How an unlikely pact with capitalism brought luxury cars to the People’s Republic and pumped life into a General Motors division on the brink of extinction
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If you look at it from the perspective of the China of barely a decade ago it seems an unlikely scenario. At the time, bicycles, motorbikes and buses ruled the roads, and the sight of a luxury automobile was enough to draw everyone’s attention. But today this communist nation has become the world’s largest car market. That’s been particularly good news for a high-end brand from the other side of the globe. Buick has just sold its three millionth vehicle behind the old Bamboo Curtain.
Something may seem out of kilter—with the relatively upscale Buick in sharp contrast to that country’s traditionally no-frills motif. But old China hands might also recall that there’s an odd historical link between the brand and the increasingly capitalistic Chinese. Whatever the reason, “It saved Buick,” Ed Welburn, GM’s global design director, says in hindsight of a deal struck to build cars at a new plant in Shanghai that was inked in the late 1990s. Had it not been for China, Buick might well have been among the brands the Obama administration insisted General Motors abandon in order to receive a government bailout in 2009. Indeed, some might suggest that the Buick-China connection has been critical to turning around the foundering GM itself. The maker now sells more vehicles in China under an expanding mix of brand names than it does in the United States.
That list includes the homegrown Baojun, or Treasured Horse, as well as Wuling microcars, various Chevrolets and Opels, and even some Cadillacs. Yet, to the Chinese, none of those carries the cache of Buick, which has been generating sales of over 60,000 a month lately. That’s nearly as many vehicles as Buick’s U.S. dealers moved in all of 2009.
That’s not to say Buick is abandoning the States. Quite the contrary. But, not surprisingly, Chinese drivers now have plenty of clout, and if you’re thinking about the fancy new Buick LaCrosse that is winning rave reviews, give thanks to those Asian buyers for driving innovation back into the storied American brand—and attracting a new generation of hip, affluent customers who had long ignored the staid and fading marque.
When Rick Coffin went looking for a new family chariot earlier this year, his friends and neighbors had plenty of suggestions—all of them imports. But the 38-year-old Coffin, a property speculator from Los Angeles, had something else in mind, something he admits took a lot of folks by surprise. He went looking at a new Buick Enclave. “It was the first time something from Buick caught my eye and I had to check it out,” admits the father of three. “Knowing that American cars haven’t been a hot ticket in years, I was surprised to see them take that leap in design. It was refreshing to see something so luxurious.” In the end, Coffin opted for another General Motors product, the equally bold Cadillac Escalade ESV, because it had more room for his family and friends. But Coffin says that he’ll be keeping his eye on the Buick line in the future. And he’s not alone.
In fact, Cigar Aficionado surprised the skeptics by naming the Buick Enclave as best luxury crossover car of 2008. Two years later, we followed by declaring the marque’s LaCrosse sedan the best entry luxury model.
Certainly, things didn’t look so good for Buick when the Enclave first rolled into showrooms. The maker’s sales and market share had steadily declined over the years, from a brand that was once near the million-unit mark to barely 445,611 by 1999.
Then the bottom dropped out entirely. By 2009, the maker was barely an asterisk on the sales charts, retail volume slipping to just 88,887 and overall sales propped up by another 13,500 cars dumped into fleets—mostly money-losing daily rentals. For years, industry analysts had been questioning Buick’s long-term viability, and as General Motors’ fortunes faded, the whispers became a loud chorus of naysayers. Indeed, many expected GM to abandon Buick entirely when the once-dominant carmaker plunged into bankruptcy in 2009. With the strict terms for a $50 billion federal bailout came GM’s agreement to dump four of its eight North American divisions. Onto the automotive scrapheap went Pontiac, Hummer, Saturn and Saab. But somehow, Buick avoided the crusher. And that, too, is beginning to look like a prescient decision.
