General Motors’ recent decision to retire the Oldsmobile brand wasn’t a surprise.
The automaker had been pondering what to do with Oldsmobile since at least 1992, when the company’s board reviewed a plan to drop the Olds name from the GM lineup. GM executives reconsidered the decision several times. And in December, after investing $3.5 billion on new Oldsmobile products, GM announced plans to phase out the 103-year-old brand, setting it on the road toward the garage of history, where names such as Studebaker, Nash, Hudson and Packard are parked.
Ron Zarrella, president of GM’s North American Operations, said the decision to drop Olds was made in the interest of the company’s other nameplates, which appear to have more staying power.
“We just couldn’t afford to invest in Oldsmobile without inhibiting our ability to strengthen our other brands,” Zarrella said recently.
Oldsmobile’s sales fell 23 percent last year despite the heavy use of rebates and other incentives. By the time GM pulled the plug, Olds, one of the top-selling nameplates in the 1970s and early 1980s, was selling fewer cars than Mitsubishi and Hyundai, according to data compiled by Autodata of Woodcliff Lake, N.J.
Olds isn’t alone, either. DaimlerChrysler’s Plymouth brand died quietly Jan. 1. DaimlerChrysler had pulled the plug on Plymouth the year before, when James Holden–then in charge of the Chrysler Groups sales and marketing–said the German-American automaker could no longer justify the promotional effort required to sell Plymouths. The brand dated to the late 1920s and the era of Walter P. Chrysler.
Jim Hall, an analyst with AutoPacific, says older brands such as Oldsmobile and Plymouth have had a hard time connecting with young consumers. “By the end, 22 percent of Oldsmobile buyers were younger than 35. But it would have taken another five years of $100 million losses to complete the process and GM had to ask whether it was worth it, particularly since they would have had to invest in new products at the same time.”
Hall says GM has committed to spending substantial sums on new products for Cadillac and Buick. Also, Ford has approved new products. The key for all three will be whether the new products win over Baby Boomers–still considered a prime market despite the automakers’ youth movement.
Such failure to connect with younger buyers that brought about Oldsmobile’s retirement also raises the question of what might happen to other old-line brands that have not won over younger consumers. Brands such as Ford Motor Co.’s Lincoln and Mercury and GM’s Buick and Cadillac.
Ford halted Mercury sales in Canada last year, prompting speculation that it could be the next to go, particularly because sales fell 17.3 percent last year and it was outsold by Volkswagen, Hyundai and Mitsubishi, according to Autodata.
Mark Hutchins, president of the Lincoln Mercury division, says Mercury is being re-energized with new products such as the 2002 Mountaineer. “The Mercury brand is very profitable for us,” Hutchins said in a recent interview.
Mercury sold 46,500 Mountaineers last year, and Ford reportedly is working on variations of vehicles such as the Mercury Cougar and Villager to go along with the Mountaineer.
The average age of the Mercury buyers in the mid-50s but should drop with the debut of the new Mountaineer scheduled for the end of the month.
Lincoln, which is part of Ford’s Premier Automotive Group with Volvo, Jaguar, Land Rover and Aston-Martin, remains a strong seller, Hutchins noted, thanks to the Lincoln Navigator, of which Ford sold 37,900 last year. Hutchins also expects the Lincoln Blackwood to attract new buyers when it debuts in late spring. Lincoln sales were up 13 percent for 2000, though they lagged in the fourth quarter along with the rest of the industry.
GM also insists that Buick is not facing any kind of trouble.
GM is revamping its product line with vehicles such as the Rendezvous car/sport-utility hybrid, which is aimed at younger buyers, Zarrella noted. “Buick is very good business for us,” he said, particularly with GM’s traditional, older buyers.
In addition, a tie-in with golfer Tiger Woods has opened the door to a new generation of youthful buyers, says Larry Gustin, a Buick spokesman. “It’s amazing the following he has,” said Gustin. Gustin said Woods has had no effect yet on sales, but Buick is expecting to see it as the product line changes.
Cadillac also is being retooled with younger buyers in mind, starting with the revamped Escalade sport-utility vehicle, Zarrella said. Cadillac will also get more products.
The average age of Cadillac buyers is now 60, but GM sees that falling with the new Escalade, the new CLR luxury roadster due out in 2002 and a new entry-level replacement for the Catera.
Other brands are also keenly aware of the need to connect with younger buyers. Jim Press, chief operating officer for Toyota Motor Sales, said that as the average age of Toyota buyers in the U.S. has risen, the Japanese automaker has taken a hard look at ways to reach out to younger buyers.
The average age of the Toyota buyer is 46, and Toyota executives are looking to reduce that with new products such as the Matrix, RAV4 and Highlander.
“You have to replant the seeds every so often. So you can harvest them in the future,” he said.
