COLUMNS: Beware the Bargain BMW

November 6, 2013
2013 Cadillac ATS Front Left Side View
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When Bob Lutz speaks, we listen. How could we not? He’s an octogenarian who looks like a Nordic god and flies fighter jets. He’s also an automotive legend who had a hand in everything from the Dodge Viper to the Chevrolet Volt. And so it was no surprise that Lutz’s comments last week about Pontiac’s plans to introduce a line of rear-wheel-drive, cut-rate BMWs drew so much attention. “Pontiac was on its way back … we were embarked on a strategy of making Pontiac different from the rest of GM in that Pontiac would not get any front wheel drive cars,” the former GM product vice chairman told a forum at the Petersen Automotive Museum in Los Angeles, according to Autoweek. He added that the next G6 was going to share the Cadillac ATS’s Alpha architecture.
But Lutz’s plan for the brand would have failed. The key problem is the incompatibility of a volume brand and rear-wheel drive. So far this year, Dodge has sold about 80,000 rear-wheel-drive Chargers. Chevrolet has sold 140,000 front-wheel-drive Impalas. In the mid-size and compact segments, there are no rear-wheel-drive cars at all. The primary reason is interior room.
“Packaging is an issue for a big part of the market,” says Jim Hall of 2953 Analytics.
You have probably heard that few buyers care—or even know—whether their car is front- or rear-wheel-drive. That’s only half true. Buyers tend to want the most interior room they can get for their money and for the size of the vehicle they’re buying. Rear-wheel-drive, with its longitudinal engine and drive shaft, simply isn’t as space efficient as front-wheel-drive. That packaging disadvantage remains in a rear-wheel-drive vehicle that offers all-wheel drive. Check out the back seat in a Chevrolet Camaro or a Cadillac ATS or CTS. Pretty tight, no? It’s "the price you pay for having a car the way God intended it," a Cadillac engineer told me during the CTS’s reveal.
The reality is, not many are willing to pay that price. That’s fine for a premium brand, which can charge more for each vehicle. A hugely successful example is BMW, which makes a handsome profit off of what is still a relatively low volume of mostly rear-wheel-drive-based vehicles (close to $7 billion off of 1.8 million vehicles, globally, in 2012). Note that BMW’s own attempt to market a lower price, higher-volume rear-wheel-drive car, the 1-series, has been a failure. Its replacement will be front-wheel drive.
Lutz says Pontiac would have sold BMW-like vehicles for less money. Pontiac would have been hard pressed to match, let alone exceed, BMWs volume (that’s true even if we assume Pontiac would have shared product with GM Australia’s Holden brand). This leaves us with the question of how Pontiac, which Lutz says had been losing money for a decade, could possibly have returned to profitability with exclusively rear-wheel-drive cars. Lutz adds that the Pontiacs would have been “de-premiumized,” which would have meant basic interiors (see: Chevrolet Camaro) and the elimination of the lightweight materials found in the ATS and CTS. Where, one must wonder, is the market for heavy BMWs that lack either the prestige or the comfort of BMWs?
“This is a fantasy on Lutz’s part,” Hall says.
For the record, I enjoy this fantasy. I love Pontiac so much I once dragged a girlfriend to Norwalk, Ohio, in the middle of summer for the Ames Performance Tri-Power Pontiac Nationals (and met Jim Wangers!). I probably would have bought one of those rear-wheel-drive G6s. But you can’t build a brand on people like me or, for that matter, people like Bob Lutz.
Indeed, the Pontiac plan is pure Lutz: the man loves European-style performance cars and he loves moon shots. The notion that this dream was spoiled by the Federal government’s task force—who demanded Pontiac’s closure as a condition for a loan, according to Lutz—plays into his oft-repeated assertion that “bean counters” can’t be trusted. The thing is, automakers only have so many beans. And GM didn't need any more moon shots. It needed good cars. It now has them. That’s thanks in large part to the product-development culture Lutz instilled during his tenure, but it’s also the fruit of the tough changes the feds forced upon the company during its bankruptcy, including the elimination of Pontiac.

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