What Went Wrong?

What brought a company low that at one time embodied the cool of Apple, the financial heft of Microsoft, and the marketing savvy of Toyota? At one point, every other car sold in America was made by GM. In a word, protection.

When Alfred Sloan organized Billy Durant’s hodgepodge of brands, he created a car for every purpose. The entry-car was a Chevy. As customers went upscale, they could ascend through Olds and Buick to eventually land a Caddy, and never leave the GM family. Any business student will tell you this is classic niche marketing, combined with price optimization. Why didn’t the model last?

Well, times change. A trade war in chickens led the US to impose tariffs on imported trucks. Capital was diverted to this more lucrative market, and GM’s “auto ladder” languished. In the end, so many resources were focused on the profitable light truck market that when fuel prices spiked again in 2008, the company couldn’t adjust..
So government protection diverted assets that should have gone to strengthening a diverse product lineup. Sure, management made bad decisions. But they were encouraged to do so by bad policies.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By |2014-09-04T18:30:23+00:00June 3rd, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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