Buick may not be the powerhouse it was when it rivaled Cadillac, Lincoln and Chrysler among domestic luxury brands, but it is suddenly showing a level of vitality not seen in decades. Through April of this year, Buick reported its 19th monthly sales gain with volume for the year-to-date up roughly 70 percent. The brand was actually running neck-and-neck with Lexus and BMW, the high-line imports that have long dominated the U.S. luxury market. Indeed, with Lexus facing shortages for the rest of the year due to the March 11 earthquake that damaged or destroyed much of the Japanese automotive infrastructure, Buick could very well land as the number two or three luxury brand in the U.S. market this year. But it’s Buick’s booming presence in a key market overseas that helped it survive GM’s bankruptcy.
The Auto-Vim and Power Company
No other brand is more closely associated with General Motors than Buick. The familiar badge traces its roots back to 1899, when it was founded as the Buick Auto-Vim and Power Company, by Scottish-born David Dunbar Buick. He changed the named to the Buick Motor Co. four years later, rolling out a grand total of 37 cars in its first year.
Detroit was the Silicon Valley of its day, but instead of software companies it had hundreds of hard-metal manufacturers, all vying for a piece of the action as Americans began to embrace the horseless carriage. Few would survive the shakeout. Even Henry Ford foundered in his first two tries. Buick’s founder knew he couldn’t pull it off on his own. Within months of renaming the company, Buick was deeply in debt and snapped up at a bargain by James H. Whiting, another automotive pioneer, who moved the maker to his hometown of Flint, barely 100 miles north of the Motor City. In turn, Whiting brought in William Crapo Durant to manage the acquisition.
Born in Boston, Billy Durant was the grandson of a Michigan governor and soon moved to the Midwest, where he tried his hand at a variety of jobs, selling cigars, working in a lumberyard, even selling carriages. Durant founded the Flint Road Cart Company in 1886—the same year Carl Benz built the first true motor car and a decade before the Duryea brothers launched the first U.S. auto company—turning a $2,000 investment into $2 million in sales. Renamed the Durant-Dort Carriage Company, it eventually became the largest producer of horse-drawn vehicles in the world. It was also a pioneer of the concept of setting up franchised dealers, a model that exists largely unchanged more than a century later.
Initially, Durant was skeptical of the horseless carriage, refusing to let his daughter ride in one of the noisy, smelly and dangerous contraptions. But he began to recognize the revolution at hand and signed on with Whiting, first as general manager. Durant soon became the president and then chief executive of the company, which was reincorporated in 1908 as General Motors. A natural born huckster, he quickly turned Buick into the best-selling automotive brand in America. But Durant had bigger things in mind. GM would become a holding company for an assortment of promising auto companies and parts suppliers. He snapped up Oldsmobile—founded by another auto pioneer, Ransom E. Olds—Oakland and Henry Leland’s Cadillac.
It was a turbulent era and Durant lost control of GM. He went on to set up Durant Motors and then raised enough cash, with the help of Pierre S. du Pont, to buy back a controlling stake in General Motors. Durant was pushed out for the last time by du Pont, in 1920, to be replaced by Alfred P. Sloan, the steely-eyed executive who would revolutionize manufacturing and business practices in general, creating the management system that would define GM for most of the rest of the twentieth century.
Sloan has often been credited with—blamed for, if you prefer— conceiving the idea of planned obsolescence, a practice now utilized in the computer trade. He also invented a pricing structure dubbed the “ladder of success.” Each of GM’s brands targeted a particular buyer and a specific price niche to avoid competing with one another. At the base was Chevrolet, followed by Pontiac, then Oldsmobile, then Buick then Cadillac. Buick had more prestige than Olds because, among other things, it used only eight-cylinder engines, notes automotive historian Mike Davis. But it was intentionally more subdued than Cadillac, explains Davis. “Buick became the doctor’s car,” while Caddy targeted the more flamboyant entrepreneur and those who could flash their money. “The doctor was your neighbor, and people didn’t want to see him driving a Cadillac because it would have meant he was getting rich off you.”
