GM Still Struggling to Gain Traction

General Motors could really use a big victory to show that it is on the mend. So far the company is having a hard time gaining traction in the marketplace.

CEO Frederick A. "Fritz" Henderson gave a 90-day update on GM's progress, in which the biggest news was the departure of North American sales vice-president Mark LaNeve. Henderson said LaNeve was leaving the auto industry, but he didn't specify where he was going.

It's easy to see why LaNeve is leaving. When GM emerged from bankruptcy on July 10, LaNeve lost oversight of marketing to Vice-Chairman Robert A. Lutz. LaNeve was not fired, company officials say. But he and GM executives have been facing serious pressure from the new board of directors to expand market share, which has fallen to 19.6%—from 22.3% this time last year—despite a slew of newly designed vehicles.

Henderson was blunt: "We're not satisfied with our market performance."

Losing brands with 3% market shareThe real problem is that just as GM is unveiling new models—many to plaudits from the motoring press—the company's image has been battered by last summer's bankruptcy and the fact that when the company emerged, the government had 60% ownership. "That's the open issue," says James N. Hall, principal of auto consulting firm 2953 Analytics. "How tainted is the company by taking government money?"

It will certainly weigh on Henderson's chances of reaching new Chairman Ed Whitacre's goal of surpassing 20% market share next year. That may not seem like a stretch from today's performance. But consider that GM is either selling or winding down Hummer, Saturn, Saab, and Pontiac—brands that collectively account for almost 3% of the U.S. market. Retaining that share depends on how well GM's mainstream Chevrolet brand can retain Pontiac and Saturn customers, Hall says.

Henderson knows he has a challenge. One Treasury Dept. official said Henderson probably has until the end of the year to show enough progress to win over the new board. If he doesn't, then they may begin to consider someone else for the job. Henderson knows he needs to show traction in the near term and growth over time. "I view this as a sprint and a marathon," he said Wednesday.

There are some good signs, though. While GM's market share is down to 19.6%, that is still higher than the 18.5% target in GM's recovery plan. That plan and target were accepted by the Treasury Dept. when the Feds approved upwards of $50 billion of loans to GM.

some new models sell more—for moreHenderson also said that GM is meeting cash-flow targets, but he won't give any financial results until next month.

The best sign for GM is that its newest vehicles are selling at higher prices than GM’s previous models, and some of them are selling in greater numbers. The new Buick LaCrosse, which went on sale this summer, sells for $31,000—$7,200 more than the old LaCrosse it just replaced. The brand new Chevy Equinox crossover SUV fetches an average price of $25,600, which is $3,300 more than its predecessor sold for. The Equinox also sells at twice the volume of the old model.

The Chevy Camaro is also outselling its rival, the Ford (F) Mustang, and getting higher prices. Chevy sold almost 8,000 Camaros last month, compared with about 5,000 Mustangs moved.

Henderson didn't say who will take over for LaNeve, but it will be an important choice. GM insiders say the candidate will probably come from inside. Just as it's hard to lure customers post-bankruptcy, it is proving to be difficult to snare talent as well. Henderson said the company would like to bring in outsiders for a variety of jobs, but until the government clarifies how executives are paid, it will be tough to do that.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE