It may take awhile to convince car buyers, but General Motors (GMGMQ, news, msgs) has emerged from bankruptcy with better prospects for a profitable future than virtually any of the automaker's critics predicted a few months ago. Here's why:
It exited bankruptcy in record time. Chrysler surprised nearly everybody by emerging from bankruptcy in 40 days. GM, a far bigger and more complex company, beat that by a couple of days. That gives the "new GM" a fighting chance to escape the cloud of failure that has hung over the company for much of the last year.
"It helps them get the idea that 'GM equals bankruptcy' out of consumers' minds," says Michael Robinet of forecasting firm CSM Worldwide.
Its biggest problems are in the past. GM has left behind billions in debt, axed hundreds of low-volume dealerships and gotten rid of its four underperforming brands: Hummer, Pontiac, Saab and Saturn.
GM has also reduced its labor costs to the point that they're practically equal to the most efficient automakers, removing another obstacle to profitability.
GM already has appealing cars. Its overall lineup is still spotty, but popular vehicles like the Chevrolet Malibu, GMC Acadia, Cadillac CTS and new Chevy Camaro represent plenty of good product that's available today.
Sales of such vehicles could take off if GM can exploit its quick exit from bankruptcy to convince buyers the company is back on its feet, and will be around for the long haul.
Chrysler, by contrast, still has huge holes in its product lineup, and they might not be filled for two or three years.
GM has to work hard to win back consumers. Henderson admitted as much when he said that GM will try to distinguish itself by reaching out to buyers in new ways, such as listing vehicles for sale on eBay (EBAY, news, msgs). Even if GM only half-delivers, some customer pampering could pay off, as long as GM's vehicles are up to scratch as well.
"Consumers have demonstrated they will endure a so-so customer experience to obtain a great vehicle," says Jack Nerad of car research site Kelley Blue Book. "Consumers haven't demonstrated they will accept a so-so vehicle because of a great customer experience."
The feds want out of GM. Despite all the rah-rah, many Americans hate the idea of buying a car from a company run by the government. The real measure of success for GM will be a public offering that buys out the U.S. government's 61% stake in the company, and the repayment of billions of dollars in taxpayer loans. Ahead of schedule.
Henderson hinted that a public offering could come as early as next year, with hopes to pay back the loans ahead of the 2015 deadline. The feds want that too.
