For A New GM, Old Questions On Incentives, Product Development

March 25, 2011
2011 Cadillac CTS-V Coupe

2011 Cadillac CTS-V Coupe

2011 Chevrolet Volt

2011 Chevrolet Volt

Last year when automaker General Motors [NYSE: GM] emerged from bankruptcy, the outlook for the automaker was looking bullish by most accounts. Yet recently, some analysts and observers have expressed concern for the company's tack under CEO Dan Akerson.

While other companies have been reeling in incentives, GM led in incentive spending among automakers for the first two months of 2011.

According to Autodata figures cited by the Detroit News, GM was spending an average $3,732 in incentives per vehicle—$1,154, or 45 percent, higher than the industry average.

That's increased GM's market share—albeit at the expense of image, resale value, and even company profits—oddly, at a time when most other automakers have admitted that such a strategy doesn't make long-term business sense.

At General Motors, it's only the latest twist in a decades-long power struggle between executives who are accustomed to the auto industry and those brought in from outside, who tend to be more focused around the idea that a car is a consumer product, appliance, or commodity.

Falling into that latter group is Akerson, who has previously held executive posts at Nextel and MCI. "It's a consumer product," he recently said to the Wall Street Journal earlier this year. "GM has to start acting like a consumer-driven, not engineering-driven, company. We sell a consumer product -- our can just costs $30,000."

Akerson has also criticized the typical four-year new-vehicle product-development cycle.

A few executives, like former vice chairman Bob Lutz, have championed engineering and product over the idea of marketing a consumable. Prior to its largely recession-induced bankruptcy GM had been on an upward trajectory—with Lutz in part to credit—thanks to a series of leading-edge products like the Chevrolet Volt and Cadillac CTS.

Some have anticipated leadership under Akerson as leading to the same tight spot that the company was led into by Chairman John Smale and North American chief Ron Zarella, in the 1990s—with a focus on cost-cutting and the cutting of more farsighted programs.

Most long-reigning executives in the auto sector do agree that the business is different. Here, top-notch engineering is the foundation of strong consumer products, and an assurance that they won't wilt with each financial quarter, or product cycle.

Is this a flashback to the mistakes GM made in the 1990s and early last decade? Surely it's different this time as the automaker can't go back to focusing mostly on trucks. But stay tuned.


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