8 more big questions for GM

June 24, 2013, 2:17 PM UTC
General Motors (GM) scored an historic coup recently when it topped Toyota, Honda, and all other automakers in the J.D. Power & Associates Initial Quality Study for the first time in the 27-year history of the survey. With GMC the second-ranked brand and Chevrolet fifth, it was a rare burst of good news for the General where little things often point to larger issues that can fester into big problems. At any other auto company, minor incidents would pass without notice, but this is GM. Recently we posed a few big questions for the automaker's management. But now a new wave of developments are raising another round of red flags.

1. A cleaner China

Smog-infested Shijiazhuang, China announced a plan to limit automobile sales of new vehicles to 100,000 units this year and only allow households to own at most two cars. GM and its joint ventures sold a record 2.8 million vehicles in China in 2012, up 11.3% from a year earlier, with plans to introduce more than 10 new or upgraded products each year through 2016. Analysts worry that more cities could be forced to limit the growth of automobiles due to worsening air pollution. The big question: Will that put a brake on your ambitious plans there?

2. China luxury

GM has set a goal of increasing its share of the China luxury automobile sales to 10% by 2020. The upscale car market in China is fiercely contested, and Mercedes has just announced a big push there to catch up with market leaders Audi and BMW. Its new S-class, which will sell for close to $500,000 (you heard right), is packed with amenities like hot-stone massage to appeal to well-heeled Chinese buyers. To reach 10%, according to analysts quoted by Seeking Alpha, GM will need to lift the number of Cadillacs it sells to close to 250,000 per year from a current level of around 30,000 -- an eightfold improvement! That's in the face of a McKinsey study that forecasts growth of upscale vehicles sales at just 12% a year through 2020. Cadillac is only now breaking ground on its first plant in Shanghai and is racing to boost the number of its dealers to 200 by the end of this year, from 69 at the end of 2011. The big question: You've got a long journey ahead. Why make it harder by setting stretch targets for yourself?

3. Withholding info

For decades, GM and most other major automakers have publicly reported the number of cars and trucks they produce at their North American plants each month, broken out by nameplate. But Automotive News reports that GM has notified several research providers that it will no longer provide the data, and only report the number of wholesale deliveries to dealers. GM says a change in the way it records financial results makes the production data less relevant, and the move will give it a clearer view of its profitability across regions. Critics pounced. Wrote one longtime antagonist who goes by the nom de web Buickman, "This breeds mistrust and is a bad boogie no matter how you cut it." The big question: Companies rarely pull back on the information they disclose unless it is causing them trouble. You've been having trouble managing your inventory from month to month. Are you trying to cover up?

4. Executive shuffle

In the midst of its biggest product launch in its history, GM removed the head of North American manufacturing, Diana Tremblay (above). It was the second job change in a year for her. In 2012, she was moved from her job as head of global manufacturing. At that time, the change was portrayed as allowing Tremblay to concentrate on this year's North American launch. This time, GM said the launch was going fine and Tremblay's move was not related. Her replacement, Gerald Johnson, is a GM lifer like Tremblay whose previous job was head of global quality, not usually regarded as a front-line operating position. His new boss says Johnson "leads by example as a mentor and strong communicator" -- not precisely a ringing endorsement. The big question: What's going on here? It sounds like Tremblay was over-matched in both positions, and the launch isn't going as smoothly as you say. Her replacement doesn't sound like a high performer, either. A cynic would say you are guilty until proven innocent.

5. Individual accountability

Tremblay was moved to vice president of business services, a new position created to reduce complexity and streamline back-office functions. The new unit will eventually include several thousand people and is expected to cut administrative expenses by $1.8 billion a year. Along with the astounding idea that GM is still over-manned and inefficient after going through bankruptcy, is the equally astounding idea that the company is creating a new bureaucracy to fight its existing bureaucracy. The big question: What's the matter with getting individual managers to slim down their own operations by making them responsible for their own profit-and-loss?

6. Continental ops

GM is still sucking wind in Europe. May sales there fell 11.3% in an industry that was only down 5.9%. While no one expected a fast turnaround, Ford (F) is doing much better than GM on the continent, losing only 0.3%. Chevrolet, GM's low-priced brand in Europe is a huge anchor, with its May sales down 23%. As one commentator observed, "Not only is the market in Europe contracting, and could for years, but buyers in the region do not want GM cars, which the numbers shout very loudly." The big question: Success in Europe is key to vice-chairman Steve Girsky's ambitions to succeed Dan Akerson as CEO. What are you going to do now, Steve?

7. EVs lose their spark

GM has announced incentives of up to $5,000 on the Chevrolet Volt and offered discounted lease rates as well. It sold 7,157 Volts in May, about the same as the month before. Except for Tesla (TSLA), the bloom is clearly off sales of electric vehicles where GM has placed a big bet. In addition to Volt, the automaker is also selling the Chevrolet Spark EV at a bargain price and is soon due to introduce the Cadillac ELR, which is based on Volt technology. The big question: Will you discount the ELR as well, or risk the embarrassment of seeing this slick new Cadillac sit on dealer lots?

8. Opel retreads

CEO Akerson told Automotive News recently that he wants to tie Buick more closely to Opel-Vauxhall in product development. "There are all sorts of synergies," he said. "We think we can take costs out that way." We've been down this road before with the Cadillac Catera and Saturn's Aura, Astra, and Vue -- all branches from Opel's tree. Currently four Buicks -- LaCrosse (above), Regal, Verano, and Encore -- - share Opel roots. But Buick product planning is increasingly being driven by demands from China, its largest market. The big question: Just what will a Sino-Euro-Americano Buick look like?