This time on Ur-turn, reader Erikstrawn weighs in on an issue that kept TTAC busy for years: Will GM go bankrupt? After all those years, Forbes woke up to the issue and wrote a long article on same. While we are at it: Parts of the Forbes article was written with generous help from TTAC. While Forbes acknowledged TTAC as a source, the magazine did so without adding a link, which is considered both common and professional courtesy in the business. Also, the rather generous "quote" from a TTAC article was more generous than the formatting at Forbes made believe. Letters to Forbes were not returned. Both common and professional courtesy must run short at the magazine. With that said, now it's Ur-turn: There's a big argument online this last week over whether or not GM is really going bankrupt again, and it seems to have been started by a politically motivated piece on Forbes.com. I've been keeping an eye on GM's situation, and I don't think GM's going bankrupt any time soon, but I think they eventually will if they don't change what they're doing. GM's foundation should be built on a bread-and-butter car. If your best-selling car isn't what you depend on to pay the bills, you're in trouble. GM spent a lot of time and money to make the new Cadillac ATS competitive with the BMW 3-series and paid for a lot of press to proclaim it a BMW-beater, but they forgot that it's a niche car with far fewer sales than their mid-sized family car, the Malibu. They cheaped out on the redesign of the Malibu by using an readily available global platform, which made it more cramped than the rest of the competition and positioned it too near the Cruze for the price. Then they botched the launch by releasing it 6 months early to avoid the launches of the new Accord and Fusion. If it were truly a great redesign, then why were they worried about the competition? They knew they'd cheaped out. To make matter worse, they didn't have the new powertrain ready yet, so they threw in their old hybrid powertrain that gets worse gas mileage than the competitor's non-hybrid powertrains. To throw even more fuel on the fire, they still had 6 months worth of 2012 Malibus to get rid of, so they discounted them, cutting their margins and slowing the launch of the new Malibu. This is their bread-and-butter car! As an automaker you have to get the bread-and-butter car right. Then you have the free cash to blow on a Cadillac ATS. All of GM's "GM is not going bankrupt!" supporters keep pointing to the Cadillac ATS as a symbol of their capability to compete with BMW, the Chevy Corvette as a symbol of their capability to produce a world-class sports car on a budget, and the Chevy Volt as the most technologically advanced car in the world. The Cadillac ATS might be good, but it's niche. The Corvette certainly lives up to the hype, but it's niche. The Chevy Volt is well-hyped, but it's not the most technologically advanced car in the world, it's just well placed in the market, and it's niche. Tout all you want, but their money-maker isn't a money-maker, and the stuff that is making money isn't making enough to keep them afloat. The execs at GM know this, so they're doing everything they can to keep up appearances and cover the losses. Fleet sales and rental car sales are up, which sounds good, but is detrimental to the brand image. GM is also under a lawsuit for packing dealer lots with profitable pickups and counting them as sales before they're sold. If the trucks don't sell, GM will have to discount them, cutting the profits on another bread-and-butter vehicle. GM supporters also like to talk about how well GM is doing in China. GM is gaining market share in China, but not by selling American-market cars. Most of the market share there comes from a three-way venture, SAIC-GM-Wuling, making vehicles in China for the local market. The Chinese market is under heavy pressure right now, and although they hold a significant market share, they're selling at a thin margin, and the American market cars that are selling are, again, niche vehicles. Still, GM touts their rising market share in China. They struggle to maintain their market share in the US. They fire executives over losing market share in Europe. GM is still chasing market share over making profits, which is what drove them into bankruptcy the first time around. GM will only get a larger share of the market when they start making cars people want instead of making cars people will take if the discount is large enough. The problem boils down to leadership. Dan Akerson is not a car guy, and he's hiring and firing people, trying to find the right formula for leadership. When Opel Europe lost $100 million in a quarter, he fired their chief without having an adequate replacement. The losses in Europe were heavy, but they were heavy for every automaker except VW. Then there was the $600 million/6 year Manchester United marketing deal. GM fired its marketing director for arranging the deal, then signed the deal two days later. Compared with how GM was spending a total of around $500 million a year on marketing before the bankruptcy, you have to ask how could the marketing director arrange a $100 million per year marketing deal without the CEO knowing? The buck stops with CEO Dan Ackerson. Does GM have anyone who would make a successful replacement, or will Ackerson himself finally study the competition? from The Truth About Cars http://www.thetruthaboutcars.com | |||
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Sunday, August 19, 2012
Ur-turn: GM Not Going Bankrupt – For Now
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