Shutting down General Motors’ Oldsmobile division over the next few years will end production of cars that symbolised sophistication and affluence through most of the 20th century, but came to be seen as simply dowdy, the New York Times (NYT) says today (13/12/00).
But the newspaper notes that US blue-collar workers will be largely insulated from layoffs as a result of the decision to axe Oldsmobile.
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The same GM assembly plants in the United States that make Oldsmobiles build similar cars for other divisions, like Chevrolet and Buick, and will stay open. GM hired tens of thousands of factory workers a year in the 1960s and now has 6% to 8% of its factory workforce retiring each year. So instead of dismissing them, it can more easily transfer its blue-collar workers as factories close.
Still, the NYT says, GM confirmed the long-expected closing of a 900-employee engine factory in Lansing, Michigan, Oldsmobile’s home town.
The NYT says that GM will continue to sell its current Oldsmobile models but will not develop any new ones. It quoted Ronald Zarrella, president of North American operations at GM as saying that production of each of the current models will be halted once the price they can be sold for falls below the cost of assembling them. The money that otherwise would have gone to designing and promoting new Oldsmobile models will be spent on other vehicles instead, particularly Saturns, which will replace Oldsmobiles as the cars that GM relies on most to fight foreign brands in the United States.
However, the NYT says that Oldsmobile dealers criticized GM’s decision to shut down the division, arguing that executives of the 103-year-old division had erred in abandoning older buyers of large cars over the last five years in an unsuccessful attempt to woo younger, better-educated customers instead.
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By GlobalData“It’s a very sad day we’ve been an Oldsmobile dealer since 1932,” J. Chapman Morris Sr., whose family dealership in Fillmore, Calif., also sells Chevrolets, told the newspaper. “They left a market that’s still there.”
But the NYT says that Wall Street has been calling for years for Oldsmobile to be shut down. After selling more than a million cars a year in the late 1970s and again in the mid-1980s, the division has lost so many customers that its sales are projected at a mere 300,000 this year.
Despite the plunge, Oldsmobile executives, long powerful within the company, continued to use the division’s storied history and nearly universal name recognition within the United States to win billions of dollars from GM’s board to invest in sportier models like the Intrigue and Alero. Those models failed to reverse the slide.
According to the NYT’s research, Oldsmobile was founded by Ransom E. Olds in 1897, six years before the creation of the Ford Motor Company. It produced four cars in its first year. In 1901, the Oldsmobile Curved Dash quickly became the nation’s best-selling car. Eclipsed by Ford’s success with the introduction of the Model N in 1906 and the Model T in 1908, Oldsmobile was sold at the end of 1908 to the new General Motors, which had been set up a couple of months earlier and had previously owned only Buick.
In the “ladder” of G.M. divisions, Oldsmobile was a cut above Chevrolet and a step below Buick. Oldsmobile built a reputation for performance, with innovations like automatic transmissions, and for understated elegance, with a style that contrasted with the flashier image of Cadillac.
The NYT says that GM executives became alarmed in the early 1990’s that they were losing market share among baby boomers to Toyota, Honda and other foreign brands and designated Oldsmobile as the company’s “import fighter” division. Big cars that appealed to older drivers, like the Oldsmobile 98, were replaced by smaller, more nimble models like the Aurora, Alero and Intrigue. But while older buyers fled Oldsmobiles for rival large cars like the Mercury Grand Marquis, younger buyers did not step forward to replace them. John P. Wolkonowicz, a partner at the Bulin Group, an automotive consulting firm in Northville, Mich., told the NYT that his company’s research found that Oldsmobile sold no more cars last year to baby boomers those Americans born from 1946 to 1963 and younger buyers than it did in 1991. Simultaneously, it lost much of its market among older Americans.
Mr. Zarrella defended G.M.’s overall brand management strategy, while acknowledging that the company’s Oldsmobile division had not survived the effort to transform it. “We tried to do a very difficult thing, which is to walk away from a customer base,” he told the NYT. The result, he said, was “lots of positive demographics the problem was, there weren’t enough of them.”
The NYT says that Oldsmobile also suffered from the relative success of two other G.M. divisions: Pontiac, which has captured the performance image that Oldsmobile once held, and Buick, which meets the needs of a big slice of the large-car market with vehicles like the LeSabre, the nation’s best- selling full-size car.
Until now, G.M. had been leery of shutting down Oldsmobile partly for fear of lawsuits from dealers, who could argue that the company was breaking its franchise agreements with them by continuing to sell many models but only under other brand names.
Harold Wells, the chairman of the National Automobile Dealers Association, and an Oldsmobile dealer since 1956, told the NYT that G.M. should provide assistance to the dealers.
“GM needs to move quickly to take into account the millions of dollars that dealers have invested in facilities, equipment, personnel and training,” he said. “They deserve nothing less than fair compensation.”
Mr. Wagoner said that G.M. would try to assist dealers, while making sure that parts and service remained available for current owners of Oldsmobiles. Only 63 of the 2,801 Oldsmobile dealers do not have franchises of other brands.
