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General Motors will face old and new challenges

The leaner automaker will seek to gain its footing in a competitive environment after its emergence from bankruptcy. It will confront an old problem: building cars people want and selling them at a profit.

July 07, 2009|Steven Mufson and Tomoeh Murakami Tse

The new General Motors hoping to emerge from bankruptcy this week will find itself mired in a weak car market, besieged by competitors vying to eat up its dwindling market share and pressed to change its corporate culture, all under the eyes of a strange new government ownership structure.

General Motors won permission from a bankruptcy judge late Sunday to sell its most-prized assets -- including the Buick, Cadillac, Chevrolet and GMC brands -- to a new government-backed company, setting the stage for a historic restructuring plan that is at the heart of the Obama administration's overhaul of the ailing auto industry. And it will shed debt, dealerships, other brands and many of its former labor obligations to try to become a more effective competitor.

But analysts said the "new GM" would still have the same challenge as before: designing good-quality cars that consumers want to buy at a price that will make the company profitable.

"The easy stuff has been done now. Now comes the hard stuff," said Maryann N. Keller, an independent auto analyst and consultant.

"From the moment that [GM Chief Executive] Fritz Henderson took over, he had one job: to get the company ready for bankruptcy and get it through. That has nothing to do with designing or assembling or marketing cars."

The new GM will also be seeking to gain its footing in a highly competitive environment. U.S. auto sales are on pace to fall short of 10 million vehicles this year, the lowest level in more than a decade.

Ford Motor Co., the only one of the Big Three to avoid bankruptcy, has been gaining U.S. market share. Fiat is breaking into the U.S. market through its new alliance with Chrysler and is angling to expand in China, where GM is strong.

Meanwhile, Roger Penske, who has agreed to buy GM's Saturn dealer network, is expected to make a deal with a manufacturer that currently lacks outlets.

"Whatever you flow through it will be something that wasn't flowing through it before," Keller said of the Saturn network. "What was GM's now becomes a competitor of GM."

The new GM will also have to overhaul its business model, which was built on a global platform that assigned design and engineering tasks for small cars to its South Korean unit, light trucks and crossovers to the U.S. operations, and mid-size cars to its Opel unit in Europe.

But in bankruptcy protection, GM gave up its controlling interest in Opel, raising questions about how GM would obtain crucial design and engineering expertise.

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Mufson and Tse write for the Washington Post.

Kendra Marr contributed to this report.

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