Monday, January 10, 2005

Misguided G.M.

I really think G.M. is making inroads in terms of initial quality. The Cobalt, the 2006 Impala and Monte Carlo, are huge improvements over the cars they replace. But then I read stuff like this, and I wonder what Bob Lutz is thinking. In five years, the price per gallon of oil in the U.S. might be around three dollars. Unless we're doing fantastically economically, no one is going to be buying V8s. Yet that is what G.M. is bargaining on. I used to believe that if you gave people a RWD, V8 performance car for an okay amount of money, you would have a hot seller. But the sales of the GTO prove otherwise. Even the Mustang, which will be a great success for Ford, makes up less than 10 percent of its sales in the U.S. Most Mustangs sold are v6s, not v8s. All GTOs are v8s. G.M. should have released a v6 version, and concentrated more on the look rather than the "stats".

I think G.M. is taking an awful risk by betting on Americans love of big engines. Americans also love cheap gas prices, reliability, and great looks. Part of the reason for the success of the Chrysler 300, if not most of the reason, is that it's a great looking car. I think that it has a v8 within it is part of the reason, but honestly not a very large one. This isn't the early 60s anymore. And the trimming continues with layoffs continuing for G.M. I wonder how many jobs could have been saved if great looking products had been produced rather than big engined monsters.

G.M. needs to invest either in hybrids, or diesels. Chrysler has the advantage of Mercedes diesel engines, Ford is already well on its way with hybrids, G.M. is lagging. They've taken their fleet and made it comparable in looks to the auto industry average, now they've got to make it fuel efficient, and less dependent on the success of SUVs. The SUV ship has already sailed.

The next couple of years will make or break G.M. I don't think they will go bankrupt, because the government will bail them out, but the loss of prestige from going to the government doll will forever taint them, as it did Chrysler. Hopefully they see the light before it's too late.

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