**For Next Time: Blue Ocean StrategyRead:Kim and Maubornge, Blue
Ocean Strategy(Either the paper or the book. Youll get more out of
the book)At the end of the session, youll receive your first HW
assignment (and most important)
*Source:
http://online.wsj.com/article/SB124709292819514621.html, Accessed
10/5/09JULY 9, 2009 GM's Fate Will Ride on the Success of Chevy
Article Comments (36) more in Auto Industry News Email Printer
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KEVIN HELLIKER and JOHN D. STOLL (See Corrections &
Amplifications item below.)
Late this week, General Motors Corp. and the Obama
administration are expected to launch the new GM as a house of four
brands. But forget Buick, Cadillac and GMC. The fate of GM will
mainly ride on Chevrolet.
"In the next year, Chevy could get upward of 70%" of total GM
sales, says Ed Peper, the Chevy chief at GM.
Is Chevy fit to carry that load? The built-for-duty image of the
division's Silverado pickups may suggest that Chevy can carry
anything, but the trucks illustrate a problem.
To lift the fortunes of a parent company that is closing or
casting off three car brands -- Pontiac, Saturn and Saab --
Chevrolet will probably need to recapture the glory days of its
sedans. But two-thirds of its sales and most of its profit now come
from trucks, and its most celebrated cars are sports models, the
Corvette and the newly launched Camaro.
View Full Image
Bloomberg News Chevrolet could get upward of 70% of GM sales,
says Chevy head Ed Peper.Among Chevy cars, says David Champion,
senior director of Consumer Reports' auto test division, the
subcompact Aveo "is dismal," as is the compact Cobalt. He adds, the
Impala is pretty long in the tooth, and the Malibu is the only
model in the lineup "that is legitimately able to help them get
back on their feet."
But that isn't how many Chevy dealers see it. In their view, the
brand boasts strengths that have been overlooked amid the eight
brands that have long vied for parent-company resources and
attention.
For several years, for instance, Chevy has been the first- or
second-ranking brand in the U.S., selling more vehicles than every
other brand with the occasional exception of Toyota. Inside GM, it
already accounts for about 60% of sales.
Surveys of brand strength also consistently rank Chevy among the
leaders world-wide. "Chevrolet is as well known as McDonald's,"
says Ron Pinelli, president of Autodata Corp., which tracks vehicle
sales in the U.S.
In contrast, the three other GM brands expected to remain after
a judge approves the company's emergence from Chapter 11 serve
niches, with Cadillac selling luxury vehicles, Buick premium
vehicles and GMC only trucks.
Chevy, meanwhile, sells everything from subcompact cars (the
$13,000 Aveo) to SUVs (the $40,000 Suburban) to sports cars (the
$105,000 Corvette ZR1). Of the 33 nameplates to be sold by the new
GM, half will be Chevrolets, up from 31% under the auto maker's
previous eight-brand portfolio.
In the new GM, Chevy is "going to get a lot more marketing
dollars," says Mr. Peper, who boasts that the Chevy brand is
already mentioned in 900 songs. Late next year, Chevy is also
positioned to take charge of GM's most anticipated new launch in
years, the electric-powered Volt.
For all of these reasons, Texas dealer Tom Durant has doubled
his portfolio of Chevy stores to four in recent months. "I believe
Chevy is going to be the best franchise to own, better than
Toyota," says Mr. Durant, owner of a dozen dealerships in the Fort
Worth area selling foreign and domestic vehicles.
Chevy's Mr. Peper, a 47-year-old former college athlete, says
the Chevy car comeback is well under way. Since the redesign of the
Malibu for the 2008 model year, the car has won market-share gains
against the Toyota Camry as well as rave reviews.
Moreover, Mr. Peper says, the Malibu shows that GM can raise its
price on cars. By strictly limiting dealer incentives and sales to
rental fleets, he says that Chevrolet successfully raised the
average transaction price of the Malibu to $23,000 from $17,000
before the redesign.
