Tuesday, June 3, 2008

GM Officially Announces Major Shift in Strategy...A bit Late?

We've known for some time now that GM (and other domestic automakers) are in dire straits as they make moves to compete in today's marketplace that devalues SUVs and pickup trucks (long the solid money maker for Detroit's big 3). This morning, at a press conference from corporate headquarters, GM's Rick Wagoner made it official. The question on everyone's mind, especially GM shareholders, might be "is it be too little too late? The news that GM is closing four North American truck and SUV assembly plants should come as no suprise. Perhaps the most telling news though, is that the future of the Hummer brand (which just six years ago GM made a national icon), is in serious jeopardy. In a move that most certainly is intended to signal that GM is serious about it's new strategy around fuel efficiency and petroleum displacement, Wagoner today announced that all options, including a sale, are on the table for the brand that has come to signify the apex of excess in the SUV market. Also of significance, and suprisingly late in coming, GM's board has officially given the go ahead for the Chevy Volt program, including the budget funding necessary to meet the goal of having production models in showrooms by late 2010.

This is particularly significant because the Volt is perhaps the single biggest card in GM's dwindling deck. They have shown signs of life with the restyled and promising Malibu (although the fuel efficiency still lags behind competitors such as Camry, Altima and Accord). Still, the Volt has the real potential to resurrect the GM brand and signal a complete shift in the marketplace to a completely new path. The Volt's plug-in technology and GM's novel extended range EV concept that the Volt depends on are both potential "game changers" in the auto industry.

What is disapointing though, is GM's track record at being behind the curve in almost every way in their efforts to regain the lost luster of what was once the dominant automaker in the world. First, they have largely ignored hybrid technology on small cars and family sedans in favor of hybridizing their large SUVs and pickups. The mentality has been "it makes more sense to us to increase fuel efficiency on a large gas guzzler than a car that already gets decent gas mileage". This thinking misses the mark on two key points: First, no one is buying SUVs and trucks anymore (and folks who've purchase them already can't give them away). And second, they are getting their clocks cleaned on vehicles that are selling...fuel efficient small, midsize and family sedans that would-be SUV owners are flocking to.

Perhaps in no other area is GM's apparent market incompetance more telling than in the Malibu hybrid. They take a very worthy vehicle, Bob Lutz newly redesigned Chevy Malibu and add a hybrid system to it that only nets and increase of 2 miles per gallon over its gasoline counterpart. What's more, until just recently, they only offered the hybrid in basic trim packages, further reducing its appeal. They've reserved their best performing hybrid systems for their large SUVs and trucks which aren't selling at all!

Its with complete irony that a company with such a terrible track record could perhaps lay claim to the one technology that has the potential to change the entire automotive landscape, the "e-flex" platform. In a rare bright spot for the company, it appears that their hopes and future depends on their ability, despite themselves, to get the e-flex Chevy Volt to market on time and at a competitive price point to stem the tide of Prius and Camrys that are flying off dealer lots amid an energy crisis that will only get worse in the years ahead. The Volt just might stave off bankruptcy and complete ruin for GM, but can they beat the clock? I'm sure hoping they can, for the sake of American ingenuity and for the sake of American consumers in need of an alternative to our growing petroleum addiction.

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