Chevy Volt Plug-in Hybrid Vehicle; Source: GM website via the Car Connection

Now that G.M. is emerging from bankruptcy, it faces formidable challenges to become a viable business.  The new G.M. will be significantly streamlined, retaining only the Chevrolet, Cadillac, Buick and GMC nameplates. Hummer, Saab, Opel and Pontiac are being sold off or shut down. How can a smaller, leaner G.M. also be meaner?

G.M.’s Strategic Challenges

In a departure from its previous business strategy, G.M.’s new strategy is to focus on making cars that will “excite buyers.” The company’s new priorities are customers, cars, and culture, in that order. G.M. admits that this will be a radical shift in emphasis.

G.M. points to the success of the newly redesigned Cadillac CTS and Chevy Camaro as examplars for the kind of cars it wants to make. The Chevy Volt, a forthcoming plug-in hybrid, is G.M.’s big bet in the electric car market. With this line up of vehicles, G.M. is presenting a mixed message to consumers. On the one hand, it is redesigning and repositioning its iconic cars, which happen to be anything but environmentally friendly. Bob Lutz, who will be taking on a new role in marketing at G.M., has been largely responsible for the changes in the CTS and Camaro. On the other hand, G.M. is trying to appeal to younger, environmentally conscious consumers with its foray into fuel-efficient electric vehicles. The common thread across these cars appears to be high style and high design.

Is building cars that excite buyers the right strategy? Yes. But the question is what will excite buyers. Smartly, G.M. is reaching out to consumers to find out what they want.

Solving G.M.’s Challenges

Here are a few things G.M. should do.

1. Emphasize quality and dependability.

This is obvious, but an emphasis on quality would certainly send a clear message about G.M.’s cars. While style, design, and fuel efficiency are attractive features, the top selling cars are also among the most reliable. Quality and reliability seem to excite buyers enough to get them to buy. It’s unclear that quality and dependability characterize the Cadillac CTS and Chevy Camaro, G.M.’s two biggest recent successes.

2. Build fuel efficient vehicles across entire G.M. fleet.

Aside from the Chevy Volt, G.M. has little going in the way of alternative fuel powered cars. If G.M. wants to be perceived as a leader in this area, it needs to devote substantial resources and make critical design decisions now. Currently, Buick, Cadillac, and GMC are perceived to be anything but fuel efficient. G.M. should introduce new fuel efficient models within one or more of these brands.

Emphasizing fuel efficiency will yield economies of scale and economies of scope. Economies of scale will come from being able to utilize common production platforms and parts. Economies of scale will come from being able to spread research and development costs across the company’s brands.

In addition, G.M. needs to do improve fuel efficiency to meet tighter, government mandated fuel efficient standards.

3. Focus more on the Chinese market and less on the U.S. market.

This one is easy. China is now a bigger car market than the U.S. is. Not only that, the Chinese car market is growing much faster than the U.S. car market. G.M. needs to build models that appeal to Chinese consumers.

4. Align strategy and organization.

This relates to G.M.’s emphasis on culture. In particular, G.M. wants to encourage risk taking. The key here is to align the focus on customers and cars with internal organization and culture. To encourage risk taking, here are a couple of things G.M. should do:

• Give greater decision making authority to teams centered on quality control and innovation. Although this means greater decentralization, corporate headquarters can monitor activities using benchmarks and standards applicable across the brands.
• Create incentives that reward quality and innovation. One way to do this is to allow internal competition across the brands and reward the teams that excel at quality and innovation.

Whatever G.M. decides to do, it must move quickly and commit to its strategy.

Douglas Y. Park
Twitter: @DougYPark