is technically produced by AM General for GM), should be left untouched, as their market strategy has proven successful. The once vibrant Saab should be made an autonomous subsidiary and perhaps should no longer market its products in the United States.

GM should also take clues from its Japanese rivals and boost research and development capabilities, eliminate costly production obstacles and offer non-monetary incentives to consumers, particularly enhanced warranties, which boost the company’s image and a developer of high quality products. All in all, GM executives should head the advice of the Phalanx; once we are nominated to the GM board we will notify our readers.
http://www.usatoday.com/money/autos/2006-04-11-isuzu-sale_x.htm