Executive Summary

Overview:

Buick went into deep financial hardships when sales took a steep decline leading to the bailout and bankruptcy in 2009. The bailout program was not looked upon favorably by the public, so this hurt the image of Buick. The company needed to rebuild its image, win back the consumer, and repay the loan to the government

Issue:

Has Buick earned back the consumer trust it lost with the bankruptcy and bailout in 2009? Has GM repaid the loan to the government? Is there data that supports the market position of Buick in U.S. cars?

Solution:

Buick has reached record sales numbers for the company for the last three years. Through creative rebranding, and innovative new car designs the company has outperformed expectations. The advantages of better lease deals and better warranties have won them the support of the consumer and the company has rewarded them with great cars. These changes have culminated in Buick being named one of the three most reliable automobiles. Something that a Detroit manufacturer has never been.

To: Professor Jones

From: Nathan Hartman

Subject: Written Research Report

Date: December 14, 2016

Overview:

This report is to examine the sales figures and company performance of GMC overall and more specifically Buick. Following the bailout and bankruptcy in 2009, has Buick earned back consumer loyalty? Have they repaid the loan from the government? What has the company done to prevent a crisis such as it experienced in 2009? By examining available data and sales reports, we will see if Buick has rebounded and how they have done this.

Methodology

Through secondary research of sales figures, before and after the bankruptcy, a clear picture started to form of the company’s business plan. I tried to focus as much as possible on the reports from well-known, credible sources. There were some findings that I took straight from the Buick website, but this information was limited to awards the company has won and special offers on cars.

There are several top sources for car information. These include but are not limited to Car & Driver, Edmonds, God Car, Bad Car, Kelley Blue Book, and JD Power. I also looked beyond those to Consumer Report, U.S. News and World Report, Forbes, and The Wall Street Journal. I spent a lot of time going through financial reports to gain a better understanding of the bailout and its terms. I studied how the money was paid back to the government and the following ramifications to the image of the government for the program, to GM for being involved in the program, and the company’s structuring going forward.

Following this part of the research, I could look at straight sales data for the time from 2010 to present. I had to account for changes to the Buick line of cars as there were several significant changes. Buick has a large presence in China, and this was a primary reason that GM kept them following the bankruptcy restructuring. I had to look at data covering their sales in the United States versus other cars, and then I had to look at the global sales numbers for cars. To find data that backed up the numbers on the total sales, I had to look at perks that Buick was offering their customers. These included money back guarantees, better leasing terms, and extended warranties.

Findings

GM knew that they had to take advantage of the bailout, this was a one-time get out of jail free card. The bankruptcy allowed them to restructure the company and eliminate assets that were dragging them down. They took full advantage of this opportunity, and they split the company into two parts, and they reduced their line of automobiles to four, down from eight. They did this and exited bankruptcy well ahead of schedule. It was estimated that they would be in chapter 11 for 90 days, and it took them only 45 days.

After exiting bankruptcy, they sold off or shut down several lines of cars including Hummer, Saturn, Saab, and Pontiac. There was a downside to this for many areas. GMC had opened too many dealerships across the country. Unable to handle all of this overhead, they had to close roughly 40 % of their dealerships across the country. “By the end of the year, GM expects to have 68,500 employees, down from 91,000 at the end of 2008.” (Stoll & King Jr., 2009) Doing this allowed the company to move forward with much less overhead.

One of the first things that had to be established for GMC to be able to exit bankruptcy was one that was crucial to any future success. There had to be a decision made about warranties on cars sold before the chapter 11 filing. “Warranties will continue to be honored, and GM will even accept some liability claims from pre-bankruptcy buyers.” (GM Exits Bankruptcy, 2009) Honoring their promise was the first step towards winning back the consumer’s trust. Buick faced another problem, though, Gm “will keep losing U.S. market because it lacks new-model introductions for early 2010.” (GM Exits Bankruptcy, 2009) This was a big problem as many of Buick’s cars were considered to be plush, oversized, grandpa cars.

To combat this perception, Buick needed to rebrand themselves. They decided to roll out a new line of cars and end production of many of their long-running models. They used this time to target a new audience. The new cars for 2010 were well received, but the target audience they were now after, the 46-55 range which was about ten years younger than their previous demographic, failed to come to the dealers. Instead of panicking at this point, Buick continued to improve their new cars and took the next step in their rebranding campaign. This part revolved around a series of television commercials. “” That’s a Buick” campaign poked fun at Buick itself and at people’s perceptions of a marque that many had written off years ago.” (Read, 2016)

Increasing sales were only a part of the problem that Buick faced, though. The company had received a black eye over the bailout. Many people were very outspoken over the issue of the government using tax dollars to save these humongous companies. GM took the largest part of the money also. With a loan of 49.5 billion GM had a new business partner, the U.S. government. Part of the deal to repay the loans was that GM could not publicly trade stock shares until the loan was repaid. The government received a significant portion of stock options in the deal.