The Emperor’s New Car
In its early years, Buick had a surprisingly loyal following around the world. The Bulgaris, known for their lavish jewelry and other luxury products, have been loyal fans over the decades. Nicola Bulgari, a grandson of the founder, owns a collection of some of the best Buicks from the past century. He spent years tracking down one of the rare 41 Model 96S Buicks built during the Depression year 1935. It took him another two years and a “significant” amount of money, he recalls, to repair the “disaster” he found. But, in the end, it landed a commendable second-place trophy at the annual Pebble Beach Concours d’Elegance—no mean feat considering that this Academy Awards of automotive car collecting is typically dominated by such exotics as Delahayes, Duesenbergs and Bugattis.
But perhaps the most influential Buick customer of all time—even if he didn’t recognize it—was the last emperor of China. Emperor P’u-i bought two of the cars in 1924. They were, in fact, the first motor vehicles ever allowed to pass through the gates of the Forbidden City. His endorsement was so critical that by 1930 one in every six cars in China was a Buick, the company boasted in an advertisement from that era. “Buick owners are mostly the leading men in China,” it declared.
Somehow one of P’u-i’s Buicks survived the devastation of the Second World War and when the communists eventually took over it landed in the hands of Zhou Enlai, Mao’s top lieutenant, who had a decidedly decadent taste for fine automobiles. Years later, long after Mao and Zhou were gone, the emperor’s Buick would still wield its influence.
As the twentieth century drew to a close, former General Motors Chairman Jack Smith decided to take a bold gamble on China. With the Chinese cautiously embracing a hybrid form of capitalism, GM saw an opportunity to cash in on potentially booming demand for automobiles. The deal was lucrative, but the Chinese were reluctant to sign. They had no interest in Chevrolet, the U.S. maker’s biggest brand, nor Cadillac, its most prestigious, nor Opel, then GM’s preferred global marque. “They only wanted the best,” recalls Larry Gustin, then a General Motors PR man in on the negotiations. “They wanted Buick.” Reluctantly, Smith and his team agreed.
The move garnered virtually comparable sales in China as in the U.S. over the last decade. By 2007, for the biennial Shanghai Motor Show, Buick took the then-unheard-of step of developing a concept vehicle specifically for China. Dubbed the Park Avenue—a nod to a once-familiar nameplate—it was “designed especially for business leaders and other elites,” explains Shanghai GM President Ding Lei, adding “it is a component of our effort to maintain our leadership position in China by addressing the needs of all of our customers.”
Building on the brand’s success, GM has expanded its presence in China, adding Chevrolet, Cadillac and Opel, as well as the homegrown Wuling and the Baojun marque, which will target second and third-tier cities in mid and western China where consumers are just getting wheels.
A Grand Transition
The unveiling of the Park Avenue show car marked a grand transformation of the Buick brand. Though they may be relative newcomers to automotive transportation, says George Peterson, chief analyst with the consulting firm AutoPacific, Inc., Chinese drivers have become surprisingly picky. Especially with luxury brands, they expect more room, better materials and luxurious appointments front and back. “So, GM has been paying a lot more attention to what they want,” adds Peterson, “and that is influencing the design and the type of vehicles Buick sells not only in China but in the U.S. as well.”
That became apparent with the launch of the LaCrosse, with GM’s Shanghai-based design and engineering center, known as PATEC, taking the lead on the project. As California property speculator Coffin recognized, Buick is no longer content to go with me-too styling. The new sedan is elegant, almost to the point of excess, with a wind-swept appearance that stands out in an otherwise conservative market segment. Inside, Buick maintained its focus on the sort of classic creature comforts that once made it among the most popular brands on the U.S. market, starting with interior noise levels that can best be described as tomb-like, thanks to acoustic laminated glass, triple-sealed doors and specially designed suspension bushings. A quiet interior is great, but all too many Buick products in recent decades offset that advantage with the use of cheap plastic parts that looked like they’d been sourced from the local Dollar Store. While plastic is a modern automotive reality, the latest Buick models have introduced better graining and finishes, with more leather, wood and chrome, as well. So, for many potential customers, the latest LaCrosse cabin comes as a delightful surprise—refined, attractive and well executed.