"With the Malibu, we attracted a younger, more affluent and
better educated driver to the Chevy brand," he says.
In recent weeks, Chevy has also launched the Camaro to laudatory
reviews and sales so brisk that many buyers have had to wait for
delivery.
"With the Camaro, Chevy is back in the car business," says Mr.
Durant, the Texas dealer.
Yet as a two-door sports car, the Camaro is a niche vehicle, and
the Malibu has yet to persuade consumers that Chevy is producing
sedans reminiscent of the 1960s Impala rather than the mid-1970s
Vega.
Wisconsin Chevy dealer John Bergstrom fears that the Obama
administration, which has already vowed to attach tax incentives to
fuel-efficient cars, could weaken Chevy's truck sales.
"Whether Chevrolet is going to be the top franchise going
forward lies in whether the government is going to mandate us out
of the truck business," he says.
And Jeff Nixon illustrates the challenges that still face
Chevrolet. When the time comes, he will replace his 1999 Silverado
pickup with another Chevy.
"I love Chevy trucks," says Mr. Nixon, a telephone lineman in
Olathe, Kan.
But he and his wife will purchase another Acura as their next
car. "My wife almost thinks that there's a stigma attached to
American cars," he says.
Write to Kevin Helliker at [email protected] and John D.
Stoll at [email protected]
Corrections & Amplifications General Motors Corp. stopped
making the Chevrolet Vega in the 1970s. A previous version of this
story described the Vega as a 1980s car.
Printed in The Wall Street Journal, page B1
*Title: GM'S FUTURE. By: Flint, Jerry, Forbes, 00156914,
5/11/2009, Vol. 183, Issue 9Database: Business Source CompleteHTML
Full TextGM'S FUTURE Section: BACKSEAT DRIVER The problems are just
too great for this management--any management--to overcome. It will
be a small, struggling, has-been company. Don't wonder about
General Motors; its future is set. With or without a bankruptcy
proceeding, the company will struggle on. But there will be no
quick return to greatness or even a return to mediocrity.The
government will continue to support GM for the next three years and
eight months. The decisions will be made in the White House and
will be political. Five midwestern states will be decisive in the
next presidential election, and they might be hard to carry if the
party in power doesn't save some Rust Belt jobs. But after the next
election GM will be largely on its own.GM's vehicles are improving,
but that really doesn't make much difference. The product
improvement is too little and too late. GM's market share is
dropping every month with the bankruptcy talk: It went from 19% in
January to 18.4% in February and 18.1% in March. My guess is 13% by
December. GM may be outsold by Toyota and even Ford before the year
is over.The problems are just too great for this management--and,
to be fair, maybe any management--to overcome. There are many:
buyers' fears about the company's future; the lack of dealer
credit; the weakness of finance arm GMAC, which was severely
damaged by subprime mortgages; the bondholder debt; the rush of new
vehicles by richer foreign companies from Japan, Germany and Korea;
and the collapse of the overseas empire in Europe. Management
stumbles from crisis to crisis, bowing to whatever thought comes
from Washington, whether sensible or foolish.Some of Washington's
thoughts are downright silly. No such bankruptcy will ever be
"surgical," as reports have suggested. Delphi, GM's parts supplier,
has been mired in Chapter 11 for four years. GM's case will
probably go to the Supreme Court at least once.Then there is the
talk about splitting GM into a good company and a bad one. The
presumably viable parts--Chevy, Cadillac, GM China, the best
plants--would go to Good GM. The bad parts--the postretirement
obligations, the old plants, the brands like Saturn to be discarded
or sold off to dreamers--would go into Bad GM, which the courts
would play with forever.With politicians in the driver's seat this
could get really interesting. If "good" means profitable, then this
part of the company will be making gas-guzzlers like Suburbans,
Cadillac Escalades and full-size pickups. But in the Obama
Administration gas-guzzling is bad and low-margin small cars are
saintly. So Washington will find some way to wreck even the good
half of the company by ordering it to make more small cars and
fewer big ones.A few years from now the surviving parts of this
has-been will be down to a 10% share of the market, with lots of
its vehicles being bought by the government. That sounds
pessimistic given that, as of this morning, GM is the largest
vehicle seller in North America. My calculation is based on the
expectation that Chevrolet and Cadillac, which now get 12% of the
market, are all that will be left of the once great company.GM's
new management says it will abandon Saturn, Saab, Hummer and most
of Pontiac. There isn't much left of Buick (only 20,534 vehicles
sold in three months), and GMC will be squeezed by fuel standards
for its pickups. So it's hard to see the Buick-Pontiac-GMC dealer
group surviving.The government debt will never be repaid. The
bondholders will lose their investments--unless they are covered by
credit default swaps from AIG, and then our Treasury Department
will see they get 100 cents on the dollar. As for the UAW contact:
No matter what you hear about sacrifices, the union won't give back
anything real. Democratic Administrations just don't pick the
pockets of their union supporters.So why do I support aid to GM?
