Why 2013 Isn’t General Motors Company (GM)’s Turnaround Year

Now, let me say that I believe this entire portfolio refresh is exactly what the doctor ordered. GM has previously said its market share loss is due to having the oldest vehicle portfolio in the industry. The problem is the costs that go hand in hand with new designs. That list above is a large number of vehicles, and a lot of inventories to keep in check. It’s also challenging to time changeovers perfectly. These next six quarters of vehicle launches will likely determine the next few years of success for GM investors. Even if rollouts are completed almost flawlessly, with zero recalls and on schedule, and inventories are held in check, I still believe the costs incurred will be too much to see a turnaround in the profits in 2013. However, it might be enough for investors’ to see revenue rise with the new vehicles, hoping that efficiency will follow.

Bottom line
If I was given the chance, as an investor, to have Ford or GM’s executive management, I would choose Ford’s, hands down. Sorry GM fans; I believe Mulally and friends have proven time and time again that they make quick, great decisions. That said, look at recent launches of the Fusion and Escape, which totaled six recalls combined, and the MKZ, which was delayed and ran out of prior year models to sell. I believe GM will have difficulties managing a portfolio refresh that is much larger and more difficult. I don’t think GM’s management will be able to pull it off without incurring a lot of cost that will weigh down 2013 earnings.

Make no mistake — the next year and a half will be crucial for GM to have the vehicles it needs to compete for the No. 1 global sales spot. If they pull it off, it could very well reward those who are willing to risk the investment. For now, I’m skeptical, but I’ll be watching closely.

The article Why 2013 Isn’t GM’s Turnaround Year originally appeared on Fool.com and is written by Daniel Miller.

Fool contributor Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends General Motors.

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