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General Motors, We Need to Talk

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I don't know about you, but I'm starting to worry about General Motors (NYSE: GM  ) .

I own shares in GM, so this is personal. I also own shares in Ford (NYSE: F  ) , and while I watch Ford closely, I don't worry too much about missteps. Sure, the company occasionally hits a bump in the road, and there's still more debt than I'd like. But that debt load is shrinking fast, and Ford's products and management inspire a lot of confidence. Even if auto sales stay stagnant, the company should fare well.

GM, on the other hand, concerns me.

A history that doesn't exactly inspire confidence
I knew when I bought my shares, shortly after GM's IPO, that this investment that would need very close watching. GM has a long, forehead-smacking history of cavalier financial (mis)management, products that were a step (or two, or 10) behind the class leaders, managers that seemed unable to see beyond the Detroit city limits as foreign competitors ate their lunch, and a corporate culture that did its best to stifle the considerable talent remaining within the company.

Since the early 1970s, GM's timeline is rife with blown chances, embarrassing missteps, and head-in-sand executive cluelessness. As I saw it, the company would need lot more than a quickie restructuring and a new CEO to really return to some semblance of its former glory. Its new boss would have to make some wrenching changes to GM's broken culture, just as Alan Mulally did so successfully at Ford.

New CEO Dan Akerson is certainly driving changes at GM -- but that's exactly what worries me.

"Lt. Dan" and the outsider problem
Akerson, of course, is an auto-industry outsider -- after a stint in the Navy, years in telecom, and a stay at a private-equity firm, he joined GM's board as an outside director in the wake of the auto giant's exit from bankruptcy.  Akerson said at the time that he saw the opportunity to participate in the revival of GM as a "patriotic duty," and I think he meant it.

But after his surprise selection as GM's CEO, it became clear that Akerson was scrambling to learn the ins and outs of the auto business. A few early missteps led acerbic Detroit pundit Peter DeLorenzo to christen Akerson "Lt. Dan", a derisive nickname that has stuck in certain circles.

My worries about Akerson only increased after a lengthy interview the CEO gave to the Detroit News last month, in which he talked in detail about his vision for GM's future.

Akerson said some good things during this interview. I applaud his desire to make the famously leaden GM bureaucracy leaner and more "agile." Same goes for his focus on key global competitors like Toyota (NYSE: TM  ) , Honda (NYSE: HMC  ) , Volkswagen (OTC: VLKAY), and Hyundai (OTC: HYMTF). As Akerson noted in the interview, past GM managers have been a little too focused on their crosstown rivals, when the real competition was coming from elsewhere.

But he also said some things that make me wonder about his ability to rally GM's rank and file, a critical component of the company's revival. Talking about two upcoming Cadillac sedans, Akerson said that "they're not going to blow the doors off, but they will be very competitive." Would you want to hear that if you were a GM employee who had put your best efforts into developing one of these cars?

Nice slip, Dr. Freud
In Akerson's defense, he might well be right, even if it was exceptionally bad politics to say so to the hometown newspaper. Cadillac has a long way to go before it can challenge the likes of Mercedes-Benz and BMW around the world. That's Akerson's ambition for the brand, and I think it's the right one -- but I also think (and here I'm speaking as someone who replaced a BMW with a Cadillac last year) that really truly getting the cars to that level will require deep thought and heavy investment.

While many of GM's products (not just Cadillacs) still lag the world's best, the company has made huge strides forward recent years. That is often attributed to the influence of former Vice Chairman Bob Lutz, an iconic Detroit "car guy" who revamped the company's product-creation process and encouraged the development of mold-breaking vehicles like the Chevy Volt. 

But Lutz is retired now, and although Lutz-influenced products will continue to hit the market over the next year or two, the shape of GM's next generation of products beyond that -- the products that will show us whether GM really intends to lead or follow, that will or won't drive a renaissance in GM's prominence and stock price -- rests in Akerson's hands.

Fool contributor John Rosevear loves his Cadillac, really he does, but anyone comparing its fit and finish favorably to a BMW's needs to look a little more closely. He owns shares of General Motors and Ford. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of General Motors and Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (13) | Recommend This Article (3)

Comments from our Foolish Readers

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 July 14, 2011, at 10:33 PM, baldheadeddork wrote:

    This is an astonishing little factoid that doesn't get nearly enough attention when discussing GM: Akerson is the company's fourth CEO in the last two years. The number alone is astonishing, but all four are wildly different characters, too.

    I don't think they're done yet. Akerson doesn't seem long for the job. He's surrounding himself with loyalists in the top jobs, but from all accounts there is a huge amount of resistance to him when you get below that level. He won't put up with that. He'll stick it out for another six months to a year, increasingly attacking the "9-5 engineers" and the like, and then bail out blaming everything on all those who wouldn't bow to his brilliance.

    What do you think about the analysis on GM's truck production? It didn't effect the stock price, but it's more proof of GM stuffing the pipeline and that will catch up eventually.

  • Report this Comment On July 14, 2011, at 11:58 PM, Clint35 wrote:

    Good article John. I really appreciate your honesty. But I have to ask why you bought shares. All the problems you mentioned at GM have been common knowledge for at least ten years. Did you think they would magically turn things around just because they got a new CEO?

  • Report this Comment On July 15, 2011, at 1:09 AM, mcgilicudy wrote:

    GM has been breaking my heart for the past 30 years. The latest dissapointmet is the Cruz. It seems the mechanicals and interior are decent but the exterior- you've got to be kidding! Yawn. How bad can you get? Just compare it to the exciting newly styled Elantras and Sonatas. Hyundai is going to eat GM alive.

