Blog: Dave LeggettNew GM, no room for complacency

Dave Leggett | 13 July 2009

It was almost an anti-climax, but in case you missed it, a new and leaner GM came out of bankruptcy at the end of last week. The consensus among the analysts appears to be that this is GM's last chance. It needs to have learned lessons from its demise and it needs to heed them.

Although New GM comes with a new and improved balance sheet – a big plus - it needs to continue to reinvent itself and convince sceptical consumers that it has brands and product that are relevant to their needs and that they can have faith in. And it needs to achieve those things with a sustainable business model.

In effect, the US government has created for GM an opportunity and a chance to survive. It is one that needs to be grabbed with both hands, but there is no guarantee of long-term survival. A lot of hard work is ahead.

There are some people at the helm of the new company or close to it – not least Messrs Henderson and the now 'unretired' Lutz - who were in influential roles in the run-up to GM's failure as a business in the US. They, in particular, need to continue to demonstrate that lessons have been learned and that the new company is not simply a slimmed down version of what went before. New GM should also have a new urgency and nimbleness about it, an energised spirit, if it is to survive and thrive.

A criticism of the old GM – and not just GM, but Detroit generally – was that there was a culture of complacency for too many years. Detroit, many say, sleepwalked into this crisis when it failed to invest in much better car product or rationalise brands and models, preferring to rake in lazy profits from truck sales in North America.

When sales got more difficult on the back of heightened competition from the Japanese transplants in particular, things deteriorated still further as the metal was pushed out unprofitably to keep factories running. Long-run loss of market share tells its own story. And there were agreements struck with the UAW that sewed the seeds for  unsustainable worker legacy costs.

The current recession in the US has brutally exposed long-run failures of strategy in the home market. The GM board and its management were surely responsible for some of GM's troubles (the reason why Rick Wagoner had to go; someone had to) even if they were putting things right and, in a sense, ran out of runway.

Any sign that the 'complacency culture' is not gone but merely dormant would jeopardise that chance that New GM has been given. Everyone on the New GM board needs to understand the seriousness of the situation and fact that New GM needs to stay on red alert, the old days and ways gone for good.

An immediate and severe crisis that would have seen GM assets liquidated and all sorts of supplier sector grief has been cleverly averted, but there is still something of a crisis on.

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