Is GM Finally on the Right Track?

Talk about a PR firestorm. After literally years of hype, General Motors presented the finally-it's-done production version of the Chevrolet Volt to the media the other day, and reactions were ... well, "sharply divided" kind of understates the case.

On the one hand, much of the mainstream media hailed the car as a triumph. It's quiet and smooth, they said; it's quicker and brakes better than Toyota's (NYSE: TM  ) Prius, and the electric-only range seems higher than advertised.

On the other hand, several automotive commentators (including, somewhat surprisingly, the influential Edmunds) howled with rage over a detail of the car's engineering that they felt had been misrepresented: GM lied! The company said the Volt would be revolutionary, but it's just another hybrid!

So which is it? Is the Volt a triumph, or a fraud? And more to the point, what does all this say about General Motors -- and its critics?

GM didn't lie ... exactly
First, some basics: The Chevy Volt is an electric car, powered by an electric motor, with a gasoline engine that serves as an on-board generator for recharging. Unlike in a conventional hybrid car, the gasoline engine doesn't actually drive the wheels. That's new and novel technology.

Or so GM has been telling everybody who would listen for several years now. It turns out that under certain driving circumstances, the gas engine assists the electric motor, driving a complex gearbox that does, indirectly, drive the wheels. GM's engineers have a whole bunch of good reasons for setting the car up this way, and it doesn't take away from either the quality of the product (in fact, it improves it) or from the assertion that the Volt is, indeed, a new kind of car.

GM probably didn't explain this detail until now because the patent on this particular technology wasn't granted until a couple of weeks ago. While it probably counts as a PR error, or at least a PR awkward moment, in truth, it was a small omission.

But that omission gave GM's diehard critics an opening to howl. That was predictable, and it's something General Motors needs to confront.

Does GM understand that it is not a beloved company?
Look, there are a lot of reasons to dislike GM: The company built lousy cars for decades. Its corporate culture was extraordinarily broken, its management unwilling to confront the increasingly grim nature of the company's situation. It got bailed out by the government via a somewhat novel bankruptcy maneuver that effectively favored the UAW over bondholders, etc., etc.

We've all heard the arguments. They get reprised in comments right here at the Fool every time I write about GM. There's a huge, deeply ingrained prejudice against GM, ranging from high-profile blogs that made their rep on GM "death watches" to new-car buyers who won't set foot in a GM-brand dealership because of resentment over the bailout.

Personally, I think a lot of this is justified. I've dished it out myself from time to time. And it's something GM's marketing and PR folks need to do a better job of taking into account, as the Volt missteps have shown.

But here's the thing, and this is important: A lot of people, including many in the investment community who should know better, are so caught up in the (justifiable) negativity about GM's past that it's hard for them to see the present state of GM through clear lenses. Just as Honda (NYSE: HMC  ) is seen by some as coasting on its reputation for innovation, GM is haunted by its own legacy.

Love 'em or hate 'em, there are reasons to believe that this teetering, damaged, long-mismanaged behemoth of a company is finally turning the corner.

Is there an opportunity here?
I haven't driven a Volt, but it's clear from the early reviews that GM is actually delivering a very good car. Sure, it's probably $10,000 too expensive for what it is, but it is from most accounts an impressively well-engineered and well-built car, and GM should have no trouble selling the 15,000 copies it hopes to make next year.

Here's the larger takeaway: GM is not the same company it was two years ago, or five years ago, or 10 years ago. It is being run by a new management team that seems to have a realistic grasp of the challenges facing the company, and the skills to do something about them. Ford's (NYSE: F  ) spectacular turnaround has given GM's rank and file a shining, local, easy-to-understand example of what's possible. In bits and pieces, the Volt being the latest bit, there are signs that, after all these years, things might just be coming together.

Will GM be able to pull off a Ford-like reinvention? Will GM's stock be worth buying when it goes public in a few weeks? I don't know. But I do know this: Seismic changes are happening at this company, lots of people haven't caught on yet, and that could create a very interesting investing opportunity. Watch this space.

Think car companies are old news? Fool Tim Beyers says Ford reminds him of one of the world's most innovative companies.

Fool contributor John Rosevear owns shares of Ford, which is a Motley Fool Stock Advisor selection. You can (and should!) try Stock Advisor or any of our Foolish newsletter services free for 30 days, with no obligation. The Motley Fool has a disclosure policy.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.


Read/Post Comments (3) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 14, 2010, at 9:50 PM, tomwittmann wrote:

    Dear Mr. Rosewear

    A good article in the midst of all the trash forwarded by other analysts,

    Three (3) Remarks:

    You wonder why Edmunds is so furiously attacking the Volt. Obviously, given the close (too close!) relationship with the Japanese, autoindustry, they are trying to motivate the by you mentioned GM heaters to "howl", as the Japanese have lost the train regarding E-Cars.

    And also obviously, NISSAN is amain motivatorof Edmunds, as they are presenting the LEAF, a real joke. Not only it needs that the purchaser has another car, but probably more important, what happens if for any reason the battery fails or simply is discharged. You call a towing service and aside of the cost, you lose probably hald the day or more, counting the charging in one of the few service station.

    2) The surprise Gas motor reinforcement of the the VoltE-operation is a bonus, if it does not work by any reason, the car continues operative

    3) And why are people so upset with the bail-out, which even probably will not only cost nothing the tax-payer, but probably will yield a profit??

    As this hate is real, this is a real success of the

    Japanese propaganda machine!

    The same people hinks nothing to travel with CONRAIL (bailed out by the US), or fly with

    Airbus, only existing due a permanen French and German subsidy and worse, buy Chinese

    artefacts which aside inducing loss of US jobs,

    are manufactured by Chinese virtual slave workers earning $50 -100 a month!!

    Tom

    caminito@netzero.com

  • Report this Comment On October 15, 2010, at 2:27 PM, plange01 wrote:

    gm the bankrupt disgrace living off of US taxpayers welfare is on the track to closing in less than six months....

  • Report this Comment On October 16, 2010, at 1:45 PM, doctorolds wrote:

    The author is wrong!

    Count 1- Volt is pure electric drive. There is no mechanical connection from the engine to drive the vehicle. The engine can do nothing other than drive a generator to recharge the drive battery.

    Count 2- GM remains the most popular maker in America- for that matter, everywhere in the world except for Toyota's closed home market where their 2,000,000 to 3,000 advantage gives them a few hundred thousand more total global sales. Date refutes "unloved" comment.

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