  • Report this Comment On July 15, 2011, at 1:53 AM, Brettze wrote:

    GM made a mistake of having an IPO so soon after the bankruptcy . I was expecting a coollng period of at least several years more. What GM accomplished is to depress Ford stock price and nothing else.. GM was supposed to be a ward of our taxpayers until it repaid all of the 50 billon it got in bail out . Most importantly, I am so amazed how quickly Wall Street forgave and forgot what GM did to the old shareholders and bondholders so recently. GM abused us and we still threw purses and wallets at GM as if it is Jim Bakker and Tammy !!

    Leaping Praise Be to the Lord!

  • Report this Comment On July 15, 2011, at 7:15 AM, TMFMarlowe wrote:

    @Clint35: "Magically"? No, of course not. But I thought they had a good chance, especially since they now have a shining example of How To Do Things Right just over in Dearborn. I still think they can pull it off, but Akerson needs to get a big dose of cluefulness (or a clueful successor), and soon.

    @baldheadeddork: The truck inventory issue... I'm not completely convinced it was pipeline-stuffing as much as a failure to pivot quickly enough in response to market trends. But either answer is a little disturbing at this point.

    @mcgilicudy: Back in the day, GM's exterior design was a huge, huge part of the company's success. They need more of that now. It's showing a few signs of life lately, but I agree, the Cruze isn't really as striking as it should be. I think it's an improvement over the Cobalt though, and at least GM has FINALLY gotten rid of those stupid-looking wheelwell gaps once and for all.

    Thanks for reading.

    John Rosevear

  • Report this Comment On July 15, 2011, at 8:11 AM, buffalonate wrote:

    I think the Cruz is the best looking compact car GM has ever made. I talked to a couple at the grocery store who bought one and they told me they loved it and recommended I buy one.

  • Report this Comment On July 15, 2011, at 9:46 AM, JoeandChuckP wrote:

    I don't think the Cruze is terrible, and it's sales are quite good, too. Its a mini malibu - and while not a risk taker, it's certainly no Aztek.

  • Report this Comment On July 15, 2011, at 10:34 AM, catoismymotor wrote:

    We are renting a GM product while my wife's Toyota is being repaired. We've had it for a week and put almost 200 miles on it. It is shameful that a seven year old mid-range Toyota outshines a one year old GM product. I can't wait to have our car back.

    One ray of hope I see is that Chevy is going to start importing the Cruze with a diesel engine. The MPGs will eclispe the Toyota Prius and should cost less to boot. I hope the Cruze turns out to be a good product. I want GM to do well.

  • Report this Comment On July 15, 2011, at 11:28 AM, TMFMarlowe wrote:

    @catoismymotor: What's the GM product you're renting and where does it fall down vs your Toyota?

    John Rosevear

  • Report this Comment On July 15, 2011, at 12:15 PM, catoismymotor wrote:

    The new Chevy HHR vs. 2004 Toyota Highlander (Not a Limited Edition).

    I anticipate my fellow Fools pointing out that one is a "compact" (just barely) and one is "mid-sized". My response is one is SEVEN years old with 112,000 miles on it compared to one year old with 9,000 miles. To be frank the HHR shares many qualities with the Chevy Traverse (Giganto People Hauler), the car owned by my mother in law: Cheap materials, more blind spots than The Helen Keller School, vague steering feel, and excess body roll and uncomforatble seats. The HHR also suffers from having the shifter out of easy reach, close to the floor, the drink holders can't be used with anything other than cans or skinny bottles or the hand brake can't be operated. When installing our child seat I accidentally exposed the foam core of the back of the back seat by torquing down on the strap as I would when installing it in our Highlander. Luckily I did not tear the material, just pulled it away from the plastic cap under the headrest. I looked to see if there was any trace of an adhesive that may have failed. No trace was seen.

    The HHR is cute, fairly quiet and has good road manners. But to pay $22,000 for a new HHR is out of the question. I just don't see the value. For the money one can take a huge step up by buying a two or three year old SUV. Or if you must buy a new car with similar capabilities the Honda Element would be a good alternative for the price.

  • Report this Comment On July 15, 2011, at 1:54 PM, baldheadeddork wrote:

    If it makes you feel better, Cato, the HHR is dead. The last one was made two months ago.

    In fairness to GM, the HHR was the last car they made on the Delta platform. It was basically a restyled Chevy Cobalt. Even though the HHR you drove was brand new the design was as old as your Highlander - and it dated from the days where GM considered making cars to be a distraction from their SUV business.

  • Report this Comment On July 15, 2011, at 2:01 PM, cmstripling wrote:

    @catoismymotor: Please don't judge GM on the HHR. That is a car that was supposed to compete with the Chrysler PT Cruiser and that vehicle only. GM just didn't realize that Chrysler was worse run than they were and didn't do a redesign for 8 years and just decided to drop the vehicle instead.

    Again, the vehicle's competition is gone and therefore in my opinion (judging by the other GM models) they have decided not to invest any money into furthering the HHR. It's only a matter of time before it's gone to.

  • Report this Comment On July 15, 2011, at 2:04 PM, tastypotato wrote:

    John, don't know if you meant to do it but the Cavalier pun in "GM has a long, forehead-smacking history of cavalier financial (mis)management, products that were a step (or two, or 10) behind the class leaders" made for a good morning chuckle.

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