GM's Stock Price Falters as Company Revisits Failed Strategies
Over the past month, GM shares have lost nearly 8% of their value. To be sure, some of the drop in value is related to events outside of GM's control: soaring fuel prices, instability in the Middle East and Japan's earthquake.
But there is likely one other source for the current spate of investor angst: Chief Executive Daniel Akerson. On more than one occasion, Akerson has expressed frustration that GM engineers aren't able to more quickly churn out fresh products -- something the automaker needs to do to keep pace with crosstown rival Ford Motor (F) and Asian automakers, including South Korea's Hyundai Motor.
'Like a Can of Diet Coke'
Akerson's discontent is driven by his perception that GM is no different from any other consumer-products company. Citing Coca-Cola (KO) as an example, Akerson recently told The Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview.
"GM has to start acting like a consumer-driven -- not [an] engineering-driven -- company," Akerson said. "We sell a consumer product -- our can just costs $30,000."
Akerson isn't the first CEO of a Detroit automaker to make the same wrongheaded assumption. Jacques Nasser, who led Ford for nearly three years before being fired in 2001, sought to rearrange the Dearborn, Mich.-based company into autonomous consumer business groups. He also, as with GM in recent years, pushed out people who knew the car business and hired from outside the industry.
Nasser's belief was that Ford was a consumer-products company that happened to sell cars, says Arthur Wheaton, who analyzes the auto industry for Cornell University's school of industrial and labor relations. "It was a huge flop."
More in Common with Tech Companies
Car companies have more in common with technology companies, such as Apple (AAPL), a company that views innovation and engineering as key, Wheaton says. Unlike beverages or hand cream, automobiles are constantly evolving technologies. Just as you wouldn't hire someone whose expertise is in shampoo or razor blades to develop the next generation iPhone or iPad, it makes as little sense to expect the same people to develop new cars, trucks and utility vehicles.
By adhering to its principles, Apple hasn't only become an iconic brand known for innovation, its reputation has allowed the company to ask for and get a premium price for the products its sells, which raises another concern among GM shareholders.
In the months after GM exited bankruptcy in 2009, the revived automaker stuck to its guns by not deeply discounting cars to spur sales, instead relying on a formula that produced hefty profits from each vehicle sold. But the automaker has since backtracked in a bid to boost its share of the U.S. car market by offering generous incentives.
To be sure, rebates, and cheap financing and lease rates have helped GM move more vehicles off dealers' lots, as last month's sales figures showed. February sales surged 46%, exceeding analyst estimates as well as those of GM itself.
But analysts warn those sales come at a cost -- reduced trade-in values, as one example. "We don't see any upside to incentives," Eric Lyman of Automotive Lease Guide told MSNBC.com. "It is manipulating the market and lowering the cost of your vehicles, which lowers the resale value of your used vehicle in the market."
GM so far has done a remarkable job at turning itself around. With the two-year anniversary of its bankruptcy looming, however, it's unclear whether reshaping its identity and selling cars on the cheap can help the company stay on the road to recovery.