Could GM Ever Fail? Yeah, It Could Happen

General Motors
General Motors

Is General Motors (GM) in trouble?

In some ways it's a silly question. Sure, GM gets a lot of flak for the money-losing Chevy Volt, which many critics say is an expensive boondoggle. And unlike rival Ford (F), which has successfully overhauled its product line, GM still has some cars and trucks that remind us of the bad old days.

GM has been cleaning up its act, and has a string of profitable quarters behind it now. But there's still work to be done -- and reasons that The General could end up with perpetual also-ran status.

The Competition Is Fierce

GM has been carrying on like an underdog for too long. For many years the company seemed content to release cars that were a step (or two or three) behind the best of the competition. It could afford to: GM made plenty of sales by discounting -- discounts it could afford thanks to the big profits it made on its pickups and SUVs.

But then gas prices went up, and sales of GM's big cash-cow SUVs went down. That led the company to bankruptcy court.

Now, GM's cars have to be good enough to compete on their own merits. But are they?

Mostly, yes. GM's newest models -- the Chevy Cruze and Malibu, the Cadillac XTS and ATS -- range from pretty good to flat-out excellent. While GM still has more work to do to update its product line, that work is happening. The new cars and trucks it rolls out over the next couple of years should be very good. But if they're not, watch out.

Never before has General Motors faced such stiff competition, all over the world. Toyota (TM) is on a roll and looking stronger than ever. Ford has a slew of hot new cars and trucks like the Focus and Explorer, and is using them to make big gains in markets like China and Russia that are important to GM. And Volkswagen (VLKAY.PK) is on a global mission to overtake GM, backed by a very strong lineup that includes the company's white-hot luxury brand, Audi.

GM's cars will have to be top-notch to compete with this crew. "Good enough" won't cut it. If GM doesn't deliver, it could be in for a long, ugly decline.

GM's Management Is Shaky

It's not that GM CEO Dan Akerson is a bad guy. He's not. A graduate of the U.S. Naval Academy and a veteran executive, Akerson is a capable leader who is said to see the task of reviving GM as a patriotic duty.

But the job of overhauling GM includes the tough work of treating the bureaucratic arthritis that has hobbled the company for decades. So far, Akerson's success on that front has been mixed.

Akerson came from outside of the auto business, and that has led him to make some questionable statements and decisions during his time at GM's helm. His sharp-edged style -- and his tendency to abruptly fire underlings who don't get with his program -- hasn't helped him within the company.

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To his credit, he has chosen good deputies: Senior managers like CFO Dan Ammann and product-development chief Mary Barra have done a good job of overhauling GM's messy, unworkable bureaucracy.

But Akerson's style, and his team, lack the easy air of competence fostered by rival Ford CEO Alan Mulally. Mulally's team has worked together for several years now, and that teamwork can be seen in the smooth, methodical way that Ford makes changes or reacts to crises.

GM hasn't reached that point yet. Will Akerson be able to make it happen? It's far from a sure thing. As long as that's true, the success of GM's turnaround will continue to be in doubt.

At the time of publication, Motley Fool contributor John Rosevear owned shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford and General Motors and have recommended creating a synthetic long position in Ford.

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