Four Lanes

It's hard to imagine anyone out there being surprised by the news that General Motors is going to discontinue the "Hummer" line of giant SUVs, unless you've been in some kind of weird time warp since the 1990's. Sales of large vehicles in general have been falling off for the past couple of years, and nothing currently for sale in the U.S. is bigger or more wasteful than the original Hummer. Even if we ignore the ethical (you're squandering limited resources), safety (Hummers are prone to collisions, because they're so hard to steer, unsafe to ride in and likely to cause fatalities in anything they hit), health (they also pollute like crazy), social (they're regulated and taxed as working vehicles -- e.g. not at all!), political (there's a reason we keep going to war in specific regions of the world) and moral (you're spending between 2 and 4 times more on your Hummer than you would on a more conventional ride; can't you think of anything better to do with your money?) aspects of the vehicle, the appeal of something that gets between 9 and 13 miles to the gallon (H1 model is 9; H3 gets up to 13) in a time when gas is over $4 a gallon is somewhat limited...

The part that confounds me is that GM seems to be surprised by these events. Certainly, they don't appear to have planned for this downturn in their sales, if closing 4 more North American plants is any indicator. Ford is suffering through a similar sales slump, and is also making plans to alter their production mix, while Chrysler is trying to deal with its flagging sales by offering gas at $2.99 a gallon for the next three years to anyone who buys one of their more problematic cars (an offer that could be very hard to cope with if gas crests $9 by 2011). Meanwhile, Toyota and Honda are actually reporting improvements in their sales, driven by hybrids and fuel-efficient compacts. Given that General Motors actually HAS both hybrids (including the Chevy Malibu and the Saturn Aura) and fuel-efficient conventional cars (like the Chevy Aveo and Pontiac Vibe), it's even more puzzling why they haven't made greater inroads into this critical market segment...

Of course, some of it may simply be that GM has been listening to closely to the fans of the Hummer (and big SUVs in general), like the ones quoted in the story this week in the Houston Chronicle. The market for Hummers has always been bigger than you might expect, and the margin on each one they can sell is also truly amazing. Still, if a company's entire product line is based on gasoline-powered vehicles, one might reasonably expect them to have their forward-planning shop keep at least one eye on the price (and projected future price) of that fuel. One might also expect them to spend some time, effort and advertising money to promote new products that they spent large amounts of R&D money to produce...

Now I'm not suggesting than any of you are going to be foolish enough to ignore what your strategic planning staff is telling you about future market conditions; I feel quite certain that if any of my readers are in an industry that depends on a single natural resource (like petroleum) to power its products that you would at least keep an eye on the supply of that resource. The problem is that just because people with an outside perspective on the world can see this sort of product crisis coming down four lanes of highway, that doesn't mean that the senior executives, who have lived with this product and its market conditions their whole lives will be able to see it, or that the CEO and the Board will be able to adjust their thinking to the new market conditions in time to make a difference. Rather than rip on these troubled industrial giants for failing to recognize the glacier advancing on them, maybe we should all ask ourselves "How will future conditions change OUR business model?"

It's worth thinking about...