Even award-winning car can't beat Olds doldrums
No division has suffered so badly from the malaise that has troubled General Motors Corporation as Oldsmobile. Once a showcase for new technology and styling, Olds has lost much of its energy and most of its spark in recent years. Sales have plunged nearly 35 percent in just four years, and buyers continue to shun the car that was supposed to mark the division's turnaround.
For Olds, there has been no greater disappointment than the launch of the Cutlass Supreme. The car is one of GM's new, aerodynamically styled midsize family sedans, collectively known as the GM10s. In all, the automaker has spent about $5 billion developing the GM10 line, which will eventually feature a range of 2- and 4-door models for four of the five General Motors passenger-car divisions.
Featuring perhaps the most advanced styling of any GM model, the Cutlass Supreme would seem to have a lot going for it. The car has been well received by the automotive and general press. It won the the 1988 industrial-design excellence award from the Industrial Designers' Society of America.
It seemed certain to be a hot seller for Oldsmobile, helping to lure in a generation of affluent young buyers who would have otherwise turned to imports or the aero-styled cars of the Ford Motor Company. But something went wrong. In all, the division will sell only about 90,000 Cutlass Supremes during the 1988 model year, barely two-thirds of initial forecasts.
``I guess we felt we could sell more than we have,'' admits David Lahti, Oldsmobile's sales and service manager.
As of the end of July, there was about a 140-day supply of unsold cars - a 60-day inventory is considered normal. And even with the recent introduction of a $1,000 incentive program, the figure has yet to drop below the 100-day mark.
As a result, Mr. Lahti admits that heavy incentives are likely to be needed throughout the 1990 model year.
Lahti notes that the Cutlass Supreme's conquest rate - the number of buyers trading in non-GM cars - is only about 25 percent.
``That's extremely low for a major new car line. You usually hope for 50 to 60 percent,'' says Michael Luckey, an auto analyst and owner of the Luckey Consulting Group in Cresskill, N.J.
The disappointing start-up of the Cutlass Supreme is perhaps the most serious setback for Oldsmobile this year, but it is not the only one. On the whole, the division has posted a steady decline from its sales peak of 1,098,685 passenger cars during the 1984 model year. Last year, the number dipped to 770,675, and Olds officials estimate 1988 sales will be a disappointing 700,000 units.
Why is Oldsmobile having so much trouble selling cars?
``I wish I had the answer,'' says Oldsmobile general manager Bill Lane. For one thing, he believes dealers were not able to convey their excitement about the new car to potential customers.
But industry analysts say Oldsmobile has had a host of problems, including some lingering questions about product quality and reliability.
In the early 1980s, the division outperformed the rest of General Motors because of its heavy reliance on fuel-efficient diesel engines. But diesels in general have fared poorly as oil prices have come down, and the Olds diesel in particular had some major technical defects that resulted in costly recalls and lawsuits. Meanwhile, there was more legal trouble when customers discovered that some Oldsmobiles were quietly being equipped with Chevrolet engines.
Then there is a problem of image.
``They're paying for their past successes,'' says David Cole, head of the Center for the Study of Automotive Transportation at the University of Michigan. ``They had a strong position in the market for many years.''
But that success bred complacency, Mr. Cole says.
A similar charge could be leveled against each of the other GM divisions, too. Yet, others have been better able to draw in new customers, or at least hold the ones they have by clearly defining or reshaping their image - Pontiac, for example, has made a name among young drivers by stressing the theme of driving performance and excitement.
``They've lost their way,'' auto analyst Maryann Keller says of the Olds division. Ms. Keller, of Furman Selz Mager Diets & Birney Inc., a New York brokerage, says Oldsmobile hasn't been able to excite young buyers with its new products, but also hasn't come up with the right products for its existing base of older drivers.
Lahti concedes that the company made a mistake by first introducing a two-door version of the Cutlass Supreme, a decision that was made in the early 1980s when coupes were strong sellers. Today, the market has reversed, and ``four-doors should eventually account for 65 percent of the demand,'' he says. The four-door, however, won't go on sale until 1990.
Still, Olds officials are cautiously optimistic about beginning a turnaround next year. Mr. Lane predicts that sales will come in between 735,000 and 750,000 during the '89 model year. The Cutlass Supreme will account for a big share of that increase, he insists, with its sales climbing to about 150,000 units.
Lane promises that ``1989 will be a good year for Oldsmobile.'' To convey that message, Olds has launched its boldest, brightest, and costliest advertising campaigns in recent memory. The TV spots feature a variety of well-known parents and their children, including actor William Shatner, astronaut Scott Carpenter, and jazz musician Dave Brubeck.
Using a mix of humor and striking video footage, they underscore the theme that ``It's not your father's Oldsmobile ... it's a new generation of Olds.''
Getting that message across will be critical for Oldsmobile, for the division's typical buyer is now a 50-year-old male. Unless Olds can bring in newer, younger males and females, it could see its share of the market wither even more.