Why is GM in trouble again? Just consider the 2013 Malibu...
By David Menzies for MSN Autos
At first blush, it seems odd to even contemplate that General Motors is in jeopardy yet again.
After all, GM sold more cars than any other automaker last year while generating record profits. GM’s debt is minimal and it had US$32.6 billion in the bank as of the end of last quarter.
So why are so many people wondering about the automaker’s long-term viability?
Consider a recent Forbes article which notes that if President Obama wins a second term, he’s likely going to have to bail-out GM again. The reason: GM is once more losing market share – and the company seems unable to develop products that are truly competitive in the domestic market.
Currently, the U.S. federal government owns 500 million shares of GM, or about 26% of the company. It would need to get about US $53/share to break even on the bailout, but the stock closed at only US$20.21/share last week. This leaves the feds holding about US$10.1 billion worth of stock – and sitting on an unrealized loss of $16.4 billion.
In the 1960s, notes Forbes, GM averaged a 48.3% share of the U.S. car and truck market. For the first seven months of 2012, GM’s market share was 18%, down from 20% for the same period in 2011.With a loss of market share comes a loss of relative cost-competitiveness. There’s only so much market share that GM can lose before it would no longer have the resources to attempt to recover.
To help understand why GM keeps losing market share, consider the sad saga of the Chevy Malibu.
The Malibu is GM’s entry in the automobile market’s “D-Segment”. The D-Segment comprises mid-size family sedans like the Toyota Camry and the Honda Accord. Because the D-Segment is the highest volume single vehicle class in the U.S., and the U.S. is GM’s home market, it is difficult to imagine how GM could survive long term unless it can profitably develop, manufacture, and market a vehicle that can hold its own in this category.
Automobile technology is progressing so fast that the best vehicle in a given segment is usually just the newest design in that segment. Accordingly, if a car company comes out with a new, completely redesigned vehicle, it had better be superior to the older models being offered by its competitors.
But when Car and Driver published a D-Segment comparison test, pitting the 2013 Chevy Malibu Eco against five competing vehicles, the Malibu finished dead last.
Not only was the 2013 Malibu (183 points) crushed by the winning 2012 Volkswagen Passat (211 points), it was soundly beaten by the 2012 Honda Accord (198 points), a 5-model-year-old design due for replacement this fall. Worst of all, the 2013 Malibu scored (and placed) lower than the 2008 Malibu would have in the same test.
Bottom line: If President Obama wins reelection (unlikely, in my book), he should probably start giving some serious thought as to how he’s going to justify bailing out GM and its unionized workforce yet again. And he might want to be a little more modest about what he actually did achieve by bailing out GM the first time around.