GM is in overdrive with its sales prospects

Some fascinating insights into the decline of a once-great motor company are provided by the New York Times.

The newspaper reminds us GM has been hemorrhaging customers for decades.

For the last 30 years, it has been losing almost one percentage point of market share every year. It sold 45 percent of the new vehicles in this country in 1980, 35 percent in 1990, 28 percent in 2000 and 19 percent so far this year.

Readers then are invited to imagine making a conservative forecast of GM’s market share five years from now.

What would you say? GM executives were asked to do precisely this, while putting together a restructuring plan to persuade the White House to save the company from collapse.

Their answer was 19 percent.

That’s right: with their company headed toward bankruptcy court, their work force being cut by 21,000 jobs and their decisions now subject to Washington’s approval, GM executives predicted that the company would suddenly become better at holding on to its customers.

This small triumph of hope over experience — and the fact that the Obama administration still approved the restructuring plan — gets right to the biggest reason to worry about the GM bailout.

The article analyses what has happened: the bailout will solve many of GM’s biggest problems. Workers have accepted painful cuts to their retirement benefits; bondholders have forgiven debts; work rules that sapped productivity and creativity have been removed; the Obama administration is preparing to remake the board.

But GM still has to make cars that enough people will want to buy, “and optimism doesn’t qualify as a strategy.”

Trouble is, GM’s rivals make better cars, and the ultimate judgment comes from the market.

As Susan Helper, an economist at Case Western Reserve University, points out, Detroit’s cars are consistently priced $2,000 to $3,000 below their Japanese equivalents, yet have continued to lose market share.

Most worrisome, many car buyers in their 20s and 30s don’t even consider buying an American car. These younger buyers are effectively replacing loyal Chevrolet, Ford and Chrysler customers in their 60s and 70s, the auto analyst John Wolkonowicz notes. Which is why Detroit’s market share just keeps falling.

Wolkonowicz and his colleagues at IHS Global Insight, a research firm, have forecast GM’s market share will drop to 17 percent in 2014 and to sell 20 percent fewer cars than the company expects, both this year and next year.

The article goes on to look at GM’s profitability prospects and chief executive Fritz Henderson confidence that the bankruptcy “marks the beginning of what will be a new company, a new GM, dedicated to building the very best cars and trucks.”

It also expresses the hope the Obama administration will force him and his colleagues to be realistic.

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