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‘Quite Good’ May Not Be Good Enough For GM

Filed by KOSU News in Business.
September 5, 2012

When you talk to car people about General Motors, they all say the company has gotten better.

“I think General Motors, product-wise, is in a better position than it’s been in a decade or so,” says Jack Nerad with Kelley Blue Book. “The new products we feel … are all quite good.”

Like many people, however, Nerad adds an important caveat. He says GM’s improvement doesn’t mean the company is completely out of the woods, because the competition is very good as well.

While GM has been getting better, so have almost all other car companies — foreign and domestic. Nerad says in this new car world, you need to be more than just good.

“They have to be No. 1 on the shopping list,” he says. “Because a person is only going to buy one car. They’re not going to buy an array of cars.”

Nerad says it’s not enough to be competitive; a car company has to have that vehicle that’s going to put it across the top — a blockbuster. Toyota has the Camry; Honda has the Civic and Accord; Ford has the Fusion. Those are all top-selling cars.

One of the ways those cars have been able to stay on top is because they are constantly being updated and changed. GM is trying to break into that territory with its new Chevy Malibu, which has been revamped but was delayed in coming out in part because of the company’s bankruptcy in 2009. (It emerged from bankruptcy shortly afterward.)

David Zenlea, assistant editor at Automobile magazine, says the new Malibu is a perfectly good car for a year and a half ago.

“When you release a new midsize car, where you want to be is you want to leap to the front of the pack, and then somebody else leapfrogs past you again in six months,” Zenlea says. “You want to have that brief window where you’re the absolute latest and greatest and best.”

The Malibu is a very good car, Zenlea says, but when he drove it he didn’t feel it set the bar a notch higher.

GM is trying to play catch-up and is revamping more than 70 percent of its cars and trucks in the next two years.

GM spokesman Randy Arickx says bankruptcy helped the company get control of its costs and made it easier to turn a profit, but being strapped for cash made it hard for GM to come up with new ideas.

“As we walked through bankruptcy, we actually had to reduce some of our capital spending,” Arickx says. “So the number of products that we’ve been able to bring to the marketplace has been less than the industry average.”

Arickx acknowledges that GM has been challenged coming up with enough new cars and trucks.

Internationally, the company faces trouble in Europe, where it lost $400 million last quarter. GM has also lost some of the ground it gained from companies such as Toyota and Honda, which are now essentially fully recovered from the effects of the March 2011 Japanese earthquake and tsunami.

But when you ask a GM executive such as Arickx about the company’s health, however, they point to two all-important numbers: $33 billion in cash and $5 billion in debt.

Last month, Fitch, the ratings agency, upgraded GM’s investment status one notch and said the company has a stable outlook. But that doesn’t take into account the one-third of the company that the government still owns.

GM’s share price is down after its 2009 initial public offering, so if the government were to divest itself of its stake in the company, GM would lose as much as $16 billion.

This all leaves one question to be asked about GM: When is it fair to really sound the alarm?

Automobile magazine’s Zenlea says he thinks people are sounding the alarm a bit too soon. He says the real hurdle for GM is not its balance sheet, but its cars.

“The real question if you want to judge post-bankruptcy General Motors is going to be to look at [their] products a year or two … down the road and see how … [they] really invest and develop … products,” Zenlea says. “I think that’s where we’ll really get to see what they’re made of.”

The next chance we’ll have to see what they’re made of is 2013. That’s when the Chevy Impala goes on sale, and it’s just one of many tests for GM. [Copyright 2012 National Public Radio]

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