Could GM Ever Fail? Yeah, It Could Happen

General MotorsIs General Motors (GM) in trouble?

In some ways it's a silly question. Sure, GM gets a lot of flak for the money-losing Chevy Volt, which many critics say is an expensive boondoggle. And unlike rival Ford (F), which has successfully overhauled its product line, GM still has some cars and trucks that remind us of the bad old days.

GM has been cleaning up its act, and has a string of profitable quarters behind it now. But there's still work to be done -- and reasons that The General could end up with perpetual also-ran status.

The Competition Is Fierce

GM has been carrying on like an underdog for too long. For many years the company seemed content to release cars that were a step (or two or three) behind the best of the competition. It could afford to: GM made plenty of sales by discounting -- discounts it could afford thanks to the big profits it made on its pickups and SUVs.

But then gas prices went up, and sales of GM's big cash-cow SUVs went down. That led the company to bankruptcy court.

Now, GM's cars have to be good enough to compete on their own merits. But are they?

Mostly, yes. GM's newest models -- the Chevy Cruze and Malibu, the Cadillac XTS and ATS -- range from pretty good to flat-out excellent. While GM still has more work to do to update its product line, that work is happening. The new cars and trucks it rolls out over the next couple of years should be very good. But if they're not, watch out.

Never before has General Motors faced such stiff competition, all over the world. Toyota (TM) is on a roll and looking stronger than ever. Ford has a slew of hot new cars and trucks like the Focus and Explorer, and is using them to make big gains in markets like China and Russia that are important to GM. And Volkswagen (VLKAY.PK) is on a global mission to overtake GM, backed by a very strong lineup that includes the company's white-hot luxury brand, Audi.

GM's cars will have to be top-notch to compete with this crew. "Good enough" won't cut it. If GM doesn't deliver, it could be in for a long, ugly decline.

GM's Management Is Shaky

It's not that GM CEO Dan Akerson is a bad guy. He's not. A graduate of the U.S. Naval Academy and a veteran executive, Akerson is a capable leader who is said to see the task of reviving GM as a patriotic duty.

But the job of overhauling GM includes the tough work of treating the bureaucratic arthritis that has hobbled the company for decades. So far, Akerson's success on that front has been mixed.

Akerson came from outside of the auto business, and that has led him to make some questionable statements and decisions during his time at GM's helm. His sharp-edged style -- and his tendency to abruptly fire underlings who don't get with his program -- hasn't helped him within the company.

To his credit, he has chosen good deputies: Senior managers like CFO Dan Ammann and product-development chief Mary Barra have done a good job of overhauling GM's messy, unworkable bureaucracy.

But Akerson's style, and his team, lack the easy air of competence fostered by rival Ford CEO Alan Mulally. Mulally's team has worked together for several years now, and that teamwork can be seen in the smooth, methodical way that Ford makes changes or reacts to crises.

GM hasn't reached that point yet. Will Akerson be able to make it happen? It's far from a sure thing. As long as that's true, the success of GM's turnaround will continue to be in doubt.

At the time of publication, Motley Fool contributor John Rosevear owned shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors and have recommended creating a synthetic long position in Ford.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum

116 Comments

Filter by:
he8

Since there is so many anti union here I will explain some things. First Union workers are middle class. You anti union people must be rich. Yes I have benifits. I pay more and more every year for them. My President of the UAW makes about $180,000 a year. Alot less then the CEO. Guess all of the anti union people here think no one but the very top should have benefits. When the Union workes make more money the middle class benefits from all there gains. The Middle class is the job creators since they spend all there money at all the small buisnesses. Are we bullies why yes we are bullies for the MIDDLE CLASS. Guess all the anti union people want no middle class since we cannot afford pay any benefits. Being Union means we are stronger. Just like wild animals herd together so we do not get picked off by the preditors. Lots of preditors here! How much do they pay you to be a profesonal blogger.

October 15 2012 at 10:56 AM Report abuse rate up rate down Reply
he8

Since there is so many anti union here I will explain some things. First Union workers are middle class. You anti union people must be rich. Yes I have benifits. I pay more and more every year for them. My President of the UAW makes about $180,000 a year. Alot less then the CEO. Guess all of the anti union people here think no one but the very top should have benefits. When the Union workes make more money the middle class benefits from all there gains. The Middle class is the job creators since they spend all there money at all the small buisnesses. Are we bullies why yes we are bullies for the MIDDLE CLASS. Guess all the anti union people want no middle class since we cannot afford any benefits.

October 15 2012 at 10:50 AM Report abuse rate up rate down Reply
DON

Using the Ford Explorer as an example of a good new model is questionable as it is not in my opinion as good a vehicle as GM's SUVs.

October 12 2012 at 1:21 PM Report abuse -1 rate up rate down Reply
gjterranov

Obama's hand picked top management of GM is quickly turning GM into CHINA MOTORS! I wonder what the GM U.S.A. union workers think of this:

http://www.youtube.com/watch?v=Lvl5Gan69Wo

October 12 2012 at 11:02 AM Report abuse +2 rate up rate down Reply
1 reply to gjterranov's comment
cpo1514

UAW (You ani't workin) as the jobs continue to go to China, Korea, India, Malaysis and Mexico.. Thanks to Bammy and hid Lib supporters like GE and Soros... Keepin the USA uninformed for the Occupant!!!

October 13 2012 at 8:00 AM Report abuse rate up rate down Reply
marine1942

Heck, if my company did not have to pay federal income taxes we would be outstanding.

October 12 2012 at 9:26 AM Report abuse +1 rate up rate down Reply
Shantel Babi

I can't believe how stupid most of you all sound. You all praise the Japanese Toyota the recall car maker but talk down on your own American company who creates jobs for so many people here in America. Why don't yall dumb*sses move to Japan then.

October 12 2012 at 9:11 AM Report abuse -1 rate up rate down Reply
1 reply to Shantel Babi's comment
livoak810

clap clap clap

October 13 2012 at 7:24 PM Report abuse rate up rate down Reply
hawkihot

This should have already happened. Bankruptcy is the answer for long term survival. No company can pay the kind of benefits their workers have for so many years after they have retired.

October 12 2012 at 7:33 AM Report abuse +4 rate up rate down Reply
1 reply to hawkihot's comment
Dale

sure they can...Congress and with life time health care that you could only dream about...its ok bash away...them ceo's laugh hard at people like you as they ship jobs overseas to pay low wages...maybe the answer is to out source congress...those in corporations love your kind of thinking as them ceo's cash them million dollars bonus checks...wall street and their pals..speculators love it to

October 12 2012 at 11:25 AM Report abuse +1 rate up rate down Reply
kgr656

If GM has to file bankruptcy so be it. They can reorganize and start again without the parasitic UAW. NO MORE BAILOUT----it does not work.

October 12 2012 at 3:18 AM Report abuse +5 rate up rate down Reply
BARKINGwolf

Yes GM can and will fail. I see the same dumass managment that put them in the cess pool in the first place.
Obama will be (if he is still around) handing out more tax payer dollars to GM.

October 12 2012 at 1:50 AM Report abuse +5 rate up rate down Reply
jh

I hope they have to bankrupt and i will never support gm and all because they were bailed out at tax payers dime.Ford is my choice for any vehicles i need.
No gm obama motors for me.

October 12 2012 at 1:27 AM Report abuse +5 rate up rate down Reply
1 reply to jh's comment
cpo1514

Love my Lincoln... built by USA workers... not the Obama appointees.

October 13 2012 at 8:01 AM Report abuse rate up rate down Reply