GM dumped thousands of HHRs into rental fleets - badly watered down its cachet.
10-31-2007, 11:27 AM
#1
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GM dumped thousands of HHRs into rental fleets - badly watered down its cachet.
Do you agree with this statement made by the WSJ writer John D. Stoll? Is the HHR’s prestige badly watered down?
Originally Posted by WSJ Article quote
How The New GM Handles A Hit: Slow Production To Prevent Incentives; Maintain Desire
By JOHN D. STOLL - The Wall Street Journal - October 31, 2007; Page B1
This summer Mary Mooney and her husband were soaking up the sun in Florida when they saw a Buick Enclave, a big, seven-passenger vehicle, and decided they just had to have one. But when the couple called two dealers back in Michigan, where they live most of the year, the model they wanted was sold out at both.
So instead of flying home, the Mooneys bought an Enclave in Florida and drove it 1,300 miles back to Michigan. Sitting in her opal-colored Enclave on Saturday, Mrs. Mooney said, "We fell in love with it."
The tight supply of Enclaves -- a so-called crossover utility vehicle that has become General Motors Corp.'s breakout hit this model year -- is no accident. Buoyed by a new labor contract that reduces its costs, GM is keeping a tight rein on production of the Enclave in an effort to avoid past mistakes that forced it to offer discounts and cheapened the image of the company's brands.
"We want to keep [the Enclave] hot," says GM Vice Chairman Robert Lutz. "Nothing destroys the value of a new product faster than over producing."
In the past, when GM had hot models, it usually built as many as it could, and almost always ended up with lots filled with unsold vehicles. For example, the Chevy HHR, a retro-styled wagon launched in 2005, sold briskly at first, often at full sticker price. But after cranking up production and offering discounts to boost sales, GM had a glut. Fifteen months after the HHR was introduced, Chevy dealers had enough in stock to last almost five months without ordering more. Since then, GM has had to continue discounting and dump thousands of HHRs into rental fleets, which eroded the margin on the car, and badly watered down its cachet.
Ford Motor Co. and Chrysler LLC often do the same with their fast-selling models and are also trying to break away from the practice. But GM's handling of the boldly styled Enclave and two other crossovers made from many of the same parts -- the GMC Acadia and the Saturn Outlook -- is one of the first signs any of the Big Three is truly changing its ways.
But overall auto sales have slowed this year, hurt by the housing slump and high gas prices. So GM is acting now to hold down its inventory of the three crossovers, which look like SUVs but are lighter, drive more like cars and get better gas mileage. In December, the Lansing, Mich., plant that makes the three models will cut back to two shifts of production from three.
It's a risky move. The crossovers, which sell for $35,000 and up, make a lot of money for GM at a time when sales of its highly profitable trucks and SUVs are falling. GM is also struggling to produce steady profits in North American and needs every dollar it can bring in.
Meticulously controlling supply takes a page out of the playbook used by many of GM's more profitable foreign rivals, said Earl Hesterberg, chief executive of Group 1 Automotive Inc. a dealership chain based in Houston. Both Toyota Motor Corp. and Honda Motor Co. ratchet production levels up or down to stay in line with demand and minimize the need for discounting.
"This is the way [Toyota's] Lexus business operates and the way the BMW business operates," Mr. Hesterberg said.
The new contract also gives GM more flexibility to lay off workers when demand slackens. Twelve days after the contract was ratified, GM announced it would phase out the Lansing plant's third shift and lay off 1,000 workers building the Enclave, Acadia and Outlook.
It is also reducing production at a truck plant and a large-sedan plant, both in Michigan, which together will result in an estimated 1,900 job cuts.
And while the Enclave and the Acadia are hits for now, that could change in 2008 when GM begins building a Chevrolet version of the same vehicle, called the Traverse, at a plant in Tennessee. Because Chevrolet sells far more vehicles than Buick or GMC, the Traverse could very well pull buyers away from the Enclave.
