Headed for That Showroom in the Sky
When the 1957 Cadillac Eldorado Brougham hit showrooms, it commanded a then-lofty $13,000 price and more than lived up to its reputation. Only Rolls-Royce sold a more expensive car than the top-shelf Caddy, which came with chrome gauges and a stainless steel roof. "No wonder we had half the market back then," marveled General Motors (GM ) Corp. Vice-Chairman Robert A. Lutz recently as he admired a gleaming '57 Eldorado. "We made better cars than everybody else."
It has been a long time since GM's cars were so prestigious. In fact, some of the auto maker's long-standing nameplates have become so tarnished by shoddy vehicles that GM is dropping them. The vaunted Eldorado was killed two years ago. Now, Lutz has the company's marketers reappraising nearly every model, from the cheapest Chevy compact to the priciest Caddy. If a name carries baggage, such as the weak Pontiac Grand Am and Chevrolet Cavalier, GM is dumping it. Says Lutz: "When you're making a big change and you want to wipe the psychological slate clean, you change the name."
Escaping the past isn't easy -- or cheap. But GM is already betting billions on new designs that are intended to prove it can once again compete with Japanese and European passenger cars. The last thing GM wants to do is waste the effort on tired names that evoke a questionable past. "You have to change the product and the name in concert," says Ed Tazzia, managing partner at marketing consultant Gundersen Partners in Detroit. "If the market hears that it's the same stuff with a different name, it'll be a disaster."
The makeover moves into high gear next year, when GM launches the reengineered Chevy Cobalt. As a replacement for the entry-level Cavalier, it represents a bold attempt to move up in price and class. Lutz boasts that GM has designed the car with the style and craftsmanship of compacts like the Honda (HMC ) Civic and Volkswagen Golf. The Cobalt's advertising will target college graduates and stress the car's European-inspired styling and more upscale interior rather than focusing on price, say GM dealers. The goal is to land the Cobalt in the same range as the Civic and Golf, about $15,000 and up. No one pays that much for a Cavalier, thanks to hefty rebates. And by adding a high-performance Cobalt SS, Chevy will signal that it's going after the street-rod crowd that loves Japanese cars.
Next on the chopping block is the Pontiac Grand Am. In 2005, GM will ditch that model for a still-unnamed replacement that will bear a close likeness to the sleek, sporty G6 concept car that was unveiled at the Detroit auto show in January. The styling is a breath of fresh air compared with today's gaudy, ribbed Grand Am. It will be built on the same platform as the nimble-handling Saab 9-3 sedan. Pasting the Grand Am name on a car as graceful as the G6 would be a definite turn-off to the young social climbers GM is seeking. Notes Wesley R. Brown, an analyst at Los Angeles consulting firm Nextrend Inc.: "The only time import buyers come in contact with a Grand Am is at Avis Rent A Car."
Renaming can be risky business: It works only when car buyers are truly convinced that a new vehicle represents a break with the past. Exhibit A for how not to rehab a nameplate is the Cadillac Catera, which GM launched in 1996. A rebadged Opel Omega, which was viewed as stodgy in Europe, the Catera fell as flat as a floor mat. GM killed the name after just six years.
Now, Cadillac has become a reason to believe that GM -- with the right cars -- could shine up its image. As it rolls out a whole new fleet of cool cars, the division is weeding out old, European-sounding names that consumers associate with big boats for the elderly, says Cadillac General Manager Mark LaNeve. The Catera has morphed into the CTS, and the next Seville will be the STS. Even the top-selling DeVille may be redubbed. But it's not as simple as coming up with new names. When Caddy attempted to reposition itself and launched the CTS in early 2002, it spent $150 million on new ads and other marketing -- up 50% from the previous year.
That's a lot of cash for a company squeezed between huge pension liabilities and cutthroat competition. But look at it another way, and it's hard to see how GM has any alternative but to spend that much and more. After all, the company has invested $4.3 billion to give Caddy's new cars bold styling and make them fun to drive. If dumping tarnished brands gives fresh new models a better chance of attracting buyers, it's the right time to take that risky step.
By David Welch in Detroit