GM’s gamble has to be part of a longer term strategy, built on market understanding

by Richard Spragg

Whether you blame bad management, Union intransigence, Washington or anyone else for the auto industry’s woes, the fact remains that the Big 3 are now looking at a new market landscape. Behind the wrangling and politics is a simple business fact. You have to understand the products that your customers want to buy, both now and in the future, and you have to deliver those products at the right price. 

The 2011 Equinox. One of GM's best selling Crossovers

Today, GM took a step toward reclaiming some of its market share with the news that it will reopen its Spring Hill manufacturing plant in Tennessee to handle increasing demand for two of its biggest sellers: the Chevrolet Equinox and the GMC Terrain; both crossovers enjoying significantly increased sales.

[Equinox sales are up 48% this year with 130,000 sold through August. Terrain sales are up even further – 61% and 57,000 units for the same 8 months. ]

Local media report that the UAW expects Spring Hill to reopen in 2012 with 500 hourly workers. GM will invest $420 million on two programs creating about 1,700 jobs total.

On the face of things, this is a sensible, practical move that will create much needed jobs and stimulate a local economy. GM are directing investment towards supplying what customers want. What they want now at any rate. The success of GM’s future planning depends on understanding the next shift in thinking for American consumers. And the Big 3 must be first to understand this and first to address these needs through future models. If the US auto industry is really coming back, it’s going to need to lead the market charge toward fuel efficient vehicles, not simply follow the trends established by Nissan, Honda and Toyota.

Maybe they can wrangle the Unions and achieve competitive levels in employment costs. Maybe they can negotiate the political mine field of Washington, in financial and legislative terms. 

Maybe.

But if they don’t have the products that people want ready for them to buy before their competition do, none of these things will matter.

It’s the market, people. And a market that doesn’t exist, is not affected by any of these complex issues.