As "cash for clunkers" provides a much-needed boost to Detroit, General Motors is trying to craft a strategy that will enable it to maintain its position as America's best-selling brand. Sporting a new board of directors, only six of whom were on the "Old GM" board, the company is simultaneously trimming fat and trying to extend its brand.
However, GM's current approach could make its goal of remaining number one a bit harder to reach. As the automaker streamlines itself, it is dropping its Pontiac, Hummer, Saturn and Saab brands, which collectively account for three percent of the US car market. Given that GM's 18.9 percent July market share put it only narrowly ahead of Toyota's 17.5 percent share and Ford's 16.5 percent share, the missing three percent could easily push it into the number two -- or even the number three -- spot.
This isn't to say that all of the company's streamlining moves are as fraught with difficulty. For example, although GM's push to cut thousands of workers will prove pricey in the short term, it will most likely pay off over the next few years, as auto sales will probably return to their previous lackluster numbers after the "cash for clunkers" program expires. And the company's sale of German automaker Opel will generate revenue without touching the domestic car market.
The ultimate key to saving GM will lie in making cars that customers want to buy. Half of this problem -- the cars themselves -- may already be on its way to being solved. The Chevrolet Volt, a battery-powered hybrid, will go into production in 2010; while it is too early to judge its impact, the gas sipper has the potential to push consumption-conscious drivers back into buying domestic. Aggressively styled and sharply attractive, it has the sleek lines and powerful look of an American car, but offers a move toward the intelligent, careful engineering of Japan's hybrids.
As GM tries to rapidly roll out its newest machines, its fate rests on its current lineup; therein lies the second half of the automaker's dilemma -- and its strategy. Over the past few years, a major part of the automaker's problem has been its reputation for making poorly-engineered, unexciting cars. As it moves forward, GM is trying to counter this perception with a new advertising blitz that will highlight its improved engineering.
Another major shortcoming is the widespread perception that GM, or "government motors," is little more than a ward of the state. Facing consumer resentment over the taxpayer money that has already been spent on keeping the company afloat, GM's leaders are toying with the idea of facing the problem directly. By asking prospective customers to try out the cars produced by the company that they already own, an aggressive ad campaign could potentially defuse consumer resentment.
Regardless of whether or not GM pursues this controversial route, it is reassuring to see that they are considering the kind of bold initiatives that could help them to compete in a car market whose rules have quickly -- and radically -- changed.
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