THE AUTOEXTREMIST

November 17, 2010

GM’s image will be a work in progress long after the IPO frenzy.

By Peter M. De Lorenzo

(Posted 11/16, 3:00 p.m.) Detroit. After witnessing the U.S. auto industry bashing over the last two years I must admit it’s a little bit stunning to see the frenzy over GM’s IPO. The run-up of Ford’s shares I can understand, as this is a company that has been focused and on an upswing almost from the moment Bill Ford Jr. brought in Alan Mulally and asked him to “fix it.” But GM?

Two years ago GM represented everything wrong with corporate America. The public flogging in the media was relentless, with GM held accountable for myriad sins both real and imagined – everything from being equated to terrorists by the resident blowhard of The New York Times, Thomas Friedman, aka the patron saint of the green-tinged intelligentsia - and pilloried by members of Congress for being blatantly and maliciously incompetent, which, given the notorious stumblebum political players involved would have been laughable if it weren’t so relentlessly tedious and insulting.

In the height of the pre-bankruptcy frenzy Friedman even went so far at one point as to suggest that GM and the rest of the U.S. automobile industry should be put to sleep and out of its misery in favor of Toyota becoming America’s only car company, because the Pious, err, I mean the Prius was just so much better than anything Detroit could muster that the most logical thing – at least through Friedman’s emerald-tinted glasses anyway - would be to shut the U.S. auto industry down and put hundreds of thousands of people out of work. Remarkably prescient, not.

Now we have an entirely different type of frenzy going on as Wall Streeters fall all over themselves to get in on the IPO action for the “new” General Motors Corp., the slim-downed, unencumbered, back-from-the-brink car company that all of a sudden is looking strong and righteously invigorated.

The unencumbered part is what really has the financial wizards frothing at the mouth. Stripped of debt and costs by way of the bankruptcy and drawing a “pass” on a $45 billion tax obligation because of the way the government-orchestrated deal was constructed – maybe the sweetheart of all sweetheart deals in the annals of corporate America, by the way – GM is a refueled corporate rocket poised to launch itself into the golden profit stratosphere, a stratum where the sun never sets, the bonuses are huge, and the payoff is damn near unlimited.

Sounds deliciously simple, no?

As Lee Corso likes to say, not so fast my friends.

As frenzies go, I admit that GM’s is worth more than a little excitement because when you look at the financials GM has not only been handed a new life via bankruptcy, it has been gifted a formidable new competitiveness, something that rankles its competitors to no end, I can assure you. But then again, all this “unencumbered” excitement going on doesn’t mask the fact that as a company and as an industry player, GM still has a long, long way to go.

It’s one thing to be the darlings of Wall Street; it’s quite another to be the darlings of Main Street. And to be blunt, GM isn’t there with the Rest of America yet. Not by a long shot. Everything associated with GM is a work in progress, especially when it comes to its image - or lack thereof - with the American consumer public.

For every single person touched by a favorable review of the Chevrolet Volt, Buick LaCrosse or Cadillac CTS-V, and every smile brought on by Chevy’s “Dogs in Pickups” commercial, there are just as many consumers out there who are not only still furious that GM took their taxpayer money, they’re even more pissed-off as the full ramifications and scope of the cozy tax break “deal” that GM was handed becomes understood.

That to me suggests that there’s still a giant disconnect between the glitzy and glamorous GM IPO - and all of the Wall Street “swells” who will benefit from it – and the true reality of GM’s image in this market, which to millions of consumers shopping in the retail trenches – the ones who will have to give GM another chance if the company expects to thrive, let alone survive – leaves a lot to be desired.

Ironically enough, the product is the one area I’m not as concerned about when it comes to the “new” GM. This business is, was and always will be about the product first and foremost, and GM is definitely firing on all cylinders in that department. As a matter of fact GM is on a new product roll, and each new vehicle execution they deliver to the streets and byways of America seems to be dramatically better than what came before, and not by just a little bit.

But after stating that fact I’ll paraphrase the great Vince Lombardi’s famous quote about winning as translated for the freshly-minted, IPO-flush GM: Image isn’t everything, it’s the only thing. And GM’s image is definitely a work in progress, at best.

Before any high-fiving can go on down in the hallways of the RenCen, GM must figure out a way to re-invent its image. Removing itself from the taint of bankruptcy by paying off most of the money, yes, that would go a long way toward improving GM’s image balance sheet. But it’s going to take more than that, and it’s going to take more than multiple variations on the Volt theme too.

GM has to figure out a way to connect with the hearts and minds of the American consumer, and it’s going to take image-wrangling of the highest order – and over many years to come – in order to get it done.

And that's the High-Octane Truth for this week.

 

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