General Motors
But was that a blip, or the new normal?
The key to GM's success last year was its leadership in the world's two biggest auto markets: the U.S. and China. But while GM's China efforts continue to be strong, its market share is slipping in the U.S. -- even as overall auto sales here are finally starting to take off.
Is GM about to get crushed at home?
Losing ground as the market accelerates
GM's loss of share in its home market has been striking. GM claimed 19.6% of the U.S. market at the end of 2011, but it has had just a 17.5% share through the first quarter of 2012. While its sales gains in March were decent -- or at least not far off the market-average increase -- GM trailed the overall market's year-over-year increase badly in both January and February.
Of course, some slippage was expected as rivals Toyota
So what's up with GM, and should shareholders be worried?
A product line in transition
To some extent, slippage for GM in 2012 was predictable. In fact, I predicted this at the beginning of last year, and I wasn't the only one. The problem is simple, but to understand it, it's helpful to look at the recent success of GM's ancient rival, Ford.
Ford's recent success has been due in large part to its much-improved product portfolio, the remaking of which was the centerpiece of CEO Alan Mulally's "One Ford" turnaround plan. Ford has streamlined its global product line, focusing the talent in its global design centers on the vehicles each center does best -- and then making those vehicles its global standard.
As a result, Ford has fewer cars and trucks to design and update with the same design and engineering resources. This means it can update each of them more frequently and lavish each design with more care. That approach has produced widely acclaimed models like last year's new Focus, which is built and sold around the world -- and which competes well wherever it's offered.
GM, on the other hand, is still working with a hit-or-miss product portfolio. That's a legacy of its slide into bankruptcy, which resulted in the delay or cancellation of many product development programs. But GM has shown that it can develop great cars. Most of its recent models, like the hot-selling Chevy Cruze, are in fact excellent offerings that rank among the world's best in their segments. But there are still large gaps in the product line, spots where GM's offering is dated and uncompetitive -- or worse, where GM doesn't currently have any offering at all.
Big gaps waiting to be filled
Cadillac, for instance, is down to just three basic models -- none of which are the kind of large luxury sedan that the brand's reputation was built on. But two new Cadillac sedans will arrive at dealers later this year, and a new large "flagship" sedan is widely rumored to be under development.
GM's other brands are in somewhat better shape, but look closely and it's still the same story. For instance, the largest Chevy sedan, the Impala, is ancient and uncompetitive with rival cars like Toyota's Avalon. However, a promising successor was shown last week and will arrive at dealers this fall.
It's a work in progress, in other words, and that's why GM's leaders -- at least in public -- haven't shown concern about the company's sliding U.S. market share. The company has rolled back spending on "incentives," or discounts, and has already begun to make progress on its own version of the "One Ford" approach to consolidate its global model lineup, which it announced last year.
The upshot: Patience required
Long story short, GM investors shouldn't worry about slipping market share -- yet. First of all, market share totals are less important than overall profits. Second, GM's share may recover and even increase as its product overhaul plan continues to bear fruit. Key new models are due later this year, as mentioned above, and all-new versions of the company's cash-cow pickups and big SUVs are expected in 2013.
That said, any slippage in quality of new products will be a warning sign. GM has been working hard to convince customers and investors that the bad old days of second-rate products are over. So far the evidence has made GM's case, but given the competition, GM will need to continue to execute at a high level just to hold its ground.
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