Why doesn't GM fold Chevrolet Trucks into GMC?

[twintornados]

The more I ponder this, the more I wonder why GM doesn't do this to maximize profit with a "One Truck" philosophy and strategy. "One Truck" would see the shuttering of Chevrolet truck division and the folding of it into GMC truck division. By doing this, GM will allow all dealers, Chevrolet, Buick, and Cadillac to sell GMC trucks.

 

In turn, GMC would drop their current SUV's in favor of each division selling SUV's in their place.

 

GMC could re-introduce a true off-road warrior in the image of Jeep that would also be sold at each marquee franchise outlet.

 

This would require NO changes in any franchise agreements and would expand GM in a profitable manner.

 

Lets face it....if Chevrolet stopped selling trucks tomorrow....the loyalists would simply replace their Chevys with GMCs....they would NOT run down the road and suddenly buy Fords and Dodg....errr, I mean, RAM trucks....no way, no how.

 

Just a thought....

Edited July 16, 2015 by twintornados

[RangerM]

Some people prefer Diet Coke and others, Coke Zero.

 

Some prefer Tide over Cheer. (both are P&G).

 

Point being, the more products your company sells in the same market, the greater your market penetration; assuming you can be profitable selling two (or more) products in the same market.

[630land]

Only if GM is bankrupt, again, but don't lose sleep.

[RichardJensen]

If Chevy-only dealers lose their trucks, then they would sue for waste and win.

 

If Chevy-only dealers are awarded GMC franchises in order to continue selling trucks, then BCG dealers sue for violating exclusivity protections in their franchise agreements and win.

Edited July 16, 2015 by RichardJensen

[akirby]

What Richard says. Having both GMC and Chevy truck dealers near each other really prevents them from eliminating either one right now, without spending tons of cash on buyouts.

 

And I don't buy the "having two brands in the same market yields more market share". Not when they're virtual clones of each other like Fusion and Milan e.g., or Silvererra and Canyorado. They do nothing more than split the same piece of the pie.

[fuzzymoomoo]

What Richard says. Having both GMC and Chevy truck dealers near each other really prevents them from eliminating either one right now, without spending tons of cash on buyouts.

 

And I don't buy the "having two brands in the same market yields more market share". Not when they're virtual clones of each other like Fusion and Milan e.g., or Silvererra and Canyorado. They do nothing more than split the same piece of the pie.

True, but isn't it amusing watching them spin it?

[twintornados]

If Chevy-only dealers lose their trucks, then they would sue for waste and win.

 

If Chevy-only dealers are awarded GMC franchises in order to continue selling trucks, then BCG dealers sue for violating exclusivity protections in their franchise agreements and win.

I would bet that those franchise agreements were re-written post bankruptcy to give GM more lee-way in the matter....

 

But my suggestion gives ALL dealers equal access to the GMC truck division with no restriction....don't really see how a "Chevy only" dealership would be upset when they get GMC trucks instead.....

[RangerM]

What Richard says. Having both GMC and Chevy truck dealers near each other really prevents them from eliminating either one right now, without spending tons of cash on buyouts.

 

And I don't buy the "having two brands in the same market yields more market share". Not when they're virtual clones of each other like Fusion and Milan e.g., or Silvererra and Canyorado. They do nothing more than split the same piece of the pie.

You don't buy it, because you're more informed about cars/trucks and understand that vehicles can be clones. Most people are completely ignorant and have no (or at least very little) idea. If this weren't true, then GM might spend millions referring to Chevy as "Professional-Grade". They don't, and that's due to their brand strategy.

 

You can see it in the original Durant strategy of tiered structure for GM (Cadillac on top, then Buick, etc). It's largely the same thing. It was only made too obvious to the ignorant in the '80s when you saw the Cimmaron/Cavalier/Firenza/Sunbird/Skyhawk clones.

[RichardJensen]

.don't really see how a "Chevy only" dealership would be upset when they get GMC trucks instead.....

 

The GMC dealership down the road has a contractually guaranteed exclusive franchise right. If you let the Chevy dealership sell GMCs, the existing GMC dealership will sue and will win.

Edited July 17, 2015 by RichardJensen

[RichardJensen]

They don't, and that's due to their brand strategy.

