GM's Latest Move Is Hard to Believe
Oct 10th 2012 2:23PM
Updated Oct 10th 2012 2:30PM
General Motors' (NYS: GM) effort to revitalize its troubled Cadillac brand continued on Tuesday, as the company promoted its chief Washington lobbyist to a newly created position as Cadillac's global sales and marketing chief.
Yes, I said "chief Washington lobbyist." Who is now the global steward of GM's flagship brand.
Does that sound weird to you?
It sure did to me when I first heard it. Let's take a closer look.
A former telecom executive who ran GM's Washington office
The person in question is Bob Ferguson, who until Tuesday was GM's vice president for public policy, based in Washington. Ferguson is a former AT&T (NYS: T) executive who joined GM in 2010 at the behest of then-CEO (and former AT&T CEO) Ed Whitacre.
He led GM's negotiations with the Obama Administration over last year's new fuel-economy standards and helped prep current CEO Dan Akerson for tough congressional hearings over the Chevy Volt earlier this year.
Word is that Ferguson impressed Akerson greatly during those hearings, and that led to his promotion. He'll be reporting directly to Akerson in his new role.
That's all fine. But he's not a "car guy," as they say approvingly in Detroit, an executive who lives and breathes cars and the car business. He's not a guy with an extensive background in luxury marketing that could maybe transfer well to this role. He's not even really an auto executive.
Or wasn't, until yesterday.
And here's the thing: The revival of Cadillac is going to be a huge, challenging project that will probably take (at least) several years of hard, high-profile work.
Is this guy really the best man GM had for the job?
A surprising choice for a critical role
Longtime industry analyst Maryann Keller told Bloomberg that she was "speechless" at news of Ferguson's ascension, finding it hard to believe that GM didn't have a candidate who could "hit the ground running. That's about where I am: This seems to be the kind of job that cries out for someone who lives and breathes Cadillac, who knows the brand and its competition inside and out and who knows the nuances of marketing luxury cars in markets around the world.
Isn't there somebody else inside the company, or at least in the industry, like that? Maybe somebody like U.S. Cadillac marketing chief Don Butler, who will now report to Ferguson? Or if he wasn't the right guy for whatever reason, couldn't GM have made a hire from VW or BMW (NASDAQOTH: BAMXF.PK) or Lexus to get someone who really knew his or her stuff?
After all, this is a critical project for GM. Cadillac is a 110-year-old brand that used to be "The Standard of the World," but fell on hard times over the last quarter-century or so. While its longtime rival, Ford's (NYS: F) Lincoln brand, has largely faded into irrelevance (though that could be changing), Cadillac itself has been eclipsed by the powerhouse German luxury brands, as well as by Toyota's (NYS: TM) Lexus.
Reversing that decline is crucial to the project of reviving GM.
Cadillac is crucial to GM's revival
Rebuilding Cadillac into a credible global competitor for the likes of BMW and Lexus and Audi is a vital undertaking, and it's going to be a huge, challenging one. While GM has already taken a few good steps in the right direction - the new Cadillac ATS is a strong entry - there's much, much more to be done.
At minimum, to compete with Lexus and the Germans, the CTS sedan needs to be overhauled and taken upmarket (that project is under way, says the GM rumor mill) and a proper no-holds-barred "flagship" large car needs to be developed. Other models will have to be conceived, carefully developed, and brought to dealers around the world. And all of those new vehicles will need to be carefully marketed to a discerning audience - the world's luxury-car buyers - that has decades' worth of good reasons to be skeptical of anything GM says.
But it has to be done: It just takes a quick look at Volkswagen's (NASDAQOTH: VLKAY.PK) financials to understand why. Audi has become a global powerhouse for VW, with big sales and fat margins generating 46% of the company's nearly $4 billion in operating profit last quarter. Audi's tremendous strength in China and resilience in Europe is the envy of... well, just about everybody.
GM would certainly like a piece of that success. Let me rephrase: To secure the global leadership position that Akerson craves for GM, that GM's shareholders are hoping for, GM needs Cadillac to succeed on the same level as Audi.
Is Ferguson really the best choice to make that happen?
Will this be another blunder for Akerson?
Maybe Ferguson will surprise us. Even if his experience is far from being on-point for this role, he seems like a capable executive, and might well thrive in this role. GM's shareholders should certainly give him a chance.
But Akerson's track record includes some head-scratching moves that have led many observers to wonder if he's out of his depth as GM's CEO. The risk is that this could well turn out to be another one.
GM's stock has risen a bit recently, but it's still not far from its post-bankruptcy low. But if CEO Dan Akerson can harness GM's potential and get the Feds to exit honorably, GM's stock could have significant upside over the next couple of years as new products hit showrooms and improvements continue around the world. However, investors need to stay attuned to fluctuating demand and the ability of automakers like GM and Ford to respond in unison. For starters, one of our top equity analysts has compiled a premium research report with in-depth analysis on Ford's competitive edge. To find out what could propel Ford down the road, click here to get instant access to this premium report now.
The article GM's Latest Move Is Hard to Believe originally appeared on Fool.com.Fool contributor John Rosevear owns shares of General Motors and Ford. Follow him on Twitter at @jrosevear . The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors, BMW, and Ford. Try any of our Foolish newsletter services free for 30 days . We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.