Buick and Tiger Divorce Exposes Legacy Cost Issue

Buick Skylark NameplateYou read it here first. Not that we had that much to do with it. On our November 1, 2008 story What’s Wrong With Buick, we suggested that it was time that General Motors get rid of Tiger Woods as spokesman. General Motors and Woods came to a decision to end the partnership just a few weeks later.

We like to think we had something to do with it, but there were larger forces at play, including those executive jets that flew to Congress when GM asked for a bailout. Has it really come to this? Yes it has; read Robert Farago’s hilarious post on eliminating trashcans at Warren Tech on the website TheTruthAboutCars.

Models are the real “Celebs” at Buick

You are reading something here that you aren’t reading ANYWHERE else. Let us tell you what the real “stars” are at Buick. The “Star” is the Buick brand itself. And not the Buick brand alone, but the ensemble of Park Avenue, LeSabre, Century and Skylark. These auto nameplates are the real stars at Buick. Here, a logo of a restored Skylark. People don’t care about Tiger. They care about the cars. They love the cars. And when Buick doesn’t give them the cars, people don’t buy them.

We gave a number of reasons to end the sponsorship, but we didn’t actually do the math on it earlier this month. As we see it, the yearly cost of Woods as a spokesman added $35 to the price of each car (we got this by dividing $7 million and Buick volume, which is now a paltry 200,000 units a year). Did Woods actually add that much value? Of course not. But here’s telling figure. If you are selling 800,000 cars a year, the cost per car goes way down, and Tiger might actually be a help. But the problem was, every year that Tiger was spokesman, sales volume went down. Of course that is true with CEO Fact Rick Wagoner, who has increased his power and salary at GM even as he as ruined one of America’s greatest companies.

A digression here: We are not blaming Tiger for the sales slide at GM. He was just doing what they asked, and who could blame him? But we do think he is symptomatic of the larger problem of this CEO-as-royalty culture. Because Tiger could have recast the image of Buick without this big deal contract, with a one-off promotion. The real reason GM kept Tiger on was that execs and Buick dealers liked hanging around with him. Well, we’d like to hang around with him too, but we learned in primary school that the worst thing you could accuse a rich kid of is buying his friends.

Legacy costs a straw man

GM now is on a legacy costs complaint binge. It has unfairly said that it is burdened with over $2,000 in legacy costs for each auto it sells, with extra pension costs, health care costs and the like. But this is so blame the union, and it is wrong. Why? Because if GM’s bloated fatcats were producing cars that people liked, it might actually have some sales volume, and those costs would be fewer. If you double the sales volume, those costs go way down. The reality is that GM has enormous advantages from being a legacy brand, like a strong dealer network and beloved brands like Buick.

This is the same issue as the elimination of Oldsmobile and the over-investment in crap like Hummer and Saturn. GM is about sales volume, and badge engineering a few platforms into a whole lineup of different looking cars. That is why the discussion now of selling Buick, or eliminating Pontiac, eliminating GMC or any number of other discussions misses the point. The point is that GM needs lots of volume to keep the machine going. It needs all the nameplates. And if you take away any more volume from GM, even the paltry number of Pontiacs sold each year, you make GM less viable.

Like the Tiger Woods sponsorship, the the discussion over the keeping of General Motors’s legacy brands involves so much crazy talk. Buick will obviously survive the mess at General Motors, as the brand is still selling in China. But there is no earthly reason any of the legacy brands of General Motors should disappear. Even still, writers from Conde Nast’s Portfolio and even Barron’s have suggested that GM’s nameplates should disappear. This is proof that the discussion of General Motors is WAY off the mark.

What should disappear is not Pontiac or Buick or GMC. What should disappear is the bloated executive salaries and the featherbedding. Until that disappears, GM will have no hope.

More Prescient Insight from BrandlandUSA

Read our other post on GM’s wacky leadership at Nameplates Like Hummer, and Saab. And read our discussion of the Future of the Oldsmobile Brand for some thoughts on why keeping these legacy brands is the only hope that GM has. We detailed that idea in July, in our prescient post GM Stock Drop Mirrors Olds Elimination.

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