If you can’t beat ‘em, join ‘em. That might as well have been the motto of Geo, a brand created by General Motors in the mid-1980s to sell rebadged Japanese cars through Chevrolet dealers.
After more than two decades trying and failing to make a high quality small car at a competitive price, General Motors decided to swallow its pride and seek help. In 1982, GM sought the master. Toyota was then, and still is, the top selling import car in America. It is also the most profitable car company in the world. Despite making mostly smaller cars, Toyota somehow managed to generate healthy returns year after year, no matter the economic conditions. This is because Toyota saw itself not so much as a car company but a manufacturing company that made cars. It operated under a principal called kaizen, or continuous improvement. For Toyota, kaizen wasn’t just a catchy word printed on buttons and affixed to executive lapels, as was the practice in Detroit at the time; it was a religion. Kaizen did not mean constantly adding more gadgets to their cars to make them more appealing. It meant constantly improving the process by which cars were designed, built and presented. Better cars, higher quality, more efficiency, reduced costs, goals General Motors had been trying and failing to do for more than two decades. If GM was serious about making a profitable small car it had to get religion from Toyota.
At the same time General Motors was looking to Toyota, Toyota was looking at Honda. What they saw was their much smaller rival gaining the upper hand in the most important car market in the world. Honda had recently become the first Japanese carmaker to open a automobile manufacturing plant in the U.S., and was now selling every U.S.-built Accord it could make.
Toyota was also looking at Washington, D.C. By 1982, the third year of a brutal recession, Japanese cars were accounting for over 25% of the U.S. market. In order to stem the tide, reeling American auto companies, together with the United Auto Workers union, pressed hard for protectionist legislation from Washington. Japanese makers sought to head off official measures that might do them long-term harm. They offered instead to implement a temporary quota system called the Voluntary Export Restraint agreement (VER) that limited auto exports from Japan to 1.68 million vehicles. Everyone who was able to stay awake during the first day of Econ 101 knows that when supply is limited, prices rise. So even though their sales would be capped, Toyota’s profits would continue to flow.
This situation might have been quite tolerable for Toyota, except that now Honda, with its Ohio plant, could potentially sell a quarter-million more cars each year that were not subject to the VER. It would take several more years before Toyota could build its own U.S. plant. They needed to do something fast in order to preserve their leadership position.
And so it was on February 14, 1983, Valentine's Day, that General Motors CEO, Roger Smith, and Toyota scion, Shiochio Toyoda, announced that the two companies would be hooking up to produce compact cars at a recently-shuttered GM plant in Fremont, California. The joint venture would be called New United Motors Manufacturing, Inc, or NUMMI. Eight months later Fremont was producing cars. Half were Toyota Corollas; the other half…were also Corollas, but with a bowtie on the grill and badges proclaiming it a Chevy.
For GM, NUMMI provided a chance to learn Japanese manufacturing and management techniques. They wanted NUMMI to be a training ground for its managers after which they would spread what they learned though out the company. NUMMI was also meant to be a stopgap to hold them over until their much anticipated Saturn small car project could be ready for launch in 1990.
For Toyota, the Freemont plant provided car sales that were not subject to the VER quotas. It was also a classroom for their executives, who would be able to learn first hand about intricacies of manufacturing in the U.S., as well as U.S. labor relations. They too had plans beyond NUMMI. Their own assembly plant was due to open in Georgetown, KY in a few years.
Get to Know Geo
For three years GM sold NUMMI-built Chevrolet Nova…or at least tried to. Around that time, an internal GM report was circulating showing that 28% of car buyers in 1987 had never been inside a domestic dealership…and never would. This was especially true for small car shoppers. Thrice burned, first by the ill-handling Corvair of the early sixties, then the self destructing Vega of the early seventies, and just recently the recall-plagued Citation, they would be hard pressed to ever buy another Chevy.
Unfazed by reality, The General decided to also throw additional billions at acquiring a piece of microcar maker, Suzuki, and to expand its stake in car and truck maker, Izuzu. Including NUMMI, GM would now have access to small cars from three differnent Japanese manufacturers.
The problem with their "Join 'em" strategy was, if GM badged these little cars as Chevys, no import buyer would come to a Chevy dealer to buy one. The solution? Even though it was readying its multibillion-dollar Saturn division, The General decided that yet another new brand was needed to sell all these imported and NUMMI-built small cars. Say hello to Geo. Despite their data showing import buyers want nothing to do with Chevy dealers, GM’s braintrust made a decision that makes the brain hurt. They chose to sell imported Geos though their 4,900 Chevy dealers. Hell, someone was sure to see the Geo sign out front and accidentally stumble into a showroom.
The new brand was launched in 1989 and would soon have 4 models. The NUMMI-built Chevy Nova compact became the Geo Prizm. A Canadian-made Suzuki Swift minicar became the Geo Metro, along with a Suzuki sourced trucklet badged the Geo Tracker. And finally, an Izuzu Impulse sport coupe lay beneath the Geo Storm label.
It seems like we should say more about the cars themselves, but why bother? They weren’t any better than the originals. They weren’t any cheaper. What reason was there for these knockoffs to exist, other than to provide Chevy dealers with something to sell import car buyers…the ones who wouldn’t ever set foot in a Chevy dealership?
Not surprisingly after selling just 37 Geos per dealer per year for 7 years, the brand was gone. No one much noticed when Geo went away after 1996. Too bad for that… if only because it was yet another fine example why a decade later General Motors would be bankrupt.
Copyright@2018 by Mal Pearson
Sources and Further Reading
Corporate Warriors: 6 Classic Cases in American Business by Douglas Ramsey (1987) Car Wars –pp179-211
Identity Crisis: A Century of Chevrolet The Automotive News Commemorative, October, 11, 2011 by Lindsay Chappell