"Of course we don't want to have too little supply on dealer lots," Mr. Ballew said, "but the situation we're looking at now is definitely a good problem to have."
Full article at www.wsj.com
By JOHN D. STOLL - The Wall Street Journal - October 31, 2007; Page B1
This summer Mary Mooney and her husband were soaking up the sun in Florida when they saw a Buick Enclave, a big, seven-passenger vehicle, and decided they just had to have one. But when the couple called two dealers back in Michigan, where they live most of the year, the model they wanted was sold out at both.
So instead of flying home, the Mooneys bought an Enclave in Florida and drove it 1,300 miles back to Michigan. Sitting in her opal-colored Enclave on Saturday, Mrs. Mooney said, "We fell in love with it."
The tight supply of Enclaves -- a so-called crossover utility vehicle that has become General Motors Corp.'s breakout hit this model year -- is no accident. Buoyed by a new labor contract that reduces its costs, GM is keeping a tight rein on production of the Enclave in an effort to avoid past mistakes that forced it to offer discounts and cheapened the image of the company's brands.
"We want to keep [the Enclave] hot," says GM Vice Chairman Robert Lutz. "Nothing destroys the value of a new product faster than over producing."
In the past, when GM had hot models, it usually built as many as it could, and almost always ended up with lots filled with unsold vehicles. For example, the Chevy HHR, a retro-styled wagon launched in 2005, sold briskly at first, often at full sticker price. But after cranking up production and offering discounts to boost sales, GM had a glut. Fifteen months after the HHR was introduced, Chevy dealers had enough in stock to last almost five months without ordering more. Since then, GM has had to continue discounting and dump thousands of HHRs into rental fleets, which eroded the margin on the car, and badly watered down its cachet.
Ford Motor Co. and Chrysler LLC often do the same with their fast-selling models and are also trying to break away from the practice. But GM's handling of the boldly styled Enclave and two other crossovers made from many of the same parts -- the GMC Acadia and the Saturn Outlook -- is one of the first signs any of the Big Three is truly changing its ways.
But overall auto sales have slowed this year, hurt by the housing slump and high gas prices. So GM is acting now to hold down its inventory of the three crossovers, which look like SUVs but are lighter, drive more like cars and get better gas mileage. In December, the Lansing, Mich., plant that makes the three models will cut back to two shifts of production from three.
It's a risky move. The crossovers, which sell for $35,000 and up, make a lot of money for GM at a time when sales of its highly profitable trucks and SUVs are falling. GM is also struggling to produce steady profits in North American and needs every dollar it can bring in.
Meticulously controlling supply takes a page out of the playbook used by many of GM's more profitable foreign rivals, said Earl Hesterberg, chief executive of Group 1 Automotive Inc. a dealership chain based in Houston. Both Toyota Motor Corp. and Honda Motor Co. ratchet production levels up or down to stay in line with demand and minimize the need for discounting.
"This is the way [Toyota's] Lexus business operates and the way the BMW business operates," Mr. Hesterberg said.
The new contract also gives GM more flexibility to lay off workers when demand slackens. Twelve days after the contract was ratified, GM announced it would phase out the Lansing plant's third shift and lay off 1,000 workers building the Enclave, Acadia and Outlook.
It is also reducing production at a truck plant and a large-sedan plant, both in Michigan, which together will result in an estimated 1,900 job cuts.
And while the Enclave and the Acadia are hits for now, that could change in 2008 when GM begins building a Chevrolet version of the same vehicle, called the Traverse, at a plant in Tennessee. Because Chevrolet sells far more vehicles than Buick or GMC, the Traverse could very well pull buyers away from the Enclave.
"Of course we don't want to have too little supply on dealer lots," Mr. Ballew said, "but the situation we're looking at now is definitely a good problem to have."
