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Last fall, the road ahead looked smooth for General Motors.

Just over a year since it sank into government-run bankruptcy, a leaner, meaner automaker relisted its shares on major world stock exchanges, bursting back onto the investment scene with the world’s largest initial public offering.

But just 4 months later some industry observers are expressing concern that the company's new driver, CEO Daniel Akerson, is unfamiliar with the car market terrain and could steer GM into a ditch.

Critics contend Akerson, a former telecommunications executive, is surrounding himself with agreeable subordinates from similar backgrounds, focusing too much on cost-cutting and relying heavily on incentives, such as rebates, to artificially inflate sales at the expense of profits and brand image.

Adding to the concern: The sudden departure this month of GM’s finance chief Chris Liddell after barely a year on the job. Liddell shepherded GM through its record $23 billion IPO last November, and his departure renewed concerns about GM’s stability and performance that many analysts had credited the automaker with having put behind it in recent months. The company has had 4 chief executives in the past 2 years.

“I’ve seen this movie before, and it doesn’t end well,”
longtime Detroit adman Peter Delorenzo said his blog, autoextremist.com.

Things have certainly looked upbeat for GM of late.

In the opening months of 2011 sales of GM’s cars and trucks have surged, as the company grabbed market share from its rivals, according to sales data from J.D. Power and Associates. That would appear to bode well for the company’s future, and with it, the potential for U.S. taxpayers to recover the remainder of their investment in the company.

But some have questioned how those sales were made, and competitors have complained over GM’s tactics. They say the use of sales incentives such as rebates to grab market share is a shortsighted tactic whose use is worrisome coming from a company now led by an industry outsider.

GM has added hefty incentives to its cars since the start of the year, offering big rebates to current owners of GM cars, no-penalty early trade-ins for currently leased GM cars and bigger rebates for users of the GM credit card. The result has been a U.S. market share of more than 21%, higher than the company has had in years.

“We don’t see any upside to incentives,” said Eric Lyman, director of residual value solutions at Automotive Lease Guide, the industry authority on residual values. “It is manipulating the market and lowering the cost of your vehicles, which lowers the resale value of your used vehicle in the market,” he said.

That is the primary concern noted by George Pipas, spokesman on sales analysis for Ford Motor Co. “the focus becomes on the deal rather than the product,” he said “It clearly does have an adverse impact on resale value.”

GM declined to respond directly, but supplied text of a March 1 conference call with analysts by Don Johnson, vice president of sales operations. “Price or incentives alone do not fully explain a 70% retain increase and a gain of almost three full share points,” he insisted.

But the word in the industry is that sales slumped in March once the incentives expired. “The metaphor that has been used is like drug addition,” said Pipas. “If you depend on it to move sheetmetal it is not so good. Then your customers depend on it.”

Some industry veterans worry that Akerson’s unfamiliarity with carmaking -- he had a long career as an executive with Nextel and MCI -- is leading GM to repeat mistakes it made when it was headed from 1992 to 1995 by Chairman John Smale, previously president and CEO of consumer products company Procter & Gamble.

Smale's hand-picked North America president Ron Zarella championed the launch of the Pontiac Aztek, a dismal-selling SUV whose laughable styling brought it to a quick end.

Akerson similarly has appointed outsiders to some top jobs including the recent announcement that Dan Ammann will take over as chief financial officer April 1. Ammann came to GM from Morgan Stanley’s investment banking group. Akerson also has installed former Sprint Nextel executive Linda Marshall to head GM’s OnStar division.

As GM’s CEO, Smale put forward the belief that GM’s cars could be packaged and sold just like P&G’s consumer goods, with the differences largely in the packaging and marketing. The result was a product line of nondescript cars -- the Aztek notwithstanding -- drained of both cost and customer appeal.

In an echo of that past, Akerson recently told the Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview.

“It’s a consumer product,” he said. “GM has to start acting like a consumer-driven, not engineering-driven, company. We sell a consumer product -- our can just costs $30,000.”

Industry insiders with a memory of the 1990s immediately blasted this view as a return to Smale’s failed strategy to commoditize a product for which a strong emotional connection is important to drive sales and to cultivate brand loyalty.

“The only difference between GM then and GM now is that this is a company that has only recently emerged from the abyss of bankruptcy, one that can ill-afford a single misstep brought upon by misguided leadership, even though it has the most competitive lineup (of vehicles) it has had in decades,” Delorenzo said.

At the time of his departure from the company last year, former vice chairman of product development boss Bob Lutz recalled the mess he found upon joining GM in 2001:

“Product development was all folded in organizationally with brand management,”
he said. “This was done by John Smale, who believed that you could use the principles of the consumer products business in the automobile business, which has been tried before and it simply does not work.”

An emphasis on cost and speed of product development rather than on product quality and customer satisfaction resulted in cars no one wanted, Lutz said.

Under Lutz, GM won numerous car awards such as the North American Car of the Year for the Saturn Aura, Chevrolet Malibu and Chevrolet Volt, while cars like the Cadillac CTS, Chevrolet Corvette and Buick LaCrosse have won plaudits from magazine reviewers.

Additionally, transaction prices -- the actual sale price of GM’s cars and trucks -- climbed by $4,000 as the result of an additional $1,000 of manufacturing cost, said Lutz, making customers happier and the company more profitable.

Now Akerson says speed and cost are the aspects on which he will concentrate, telling the Journal that “during World War II, GM produced tanks and equipment within 4 years. Why should it take 4 years to put a car out?”
 

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who would buy a GM car? shouldve used our Tax money to help out with Ford and Chevorlet instead of a "Gay Man's" car
So... couple problems here.

A - Ford didn't need the tax money bail out, so that is wrong, they did under Alan Mulally, who has straightened Ford out. No assistance from federal government.

B - GM is the umbrella that Chevrolet falls under. (GMC, BUICK, Cadillac, Chevrolet, Opel, amongst others) They also used to own Hummer, Saab, Saturn, Pontiac, etc.

C- What does a individuals sexual preference have to do anything with what car they drive?
 

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^ or they should have used the tax money to help our economy or help the needy at least. I dont know I really don't watch the news that much and I know I should so I know whats going on in our country.
 

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GM is still junk. I just bought my Civic SI from a Chevy dealer...he was trying to talk me into a chevy. I said "I'm a honda guy...you aren't going to get me into one of those" and that was the end of that.
 

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GM is still junk. I just bought my Civic SI from a Chevy dealer...he was trying to talk me into a chevy. I said "I'm a honda guy...you aren't going to get me into one of those" and that was the end of that.
I agree, however, Chevy is alright, but if I were to pick a domestic car, i rather get a Ford Focus or a Fusion.
 

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I agree, however, Chevy is alright, but if I were to pick a domestic car, i rather get a Ford Focus or a Fusion.
Ford is the only domestic car I would consider buying. And you'd have to practically give it to me.

Now the newer boss mustangs....that's a different story, haha.
 
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