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December 14, 2008

Comments

Rachael S.

Thank you for the helpful information. I bookmarked your site, and I hope you keep up the good work on making your blog a success!

Doc

Jonathan, thank you for your thoughtful comments. You ask a fundamental question -- for which there is no clear cut answer. Elimination of redundant manufacturing assets may (or may not) increase GM’s natural market share. On the one hand, the cash from sale of these assets would enter the company’s balance sheet and likely have no direct affect on cost of goods sold in the remaining plants. Therefore, gross margins would remain the same. On the other hand, removing the vehicles produced by the redundant factories likely would reduce the downward pressure on prices due to fleet sales and consumer incentives. This would increase the average revenue per vehicle and thus increase gross margins, boosting GM’s natural share level a bit. In either case, long-term success of the company probably depends on even more radical actions than massive changes in the scale and scope of its operations. Following the lead of IBM’s turnaround, what GM may need is an entirely new business model.

~V

Jonathan Knowles

Another fascinating post, Victor. The contrast between the 24% actual market share and the 13% natural market share is even more stunning than for IBM. I wonder, however, if the natural market share for GM might be somewhat higher once you eliminate the massive manufacturing redundancies that exist in maintaining 8 brands (IBM had unprofitable divisions but did not suffer from the same level of redundancy?). But, in any event, the scale of the required change is massive.

Marcos Escobar

Very interesting Victor! I am amazed of how into the topic you are!

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