When history is written, 2009 will go down as an ignominious year for Detroit. Driven to the brink by a potent combination of fleeing customers and a free-falling economy, General Motors and Chrysler were left staggering in the first half of the year, finally capitulating to bankruptcy after Uncle Sam intervened to save the companies. Once icons of American industrial might, the automakers cut jobs, closed plants, eliminated models and shed storied brands.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% What will 2010 bring? Both companies have a long way to go to convince U.S. consumers that GM and Chrysler products are worthy of consideration. Further, it doesn't help that some potential car buyers have sworn off the makes altogether for taking a combined $82 billion in federal bailouts, a sentiment that has helped boost the fortunes of the only other U.S. auto company, Ford Motor (F), simply for staying afloat.

The recent ouster of GM CEO Frederick "Fritz" Henderson has led industry insiders to believe that the Detroit-based company, at least, is finally moving in the right direction -- and at a brisker pace. Credit for that goes to interim-CEO Ed Whitacre. In short order, the former AT&T (T) CEO has rebooted GM management, including naming former Microsoft (MSFT) Chief Financial Officer Chris Liddell to run GM's finances, a move some say puts him on the CEO shortlist.

GM Products Are "Worthy"


Whitacre also wants to repay its $6.9 billion in debt sooner than anticipated, a plan one analyst says has the potential to help the Obama administration stave off a public-relations problem should repayment otherwise drag out. "All of us as taxpayers who are exposed in this are paying at least a half a drop of attention to it," says James Bell, executive market analyst for Kelly Blue Book. "There's a sense of obligation to pay that money back." Moreover, Bell says, GM's descent into bankruptcy has allowed the car maker to substantially reduce costs, making early repayment viable.

In addition to reconfiguring management and straightening out its finances, another upside for GM is its products, which Bell says are worthy of consumer consideration. "There is very little reason to shun GM to go look at another brand," he says. As long as consumers are willing to give it a fair shake, GM has every opportunity to gain market share.

It's losing -- not gaining -- a greater share of the market that concerns George Magliano, director of automotive industry research in North America at IHS Global Insight. Magliano says GM is likely to end 2009 with about 20% of the market, when measured by sales. That compares to 22% last year, and IHS expectations that GM's market share will shrink below 17% by 2012. GM's own estimates put its share at about 20% of the market.

At stake is whether GM can covert current Pontiac, Saturn, Hummer and Saab owners over to the auto maker's remaining four "core" brands -- Chevrolet, Buick, Cadillac and GMC. "We're basically saying we don't think they're going to do that," says Magliano, adding that owners of the defunct GM brands will likely defect to Ford, and Japanese and Korean makes.

Chrysler's Challenged Product Strategy

Magliano agrees that Whitacre is acting out of a sense of urgency that didn't exist prior to his ascendancy to the top spot. That means under his leadership GM will do things differently, be more aggressive and take more risks. "They're not going to sit," he says.

As for Chrysler both men agree little is likely to change during the next year. The Auburn Hills, Mich.-based company, now run by Italy's Fiat, has only one new model planned for near-term introduction, a freshened Jeep Grand Cherokee. While a nice vehicle, Bell says, "the market for heavy, mid-sized SUVs is not hot."

Chrysler's lack of a coherent product strategy is no fault of its own, Bell says. Rather, it is the victim of two unsuccessful relationships, first with Germany's Daimler (DAI), which did little to sustain Chrysler amid a slow and painful divorce, and more recently with private-equity firm Cerberus Capital Management, whose management led Chrysler into bankruptcy last spring.

Fiat CEO Sergio Marchionne is a charismatic leader, Magliano says, but talking about new products and actually getting them to market aren't the same. The process is difficult to accelerate. Further, it remains uncertain whether Fiat-based products, including the company's subcompact 500, will appeal to U.S. customers.

Shrinking Market Share


Absent new models, Magliano expects Chrysler's share of the U.S. auto market to slip from its 11% share last year to 6.9% by 2012. At below 7%, Chrysler would have a smaller share than either Nissan or Hyundai/Kia, and become the tiniest of the top seven largest car companies that supply the domestic market. At that level, he says, "surviving as an entity is a major, major issue."

Lastly, while GM has pledged to repay its loan faster than anticipated, Chrysler has hedged on repaying its $3.7 billion in debt. Or as Magliano says, "They're not going to repay anytime soon."

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