At the time of the bankruptcy, Buick had just three models in its diminishing U.S. lineup. That’s beginning to bounce back, the well-received Regal added for 2011, with the compact Verano on tap for 2012 —and a new small crossover set to complement the Enclave. As with LaCrosse, these are “world cars,” no longer designed and engineered in the States and targeted solely for the American market. But clearly, building on recent momentum is critical for the brand. It helps, says analyst Peterson, that there are fewer brands in the GM portfolio. Buick can now focus on competing with the likes of Lexus or Infiniti, rather than Pontiac or Oldsmobile.
Ironically, Buick’s steady decline might be working to the brand’s advantage, suggests Craig Bierley, the marque’s marketing director, since, “a lot of people simply aren’t aware of the brand,” which could make it easier to create a new brand image for it. Art Spinella, chief researcher with CNW Marketing, agrees, suggesting that in recent years Buick had become “so irrelevant” it was off the radar screen for most shoppers. But that has begun to change, CNW studies are showing. “Buick is almost like a new brand,” and that is helping it lure in a younger, better educated and decidedly more affluent buyer than the one the GM division had appealed to in recent decades. “The typical Buick buyer was in their 60s or even older. Nobody bought Buicks except great-grandfathers. Now (the typical buyer) is getting down into their 40s.”
To reach those buyers, Buick has walked away from its past association with marketing ventures, like professional golf, that targeted older buyers. It recently signed a long-term deal with the NCAA, which launched during the annual “March Madness” college basketball tournament. In a creative twist to the typical sports marketing partnership, Buick is skipping the shopworn “Play of the Game” tie-in, instead introducing the “Human Highlight Reel,” which Bierley says will focus on stories about NCAA athletes “who have gone on to do good things for the community.”
Warm, Inviting, Inclusive
Buick’s turnaround—indeed, GM’s as a whole—is anything but certain. The maker faces some intense competition from established luxury makers and some new insurgents, like Hyundai, which introduced its mid-luxury Genesis to plenty of acclaim several years ago and is now moving even more up-market with the Equus. Buick must also work to differentiate itself from the sibling Cadillac brand. Where Caddy is being positioned as “visceral and emotional,” with its coolly angular “Art & Science” design language, Buick aims to be “warm, more inviting and inclusive,” says Tony DiSalle, its sales chief.
The good news, he adds, is that having a strong Buick in China can only help. It improves economies of scale, making for a better business case when it comes to adding new products—and loading up more features on existing models, like the LaCrosse and Regal. What might be coming? Buick officials aren’t saying, though they hint they’d like a “halo” car, much like Chevrolet has the Corvette and Mercedes-Benz has the SL roadster.
A very different take might be based on the Envision concept vehicle that was unveiled at this year’s Shanghai Motor Show. “It introduces the development direction for Buick’s future SUV products for the China market,” added Shi Hong, Director of Buick Marketing at Shanghai GM. And it could very well influence future U.S. models, as well. Envision uses a prototype plug-in hybrid drivetrain which could very well appear in Buick’s lineup by mid-decade. Starting in 2012, U.S. buyers will see the LaCrosse adopt the new eAssist system as its standard-issue drivetrain. A “mild” hybrid—meaning it cannot run solely on battery power—the eAssist system nonetheless boosts the sedan’s highway mileage from an acceptable 30 mpg to a segment-leading 37.
“Things are changing for Buick,” contends analyst Peterson. Buick still has a long way to go. But it has so far pulled off the sort of turnaround few would have expected for a brand long written off for dead. The proof, of course, will be in the product. But that’s where Buick has already begun winning new fans—and buyers.
Paul A. Eisenstein is publisher of TheDetroitBureau.com on the Internet.