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Last Updated: Wednesday, 23 March, 2005, 08:48 GMT
General Motors' desperate challenge

By Stephen Evans
BBC North America business correspondent

The trouble with American cars is that Americans don't seem to like them like they used to.

Harley-Davidson riders
Harley-Davidson has overtaken GM

Or, to be slightly less provocative, the trouble for the biggest American car-maker is that Americans don't like the American look any more.

Where the big Detroit auto-makers have clung to the idea that ostentatious power and size, ideally at a low price, are what sells cars to Americans, the competition's realised that style is ultra important in a world where cars are fashion items.

Tastes have changed with incomes and technology.

A quarter of a century ago, 80% of new cars were bought because the old one had died. Fifteen years ago, that figure had fallen to 60%.

Marketing companies reckon that today less than one in five cars are bought out of necessity.

Most people make their choice by what they want the car to say. Distinctiveness is everything.

Strong brands

It's a lesson the biggest Detroit auto-maker seems to have been particularly slow to learn.

New Chevrolet cars stand on display in front of a dealership March 16, 2005 in Chicago
Sales of GM models have fallen sharply

GM has the strong brands in Pontiac and Buick, but not models that have won much acclaim.

Sales of General Motors models in North America have been slow so the company's cut its production by 10%.

Dealers now quote GM bonds as if they were already rated as junk amidst expectations that the car maker will lose its investment-grade status.

GM's stock price has fallen to below $30, its lowest level in a decade, which means that on paper the company is now worth less than the motorcycle maker Harley-Davidson.

Three years ago, the auto giant's the newly installed vice chairman, Bob Lutz, spoke of some of the company's designs as "a whole family of angry kitchen appliances, demented toasters, furious bread machines and vengeful trash compactors".

In other words, they were dull, boring, undistinguished, functional, un-cool and any other synonym you can think of for "lacking in style".

Distinct cars

Contrast GM with Daimler-Chrysler where the German-American marriage now seems to be producing a synergy - German focus and discipline with American "let's-do-it" attitude - what chief executive Dieter Zetsche calls "disciplined pizzazz".

A Pontiac G6 is shown outside the General Motors Orion Assembly plant in Orion Township, Michigan
The Pontiac brand is strong but its models are not distinctive

The approach has led to the American half, Chrysler, gaining market share while Ford and General Motors lose it.

Pizzazz is an important word the American car-makers are re-learning.

It's something both the strongly retro Chrysler PT Cruiser and the Ford Thunderbird have.

It's something BMW's Mini and VW's new Beetle certainly have, but they have both come from Europe.

What they all have is style that marks them out from the rest of the rental car park.

Plan B

GM's chief executive, Rick Wagoner, recognises that there is a problem: "Clearly we have significant challenges in North America", he says.

"North America is our biggest business, and the key driver of automotive earnings and cash flow, so it's important that we get this business right".

Yes, but how?

New models don't appear overnight. Design is a complicated, mysterious process. A perfect storm is also on the way: high oil prices plus a less than sizzling economy; its European operations are not making money; interest rates are rising; Toyota and Nissan are on a roll.

Which all begs a question for GM: What's Plan B?

Can GM and the rest of America's car industry recover, or is Motown doomed? Please share your views.

Below is a selection of readers' letters which reflect the views we have received. This debate is now closed.

GM can and will recover. What they need to do though is to start designing cars people want to be seen in - and then don't produce huge numbers of them for a couple of years.

People like cars that are aspirational so if you start the production run low and then build it up you produce an air of unavailability around the car.

When BMW introduce new models they start with the expensive top-end and then produce the entry level. GM does it the other way around and look what is happening to them!
James Snowsill, Woodford, UK

GM will probably lose it's position as the largest car maker. Pizzazz it has not - just look at it's cars in Europe: Vauxhall/Opel pizzazzless. Perhaps they ought to have bought Fiat after all?
Richard, Brussels, Belgium

GM (and Ford) are very dependent on the profitability of trucks and SUVs in North America and their sales must be at risk as oil prices are set to stay high for the foreseeable future.

