Only by eradicating existing problems can GM turn around

• Source: xinhua
• [09:43 June 09 2009]
• Comments

By Wang Jiangang

When Shirley Young, former corporate vice president of General Motors Corp., heard that the auto giant filed bankruptcy petition last Monday, she felt grieved, but not surprised. It was GM's fundamental problems that had led to its decline, she said.

"Only by eradicating its existing problems can GM walk out of the difficulties," she said in an exclusive interview with Xinhua.

INTERNAL PROBLEMS

Young, senior adviser to General Motors-Asia Pacific, said: "Financial crisis had accelerated the pace for GM to go bankrupt, but its intrinsic internal problems accumulated over the years were the core factors leading to its decline."

"The US government has cleared the track for GM's restructuring process. However, the rebirth of a new GM hinges on whether the new managerial team is equipped with a brand-new management philosophy or not," she said.

"GM must reexamine its ways, learn from other counterparts and pay even greater attention to the real needs of market and customers," she said. "It should be aware that under the current circumstances, no company or business can maintain a leading market share unless it is able to change to adapt."

"If a company has been successful for years and becomes fixed in its ways and unable to change, it is doomed to be cast aside by the market." she noted.

Starting 2005, the production cost of GM's automobiles has been on a steady rise with the rapid increase of medical insurance expenses and labor costs, which made GM's products less competitive.

"I noticed while I was working to make marketing reforms at GM that serious problems could be seen not just from its structural costs and balance sheet but also with its ability to respond to customer needs and rising competition," said Young, adding that with some other problematic practices, "risks at GM began accumulating."

THREAT OF JAPANESE CARS

Historically, GM had been very successful in its first 30 or 40years, but GM became "complacent" later, said Young. So while the Japanese cars were penetrating into the US market aggressively, GM did not start to aggressively change to meet the challenge until much later.

"GM's market share began shrinking with each passing year, and finally walked into a situation of insolvency with the added pressure of the economic crises which shrank the market dramatically," she said.

For example, Young said, although GM had been making hard efforts in brand name building, there were problems with this effort. "GM had many brands and many other sub-brands, and new brands were replacing old ones at too fast a pace," she noted.

"GM can learn from the good practices of Japanese carmakers," she said. "Some Japanese brands, such as Accord and Camry, although with constant changes in outer design and functions, have never changed the model names. This allows them to keep building customer interest and new customers will know what to buy instead of having to learn about new brand names."

"The new management of GM must concentrate their energy on fewer mega brands," she said, while praising the GM decision to give up four out of its eight brands.

In addition, Young pointed out that because of history, GM had too many dealers, which made them less competitive and efficient in sales and customer service.