Currency is only part of the problem…
When is a flop not a flop? When it was never meant to be a success in the first place. A post at TTAC grapples with this reality, wondering why GM seems to have no interest in promoting its rear-drive V8-powered NASCAR-for-the-road Chevrolet SS. After describing the car’s weak sales and lack of marketing, the author notes:
I’d love to have the chance to have a candid, off-the-record conversation with somebody, hell, anybody at GM about what the thought process was behind the SS. Are they just trying to spread out the Commodore R&D budget? Is this some empty suit’s crusade? Why has there been NO advertising push behind this car? Are they so afraid to fail on a grand scale that they’ve decided to do the automotive equivalent of a direct-to-video release?
Only an automotive enthusiast could look at the SS and wonder why GM isn’t doing more to back it. From the pistonhead perspective, cars like the SS are the crowning achievement of an auto industry which builds hundreds of thousands of bland commuter-mobiles simply to finance the fun cars. After all, in the mind of plenty of auto enthusiasts, the best criteria for buying a new commuter car is the relative merit of a brand’s halo car.
Of course, exactly the opposite is true: only relentlessly rational, scale-based models can hope to survive in the brutally competitive global car industry, and every unique, hi-po, fanboy-baiting model like the SS is a gigantic risk. In fact, few cars illustrate the danger of emotionalism and sentimentality in the car business quite like Chevy’s big, Aussie-derived sports sedan.
Prior to the SS, GM had twice attempted to sell Australian-built, Holden Commodore-based in the US: first in 2004-05 as the Pontiac GTO, then in 2007-09 as the Pontiac G8. Over 30k GTOs were exported, and the G8 was planned as a 30k/year vehicle until Pontiac was unceremoniously shut down. And though neither was a breakout hit in the US, and though there’s little evidence either actually made much money for GM, both outsold their Australian-market equivalents.
Though the bailout of GM spelled the end of Pontiac and the G8, there were far greater headwinds facing Australian Commodore exports to the US than mere branding issues. As the graph above makes perfectly clear, the major difference between the G8-era exports and the post-bailout exports of Caprice PPV and SS variants of the Commodore has to do with currency. Currency issues hurt earlier Holden exports, but the dramatic drop in the US dollar relative to the Australian dollar since the financial crisis has doomed any hope that Holdens might make money in the US. Ironically that fall in the value of the US dollar has helped GM –and the US auto industry more broadly– recover rapidly. It’s simply done so at the expense of the traditional outposts of the US auto industry: Australia and Canada.
As a matter of common sense, two failed vehicle programs during periods of more favorable currency conditions should have proven to GM’s executives that the current crop of Commodore exports was doomed to fail. Indeed, GM’s own goals for the model are so limited that one can’t help but wonder why they even bother: initial reports indicated a planned volume of 2,000 annual units (and sales at only half of GM’s Chevy dealers) but early shipments seem to be short even of that modest number. With worse currency conditions, lower planned volume and more competition in the segment than G8 ever faced, GM’s decision to export Commodores for the US retail market could only make sense in traditional car business terms if Chevy were marketing the car heavily as a brand halo. But, as TTAC points out, that’s not happening. More importantly, with a new Corvette just hitting dealerships, the Chevrolet brand has absolutely zero need for a money-losing halo.
So then why create the SS at all?
It appears the answer dates back to 2008-09, when Mark Reuss, GM’s current head of North American operations, was running Holden. According to GoAuto,
Mr Reuss championed the development of a police version of Holden’s long-wheelbase Statesman, which was officially revealed as the Chevrolet Caprice Police Patrol Vehicle (PPV) in Denver in October, following the axing of GM’s historic Pontiac brand – and exports of Holden’s Commodore SS-based Pontiac G8 sports sedan – in April this year…
“The cop car was something I really wanted to have happen here (in the US) because it’s very stable volume and it can be (employing) almost a shift of people at Adelaide in South Australia,” [Reuss] said.
This focus on maintaining employment for Holden workers became the hallmark of Reuss’s tenure at Holden, as Automotive News [sub] reports:
To replace the lost G8 exports, he brought in production of the Chevrolet Caprice Police Patrol Vehicle, a car that will be built in Australia and exported to U.S. law enforcement agencies in 2011. It is based on the Holden Caprice, a stretch version of the Commodore.
