Saturday, May 07, 2005

The Trouble with GM

To be fair, Ford is having similar problems, but they just aren't the whipping boy in the media now. Let's not forget back in 2002/2003 they sure were, while GM was sitting on the sidelines.

BusinessWeek did a great article on GM, and why their problems cannot be easily fixed. I'd like to say the problem is their cars, but I think some of it is their lack of....GM has been focusing too much on SUV's and pickup trucks, while letting their car line lag. In reality, GM has put out some new cars lately (Pontiac G6, Chevy Cobalt, Buick Lacross), but none of these cars are "pushing the envelope". I've seen the G6, and I think that is one sweet car. Haven't driven it yet, but I would say that GM is probably getting a worse whipping than they deserve from the media. Same for the Cobalt. The Chevy Equinox cross over SUV has been selling like hotcakes. The selling problem with GM is they are too dependent on "chic" vehicles. The large SUV has been the "wanted" vehicle the past couple years, but as any one with any marketing knowledge will know, consumer trends and tastes shift over time. Why GM could not figure out that the SUV craze was cooling off is beyond me. Ford saw it and planned for it. GM is in denial, stating that new versions of the Tahoe, Suburban, and Silverado will spur sales. I'm sure they are right; some holdouts will trade up for the new thing. I am quite certain it will be a short term boost, not drawing huge amounts of buyers who might not have otherwise bought a GM product.

Quality is not GM's problem either. GM makes quality cars. I have been very happy with the three I have owned. The problem is the perception, Honda and Toyota have been building quality cars for 30 years. They have an expectation of quality. People almost expect GM not to be as good as Toyota or Honda. It doesn't help when magazines like "Consumer Reports", (which I love their reviews), appear to show obvious bias towards foreign cars. In 2000, they had the VW Passat as the best sedan. Come on now, a VW is a nice car, but for many of us, a Ford Taurus, that likely has similar reliability, fits the call of duty for a lot less cash.

Labor contracts are certainly a big issue and it looks like the day of reckoning has finally arrived.

GM's possible plan on hanging on until the actuarial tables change in its' favor (BW) sounds very similar to a company I once followed. That company had labor issues, product (mainly perception) problems, and never took the opportunity to make the painful cuts that could have ensured its survival. That company was TWA airlines.