Monday, November 1, 2010

The Future of GM

This week I sat through a lecture discussing the current state of the US auto industry, specifically GM. I am mainly restating what I heard in this lecture because I find it very interesting and I think that it should be discussed.

Many political pundits will tell you that with hindsight, the GM bailout was a good idea. After all, we gave the company breathing room to pay off some debts, renegotiate others, and most importantly we saved thousands of American manufacturing jobs and we can still say that “America Builds Things”! Now as GM prepares for one of the largest public stock offerings in history in which they plan to pay back the government for its investment we can start to ask, was this really a good idea?

Here’s a couple reasons why we might want to still be a little sceptical of the bailout frenzy. First of all let’s ask, what does GM still make? Primarily trucks that sit on large chassis and frames that tend to use lots of fuel. What’s most frightening about these trucks though is that many in Washington want to push through legislation to make these same exact vehicles illegal to drive on American roads by the year 2015 (find source). Therefore if that’s the case then we just bailed out a company whose main product will be illegal to sell in the US in under 5 years...interesting.

Another reason to be skeptical is to really look at the Chevy Volt, what some are saying will be the savior of the company. The Volt is still out of reach of many Americans at a price tag of $41K ($33K if Washington can implement the tax credit) and therefore still can’t compete with Toyota’s Prius at around $25K. And when you look at the overall product line of GM the Volt is still just a tiny sliver of their offering. I might even venture to say that the Volt was somewhat of a political maneuver to show Washington that they’re moving forward but they’re really still banking on the old way of doing business.

Again I’m not claiming this is exactly what will happen but it is something that should be discussed.

No comments: