GM and Chrysler Troubles Are About Marketing

Posted: February 19, 2009 in Uncategorized
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The feeding frenzy continues. GM and Chrysler need over $20Billion in government funds just to survive. They also need to make massive cuts in employment so they can bring the cash flow bleed under control.

This will stanch the flow, but I still think these two companies will have no choice but to go into bankruptcy protection, and sooner rather than later. Moreover, the focus on hourly labour costs is a bit of a red herring in my estimation. The real problem is that people don’t want these cars.

How else can you explain the fact that the Mazda Tribute has a higher resale value than the Ford Escape, its twin. The same applies to other models. North American cars are just as reliable now as the Japanese models, but they can’t command the “reliability” premium that the Japanese makers do, even on twin versions. This situation is even worse when it comes to luxury brands, such as Cadillac and Lincoln. GM and Ford are producing well engineered, luxurious, high performance automobiles that are also good looking. They just can’t command the prices that BMW or Mercedes do. This is a marketing problem, not a manufacturing problem.

© Richard Martin 2009

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