Jonathan Browning can actually look back on 2006 and allow himself a smile. For the first time since he joined General Motors in 2001, he has made some money for the company.
“It is very encouraging to see the change. But we are in continuous restructuring. There is no room for complacency.”
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To be absolutely precise, the financial figures for the year are not available just yet, but given that there was profit at the end of the third quarter, unit sales for the final quarter have been good and there has been no hint of any last minute disasters. There should have been a profit for the year.
That would be the first in six years for General Motors Europe. Browning has been a bit short of financial success stories for the recent part of his career. His previous berth was with Ford as the chief executive of Jaguar where profit was equally elusive. Browning switched to GM after he disagreed with the hierarchy about the integration of the various brands under the Premier Auto Group and after failing to win support for the production of the F-type.
He had done two years running Ford of Europe marketing before being put in sole charge of Jaguar for two and a half years.
“I fought hard for the F-type,” he says. This interview for just-auto was conducted over the Atlantic en-route to the Detroit auto show. It was very encouraging to hear later from Browning that he was entranced by the C-XF concept shown by Jaguar. “That is a premium brand that can still be developed.”
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By GlobalDataNow still only 47, Browning is six years in to the GM job. His role is vice chairman of sales, marketing and aftersales for GM Europe. He is one of three VPs on the GME board under Carl-Peter Forster. Two of them are spending the money on engineering and manufacturing. Browning is out there in the markets trying to find where the treasure is buried.
In addition, he has to nurture the fast-growing markets. GM has identified eleven of them worldwide and three are in Europe – Russia, Turkey and Poland. Russia has gone bonkers in the last year – a great payback on the plans carefully assembled years ago. GM has now claimed market leadership, among the Western brands anyway, in Russia and will double sales next year.
Oh, and if all of that is not enough to keep one man busy, he is also chairman of Vauxhall which means getting the best out of the investment in Ellesmere Port. Vauxhall may not sound so important in the great scheme of things for GM but thanks to Vauxhall the UK is its fourth market worldwide.
Ask him if Vauxhall is now making money and the answer is evasive. The only clue is that within a portfolio of brands – Saab, Vauxhall-Opel and Chevrolet (which is profitable) – Vauxhall and Opel are now “in the middle ground in terms of their profit potential.” GM’s fifth brand of Cadillac is still tiny. Only 3,500 Cadillacs and Corvettes go into the whole of Europe. Hummer is about to join them – sharing showrooms.
Two million cars were sold by GM Europe last year for the first time. In the first nine months of the year, Browning’s sales teams had sold enough of the right stuff to generate a net income of US$196m. That was a year on year swing of US$350m. That’s still a pretty tacky return for the world’s largest carmaker in its second largest market. And “net income” is not actually clear profit. Not all the fixed costs are in there. But it ends losses that have lasted for the whole of this millennium. As a return on two million cars sold of less than US$100 per car. There is a long, long way to go before GM shareholders can call a truce.
“The most critical piece of what I do is building our strategy to leverage the portfolio of brands. We used to go to market brand by brand. What we do now is to define customer segments and then keep the brand separation. We spend the time looking at each brand footprint in Europe. We have stopped looking at the product segmentation and started segmenting customers and then targeting them with a brand.
Eleven turns out to be an important number for GM: eleven growth markets worldwide; eleven customer segments in Europe. The research relies on SIGMA social milieus. SIGMA Milieus reflect the psychological predisposition of customers and align them to the acceptance or rejection of products and makes. (This link provides the idiot guide for those us new to the science: http://www.sigma-online.com/en/SIGMA_Milieus/.)
Thus in Browning’s new world, Chevrolet becomes the “foundation brand” which “stops Vauxhall and Opel descending into value brand territory.” It looks like the plan is starting to work already if the reaction to the Astra models is a measure of the way the product is rising to meet the new role.
Browning revealed that GME relies heavily on “non-owner” research and measures propensity to buy. Vauxhall was down at 17% at the low point compared with 30% plus when the UK market was split three ways between Ford, Vauxhall and BL. Now it is back to 27%. In Germany, Opel is two or three years behind Vauxhall in its rehabilitation track.
Was Vauxhall never going to surrender and let Opel take over? “The only case you could come up with for combining the brands would be if one or other was on a downward trajectory. But neither is. And then look at the cost of change; it is huge. And once you have changed all the furniture you still have to build confidence in the part of the brand that is operating in a new market.”
“Saab has a dream customer group and is our most progressive brand. The group is very loyal, highly educated and with high disposable income and in the US a Saab owner would never consider a domestic brand.”
But has it not long been unprofitable? “True. But we have seen a record level of interest in Saab and we keep driving it forward. Once you are delivering against plan there can be further investment.”
Saab is still selling only 135,000 units worldwide but it has been down a blind alley with much scorn poured on the so-called Saabrolet design collaboration between Saab, Subaru and Chevrolet. “There is some scope for growth. We can see a business model for 150,000 to 200,000 annually and Saab will now leverage global GM technology. It will no longer be an island and instead of fighting we have a plan that the company and the group share.”
It is clearly going to be an interesting fight. The existing premium sector makers are not going to give ground readily and there are two others determined to dig themselves out of the grimy – Alfa and Jaguar.
The financial turnaround for GM only started when 12,000 people were made redundant in 2004 alongside a commitment to save US$500m of structural cost every year. In the event both revenue and cost have contributed almost exactly equally.
“In two years we have reduced the short cycle business (rental fleet) by 20%. In absolute terms we have driven variable profit by 50% by not chasing rental and by dropping 20% of volume.
“That is how we worked the turnaround and that is what is still not yet fully understood outside the company.”
Rob Golding
See also: Q&A with Jonathan Browning, GM Europe (July 2006)
