Sale of Saab and Hummer Seen as Crucial for Embattled General Motors

After emerging from bankruptcy this past July, General Motors Company exhibited confidence that the worst was behind them and brighter days lay ahead. Five months later the troubled automaker is still struggling to break free from its tarnished past.

The new GM would be more responsive to its customers and embrace innovation “ so said the company’s recently ousted CEO, Fritz Henderson.

He, along with other top executives, said the company’s $50 billion restructuring offered the chance for a new beginning that would be focused on producing better engineered vehicles and higher sales margins.

Henderson proclaimed, “Business as usual is over at General Motors.” He also warned, “If we don’t get this right, nothing else is going to work.

A key component of getting it right was for GM to concentrate its attentions on its core brands (Cadillac, Chevrolet, Buick and GMC) and shed the rest. But the pursuit of that strategy has led to a major shakeup of the automaker’s management that resulted in Henderson’s dismissal earlier this month.

In the past three months, GM has seen the collapse of deals to sell off its Saturn brand to Penske and its Saab brand to Spyker. The company now faces delays in its sale of Hummer to a China’s Tenzhong Heavy Industrial Machinery. GM also abruptly pulled out of its deal to sell Opel to Canadian auto parts supplier, Magna International Incorporated.

Last week, Swedish automaker Spyker upped the ante in its bid for Saab after GM announced that they planned to close down the brand. Although negotiations have resumed, most industry experts consider the chances of a sale as remote. Spyker CEO, Victor Muller, remains optimistic that a deal can yet be reached.

Unless a last minute deal can be struck with Spyker, GM will likely wind down its money-losing Saab division in January.

University of Michigan business professor and former CEO of American Motors, Gerald Meyers said, “Saab is a black eye for the former GM management and for Fritz Henderson. It was one of the things GM said it was going to do and failed to do.”

Former CEO Fritz Henderson had supported the sale of GM’s Opel and Vauxhall divisions to Magna International and its financial partner Sberbank of Russia. That deal was also supported by the governments of Germany and other key European Union members. The deal appeared imminent when, in November, GM’s chairman, Ed Whitacre, rejected the sale. The division between Whitacre and Henderson over the sale of Opel is considered by many to have been instrumental in Henderson’s ouster.

Automotive Consulting Group president Dennis Virag says it is essential that GM rid itself of the Hummer and Saab brands in order to concentrate its efforts on developing new products for its core brands.

He says, “There is a lot of good product coming out of GM, but the bureaucracy is disrupting.”

Recent studies show that GM still suffers from the perception that its vehicles are not as reliable, affordable or technologically advanced as those offered by its competitors and that those misconceptions are keeping potential buyers away from showrooms.

A recent survey of dealers conducted by CNW Research showed that shoppers who actually see the new Chevy Malibu purchase at a higher rate than those who test drive the competing Ford Fusion. The Fusion, however, continues to outsell the Malibu by a 12% margin. The research concluded that Ford’s higher sales are due to the automaker’s success in getting consumers into its dealer showrooms.

Like GM, Ford has concentrated on shedding money-losing brands. Unlike GM, Ford’s sales have been relatively quick and clean. In 2007, Ford sold Aston Martin. This year it has sold its Jaguar and Land Rover divisions to Tata Motors and is close to completing the sale of Volvo to China’s Zhejaing Geely Holding Group. Ford expects to finalize the sale during the first quarter of 2010.

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