He also dialed down production to fit shrinking demand — with a big compromise. Instead of slashing jobs, Reuss negotiated a work-share program in which the plant’s two shifts were reduced to one and the two crews shared the work, alternating on-and-off each week.
In fact, Reuss was a key player lobbying the government for industry incentives in the first place. In late 2008, Canberra came through with $5.6 billion in aid for local carmakers.
“It safeguarded the subsidiary’s future at a time when it really could have gone either way,” said Andrew McKellar, chief executive of the Federal Chamber of Automotive Industries, Australia’s auto manufacturers’ association. “He had a very successful, if brief, tenure here.”
With its market share in Australia eroding for years now, Holden has only one real opportunity to maintain the jobs needed to justify further government support: exports. After all, “safeguarding Holden’s future” was synonymous with driving exports, whether it made business sense to or not. Thus, shortly after the Australian government announced billions in aid to the auto industry in 2008, Reuss “championed” the LWB Commodore specifically because the “stable” demand for police cars could support “almost a shift” at Holden’s plant. Unfortunately for Reuss, Holden and Australia, sales of of the Caprice PPV turned out to be consistently low and with a new conservative government in office, Holden is under more pressure to export than ever.
Under pressure to double exports in order to receive the government support it says it needs to survive, it’s not surprising that a retail version of the Caprice PPV would be added to Holden’s export lineup. But once again, Reuss’s emphasis (now surveying the scene from Detroit) seems to be on achieving consistent demand rather than trying to push for real sales growth. As a result, Chevrolet SS are being built-to-order in hopes of avoiding mistakes which marred the G8 and GTO export programs.
“I was on the other side of this when the financial crisis happened and we had boats lined up with stock on the water, and we’re not doing that anymore,” Reuss said.
“We’re going to take orders from the United States, build the cars in South Australia and we’ll ship them over within a 90-day window; that’s the proper way to do it so that both Holden is not hurt and the States are not hurt with inventory.”
Reuss admitted the G8 and GTO programs were “poorly set up the first time” and believes, despite US customers being forced to wait, his team has established a plan that will benefit both sides of the Pacific.
“It’s all about building a consistent order bank for Adelaide so that we don’t put people on and then take them off again,” he said.
“I went through all of that before, and it was awful. And that’s because it just wasn’t the right business.
“People are going to wait 90 days for their car, simple as that.”
Even now that Reuss’s current job has nothing to do with Australia, it’s clear that his sense of obligation to Holden and its workers is at least as strong as his desire to see the SS become a hit in America. Indeed, Reuss made it clear when he left Holden that he will continue to champion the Aussie outfit in internal GM debates:
Will he feel conflicted by a sense of loyalty to his ‘home’ over the past 18 months or his long-standing loyalty to the corporation over which his father presided? One example of potential conflict arising is the American market’s migration to front-wheel drive for larger passenger cars. For the time being at least, Holden’s rear-wheel drive commitment in the Commodore seems safe, but would Reuss feel compelled to guide Holden in the direction of front-wheel drive, for instance? And would he feel pressured from above to be ‘impartial’ with the company he once headed?
“Hell no, I love this place, I love the company…” was his succinct response.
“We’re going to do what’s right. I would do what’s right… what’s right for here and what’s right for GM — there’s no conflict in that, at all.”
As cheerful as that perspective is, unfortunately it simply doesn’t hold up. And at the point that GM is exporting not one but two money-losing products to the US in order to maintain whatever Australian export volume it can, that conflict is as clear as day. Reuss has the power to bring his LWB Commodore babies to the US, but since the model’s cost center is in Australia, he can’t risk over-ordering and sticking Holden with the cost. Moreover, because Commodore isn’t global, his US operations have no incentive to spend money marketing it… especially when halo marketing money would be better spent on Corvette.
The benefits of a Commodore export program are completely limited to Australia, and even there it is doing nothing to get GM to the 30% export number it needs to keep government aid. But because the GM executive who has the final say on US product decisions was the internal champion of not just Holden and its workers but the LWB Commodore, GM will continue to half-heartedly sell Caprice PPVs and SS sedans at US dealers. As a result, GM is not only stuck with two money-losing vehicles with no real demand, it’s stuck in a market that can no longer support its presence.
Enthusiasm, it seems, carries its own costs in the auto business.