Maybe because I realize I could be wrong, and government money will
be enough to make GM competitive again. Maybe I've got a soft spot
for Detroit, where I grew up, and I realize that the Midwest
economy would be set back 15 years if GM shut down. Maybe it's just
that I think this company and its workers deserve a break more than
those banks do.Someday a new Moses might come out of the wilderness
and rebuild this company. He will gather a band around him like the
greats of that old GM: Alfred Sloan and Charles Kettering, Charles
Nash and Walter Chrysler (yes, they were GM men first), William
Knudsen and Ed Cole. But fighters like these aren't the leaders
that a government would choose. If GM is reborn, it won't be in my
lifetime.
**Note: The UAW has one contract among all the Bg 3. Hard for a
startup car company to match the benefits offered by Ford et
al.**Auto suppliers are branching out. As more foreign makes are
built here, theyve been able to offer them parts as well, lessening
the Big 3s influence. And general economic conditions are forcing
them to look at making other things.**In that case, Southwest
decided to compete against point-to-point car travel, which
airlines hadnt really though of as a competitor. Basically, SWA
thought of themselves as a travel company, not an airline.*Source:
http://online.wsj.com/article/SB10001424052748703628304574452951795911162.html?mod=googlenews_wsj
(Accessed 10/7/2009)Google and the Problem With 'Net Neutrality'
Broadband has been a rare bright spot in the economy. Why
discourage new investment?Article Comments (13) more in Opinion
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Text By BRET SWANSON On Sept. 25, AT&T accused Google of
violating the very "net neutrality" principles the world's dominant
search company has righteously sought for others.
Net neutrality conjures the benign notion of an open and fair
Web, where all applications and data packets are treated equally.
Net reality is much more complicated. Google says it doesn't have
to abide by rules meant for telecom companies. But with the
Internet obliterating such distinctions, this defense exposes net
neutrality's inherent flaws.
The controversy involves Google Voice, a new service that rings
all of a user's phone lines simultaneously and provides other
conference-calling and voice-mail features. Like myriad digital
applications, the service is possible because the Web and phone
lines have in many ways converged. Google can thus offer "free"
services over the world's vast, expensive broadband networks.
Google thinks net neutrality should regulate only traditional
phone and cable companies. Phone carriers have long been ordered to
connect all calls. And open Internet principles agreed to by all
sides in 2005 offer similar guidance for the Web: no blocking of
Web sites or applications.
But Google Voice does not connect all calls. It blocks access,
for example, to some rural areas and conferencing services that
would impose heavier interconnection fees on Google. AT&T thus
charged Google with cherry-picking. Why, AT&T asks, can Google
exploit expensive communications networks when it's profitable but
refuse neutral service to all customers when it's not?
This row unmasks something far more important than Google's
hypocrisy: the deep structural flaws of net neutrality itself. Last
week, Federal Communications Commission (FCC) Chairman Julius
Genachowski outlined a more expansive and legally binding regime.
