In the age of hip, it's hard to be an old fogey. But that's the image the once legendary Oldsmobile has tried to shed for almost 40 years. It hasn't been easy. In the late 1960s, General Motors Corp., which owns the Oldsmobile division, launched an Orwellian ad campaign boldly re-branding their Oldsmobiles as "Youngmobiles." Twenty years later came a new pitch to attract younger, more affluent customers - "It's Not Your Father's Car." Still, no amount of fancy advertising or catchy taglines could shake the consumers' sense that Oldsmobiles were little more than Barcoloungers on wheels - a retail brand beyond redemption.
Last week, GM finally came to the same conclusion, pulling the plug on the granddaddy of the American automotive industry founded in 1897 by Ransom E. Olds. After spending an estimated $4 billion over the past five years to re-engineer and market Oldsmobile's newest lines - among them, the Alero, Intrigue and Aurora - GM announced the Olds division would be phased out, mostly by 2004. Chief executive Rick Wagoner said the company had done everything it could to salvage the money-losing division. "I've got a clear conscience that we gave it a good effort," said Wagoner. "There was no workable solution."
While hugely symbolic, the death of Oldsmobile is just part of a vast GM restructuring plan to increase the profitability of the world's largest automaker. Over the next couple of years, the company will slash about 14,000 jobs worldwide, shut plants and reduce production. The downsizing comes at a time when auto sales in North America and Europe have begun to fizzle following two years of strong sizzle.
With formerly high-spending consumers turning cautious, too many cars are sitting on too many dealers' lots, driving prices down and narrowing already razor-thin profit margins. GM is not the only automotive giant in the soup. Recently, two other automakers - Ford Motor Co. and DaimlerChrysler - warned shareholders of rising inventories and shrinking profits. And last week, U.S. Commerce Department figures showed that November sales of new cars and trucks dropped a whopping 2.2 per cent compared with the same month last year. For economic analysts, it was a sure sign the American economy is softening. Said Sherry Cooper, chief economist for BMO Nesbitt Burns: "These retail sales figures are another loud and clear signal that the U.S. economy is gearing down in a hurry."
A similar downshifting will take place at General Motors of Canada Ltd. assembly lines in Ontario and Quebec. Canada's largest automaker employs 22,000 people and turned out 915,000 vehicles last year - a true bumper crop aimed mostly at the American market. But those robust days are over. To reduce inventories, GM plans to slash 16 per cent of its new car and truck production for the next three months. This will mean temporary shutdowns at plants in Sainte-Thérèse, Que., Oshawa, Ont., and St. Catharines, Ont. About 330 white-collar employees will lose their jobs, as will about 150 plant workers at Sainte-Thérèse. Starting in January, GM will institute a variety of belt-tightening measures - cancelling overtime, slowing assembly lines and temporary layoffs - affecting 4,000 workers. Canadian Auto Workers president Buzz Hargrove believes GM should have seen the problems coming sooner and dealt with them in a less draconian way. He says the company could have lowered production simply by reducing overtime. "Had the companies started this earlier we wouldn't have had this major inventory problem," said Hargrove. "Nobody wants to be the first to cut production."
How long the measures will stay in place - whether it's a short-term interruption or a long-term correction - depends on the market. "It's all driven by demand," said GM spokeswoman Faye Roberts. For devotees of the Oldsmobile, however, it's the end of the road.
Maclean's December 25, 2000