Full article at www.wsj.com
10-31-2007, 01:11 PM
#3
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Join Date: 07-17-2006
Location: Dallas, GA
Posts: 6,052
another reason when the UAW went on strike, they should have just stop production for a while and cleaned out inventory.
Personally, could care less. Not planning on getting rid of it for a long time.
Personally, could care less. Not planning on getting rid of it for a long time.
10-31-2007, 01:31 PM
#5
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Join Date: 07-13-2006
Location: Geneva, FL.
Posts: 1,567
All true, But here in central FL. the 06 HHR were in the rental fleets way before they were on the dealer lots. So I can,t see the statement-
{ But after cranking up production and offering discounts to boost sales, GM had a glut. Fifteen months after the HHR was introduced, Chevy dealers had enough in stock to last almost five months without ordering more. Since then, GM has had to continue discounting and dump thousands of HHRs into rental fleets }
Because after Fifteen months the rental car fleet was hitting the used car lots around here!
{ But after cranking up production and offering discounts to boost sales, GM had a glut. Fifteen months after the HHR was introduced, Chevy dealers had enough in stock to last almost five months without ordering more. Since then, GM has had to continue discounting and dump thousands of HHRs into rental fleets }
Because after Fifteen months the rental car fleet was hitting the used car lots around here!
10-31-2007, 02:31 PM
#6
Join Date: 10-23-2007
Location: St. Cloud, Florida
Posts: 3
I am just now seeing more of them on the road. I don't know about the national level, but locally I don't/didn't see that statement.
10-31-2007, 03:46 PM
#7
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Join Date: 05-25-2007
Location: Ontario
Posts: 181
I was watching a round table with the 'big 3' a year or so ago and they said that perhaps they need to start taking a page out of the Mazda and VWs of the industry's book. Make the right product for the market and under produce very slightly... and they'll walk themselves off the lot with whatever options you put on them for your original asking price. The North American philosophy is to put as many different vehicles with the different options and colour combinations as possible so they have the right combination for everyone.
Although I would prefer walking on to a lot and having a broad choice... it's not making business sence any more for the auto manufacturers. ie... if the market would move 50,000 of this model per year, VW would ship 40,000 and sell them all at the full asking price. GM would ship 50,000 and start discounting them after 6 months and selling 1/4 to 1/3 at hevily discounted prices. Net proffit is higher the VW way.
Although I would prefer walking on to a lot and having a broad choice... it's not making business sence any more for the auto manufacturers. ie... if the market would move 50,000 of this model per year, VW would ship 40,000 and sell them all at the full asking price. GM would ship 50,000 and start discounting them after 6 months and selling 1/4 to 1/3 at hevily discounted prices. Net proffit is higher the VW way.
10-31-2007, 04:00 PM
#8
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Join Date: 08-26-2007
Location: Schaumburg, IL
Posts: 130
Although I picked up my '07 in September with $2000.00 cash back from GM (and a supplier discount also), I would have bought one eventually with or without an incentive. I still only see no more than one or two a day at the most, so I'm not sure there is a glut out here in Chicagoland. It's a cool car and I feel it's well built. We all have one because it's a gotta have it kind of vehicle. There are kernels of truth in the article, but GM will never do too much right in the eyes of the press. I'm proud to have bought a GM car. I got more for my money, the quality and innovation is baked in and it's styling rocks!
10-31-2007, 07:14 PM
#9
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Join Date: 05-23-2006
Location: Chandler, AZ
Posts: 1,082
It wouldn't surprise me at all that GM would do this, but you couldn't prove it by me. I see more and more HHRs around here all the time. What I do know is that I'm one of those that jumped on the HHR Bandwagon back in August '05 when I first saw it. (Dealer only had 2 in stock) Paid sticker price, no rebate, no 0% financing!
Really ticks me off now. Just a few Months later they come out with all the perks 
Live and learn I guess. Thank goodness our HHR has been Star and we plan on keeping it for a long time!