He would not only codify existing nonblocking principles but would
also add a highly controversial "nondiscrimination" rule. This
regulation could expand bureaucratic oversight to every bit, switch
and business plan on the Internet.
Basic technologies, like packet prioritization (voice calls
first, spam second), could be banned. So could many business plans
based on robust and differentiated services. This regime could send
all routing algorithms and network services into courtrooms for the
next decade.
Despite the brutal economic downturn, Internet-sector growth has
been solid. From the Amazon Kindle and 85,000 iPhone "apps" to Hulu
video and broadband health care, Web innovation flourishes. Mr.
Genachowski heartily acknowledges these happy industry facts but
then pivots to assert the Web is at a "crossroads" and only the FCC
can choose the right path.
The events of the last half-decade prove otherwise. Since 2004,
bandwidth per capita in the U.S. grew to three megabits per second
from just 262 kilobits per second, and monthly Internet traffic
increased to two billion gigabytes from 170 million gigabytesboth
tenfold leaps.
No sector has boomed more than wireless. Yet Mr. Genachowski
wants to extend his new regulations to the most technically
complicated and bandwidth-constrained realmmobile networks and
devices.
In 2004, Wi-Fi was embryonic, the Motorola Razr was the hot
phone, the BlackBerry was a CEO's email device, and Apple's most
recognizable product was an orange-sicle laptop. But then the
industry turned upside-down in a flurry of dynamism. Both Motorola
and Palm plummeted in popularity and only now are attempting real
comebacks. BlackBerry and Apple vaulted to smart-phone supremacy
from out of nowhere, Nokia became the world's largest camera
company, and a new wireless reading device rekindled Amazon's
fortunes.
Wireless carriers invested $100 billion in just the past three
years, and the U.S. vaulted past Europe in fast 3G mobile networks.
Americans enjoy mobile voice prices 60% cheaper than foreign peers.
And the once closed mobile ecosystem is more open, modular and
dynamic than ever.
All this occurred without net neutrality regulation.
My research suggests that U.S. Internet traffic will continue to
rise 50% annually through 2015. Cisco estimates wireless data
traffic will rise 131% per year through 2013. Hundreds of billions
of dollars in fiber optics, data centers, and fourth-generation
mobile networks will be needed. But if network service providers
can't design their own networks, offer creative services, or make
fair business transactions with vendors, will they invest these
massive sums to meet (and drive) demand?
Some question the network companies' expensive and risky plans,
asking if the customers will come. But one thing's for sure: If you
don't build it, they can't come.
If net neutrality applies neutrally to all players in the Web
ecosystem, then it would regulate every component and entrepreneur
in a vast and unknowable future. If neutrality applies selectively
(oxymoron alert) to only one sliver of the network, then it is
merely a political tool of one set of companies to cripple its
competitors.
At a time of continued national economic peril, the last thing
we need is a new heavy hand weighing down our most promising
high-growth sector. Better to maintain the existing open-Web
principles and let the Internet evolve.
Mr. Swanson is president of the technology research and strategy
firm Entropy Economics LLC.
http://thehill.com/hillicon-valley/new-hires/62239-dorgan-staffer-heads-to-google#
(Accessed 10/8/09)Dorgan staffer heads to GoogleBy Kim Hart -
10/08/09 12:06 PM ET Frannie Wellings, telecom staffer to Sen.
Byron Dorgan (D-N.D.), is leaving Capitol Hill to join Google as
federal policy outreach manager, a newly created position.Wellings,
who worked at public interest group Free Press before joining
Dorgan's office, was the senator's lead staffer working on net
neutrality issues in the Senate Commerce Committee. It is unclear
whether she will register as a lobbyist, Roll Call reported this
morning. According to Roll Call, some Republicans are criticizing
the move, especially at a time when lobbying over the controversial
net neutrality regulations is heating up. Net neutrality supporters
said it isn't an issue because Google and Dorgan have long been on
the same page when it comes to the regulations, which would
prohibit Internet service providers from blocking customer access
to certain content and services.
