We knew that it was coming. Tomorrow's the day that General Motors officially goes bankrupt. This is what happens when you try to fill a bath tub with the drain open. No matter how much water you pour into the tub, it'll never get filled with the drain open!
Now that GM is legally bankrupt, there are opportunities and challenges which were not here, recently. Challenges: A tarnished image. Americans will not make a big ticket purchase from a "loser." I have been selling GM products for six days a week for 14 years. I've...eh...noticed this and a few other things, too.
Closing franchises: This is interesting. The public looks on with morbid interest and curiosity as failing automakers choose to sever relationships with locally owned dealerships. These are businesses which do not cost the automaker a dime! These are businesses which contribute to their local areas with local tax revenue, charitable donations, local employment, local choice. When one of these businesses vanishes, so do the benefits! You get less of the local benefits that you have enjoyed and the automaker saves no money and has fewer places in which to sell their product.
With so many divisions, you would think that GM would have an advantage over Honda and Toyota. GM could have made their individual divisions unique from each other. Instead, they made them painfully similar. An example would be making the exact same mini-van with six different nameplates on it. How dynamic is that?
My recommendations for GM? Delay the 2010 model year debut. Sell the remaining 2009 inventory, most of which is sitting in limbo at or near the assembly plants. Sell these vehicles with tremendous incentives! Money talks! Quality is important, but money is more important. Here's what I have found - people will buy a car that lists for $25,000 with a $5,000 rebate much more than they would buy a $20,000 car with no rebate. (A sunroof and DVD combination will always win!) It doesn't matter much which car is built better. With the $25,000 car, there is the $5,000 victory for the buyer! Oh, resale value will be pretty much the same on both cars.
So, GM, here's what you should be working on:
Image - portray yourself as a winner! Advertise that you are dynamic and heroic. Somebody will believe it!
Fuel Economy - When gas is expensive, most people pay more attention to the amount of money it takes to fill-up! They should be looking at their MPG!
Price/Incentives - make the price look good with a big rebate and/or low rate long term financing.
Do I think that the GM bankruptcy will work? Well, yes and no. I think that GM will continue to fade over the years into obscurity. The short term future of the retail car business is USED CARS. This will last for about 5 years. At that time the bulk of the used cars will be older so we will need some newer used cars. The lower supply of used cars will cause the used car pices to go up - New Cars will become a popular choice, again. Think about it.
