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A Year After Bankruptcy GM Needs to Take the Next Step

Tuesday, 1 Jun 2010 | 12:17 PM ET
GM Headquarters
GM Headquarters

A year ago, who would have thought GM would be where it is today?

A year ago, as then GM CEO Fritz Henderson walked into bankruptcy court, who thought GM would be profitable, and still #1 in the U.S. in the middle of 2010?

A year ago, who figured the people guiding GM would be a former analyst on Wall Street and the former CFO of Microsoft ?

If you thought GM would be in this position or this healthy financially, you were in the minority.

And for all of you who are reading this and saying, "oh yeah, I knew GM would come through the last year in good shape," I'm not buying it.

In reality, few expected GM under Ed Whitacre Jr. to work as well as it has in the last year. Sure, it helps immensely that the U.S. government plunked down $49 billion to make sure GM had the resources to restructure in bankruptcy. That said, you have to give Whitacre and his team credit for making the changes needed for GM to not only become profitable, but more importantly, set itself up to grow in the future.

The question now is whether GM can take the next step?

* Can it grow profits?

Absolutely. What we saw in the first quarter ($865 Million profit) is a taste of what's to come. GM dropping its fixed cost per vehicle by more than $3,000, its costs are not only competitive with Asian automakers. Not only that, using bankruptcy to cut costs, GM is clear to break even when industry sales are at 10.5 million. This year, sales are expected to come in around 11.5-12 million and then grow from there. Bottom line: this company is primed to grow the bottom line.

* Can it succeed as a publicly traded company?

Once GM goes public, likely later this year, it will have a management team more focused on moving quickly. Investors will buy into the new GM. Ed Whitacre Jr. will not run GM forever, but at least initially, he will keep pushing GM employees to make money or get out of the way. It's the kind urgency that GM needs.

* Can it pick up market share in the U.S. and steal Ford's momentum

This will be the biggest challenge for the new GM and the one that will take the longest. New marketing guru Joel Ewanick has a track record (Hyundai) of being bold and taking steps to break from the pack. That is exactly what GM needs to do if it's going to pick up sales and generate the kind of buzz Ford enjoys. Not only that, GM will need to continue cranking out well designed and well made models. The quality has improved substantially, but GM still has a ways to go. If it can combine well made cars and truck with marketing that breaks out of the stodginess we've seen in recent years, then GM could enjoy a renaissance with the American car buyer.

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Questions? Comments? BehindTheWheel@cnbc.com

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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