Customer Preview Precedes Media Event at GM

It's not at all clear that the hidebound company knows how damaged its brands are, let alone have any idea what to do about fixing them.

A month and a day after General Motors Company was launched its new executive corps were out in force in a product preview and update session led by CEO Fritz Henderson. The difference from the old GM was noted by Henderson, who said the product portion of the program was run for customers yesterday in an attempt to demonstrate that the company really takes seriously it newly vowed pledge to put customers first, perhaps the most over-used cliché in the automobile business.

“As I’ve said many times, we’re putting the customer first at GM, and this event is a literal demonstration of that, said Henderson, whose job is thought to hinge on turning around GM’s decades’ long slump in sales and marketshare. “Today, we’re hosting media and analysts; yesterday, we hosted customers.”

Henderson said he planned to prove the customer focus to “our current and potential customers every day. We need to live this philosophy.”

About 100 customers were in attendance at GM’s Milford, Michigan, proving grounds yesterday with GM potentates. They were selected from bloggers who contacted Henderson. “We picked thoughtful, severe critics, “Henderson said, while excluding the ones who told him “to go jump out of a window,” since he wasn’t  inclined to follow that particular piece of advice. He said a good cross section of young and old were selected, and the “vast majority haven’t owned GM vehicles for some time now.”

What customers and then media were shown revolved around GM’s four core brands, Chevrolet, GMC, Buick, and Cadillac. It was an attempt to demonstrate what the brands “stand  for today, and a peek at what they’ll look like tomorrow,” said Henderson.

The events were obvious publicity stunts, of the type  often used by struggling automakers to shift the focus from current problems to a promised golden future. GM is banking on 25 new vehicle launches in the U.S. between now and 2011 to revive its sagging fortunes. But it’s not clear that the hidebound company understands just how damaged its brands are, let alone have any idea what to do about them.

There is no question that the need to turn things around is dire: In the North American market, GM sales were down 32% to 307,000 vehicles in the second quarter. This trend, which will likely continue based on past performance, underscores both the ongoing weakness of the U.S. economy and GM’s continued slide in what was once its largest market, one it dominated for decades.

No more.

The company is trying to be optimistic by pointing out that sales in the U.S. were up 31% when compared with the first quarter of the year, increasing GM’s market share from 18.4% then, to 20.5% in the second quarter. Additionally, GM share in North America increased nearly two percentage points, to 19.9% when comparing Q1 with Q2, 2009.

GM needs between an 18-19% share to just reach break even at current annual sales volumes of 10 million units. Henderson reiterated the guidance provided during the bankruptcy that GM would not return to profitability before 2011.

However, Henderson said that the second half of 2009 is shaping up to be better than the first. While there was an upturn in the market from Cash for Clunkers at the end of July, more is going on in the showrooms than just the government handing buyers $3,500 to $4,500 in cash. Showroom traffic is up as a result of the program and people who don’t qualify for Clunkers cash are being converted to buyers by dealers who are giving generous trade-ins on used cars that are now in short supply. Also credit is returning to the marketplace and even GM is offering some limited forms of leasing for the first time in a year.

The newly formed GM Executive Committee, the top nine people in the company, met this morning to discuss if GM had cut its production back too far and would increase it later this year. Henderson declined to elaborate, but it is difficult for large automakers to start and stop production on short notice. August and most of September production schedules are likely locked in by now. If the market comes back strongly, GM could miss sales; a production problem that all automakers are debating right now.