Is GM Repeating Old Mistakes?

Apr 04, 2011

Just over a year since it sank into government-run bankruptcy, a leaner, meaner GM relisted its shares on major world stock exchanges, bursting back onto the investment scene with the world’s largest initial public offering.

Is GM Repeating Old Mistakes

 

In the opening months of 2011 sales of GM’s cars and trucks have surged, as the company grabbed market share from its rivals, according to sales data from J.D. Power and Associates. That would appear to bode well for the company’s future, and with it, the potential for U.S. taxpayers to recover the remainder of their investment in the company.

 

But some have questioned how those sales were made, and competitors have complained over GM’s tactics. They say the use of sales incentives such as rebates to grab market share is a shortsighted tactic whose use is worrisome coming from a company now led by an industry outsider.

 

GM has added hefty incentives to its cars since the start of the year, offering big rebates to current owners of GM cars, no-penalty early trade-ins for currently leased GM cars and bigger rebates for users of the GM credit card. The result has been a U.S. market share of more than 21 percent, higher than the company has had in years.

 

But the word in the industry is that sales slumped in March once the incentives expired. “The metaphor that has been used is like drug addition,” said

George Pipas, spokesman on sales analysis for Ford Motor Co. “If you depend on it to move sheet metal it is not so good.  Then your customers depend on it.”

 

Some industry veterans worry that new GM CEO Daniel Akerson’s unfamiliarity with carmaking -- he had a long career as an executive with Nextel and MCI -- is leading GM to repeat mistakes it made when it was headed from 1992 to 1995 by Chairman John Smale, previously president and CEO of consumer products company Procter & Gamble.

 

[via MSNBC]

 

Photo courtesy of Richard Freeman and re-used under the Creative Commons license.