Buick was loaned 30 billion dollars that they promised to pay back. The government gave them nearly 20 billion more and received stock options for this money. Buick repaid the money to the government well ahead of schedule, and as part of the deal, GM could buy back a majority of the stock options. They did this, and the government sold the rest of them on the open market. The stock prices were not high enough to cover all the money that the government paid for them resulting in a loss of about 10 billion. By the agreed upon guidelines of the loan GM held up their end entirely. These losses have not helped with the hard feeling of some that feel GM should cover the losses by the government.

Recommendations for the Organization

Buick has done nearly everything they can do to this point. They have redesigned their line of cars to make themselves more appealing to the new target market. The advertising has been effective and humorous with the primary goal of it to make people see Buick differently. They have manufactured reliable award-winning cars and have offered better lease terms and

warranties. Buick even has an eye on the future with several outstanding new models coming soon.

Buick has only lacked in one area that they have been seeking. The company wants to be viewed as a luxury car. While the top end cars are getting close to the standard of Lexus, the brand is not seen that way. The next step is to continue to heighten the brand image. The company needs to come out with a car that is known as a sporty car with fantastic handling and performance. The current cars are known for their comfort and reliability. All the luxury cars offer a sports car though that really can appeal to those wanting something more than just a car.

There also needs to be improvements to the dealerships. When one goes to buy a luxury car, they want the luxury car experience. Mercedes dealerships have leather chairs, and they offer you an espresso while you are waiting. When you pay that much for a car, you want to be treated a certain way. The dealerships currently are not set up for this. Perhaps dividing the locations into two sections, one that offers the majority of the line of cars and the other that offers the top end cars would work. The company could create two separate environments in one location. By keeping them distanced enough from each other, they could avoid offending the other level of customer.

Generalizability of Results

Beginning in 2002 one can see a sharp decline in U.S. sales for Buick, leading to the bankruptcy in 2009. After leaving bankruptcy. Sales started to increase. 2010 saw a large jump in numbers, while 2011 rose slightly. commencing in 2012 the U.S. sales numbers started climbing quickly. (Cain, 2012) These figures have led to GM being the number one car manufacturer in America again with Buick leading the way. Buick has passed the 1 million mark for deliveries worldwide in 2016. The company ranks number 2 in China for auto sales while the U.S. numbers are record highs. “Buick’s year-over-year growth of 23 percent is the highest in the industry for major brands selling vehicles in both North America and China. With three months left in the year, Buick is on track for its fourth consecutive global sales record.” (Buick Global Sales, 2016)

The sales numbers are a direct reflection on the better product that Buick is putting forth, and the better options and service packages they provide to the consumer. The company has extended the warranties on all models offered. Buick has also started to offer a 24-month lease instead of the standard 36-month lease. J.D. Power conducted an annual study that said customers rank Buick number in in customer satisfaction for 2016. They cite the main reason for this being that Buick takes the extra time to teach new buyers all about the technology in the cars, so they have a better understanding. (Customer Rank, 2016) Perhaps most importantly was the finding of Consumer Reports. Buick was named one of the three most reliable car brand in America. “Buick’s bronze medal marks the first time in Consumer Reports’ 30 + years of issuing reliability rankings that a Detroit brand landed in the top three. No small feat, that.” (Read, 2016)

These achievements go to show that GM, and Buick in particular, are on the right track as a business. Buick has gone above and beyond for the customers under the new structure. The consumers have noticed this and rewarded Buick for their work by buying the product. To answer the original question of “has Buick earned back consumer loyalty?” the answer comes from the consumers themselves, and they have said yes.

Appendix

References

2016 Buick Global Sales Pass 1 Million at Record Pace. (2016). Retrieved from http://media.buick.com/media/us/en/buick/news.detail.print.html/content/Pages/news/us/en/2016/oct/1018-buick.html

Cain, Timothy. (2012). Buick Brand Sales Figures. Retrieved from http://www.goodcarbadcar.net/2012/10/buick-brand-sales-figures-usa-canada.html

GM Exits Bankruptcy. (2009). U.S. News & World Report. Retrieved from http://usnews.rankingsandreviews.com/cars-trucks/daily-news/090710-GM-Exits-Bankruptcy/

Read, Richard. (2016). Consumer Reports’ Most Reliable Brands: Toyota, Lexus, and…Buick? Retrieved from http://www.thecarconnection.com/news/1106881_consumer-reports-most-reliable-brands-toyota-lexus-and-buick

Stoll, John D. & King Jr., Neil. (2009). GM Set to Exit Bankruptcy. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB124715504549018481