With Bankruptcy Over, What's Next for GM?

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Researched by Industrial Info Resources (Sugar Land, Texas)--Now that General Motors Corporation (OTC:GMGMQ) (GM) (Detroit, Michigan) has emerged from its 40 days in the hole, so to speak, it's time for the new GM to step forward and make the necessary changes to get the automotive giant back on top. While its bankruptcy was one of the quickest in history, especially given the size of GM, the company's problems are far from over if significant changes are not made across the board. Upper management obviously said and did the right things during the bankruptcy period, but now that the protection is over, there are a number of things that GM must do to regain what it has lost during the last few years. Below is a list of some of the key items that must be addressed in the coming months if GM is going to recover.

1] Rebuild its image.

First and foremost, GM must rebuild its image. For decades, GM has been the automotive giant, the company that led the way, rather than followed the trends within the automotive sector. However, all of this came crashing to a halt as problem after problem faced the automaker that it was simply unable to solve. Now consumers, for good reason, lack confidence in GM the brand, as well as the vehicles that it produces. So the first thing that GM must do is rebuild this shattered consumer confidence and get people buying its vehicles once again. We can expect, in the coming weeks and months, massive advertising campaigns coupled with major deals and breaks on vehicles across the country as GM looks for a rapid way to get money coming back into its massive coffers.

2] Trim its lineup.

One of GM's major problems up until this point is that it simply manufactures too many vehicles under too many brands. The automaker has already begun the trimming process in this area by attempting to get rid of the Hummer, Saturn and Saab brands, as well as officially discontinuing the Pontiac brand. Only the coming months will show if the sales of these brands do indeed come off, but in the meantime, GM needs to take a cold, hard look at the brands and models it intends to keep and make some tough decisions. Do they really need all of these models? Can they continue to produce all of these models and make money? What models can they discontinue and what new models do they need to bring in? These and many other questions about the GM lineup will need to be addressed before the automaker will have any hope of recovering completely from its financial troubles.

3] Restructure its infrastructure, yet maintain cordial relations with the unions and suppliers.

GM has already made significant strides towards restructuring its infrastructure. The company has closed or will close up to 14 plants and has trimmed its workforce by thousands. However, as GM does some serious soul-searching and identifies what models need to be discontinued and also looks at how best to streamline overall operations, additional plant closures and job cuts may well be necessary. In order to accomplish this, GM will have to continue to walk the tightrope of its relationship with the all-powerful United Autoworkers Union (UAW) (Detroit). If the company decides to close additional plants and makes additional job cuts, it will have to negotiate with the UAW in each case. While the union has been working closely with GM during the past two years as GM has struggled, there will come a time when the union will probably stiffen and demand more from GM in order to approve additional cuts.

In addition, GM is going to have to take a serious look at its supplier network. Currently, thousands of companies supply parts to GM as well as the other North American automakers. Many of these companies have faced significant financial problems of their own as the automotive market has crashed in the past two years. GM is going to have to work with the remaining suppliers to streamline the supply process for its remaining plants, coming to agreements that benefit both GM and the suppliers and help keep all the involved companies in business for the long run. GM cannot produce vehicles without its supplier network and must change the way it has dealt with these companies if it wants to evolve and survive in the coming years.

4] Streamline management.

One of the key reasons GM managed to get out of bankruptcy so rapidly was the agreements made to streamline management processes. GM has always been slow and ponderous when it came to upper management and decision making. That has to change for GM to evolve into a successful automaker once again. GM has already begun trimming its upper management payroll and this is expected to continue in the coming months. However, simply cutting jobs will not completely solve the problems facing the company. There needs to be a complete change in corporate philosophy, without which GM will likely fail once again. Decisions on making cuts, which vehicles to develop and what direction the company will head must be made in a much more rapid fashion if GM is going to avoid a future bankruptcy problem. While upper management is saying all the right things at this time, we will have to see how these changes are made, how deep they go and how they are implemented to determine if enough has been done on this front.

5] Pay attention to the marketplace.

For decades GM has marched to the beat of its own drummer. While gas prices fluctuated wildly and sales on larger vehicles were sluggish, GM continued to focus on selling trucks and SUVs, simply because that was where the greatest profit margin was. This will certainly have to change at the new GM. Management has stated GM will focus on smaller, more fuel-efficient vehicles, and while the company will certainly continue to sell pickups and SUVs, GM will also try to develop vehicles in the future that the consumer actually wants, rather than trying to dictate what the market is based on the types of vehicles that will make the most money for the company. This will be a significant change for GM, and it will be interesting to see if they can pull it off. This will also be tied in directly with the previous point about management changes, because without significant changes in regard to whom is running the company and how they run it, it will be difficult for GM to let the marketplace dictate which vehicles the company produces, and GM may well find itself attempting to force feed consumers once again.

6] Build fuel-efficient vehicles.

The federal government has taken the effort to change the automotive sector's focus from larger, inefficient vehicles to smaller, more fuel-efficient vehicles very seriously. There has also been increased pressure for automakers to develop alternative vehicles such as solar- or battery-powered cars. GM will have to pull out all the stops to attempt to be on the forefront of these efforts in the coming years. Times are changing within the automotive sector, and GM will have to change with them or will face the prospect of another bankruptcy looming in the future.

7] Turn a profit and pay back tax payer debt.

GM will also have to walk the fine line of turning a profit, making investors happy and finding ways to pay back the billions of dollars in taxpayer loans that the company has accepted. This is going to be one of the more difficult aspects of the coming years for the new GM. GM will have to make intelligent choices about the focus of the company in order to make money if it is to have any hope of paying back these loans and getting out from under the heavy hand of governmental ownership. GM will be under a microscope the entire time it is making changes, as both the federal government and the taxpayer now have a vested interest in the future of GM, thanks to the bailouts the company has accepted.

8] Not to slip back into old ways once free and clear.

Probably the most difficult thing for the new GM to accomplish in the coming months is to not slip back into old ways once the changes are made. GM has a long and storied history as an automaker in the U.S., and most of the decision-makers at the company have been there for decades. It is going to be difficult for these management titans to make sweeping changes--changes that are necessary, but in many cases go against the GM culture that has developed during the life of the company. Yet, if the company does not make the necessary changes, GM could find itself slipping back into old ways of doing business, ways that led them to the bankruptcy from which the company has just emerged.

The coming months, if not years, will be both trying and exciting times for the new GM. Changes will need to be made, in some cases sweeping changes, or GM could find itself regressing and facing the same problems all over again. However, at the same time, the new GM has a chance to start fresh, with a clean slate, which is an amazing thing for a company of the size of GM. Hopefully, GM will take advantage of this second chance and make the most of this opportunity, turning a stagnant, old company into a new, vibrant and once more successful company that can take its place at the forefront of the American automotive sector.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.