 

You can see it in the original Durant strategy of tiered structure for GM

 

They have that brand strategy because they're stuck with those dealers. It does not make any sense in a larger framework.

 

And Durant's tiered structure was torn to shreds by Ford in the 60s, even though it took 40-50 years for the full effect to hit GM.

 

When Ford launched the Falcon, the Fairlane and the LTD, they basically obsoleted the Chevy-Pontiac-Oldsmobile-Buick ladder. It doesn't make sense anymore. You've got luxury and entry-level and that's it.

[RangerM]

 

They have that brand strategy because they're stuck with those dealers. It does not make any sense in a larger framework.

If they weren't making money with them pre-bankruptcy, would it not have made sense to ditch it then, as they did Hummer?

 

If GM wanted to drop GMC, I'm sure they could find a way as they did with Oldsmobile.

Edited July 17, 2015 by RangerM

[RichardJensen]

If they weren't making money with them pre-bankruptcy, would it not have made sense to ditch it then, as they did Hummer?

 

If GM wanted to drop GMC, I'm sure they can find a way as they did with Oldsmobile.

 

They're making money *now*, as they're basically able to sell trucks from almost every franchise location.

 

But the rationale behind the brand is non-existent.

 

If starting from scratch, it would be more profitable to have only a single truck brand sold from fewer dealers.

 

The reason why they didn't push for that in bankruptcy is, I figure, a combination of things:

 

1 - they were still going to get major pushback from dealers directly and from dealers contacting politicians who would be hassling Treasury.

2 - the government, as with factory closures, wanted as little trauma to local economies as possible, over and above political considerations--that is to say, there were economic arguments in favor of preserving a higher number of dealers than the 'bare minimum'

3 - a lot of people at GM still don't get it.

[RangerM]

But the rationale behind the brand is non-existent.

 

If starting from scratch, it would be more profitable to have only a single truck brand sold from fewer dealers.

 

The reason why they didn't push for that in bankruptcy is, I figure, a combination of things:

1 - they were still going to get major pushback from dealers directly and from dealers contacting politicians who would be hassling Treasury.

2 - the government, as with factory closures, wanted as little trauma to local economies as possible, over and above political considerations--that is to say, there were economic arguments in favor of preserving a higher number of dealers than the 'bare minimum'

3 - a lot of people at GM still don't get it.

I can agree to some extent. Although if Cadillac were to ditch the trucks/SUVs, then GMC could fill the role quite nicely with the Denali trim level. If Cadillac were to drop the trucks from its brand (assuming it could ever get its cars to attain some sort of brand identity), I wouldn't be surprised if Lincoln followed.

 

Although I'm not fond of the looks of the coming Chevy/GMC fullsize trucks, I've long considered the GMC variants the more attractive.

 

I don't know how many GMC dealers there are, but most I've ever seen were paired with another franchise. I'd speculate there were more Pontiac dealers pre-bankruptcy than GMC dealers.

[sullynd]

I wonder how many GMCs are Denalis. I know people who buy Denalis because they don't want the bling image associated with the Escalade..

[RichardJensen]

I can agree to some extent.

 

In their favor, GM has probably done the best job at branding with GMC which is, ironically, their least differentiated brand.

[twintornados]

I do remember how in the late 80's, it came time to replace the service van for my Dads TV shop....I shopped 'em all....the salesman at the GMC dealership tired to run the "Well, GMC's are built with heavier steel, so that is why it is more expensive than the Chevy.".....I laughed and we ended up with an Econoline 150.

[silvrsvt]

 

You can see it in the original Durant strategy of tiered structure for GM (Cadillac on top, then Buick, etc). It's largely the same thing. It was only made too obvious to the ignorant in the '80s when you saw the Cimmaron/Cavalier/Firenza/Sunbird/Skyhawk clones.

 

Don't forget the Monte Carlo, Oldsmobile Cutlass Supreme, Pontiac Grand Prix, Buick Regal too!

[akirby]

It's not the franchise agreements - it's the state franchise laws that prevent adding a GMC dealership within a certain radius of an existing GMC dealer.

 

And it's not that it can't work - it can and is right now. It's just that from a corporate standpoint (or as Richard says, if they were starting from scratch) they would be better off with fewer brands and fewer dealers.

 

GM is still chasing volume and not trying to maximize profits or ROI. The limited edition Impala and Cruze stuff is ridiculous.

 

Let's say individually GM and Chevy trucks were making $1B each. If you dumped GMC you'd still sell close to the same number of trucks but your costs go down dramatically. So instead of making $2B with 2 brands you make $2.5B with 1 brand.

 

GM makes product decisions at a product or brand level, and it's easy to justify these projects individually. Ford looks at it from a corporate level and says where should we be investing our resources for the best overall ROI and protect ourselves in case of another economic downturn.

 

GM develops a platform for Caddy, then decides to share it with other brands and models. Ford develops shared platforms from the beginning. GM looks at each project individually and says "is this profitable and how much volume does it add?". Ford looks at all projects and says "which of these represents the best use of our resources?"

[MY93SHO]

Now with MOAR chiseling!

 

http://truckyeah.jalopnik.com/heres-the-new-face-of-the-2016-gmc-sierra-1718296559

[grbeck]

And Durant's tiered structure was torn to shreds by Ford in the 60s, even though it took 40-50 years for the full effect to hit GM.

 

When Ford launched the Falcon, the Fairlane and the LTD, they basically obsoleted the Chevy-Pontiac-Oldsmobile-Buick ladder. It doesn't make sense anymore. You've got luxury and entry-level and that's it.

Don't forget the 1958 Thunderbird, which got the whole ball rolling.

[RichardJensen]

It's not the franchise agreements

 

No. It's the franchise agreements. The franchise laws basically prevent dealers from being starved out or having the manufacturer compete with them.

 

The agreements themselves spell out the geographic exclusivity, the same as they do in many other franchised businesses (especially fast food).

[akirby]

The franchise laws basically prevent dealers from being starved out or having the manufacturer compete with them.

 

The agreements themselves spell out the geographic exclusivity, the same as they do in many other franchised businesses (especially fast food).

 

Not in GA. GA law also covers geographic exclusivity.

 

http://law.justia.com/codes/georgia/2010/title-10/chapter-1/e/part-5/10-1-664

 

So even if you removed that from the franchise agreement, they could still sue under the law.

Edited July 17, 2015 by akirby

[RichardJensen]

 

Not in GA. GA law also covers geographic exclusivity.

 

http://law.justia.com/codes/georgia/2010/title-10/chapter-1/e/part-5/10-1-664

 

So even if you removed that from the franchise agreement, they could still sue under the law.

 

"in whose relevant market area"

 

That's a legal term that isn't defined in the statute, it's defined in the franchise agreement.

 

Every competently drawn franchise agreement--regardless of industry--contains such a clause and a guarantee of exclusivity within it.

 

All this law does is codify the procedure for a perceived breach of contract which would be actionable regardless--presumably to prevent manufacturers from requiring dealers to submit to binding arbitration in the event a breach is alleged.

 

South Dakota has tenant's rights laws which codify the basis and mechanism for a rent strike. The laws don't create the 'right' to refuse to pay rent until a building is rendered habitable, but they structure it. The same thing is going on here. The cause for action isn't violation of this law, it's a breach of the franchise agreement (the manufacturer's proposal to establish another franchise in the 'relevant market area'). In the 'rent strike' law, the cause for action is a breach of the rental agreement (the 'covenant of quiet enjoyment'), not violation of that particular law.

Edited July 17, 2015 by RichardJensen

[RichardJensen]

Don't forget the 1958 Thunderbird, which got the whole ball rolling.

 

Refresh my memory--who was behind the Fairlane?

 

Be interesting to reflect that Bob McNamara & Lee Iacocca brought down GM....eventually.

[akirby]

Not in GA or CA. They both define Relevant Market Area within the statutes.

 

http://law.justia.com/codes/georgia/2010/title-10/chapter-1/article-22/part-1/10-1-622/

 

 

(13.1) "Relevant market area" means the area located within an eight-mile radius of an existing dealership.

 

 

http://law.justia.com/codes/california/2011/veh/division-1/507

 

 

The relevant market area is any area within a radius of 10 miles from the site of a potential new dealership.