Friday, June 12, 2009

GM Eliminating Brands

In 2007 an article on CNN stated that GM should shed some of its dying brands, and in hindsight this was excellent advice. The author recommends that GM keep Chevrolet, Cadillac and Saturn, and makes an interesting argument for each. It recommends eliminating or selling the rest.

Turning the clock ahead to the present, we have seen that GM has announced the sale of Hummer and just recently announced the sale of Saturn. GM also has a buyer for Saab.

Given GM's negative cash flow, declining credit rating and increasing pension and health care liabilities, selling these two brands (and most likely others) along with paring down it's number of dealers will bring some more flexibility to address changing market conditions (such as higher gas prices for a portfolio of low gas mileage vehicles and some evidence of increasing consumer demand for hybrid/electric vehicles) as it moves forward from bankruptcy.

Yet I am still concerned about the overall approach by GM as I see it with their focus more on market share as opposed to focusing more on profitability. Hopefully, bankruptcy will give GM the ability to shed some liabilities, but some of those I do not see changing substantially. If that is the case, GM is just forestalling the inevitable, much like many US brewers have done over the last 40 years. I hope that I am wrong, or the market conditions change in the future to give GM a competitive advantage.

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