Can GM Turn Itself Around?

February 19, 2006

Delphi Sets Final UAW Deadline by Joseph Szczesny (2/19/2006)
Will there be a strike on March 30?




Workers at General Motors’ Pontiac Assembly Plant, a half-hour’s drive north of Detroit, got a rare bit of good news last week. The increasingly troubled automaker will not only invest $545 million to upgrade some of its Michigan factories, but it will also add an estimated 280 jobs at the Pontiac plant later this year.


The announcement comes in sharp contrast to others the automaker has made in recent months. Just weeks ago, GM revealed plans to sharply cut back on salaried pension and healthcare, while also “sharing the pain” with stockholders, who’ll lose half their dividends, and senior executives, who’ll lose up to half their pay. Last autumn, CEO Rick Wagoner announced plans to close five assembly plants and trim around 30,000 jobs.


Even the latest, upbeat announcement has fueled skepticism. The Pontiac plant is being readied for a new line of full-size pickups GM will start producing in October. They share their underlying platform with a generation of new sport-utility vehicles, such as the Chevrolet Tahoe, which went on sale in January.


When the giant automaker began work on those SUVs, it envisioned a market segment of at least one million vehicles annually. Now, however, it’s more likely to run in the range of 750,000, according to vice chairman Bob Lutz. Even if GM can maintain its current share, an eye-popping 60 percent, that’s a significant shortfall.


Like the big SUVs, the next-generation pickups face a new world order of high-priced petroleum, as well as some increasingly serious import competition from the General’s most feared rival, Toyota. The 2008 Tundra, unveiled at this month’s Chicago Auto Show, is no longer an underpowered runt. It has the muscle to become the first big-selling import contender in the last segment unabashedly dominated by Detroit.


That would be devastating to GM, in particular, as one senior truck executive — who spoke only on background — acknowledged this week. During a test drive of the Tahoe’s sibling SUV, the GMC Yukon, he lamented hearing from colleagues across the company. “You’ve got to save us,” said one, admitting his own project was almost certainly not going to meet its sales and profit targets.


Living up to expectations


With the exception of the obscenely profitable full-size trucks, few recent GM products have lived up to expectations. The automaker’s ungainly sport vans have proved an unmitigated disaster. Specialty vehicles, such as Chevy’s “Corvette pickup,” the SSR, and convertible/ute Envoy XUV, have answered questions consumers weren’t asking.


All the while, sales and market share have continued to plunge. Just a few years ago, workers at GM world headquarters in Detroit ’s Renaissance Center wore buttons that simply said, “28.” Points of market share that is, a figure the automaker came tantalizingly close to — before heading in a downward death spiral. Last year’s giveaway “employee pricing” incentives offered nothing but a brief reprieve. So now, more than a few analysts, such as Joe Phillippi, fear the automaker may soon be struggling to keep its head above the 20-percent mark.

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