GM Disbands High Performance Vehicle Operations

4th March 2009

GM announced that is disbanding the group responsible for the high-performance versions of many of their “regular” cars, High Performance Vehicle Operations (HPVO). HPVO is responsible for the V-Series Cadillac CTS/STS/XLR and for the Chevrolet SS versions of the Cobalt and HHR. More were to be on the way, including a rumored SS version of the upcoming Cruze small sedan. Enthusiasts should mourn the loss of this “tuner” division with the General’s ranks, even if you don’t like GM’s products. The existence of this type of “car guy” division likely has influence not only on the General’s products, but on other manufacturer’s as well. The automobile business is largely one of copy cats. When one has an original idea and implements it successfully, the others are sure to follow as soon as their engineering and manufacturing systems will allow it. The interesting thing there is that they don’t even try to hide it, at least internally. When Chrysler introduced the Neon in 1994, Ford immediately put a product in the cycle plan called (and I’m not making this up), “Neon Fighter”. While the Excursion was still in development and before it was named, it was known as “Suburban Fighter”. The point is that if the General doesn’t see value in the performance division, then others may start to question theirs. Then we all lose.

The problem is that the HPVO products simply don’t generate enough revenue to cover the costs (ongoing per-unit costs and development). However, I think GM is missing part of the equation. Products like these help sell the lesser, more plebeian versions of those same products. A customer enthusiastically enters a Cadillac dealer to check out the CTS-V, for example. He read about the CTS-V in an enthusiast magazine, and is excited to have the “fastest production sedan in the world.” The $60K+ price tag, though, is a major buzz-kill. He looks next to his dream and sees a “regular” CTS, which starts at less than $40K, looks about the same, and has as much as 304hp! It’s a steal compared to the V, because he realizes that he really wouldn’t be able to use the 556hp anyway. The V or SS versions drive traffic in the showroom, but it’s the regular versions that pay the bills. To properly evaluate the benefit of HPVO, you need to understand this dynamic. I’m sure the General understands this, but lacks an ability to measure it. In the D3 world where the “bean counters” have final say, if you can’t measure it, it doesn’t exist.

With this action, GM is NOT going to pull any products already on the road; it is redeploying the engineers to other programs that will get more bang for the government-loan buck (this is good for your humble reporter, as I have my eye on a Chevrolet HHR SS for my next vehicle). This also does not affect Performance Vehicle Engineering - a separate group that develops performance vehicles from scratch like the new Camaro or the Pontiac Solstice - or Corvette, which has its own engineering team. Maybe this is part of the General’s problem: 3 separate groups with the task of developing performance vehicles. If there were only 1 with all 3 roles, they would likely get better efficiency and maybe be able to keep developing these stealth rockets.

All this doesn’t change the fact that GM needs to cut costs as quickly and as severely as possible, without damaging the revenue stream. With apologies to Fig Newton, that’s the tricky part. Cutting costs where the customer can’t see them requires engineering money and resources and time; cutting features and options is relatively easy and quick. It’s the catch-22 of the modern automotive industry. Cut later and do it right and you might not be around later. Cut now to live later and you hurt your ability to generate revenue now and later. The answer is, of course, constant vigilance on reducing costs where the customer cannot see them. You must build that into every new product program. No detail is too small. Unfortunately, the D3 have not done a good job of managing this in the past, and it might be too late now.