Skip to main content

GM Proves That Bigger Isn't Always Better

General Motors added Hummers and Saabs to its lineup without strengthening core brands like Pontiac.

Efficiency hasn't been a quality associated with

General Motors



This week, in an effort to stave off bankruptcy,

General Motors

said it will shed its Pontiac


, one of the industry's best-known brands. Pontiac cars haven't sold well for decades, and a failing company needs to focus on products with the best chance of success.

The struggles of finance firms

American International Group





prove that bigger isn't better. After years of growth, companies are cutting workers, businesses and brands to try to become more efficient. These situations offer lessons for firms of all sizes.

GM might seem a world away from small businesses, but the fate of Pontiac illustrates the pitfalls of expansions. Before you broaden your company's reach, you need to make sure you strengthen your core brand.

GM introduced Pontiac in 1926 as a more affordable alternative to its other cars. The brand gained popularity in the 1960s and '70s. The GTO, Firebird and Trans Am cemented GM's reputation for making affordable performance vehicles.

But the glory days of muscle cars couldn't last forever. As foreign car imports increased and competition heated up, GM couldn't figure out how to keep Pontiac relevant. GM kept buying new brands, such as Hummer and Saab, without shoring up the ones it already had.

The debut of the Aztek crossover vehicle in 2001 was a risk for Pontiac that proved to be a major dud. Its boxy, awkward shape had few fans, and the model was discontinued four years later.

Juggling all those brands, each with its own mix of constantly changing vehicle models, proved to be too much for GM. Companies that expand successfully make sure new brands have the company's original DNA.




. When the company entered the digital music business, the design of its iPods and iTunes reflected the company's Mac computers. When Apple expanded into cell phones, the iPhone maintained the same style.

General Mills


offers another example of successful brand integration, though the lesson here is knowing when to exit.

In the 1970s and '80s, the food producer developed a restaurant division, which brought Red Lobster and Olive Garden to suburban shopping centers. Restaurants eventually became a distraction to General Mills, prompting the company to spin off the unit as

Darden Restaurants


. General Mills went on to buy Pillsbury, a company whose products complemented and enhanced its food lineup.

Rapid expansions might make you top dog for awhile. But if you don't integrate your new products into your existing business, it can be costly. GM, which also plans to shed its Saturn and Hummer brands, has probably learned these lessons too late.

Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago, and other national magazines.