GM: Fitter, Happier, More Productive?
Automotive News [sub] indulges in the optimism that dare not speak its name, courtesy of the omnipresent Center for Automotive Research. “A happier GM? Billions in costs disappear,” runs AN‘s headline. And then comes the equivocation [emphasis added]:
During its reorganization, General Motors should be able to shed about $12.5 billion in annual costs — paving the way for possible profits, higher product spending and improved supplier health once U.S. vehicle sales recover to more normal levels.
Inspiring stuff! Why, if these “shoulds” and “possibles” come true, CAR research shows that “GM could even eliminate almost $3,000 per vehicle in incentive spending, adding an additional $8 billion in savings when compared with the pre-bankruptcy GM.” It’s already a stretch to believe that GM can hold steady at a 10m SAAR, given its long-term market share losses, but eliminating incentives? Why not a flying, carbon-neutral Camaro?
After all, the cut-to-the-bone downsizing is only necessary given the current overcapacity. But shutting plants, squeezing the union, and forcing dealers out of business do little to improve the miserable perceptions of GM’s products. In fact, given the public funding for this cost-cutting campaign, GM has to consider the possibility that the more they cut, the less popular they become. And in any case, GM’s decades-long addiction to incentives is going to make a product-led turnaround that much harder, since transaction prices will be considerably higher than GM customers have become used to. As CAR’s data shows, GM may fall short of selling 2 million vehicles in the US this year. Where exactly is all this optimism coming from?
More by Edward Niedermeyer