Five keys to GM's success after bankruptcy

updated 6:36 p.m. ET July 10, 2009

DETROIT - Even after emerging from bankruptcy protection, the new General Motors still faces some of the same troubles that haunted the old one, which piled up more than $80 billion in losses during the past four years and still needs government aid to survive.

So how does a company that has not made money since 2004 get back to turning a profit?

The top five things GM needs to do to be successful:

1. Win back customers from Toyota and other competitors by making cars that are more reliable than rival brands.

• Why it's important: GM has the image of building shoddy cars, mainly because that's what it did in the 1970s, '80s and even '90s. GM neglected its cars in favor of higher-profit trucks and SUVs until five years ago, and the stigma remains.
• How soon can this be done: It's already in progress. GM's Buick brand was tops in J.D. Power and Associates' three-year quality rankings, and several individual models have won their segments. But all of GM's new cars must have above-average quality and remain that way throughout the first five to six years of ownership. Problems early in a vehicle's lifespan discourage repeat customers.
• What the experts say: Many people will forgo style for reliability because they don't want to worry about costly repairs, said David Champion, director of automotive testing for Consumer Reports magazine. Said CEO Fritz Henderson: "I'm a believer that this is a cumulative game. GM is not a company that can be changed by one product. We need to have a continuous cadence of fantastic products."
• GM is succeeding if: Vehicles introduced in the next 18 months have above-average reliability, Champion said. The forthcoming Chevrolet Cruze compact, for example, must not only be stylish, but perform over time.
• GM is falling short if: People have to take their cars in for repairs during the first few months of ownership.

2. Raise gas mileage on every vehicle and bring out electric cars.

• Why it's important: Experts agree that gas prices will stay volatile. Supply is limited, and when the world economy recovers, demand will rise. That means a possible return to $4-a-gallon gasoline.
• How soon can this be done: It's already under way. A four-cylinder version of GM's midsize Chevrolet Malibu, for instance, gets 33 mpg on the highway, and it can carry a small family. GM has promised to put the Chevrolet Volt rechargeable electric car in showrooms by late next year. It can go 40 miles on a single electric charge and has a small gas engine for longer trips.
• GM is succeeding if: Every new model (GM plans to roll out 10 in the U.S. and 17 in other countries in the next 17 months) has dramatically better gas mileage in government testing than its predecessor.
• GM is falling short if: The mileage of its new cars is the same or only a mile or two per gallon better than the models they replaced.

3. Draw younger buyers into showrooms.

• Why it's important: Impressing buyers when they're young makes it more likely that they will stick with the same brand in the future. Yet GM's customers are typically older, said John Wolconowicz, auto analyst at IHS-Global Insight. The brands with the most appeal among younger buyers are Volkswagen, Mitsuishi and Honda, he said.
• How soon can this be done: Building a customer base among young buyers is a long and expensive process. And many small cars that GM has geared toward young buyers, like the Chevrolet Cobalt, have fallen short in quality and popularity. "It's going to be years to turn it around," said Karl Brauer, editor in chief of the automotive Web site Edmunds.com.
• What the experts say: Wolconowicz said GM was right to bring back Bob Lutz, the legendary industry executive and auto designer who will head the creative elements of GM's products and marketing. Said Brauer: "The Escalade kind of reacquainted a younger generation with Cadillac. That was the young, rich, hip person's car. They need to appeal to more than that."
• GM is succeeding if: GM products are appearing in hit movies, music videos, TV shows and other media. "If GM is smart, they'll get that car out in all the right places with all the right people," Brauer said.
• GM is falling short if: The perception persists that a Buick is a car only grandpa would drive.

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