The Newspapers (not the Unions or the Debt Holders) are GM’s Largest Obstacle to Success

The biggest problem that GM has suffered from since the 1980s is negative public perception – both at a corporate and a product level.  Despite numerous management changes and strategy shifts, GM has failed to convince the American public that is an innovative company which can build high quality vehicles.  From my perspective, one of the biggest reasons that GM has been unable to overcome its public perception dilemma is the on-going negative attention it receives in the media.  For as long as I can remember (at least over the past 20 years), GM has served as a punching bag for the media.  Not a month goes by without some negative story making the front page about GM.  Even at the height of GM’s market capitalization in the 1990s, the media found ways to criticize its management for its focus on SUVs, Minivans and Trucks.  The media portrayed these vehicles gas-guzzling monstrosities that posed a safety hazard to other drivers due to their size, weight and ability to rollover during collisions.  The past two years, have been a virtual field day for the media as GM suffered under extraordinary macroeconomic conditions.  Throughout most of 2007 and 2008 GM was heavily criticized as contributing to the environment and energy crisis in the US as oil prices spiked to $150 per barrel.  The second half of 2008 and early 2009 have seen GM devolve into the most impacted by the global liquidity crisis. 

Toyota, now the world’s largest automaker, is what most experts point to as the industry’s poster child for success.  Toyota has defeated GM on its home turf with better designs, higher quality and more fuel efficiency.  However, Toyota has been experiencing financial performance almost as dismal as GM during the past six months.  A recent article in Automotive News states that:

“In six short months, Toyota Motor Corp. collapsed from the world’s biggest, most profitable car company to the industry’s top quarterly money loser.  The roughly $28 billion swing – from record operating profit to loss – was whiplash fast…” 

AP-ToyotaLoss

Source: AP

Toyota’s greatest challenge has been currency fluctuations.  The yen has appreciated 14% against the dollar recently.  Toyota imports 45% of the vehicles sold in the US from foreign manufacturing plants, primarily in Japan.  Consequently, even minor changes in the currency rates can have significant impacts on profits.  Another challenge Toyota has experienced is with its product portfolio.  Toyota has de-emphasized focus on its traditional strength of small sedans as it has attempted to grow market share in the luxury and SUV sector.  With the record oil prices of 2008 and the economic crisis of 2009, both the luxury and SUV sector are struggling.  Toyota has the capacity to build 9.3M vehicles this year, but will only have demand for 6.4M.  A 3M (33%) production capacity excess for the company that has traditionally defined lean manufacturing is unprecedented.  Yet despite Toyota’s challenges, there has been little media attention on the Japanese automaker.  I read the Wall Street Journal every day.  I do not recall even a single story about Toyota’s problems being published on either the front page or the secondary Marketplace or Money & Investing sections.  

GMC logo

The fact is that the American media painted a bulls-eye on GM in the 1980s and has been shooting arrows at GM constantly since then.  And in 2009 they finally won.  The irony is that GM remains one of the most loyal sponsors of the television and print advertising spots that the media industry depends upon for its funding.   This is a topic I will explore in a future post, but I will close by stating that there are a few lessons that I think marketing professionals can learn from the newspaper industry:

  • Public relations can make or break a company.  GM’s failure to influence its reputation with the popular media has been the single largest obstacle it has faced to success.
  • Even the most dynamic and robust business models (e.g. Toyota) can fail in extraordinary circumstances such as the global credit crisis experienced in 2008 and 2009.

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