A Research Report on the Change in Global Auto Industry (VIII)

Part Two.  Analysis of the impact of the change on typical mainstream automakers

1.   It remains to be seen whether GM will rise from the ashes or fall deeper in the mire after the bankruptcy protection

1)  General Motors filed for bankruptcy protection as the most impacted and most injured mainstream automaker in this financial crisis.

Of course, the bankruptcy of GM was not merely caused by the financial crisis, which is only an external force that has triggered the outbreak of the long-accumulated ills of the company. There are two industry judgments about the long-term impact of this financial crisis on this U.S. auto giant:

① General Motors, the world's largest car company for many years, has failed mainly due to some historical reasons, high production costs, and long-term dependence on large vehicles. Therefore, the bankruptcy protection may restore GM like a tumor-plighted patient after a surgery and make it much stronger and more powerful. Therefore, the current round of crisis may be a good thing for the long-term development of the seriously ill GM.

② General Motors' dominant status in history and in the global auto industry made it have more resources for support, such as the government, media, financial institutions, suppliers, distributors and other service agencies. But now the glory has vanished, and the new GM may not be able to return to GM's original level of competitiveness. Like a seriously ill person after a major surgery, it would suffer a series of complications without normal symptoms, and need a series of long-term treatment.

Both the judgments are reasonable, as our survey among experts has found that 60% of the professionals agree with the second judgment, that is, for General Motors, its current situation poses more challenges than opportunities.

In fact, only GM itself can decide its future direction of development. The industry believes that the possibility for GM to get quickly out of the current plight depends primarily on the following four aspects:

① GM must find and appoint a CEO as soon as possible who has the ability to reverse the course of events, and a strong new management team is also critical. The new GM's majority shareholder is the U.S. government, which means the personnel will have less stability and the management will continue to have problems. In addition, the current CEO Henderson is a transitional figure and has difficulty carrying out fundamental reform of the management team.

② GM's reorganization must be effective in reducing the burdens and dealing several sub-brands and assets, including those in the European market. By the current restructuring, GM should remove the infected part of its body without complications, though the current process of restructuring has more uncertainty. The disposal of Opel is the most critical. If Magna can control Opel for a short time, GM might buy this European brand back after regaining its own strength, and this will bring GM substantive good. GM's loss of Opel means its loss of the Western European market and will affect the support for its new model platforms in the emerging markets including China.

③ GM should shake off its dependence on large vehicles, and secure continued profitability from economy vehicles and new-energy vehicles. GM has the technical capability to make economy vehicles, but currently cannot ensure their high profitability as its large vehicles such as pickup trucks.

④ GM should resolve the negative impact of the bankruptcy protection on its brands and restore the confidence of the industry and consumers alike in the new GM. The negative impact on its consumers, employees and the core upstream and downstream partners should been reversed as soon as possible. Currently, the influence on these groups is only just beginning, and it is very difficult to conclude how deep the ultimate effect will be.

(To be continued)

A Research Report on the Change in Global Auto Industry (I)

A Research Report on the Change in Global Auto Industry (II)

A Research Report on the Change in Global Auto Industry (III)

A Research Report on the Change in Global Auto Industry (IV)

A Research Report on the Change in Global Auto Industry (V)

A Research Report on the Change in Global Auto Industry (VI)

A Research Report on the Change in Global Auto Industry (VII)

A Research Report on the Change in Global Auto Industry (IX)

A Research Report on the Change in Global Auto Industry (X)

A Research Report on the Change in Global Auto Industry (XI)

A Research Report on the Change in Global Auto Industry (XII)

A Research Report on the Change in Global Auto Industry (XIII)

A Research Report on the Change in Global Auto Industry (XIV)

A Research Report on the Change in Global Auto Industry (XV)

A Research Report on the Change in Global Auto Industry (XVI)

A Research Report on the Change in Global Auto Industry (XVII)