Thursday, August 19, 2010

GM Pledges to Become 'Industry Leader' in Fuel Efficiency, But IPO Still Leaves Many Questions Unanswered

GM Headquarters

Don't call it a comeback. As General Motors moves forward with plans to recapture its status as a publicly traded company, one question seems to dominate coverage in the financial press: Why now?

Despite two consecutive profitable quarters, consumer confidence continues to drag and most analysts are pessimistic about the short-term outlook for both domestic and international auto sales across the industry. Meanwhile, GM's market share has continued to shrink. As Dennis Virag, president of Automotive Consulting Group put it on Bloomberg Television today, there is a strong suspicion that the company's decision to move forward with an IPO at this stage is �Smore political than practical.⬝

Still, GM's S-1 filing with the SEC does provide us with some valuable insight into how it plans to turn things around in the coming years�even if it sends some confusing signals about what role the company's newfound commitment to fuel economy will play in that process.

Now or Later?

On Tuesday, we summarized General Motors's fuel economy strategy as follows: �SMild Hybrids, Then Full Hybrids, Then EVs, In That Order." And while there's certainly no question that winning the long-term market strategy battle is essential to success in the automotive industry, one questions just how far behind GM actually is in the efficiency race. What should be perfectly clear from reading GM's S-1 filing though, is that the company would very much prefer that gas prices remain low for the time being.

The carmaker is still heavily dependent on truck and SUV sales, and according to Consumer Reports, only one of the company's nine best vehicles gets more than 25 mpg in fuel economy. As GM itself put it in today's filing, �SAny future increases in the price of oil in the U.S. or in our other markets or any sustained shortage of oil... could reduce our market share in affected markets, decrease profitability, and have a material adverse effect on our business.⬝

read more

Read More... [Source:]

No comments: