May The Best Car Win: GM’s Wallet of $50 Bn Fat Enough To Beat Honda?

Posted by Hersh Bhardwaj in Marketing Current Affairs | 1 comment

NO.

Tom Peters, amongst many agonized American taxpayers, believes that GM will not be paying back  $50 Bn. Simply because they can’t. Tom Peters lost his faith in the largest US auto-maker, believing that they stopped worrying about making the best cars in the world.A vision that made GM number one car-maker in the world.

The debate whether GM should have been given the federal assistance will never subside.Not soon, at least. The manner in which the auto-maker somehow took US government hostage is bizarre. Read this:-

“G.M. used to say that the federal government absolutely had to bailout the struggling firm because if it didn’t, especially in a time of great economic crisis, the affect on the U.S. jobs market would be devastating and America may well see the end of its auto industry because consumers would forever be turned off by a bankrupt firm no matter the success at reorganization.” (Instablogs)

Now, for every one optimist supporting the GM cause, there are ten nearly-cynical realists proclaiming that GM will never be able to pay back the taxpayer’s money.  One of the weblogs quoted the NYT thus-

“We don’t think that after this next $30 billion, they will need more money,” one administration official said. “But the fact is there are things you don’t know — like when the car market will come back, and how much Toyota and Honda and Volkswagen will benefit from the chaos.” (Kausfiles.com)

So, two major factors to decide GM’s future according to the official report are: car-market‘s recovery, and, competitive dis-advantage. Kausfiles explains that this statement merely means that if more money will be needed to compete with Honda, Toyota, and Volksvagen then so be it. US government will do all it can to save the big American ego and even bigger white elephant, the once-number-one, General Motors.

Peter Cohan from Peter S. Cohan Associates has the valid numbers to support his theory that GM cannot pay back even if they earnestly wanted to. Peter says, “General Motors would have to reach a value 20 percent above its all time high in order to repay the $50 billion government loan it received…” He also believes that GM’s pre-bankrupcy projections were “tortured to support the outcome that management was seeking.”

Amidst all this hoopla and nerve-wrecking pressure to produce goods ( read, a great car), GM launched a ‘May The Best Car Win’ scheme. Under the schemes buyers can return and get a full no-questions-asked refund. The scheme applies to Chevrolet, GMAC, Buick  and Cadillac.

Is it just an attempt to show an intent of innovation to the major stockholders (US government)?

Have they actually woken up to the original GM mantra of making the best cars in the world?

Is it just a marketing gimmick to garner trust in GM brand?

Is it just a get-the-crowds strategy?

Ears to the ground.