“A car for every purse and purpose” Alfred P Sloan

GM is aggressively trying to distance their Cadillac brand from the rest of General Motors.
Bloomberg reported today that “Cadillac is erasing the GM name from its marketing and dealerships, changing e-mail addresses to @cadillac.com from @gm.com and exiting companywide promotions such as the Red Tag Event, said Nick Twork, a spokesman. The separation strategy was “absolutely” driven by GM’s restructuring, he said.”

“Cadillac, which has really turned itself around with new levels of quality and exemplary products, doesn’t want to be associated with something that will drag it down,” said John Grace, president of marketing consultant BrandTaxi LLC in Stamford, Connecticut. “With GM’s bankruptcy comes lower credibility in the ability to build quality products.”

John Grace correctly stated that Cadillac doesn’t want to be associated with something that will “drag it down”. However, the opposite is also true. Apparently, GM doesn’t want to be associated with something that will bring it up. I would have NO problem with this strategy, if the American tax payer was only on the hook for Cadillac.

In the short term, this appears to be a good decision, but I fear, in the long run, it will drastically impair GM’s overall recovery. As a GM stock holder (taxpayer), I am concerned about this decision. If GM wants to sell Cadillac and repay some of our (taxpayer) money back to us, that is one thing, but distancing the only part of GM that is doing well from GM doesn’t sound like the best thing for GM stockholders. In other words, American taxpayers didn’t bail out Cadillac, we bailed out GM.

The Bloomberg article quotes several dealers whose business suffered because of their relationship to GM during the bankruptcy process. That is unfortunate, especially since our MAIN concern at UsedCarVoice is ALWAYS the dealer. However, it is the same argument Toyota dealers can now make, Chrysler dealers can make, and Ford dealers could have made during the Firestone recall.

My question for GM’s senior management is this, what happens the next time gas hits $4.50?
Every time gas gets that high, every manufacturer moves their advertising to promote the products with superior gas mileage. In GMs case, this would include models in the Chevrolet line. Will Cadillac dealers still want as much distance from Chevy as possible when the next gas crunch comes? I recall several gas crunches being extremely bad for Cadillac sales.

What if other companies, segmented their products and divisions in the same manner? Why isn’t the I Phone a separate division from the rest of Apple? Why hasn’t McDonalds broken off their new coffee line into stand alone stores? Why isn’t Lipitor a separate company from Pfizer? The reason is this, great products and brands HELP the overall corporation. Granted, there are situations where separating the brands is a good idea, but I don’t believe it is appropriate in this case.

General Motors seems to think that if they sever ties with Cadillac, the American consumer who has followed the General Motors Company for over a Century will suddenly forget that Cadillac is part of GM. Apparently, the American consumer, tax payer, and thus GM stock holder will also forget that GM had to go into bankruptcy. We will simply forget the news stories that ran day after day for over 6 months. We will forget the famous day when all of the domestic CEO’s were summoned to Congress and flew to D.C. in their private jets. Cadillac and GM have been intertwined for 101 years. Changing an email address isn’t going to change that perception in any educated consumer’s mind.

Bloomberg reported, “Cadillac is critical to GM’s turnaround,” said Jeff Schuster, a J.D. Power analyst in Troy, Michigan. “Certainly from a profitability standpoint, it’s important. But if you can raise the image of Cadillac, that will also buttress the GM brand.” I agree with Jeff. But, this effect will be diminished the more GM tries to separate from Cadillac.

For the entire Bloomberg article click here.