American car companies have big pension fund holes which Toyota doesn't. GM seems to be run by accountants who are unlikely to see a creative route out of their problems. As the late John DeLorean said, "there aren't enough engineers in charge at GM".

The Pontiac brand is still influenced by his decision, in the mid-sixties, to invent the muscle car with the launch of the Pontiac GTO. Not much has happened since!
Nick Doughty, Nottingham, England

US cars used be connected with success and wealth in the 1950s and 60s. New money would buy a Cadillac, old money would buy a Rolls Royce. Now they are a joke, ugly cars designed in a cynical fashion for a market that has become a lot more sophisticated.
James Foster,

America has fallen behind in many areas of automotive design because they have not faced up to the damage they have caused to the environment.

They needed to dedicate research dollars to developing economical, low environmental impact transport, not stupid 4X4 dinosaurs.

As for style I don't believe the US has moved on from the Ford Edsell and AMC Gremlin - anyone ever driven the ghastly Chrysler PT and Neon?
Rick Hough, Knutsford, Cheshire, UK

GM isn't doomed so long as their quest for European style doesn't lead them to draw from their European division Vauxhall.
K, Huntingdon

GM and its other brethren have not stepped up to the challenge. They have been given more than enough time to come up with a solution. In an industry that is so obviously oversupplied, only efficiency and innovation are the viable solutions to survival. However, sadly these seem to be sorely lacking in GM in every way and the natural conclusion is that some companies will inevitably lose out in such a hypercompetitive sector.
Ben, UK

Interesting that you use the California designed VW Beetle as an example of a European car.
Nick Wallis, Lancashire, UK

For years and years Europe made jokes about how rubbish American cars where and Americans made jokes about how small European cars where. Europe now makes bigger cars, unfortunately American still makes rubbish cars.
Chris, London

I don't believe that they are doomed. Even the stylish car makers have models that don't sell anymore.

Who wants a saloon car when you can have a 4x4, MPV, convertible, coupe-cabriolet or different looking cars like the Beetle and Mini?

They could design models that are more attractive and have better image and quality. They'll suffer until they fix it, and they will.
John, Livingston, UK

I always buy US made cars. US made cars have the best services and warranties in the world.

The Asian and European made cars are only fancy but not strong; there is better quality from US made cars.

I love the Chrysler and GM vehicles. GM is just doing fine!
Andy Baker, Edmonton, Alberta, Canada

From what I read GM has a market capitalization of approx $18bn and debts of $300bn and a rapidly dwindling cashflow position.

Surely it will find it difficult to survive without resulting to Chapter 11 bankruptcy protection.

This could send shock waves through the US markets and ruin any hopes of an economic revival, thereby throwing the markets into a tail spin and bring about a new bear market that could last years.
David Smith, Tauranga, New Zealand

Given GM's intense interest in the China market, especially in alternative powered vehicles, it might do well to focus on China and scale down its offerings in the US market where it seems to be languishing.

It is a shame that the US makers have lost touch with their home markets, save Chrysler, but it is totally up to them to renew themselves now, and decide if they want US sales or not.

I'm awaiting the arrival of possibly innovative and inexpensive vehicles from China and alternative cars from the European manufacturers, since I am not interested in American SUVs or passenger cars.
John, Raleigh North Carolina USA

Look at any GM on the road over here, they're incredibly ugly. Nissan is rapidly growing in popularity. For those with cash, you're seeing a lot more VWs, Saabs and Volvos over here. Having a Mini or a Beetle is a major status symbol. Even Ford saw what was going on, and started improving their cars (though I'll exclude their new '500) a few years back.
Sean Donovan, Hoboken, NJ, United States

Not to be un-patriotic, but I know what you mean.

Nothing GM can do seems to be able to keep up with the quality of the European engineering.

It doesn't matter how much plastic you put on a car to try and make it look nice or how much horsepower you put under the hood; if it doesn't handle and have a respectable amount of comfort, the view (ie not the lead dog) will not change for GM.
Bruce Avera, Fernandina Beach, Fl USA

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