General Motors (gm) has been the beneficiary of a spate of good news lately.
Item: The Treasury Department will begin selling off its remaining 19% stake (300.1 million shares) as the Obama administration unwinds its bailout of the automaker.
Item: GM expects modest growth in global auto sales in 2013 with improvements in China and the United States.
Item: The gusher of bad news out of Opel has slowed to a trickle with the appointment (finally) of a new CEO.
Item: Investors pushed GM's stock price up from $23.85 in November to a high of $30.60 before settling back down to $28.57. On Christmas Eve, Goldman Sachs reinstated coverage with a buy rating and a $35 price target.
But dangers lurk all around for GM's North American operations, which just can't seem to get out of their own way. Part of the problem is working through the weak product entries that came through the engineering process just before bankruptcy, but other issues seem systemic.
1. The weak yen
Since Japanese Prime Minister Shinzo Abe was elected in December, the yen has moved from 86 to the dollar to 92, helping make Japanese auto imports cheaper for American buyers. The U.S. auto industry's lobbyist complains that Japan is engaging in "currency manipulation," a frequent, if empty, complaint from the pre-bankruptcy days. Says independent analyst Warren Browne: "If the Detroit Three need help from the government now, then perhaps their performance was not as good as everybody was indicating during the election cycle."
2. Toyota nearly outsold Chevy in January
Chevrolet outpaced Toyota by a mere 683 units. Chevy may run deep, but Toyota (tm) is running fast. These days, the competition between the two brands seems a bit more even keeled, says Jessica Caldwell of Edmunds.com "Chevrolet has the pickup truck launch coming this year," she says, "which will make a big impact, but with the new Corolla coming later this year (concept car seen above), Toyota should be in a better place -- fixing a weak link in their lineup." Somebody may have to rewrite the words to that old song about baseball, apple pie, and Chevrolet.
3. Silverado and Sierra are losing share
As full-size pickups go, so goes Detroit, and GM is getting a smaller slice of that business. Combined, the Chevrolet Silverado and its sister GMC Sierra (above) took 34.7% of the full-size truck market through the first 11 months of 2012, in figures compiled by the Los Angeles Times, down from a 40.3% share in 2008. Meanwhile, Ford's (f) F-series has gained nearly seven points of share, and Chrysler's Ram two and a half points in 2008. Chrysler's Dodge Ram is at 18.1%, up from 15.6% in 2008.
4. The new Silverado fails to excite
When times are tough, GM gets conservative. When the automaker ran into trouble in the early '90s, it introduced a Chevy Lumina that was so tired that it looked like it had been designed a decade earlier. Ditto for the Silverado and Sierra. After they were unveiled recently, Car and Driver reported, "The latest iteration of Chevrolet's big-selling Silverado is here, and -- surprise! -- it looks pretty much like the last one." That may satisfy Chevy die-hards who said don't change it, but it won't do much to recover lost market share.
5. Malibu is losing ground in mid-sizes
GM just slashed prices on the distressed sedan so it would perform better in online searches. But it can't do much to stretch the room in the rear back seat that resulted from an ill-advised decision to save money by building the 2013 redesign on a shorter platform. With 13 new or refreshed models on tap, Chevrolet is telling dealers to expect a 7% gain in U.S. sales this year. But it needs the volume from a strong mid-size contender and, so far, it doesn't have one.
6. Cadillac ATS is cannibalizing CTS
The ATS (above) was aiming for BMW's 3-series, but it seems to have hit the CTS instead. CTS sales fell 15% in 2012 and another 17% in January. The arrival of a new larger CTS later this year should slow the defections, but in the meantime, GM has foregone some profit by substituting sales of the smaller car for the larger one. And will someone remind me how the larger-still, front-wheel drive XTS fits into this lineup of rear-drive Euro-car wannabees?
7. GM cars lack stature
Take a look at the list of top-10-selling vehicles in 2012, and you see cars from Toyota, Honda, and Nissan but none from GM. The Chevy Cruze (above) just misses the cut. This is more than a popularity contest. "GM can't consider itself on the road to recovery until it gets a car in the top 10 vehicle category," says analyst Browne, "and Buick has a car that sells 100,000 units." (Buick sold 57,079 LaCrosses in 2012). It is just too inefficient to have so many nameplates with so little volume.
8. Inventories are piling up
Malibu stocks rose as high as 129 days as of January 1 before sliding to 94 days on February 1, still well above the standard 60 days. But GM's pickup inventories rose 24% to a 117-day supply at the end of January. The automaker plans to work them off during a 10-week shutdown for model changeover, but that's a tough way to run a business.
9. A firmly entrenched bureaucracy
In his American Turnaround memoir, former CEO Ed Whitacre (above) describes the cover-your-butt attitude at GM he saw when he was steering the automaker through its 2009 bankruptcy. According to Whitacre, managers who weren't sure who to ask for approval wound up asking everyone. "This contributed to a stall-and-delay mentality. Engineering projects were regularly vetted by the board -- why, I have no idea." There's very little to indicate that anything has changed post-bankruptcy. In GM's military-like bureaucracy, everything still has to go up the chain of command.
10. GM's newest board member
So then -- who does current chairman CEO (and Annapolis grad) Dan Akerson appoint to GM's board? Admiral Michel Mullen (above), a former military adviser to President George W. Bush and President Barack Obama. "We're fortunate to have Adm. Mullen join GM's Board of Directors," said Akerson. "He brings proven leadership and deep experience in change management, strategic planning, technical innovation, and risk management gained over the course of his 43 years serving our country."
Wonder what he knows about Malibus and Silverados?