What General Motors Needs to Do

The New GM Will Be Boring

June 10, 2009

General Motors (GM) is now running TV commercials advertising that the new GM will be selling fuel-efficient cars, such as hybrids and plug-in vehicles. This is a bit like your butcher trying to sell you celery instead of a big chunk of meat.

As lovers of SUVs, Corvettes and other big, high-performance vehicles cry, it's becoming clear that post-bankruptcy, the new GM won't be a very exciting company. Any passion left for GM vehicles is fizzling fast. This isn't good. I watched GM's CEO Fitz Henderson on television brag about the new Chevrolet Equinox to Neil Cavuto. Unfortunately, the Equinox isn't an exciting vehicle, and the post-bankruptcy GM is going to be, well…boring!

Even Honda, which makes very fuel-efficient cars, tries to profile its vehicles as fun and exciting. GM needs to learn how to remarket its products very quickly and spice up its most boring vehicles otherwise consumers won't bother to look at them.

GM reached a tentative agreement to sell its rugged Hummer brand to China's Sichuan Tengzhong Heavy Industrial Machinery Co. for $500 million. Sichuan Tengzhong deals in road construction, plastics, resins and other industrial products, and the Hummer brand would be its first step into the automotive business. GM said the Hummer sale would likely save more than 3,000 U.S. jobs in manufacturing, engineering and at various Hummer dealerships.

As part of the Hummer transaction, GM said Sichuan Tengzhong would continue to contract vehicle manufacturing and business services from GM during a transitional period. For example, GM's Shreveport, Louisiana assembly plant would continue assembling the Hummer H3 models through at least 2010. But soon after, the Hummer brand will become the first company to import Chinese-made vehicles into the U.S.

GM also reached a tentative deal to sell its Saturn brand and 350 dealerships to auto racing magnate's Roger Penske's dealership group, Penske Automotive Group. Penske said that he expects to offer all Saturn dealers new franchise agreements and will retain all 13,000 Saturn employees for now.

Penske also said he expects the deal to close in the third quarter. Initially, GM will continue to produce the different models on a contract basis. Penske said that foreign automakers would be key to his making Saturn succeed, but they will have to match GM's quality standards before Saturn's dealer network will distribute their products.

Both the Hummer and Saturn deals will send more manufacturing overseas and promote more imported vehicle brands in the U.S. Obviously, the Obama administration may be criticized for these deals, especially if imported Hummer and Saturn vehicles become a big success.

The result is that a leaner, meaner auto industry is clearly emerging. Vehicle manufacturing will always find the most efficient location, whether it's in Canada, China, Europe, Mexico, South Korea or the U.S. A foreign invasion led by South Korea via Saturn and then China via Hummer is brewing. But what the auto industry needs more than anything is passion, since the fuel-efficient vehicles that the Obama administration and other governments are mandating are dull and passionless.

I strongly recommend that you buy your favorite high-performance vehicle (like the ZR1 Corvette) or beloved full-sized SUV (like the GMC Denali) before they disappear like the dinosaurs.

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