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Behind The Wheel

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Mar.31

9:39 AM ET

Tuesday, 31 Mar 2009

Good GM, Bad GM — and Obama's GM

Posted By:Phil LeBeau

Sectors:Oil and Gas | Technology | Automobiles and Parts

Companies:Toyota Motor Corporation | General Motors Corp | Honda Motor Company, Ltd. | Ford Motor Company

General Motors
CNBC.com
General Motors
With members of President Obama's Auto Task Force hitting the ground in Detroit, the re-structuring of General Motors kicks into gear. Monday in Washington may have been all about justifying and selling the government calling the shots at GM, but Tuesday in Detroit is when the president's people get to work. No wonder critics are now saying GM now stands for Government Motors, not General Motors.

So what happens next at GM? Look for the auto task force to move quickly in certain areas.

Splitting the company into "Good GM" and "Bad GM"

The president's people have been kicking around the idea of taking the best parts of GM and making them the core of the company. The "bad" assets of GM (liabilities, debt, etc.) would then be part of what the government may try to wash it in bankruptcy court.
(Contd.)

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The Auto Crisis:

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Chevrolet, Cadillac and GMC

These are the best parts of GM's remaining brands and will be the focus of a leaner company. Having Chevy as the mass market brand and Cadillac for luxury would replicate the Toyota (Toyota, Lexus) and Honda (Honda, Acura) business models. GMC is very successful and could serve the company well as the brand for GM trucks and SUVs, though you could argue those models can just as easily fall under Chevy.

Fewer dealers in metropolitan areas

GM has long had a problem with too many dealers cannibalizing sales in metropolitan areas. In rural America, GM has a slew of dealers, but they require less financial assistance from the parent company and are so spread out that their impact on sales is limited.

In cities and suburbs it's a different story. Look for the government to start targeting the best, most profitable dealers GM should keep — and those that are weaker, less profitable. The dealerships GM doesn't want are the ones the company will cut if there is a bankruptcy filing.

Stripping foreign assets

GM's global network and reach are a strength for this company. The government would be foolish to gut GM's overseas operations, but there are areas and assets that could be sold. There are also brands with limited, or regional appeal. Holden in Australia is a perfect example. Look for the president's auto people to assess the "core" international assets GM should keep.

Next generation technology will be a priority

GM's Voltech is the type of promising technology President Obama wants the auto maker to target and develop. GM will push that technology (along with hybrid and fuel cell development) hard. What about trucks and SUVs? GM won't abandon them, but the government will want R&D spending and future product plans centered around the next generation of vehicles.

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