Last week, my Foolish colleague David Williamson wrote a thoughtful piece on General Motors (NYSE: GM) and its lagging stock price, arguing that the market has been wrong about America's biggest automaker.

Like David, I'm a GM shareholder, so obviously I think the company has a good chance of succeeding, at least eventually. I think he made some very important points, particularly about GM's financial condition and about the likely effects of the Japanese disaster. But I also think he overlooked one important issue, perhaps the important issue. And it's that issue that needs to be confronted and pondered by anyone considering investing in GM, or any other automaker.

What is it? Product.

Automakers live or die by this, period.
While automakers are cyclical, industrial businesses, they're very different from steelmakers or chemical producers in that their products are not commodities. Cars and light trucks are unique products that sell in part because of difficult-to-quantify emotional appeals. What's more, they compete in a marketplace that is hyper-competitive and low-margin, with a small number of giant, global players and immense barriers to entry to boot.

I believe the competitive standing of an automaker's product is the most important factor to consider when evaluating an automaker as an investment. An automaker with great, competitive products has a good chance of overcoming problems that would cripple or sink many other industrial firms. Ford (NYSE: F) in early 2009 had a surreal debt load and a wretched economy to contend with -- but it also had some truly excellent cars and trucks, and more in its pipeline. The market saw the debt and left it for dead, but auto-savvy investors knew that it had a chance -- and have been generously rewarded since.

Conversely, an automaker whose products lag behind the leaders will have to spend heavily on incentives to keep sales at a level sufficient to placate its dealers. (In many ways, dealers are an automaker's real customers.) It will also have to spend even more on product development, or risk falling even further behind. And of course there's a risk that it won't be able to catch up at all without some sort of outside intervention -- that's essentially Chrysler's story over the last decade.

Product is a major reason I'm skeptical of Tesla Motors' (Nasdaq: TSLA) chances. Can a little startup really build cars that compete on price and quality and ownership experience with the likes of BMW (OTC: BAMXY.PK) and its massive global scale? Product is the biggest reason I've been so bullish on Ford, it's why I think last year's Toyota (NYSE: TM) recalls will hurt the Japanese giant for a long time, and it's why I'm concerned about the future of Honda (NYSE: HMC).

And product is why my enthusiasm for General Motors is still muted. While I think there's a good case for GM as an investment, I also think that it isn't so simple.

GM has a product problem
Even as recently as a few years ago, it was reasonable to say that most of GM's products were a step (or two, or six) behind the industry's best. That's no longer true: Thanks to a much-improved cost structure and the lessons of the company's near-death experience, GM's most recent products are by and large excellent.

So what's the problem? This: A lot of the company's products are still not-so-recent, and it's going to be a few years before the company can fix that.

It takes more time than most people realize to develop a new vehicle from scratch -- 28 to 36 months is typical. That's for a fully funded development program (where "fully funded" can mean $1 billion or more) that has an enthusiastic green light from senior management. Constrain the funding or shake up the management's priorities and that time span can expand significantly. If it expands too far, the product that would have been a class leader had it arrived on schedule two or three years earlier can end up being midpack (or worse, irrelevant) when it finally gets to dealers.

GM's product-development programs were cut to the bone -- and beyond, in some cases; several programs will never be revived -- during the company's death spiral. The revolving door in GM's C-suite during the year-plus following bankruptcy made matters worse. Reports suggest that key programs are now ramped up and proceeding at full speed, but the lost time means GM may not reach across-the-board product parity with the likes of Ford and Toyota until 2014, maybe even later if any of the worst-case scenarios above actually occur.

That in turn means two things: First, GM's going to be spending a lot of money as it attempts to overhaul its product portfolio as quickly as possible without compromising quality. Second, GM's incentives spending, which has fallen a bit recently but is still quite high, is going to have to stay high to keep its current products selling at the rate to which its dealers would like to stay accustomed.

That means GM's profits could be muted for a while, particularly in comparison with the gaudy results on display at Ford's headquarters in Dearborn. And that is likely to weigh on GM's stock price in the near-ish term. But it might also make for an intriguing buy opportunity for those who are willing to be patient. Personally, I don't plan to sell anytime soon.

Keep up with the latest on the General's maybe-renaissance by adding GM to your free My Watchlist page.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.