2006 Pontiac GTO Review

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The Car Connection
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The Car Connection Expert Review

Joseph Szczesny Joseph Szczesny Editor
February 26, 2006


Witzenburg: Elephant in the Boardroom by Gary Witzenburg (2/26/2006)
Business costs are driving U.S. companies offshore.

 

End of the Line for Generous Motors? by Joseph Szczesny (2/20/2006)
A new cap on pensions means the days of big bennies are out.

Review continues below

 

Can GM Turn Itself Around? by TCC Team (2/20/2006)
Is there enough time, analysts ask?

 

Delphi Sets Final UAW Deadline by Joseph Szczesny (2/20/2006)
Will there be a strike on March 30?


 

2004 Pontiac GTO

2004 Pontiac GTO

Enlarge Photo
2004 Pontiac GTO

2004 Pontiac GTO

Enlarge Photo
The shortcomings of General Motors’ product development efforts were exposed yet again last week when the automaker confirmed that it was dropping the Pontiac GTO this summer. GM has rolled out the GTO as kind of an off-the-shelf answer to the complaints that the automaker’s cars weren’t exciting or muscular enough.

The Australian-made GTO, with its 400-horsepower, 6.0-liter V-8 engine could accelerate from 0 to 60 mph in six seconds. But sales, despite some hefty discounts and some heavy-duty personal lobbying of the press by GM Vice Chairman Robert Lutz, never lived up to the hype.

Thus, GM decided to pull the plug on GTO without even bothering to find a replacement for the car. At the same, time GM also shut down an assembly plant in Oklahoma City that build mid-size sport-utility vehicles. GM is ostensibly working on a replacement for the current mid-sized SUVS, which are also being supplanted by a new generation of crossover vehicles. However, GM’s crossover replacements won’t be ready until later this year when the company opens a new assembly plant outside of Lansing, Mich.

2006 Pontiac GTO

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The start-up of the new Lansing plant has been pushed back by years as GM has wrestled with decisions on what to build in the new plant.
Consequently, the new crossover from Lansing will be rolling out months after competitors have managed to introduce a new generation of crossovers to the public.

 

Have things really changed?

 

A new report from Merrill Lynch suggests that GM has been investing too little in new products for a long time and it isn’t clear that even in the present crisis, the auto giant is prepared to change. “We believe GM will continue its historical pattern of underinvesting in product to the detriment of earnings and stock price,” noted a new research report from John Murphy, Merrill Lynch’s new auto analyst.

“GM’s market share losses are not new news. The company’s consistent underinvestment is the primary driver of its consistent market share losses,” the report says.

Murphy points out that in 1998 GM’s legacy cash costs were about half of the company’s combined spending in capital investment and research and development, which together drive product development. As the size of GM’s retiree base has risen in recent years, the legacy costs now equal 80 percent of the combination of capital and research and development spending, the research notes.

The numbers are pretty stark, according to the numbers worked up by Merrill Lynch. In 2005, GM’s spending on product development was $1611 per vehicle, while spending on legacy costs, including pensions and retiree healthcare amounted to $1338. Meanwhile, competitors are investing much more aggressively in future product than GM. GM not only lags behind it European and Asian rivals but even its domestic competitors such as Ford and Chrysler, the report noted.

For GM, the relatively lower capital spending and spending on research and development has resulted in a less competitive product lineup for GM, according to the replacement rate charted by Merrill Lynch.
GM’s product replacement rate is lagging the competition, which is one of the main reasons why GM’s market share has dropped.

Moreover, the situation could only get worse as rivals such as Toyota and Honda are expected to replace vehicles that represent better than 90 percent of their sales volume. GM’s replacement rate is calculated at 64 percent even with the introduction of new pickup trucks and full-size sport-utility vehicles.

In turn the decline in market share, created by the shortcomings in product development, invariably leads to other problems, including a drop in dealer profits. “The result is that dealers are actively allocating capital to more successful brands, which is accelerating both their market share gains and GM’s losses,” the Merrill Lynch report said.

Merrill Lynch’s analysts, however, did not try to quantify the damage to GM’s reputation or image by the company’s inability to deliver attractive new vehicles to the showroom on a regular basis. Nor did it address the problem with GM design, which has been left in the dust by its rivals over the past decade.

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April 17, 2015
For 2006 Pontiac GTO

2006 Pontiac GTO

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I have owned 18 Pontiacs over the years including four GTO's. The 2006 has been a fantastic car. My only complaints is the four speed automatic transmission and the extremely small trunk The car is a blast to... + More »
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April 14, 2015
For 2006 Pontiac GTO

Modern Muscle Car

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This is a real muscle car with an economy car price tag, where can you buy a car with this performance for 30K (new) these days?. The build quality from the land down under is really good. This is a fun... + More »
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