Amid reports that the Treasury will soon attempt to sell the government’s stake in General Motors at a huge loss, CEO Dan Akerson this morning offered thin gruel for those hopeful about the future of the company. Akerson keynoted a breakfast sponsored by the National Association of Automobile Dealers in New York City, the site of the New York International Auto Show.
Asked about the flagging share price, which is now below its IPO price, Akerson cited oil prices, supply chain problems in Japan, and the fact that GM “incented (sic) more heavily” in the first quarter. He offered no scenario that would propel the share price higher.
Akerson defended GM’s incentives, which greatly exceeded the industry average, saying they were designed to give the company a “fast jump” in the new year. More likely, they moved ahead purchases that were going to take place anyway, and they certainly hurt profitability.
Akerson claimed that at the time of the IPO he asked senior management what could go wrong. The answer was $120 per barrel oil, so the company developed its “120 Plan.” It includes the “new generation” Malibu, which will not debut until the 2013 model year, and its eAssist technology being introduced into 2012 models. If it works as promised, eAssist is a nice, hybrid-like system that will boost mileage, and should help sales. But it is alone not enough to save the company. Strangely, Akerson did not even mention the Chevy Volt in his discussion of oil.
To the audience of (surviving) car dealers, Akerson said he wanted a “market driven” GM. He claimed that he wanted “imput from customers,” and intended to “listen to customers,” a sore point for dealers in the past. I doubt many dealers are crying out for electric Chevy Volts that cost $40,000 so they can sit on their lots. And GM really will not make much money on Volts even if they sell. No doubt Akerson understands all this, but he cannot offend his real boss, President Obama, who has pledged to put one million electric vehicles on the road by 2015. So much for a “market driven” GM.
GM is only major auto company without a captive finance company, putting it a disadvantage to its rivals. Akerson pointed to GM’s acquisition of subprime auto lender AmeriCredit but said that GM intended to “rely on Ally Financial going forward.” Ally is the former GMAC, now independent, that itself is the recipient of a string of multibillion taxpayer bailouts. Akerson said he “doesn’t want a $100 billion financing arm.” Akerson at several points mentioned his background in finance, but seems unimpressed by the fact that a lot of money can be made in making loans so people can buy cars.
The session was hosted by AutoNation CEO Mike Jackson who was more than deferential, even allowing Akerson to characterize GM as his “forum for national service.” Akerson was asked a series of soft balls about how he joined the GM board and “woke up one day” and found himself CEO. Akerson joked that White House needed “a token Republican,” but seemed dead serious when he implied that he was doing us all a favor by heading up GM. Arrogance helped do in the old GM. I wonder what it is doing to the new.
After Akerson left the podium, he was surrounded by reporters. He received a couple of clearly unwelcome questions about Treasury selling its stake. He claimed that he was having no discussions with them, and that it was totally up to the government. It didn’t sound like he is exactly in charge of the company.
I asked, “Sir, what about the Volt fires,” referring to a fire in a Connecticut garage housing a Volt and another electric vehicle. A few days later, the Volt mysteriously ignited again. Akerson stated that GM had sent engineers to the scene and that the Volt was not the source of the fire. (Authorities have not ruled on the cause of the blaze.) When I followed up by asking about the second fire, he was either unaware of it or played dumb.