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General Motors' Natural Share Level: Can GM Be Like IBM?

Dec. 15, 2008 1:20 AM ETGM, IBM5 Comments
Victor Cook profile picture
Victor Cook

After weeks of debate in the press and the U.S. Congress, few concrete recommendations about how to ensure the future of the big three U.S. auto makers have surfaced. Lost in the noise is the following insight about the General Motors Corporation (GM) in a Bloomberg News interview of Jerry York:

As I look at the GM numbers, they've actually done 22.3% of the U.S. market year to date. But when you look at their level of fleet sales and the very heavy level of incentive spending to move product, their natural share level is down in the 15 to 17 % range.

One way to define a company's "natural share level" is the point at which the last dollar earned just equals its cost. Based on this definition, Mr. York's estimate is a bit on the high side. GM's natural share level was 12.7% of the $160.3 billion combined worldwide revenues of GM, Ford Motor Co. (F), Nissan Motor Co. Ltd. (OTCPK:NSANY) and Toyota Motor Co. (TM) at the close of the 2nd quarter 2008. There is another famous company -- whose name happens to rhyme with GM -- which was forced to lose market share in order to remain afloat.

You may remember Jerry York from his days as CFO of International Business Machines (IBM) in 1993. He's the guy who figured out that IBM had a $7 billion dollar problem. Fixing that problem required massive downsizing. For a brief account of these events see my March 13, 2007 post, "Make an Elephant Dance."

Over the years from 1993 through 2000, Lou Gerstner took IBM from the brink of failure to what I define as its natural share level. I trace the history of this extraordinary journey in my 14 minute audio slide show

This article was written by

Victor Cook profile picture
Victor Cook, Ph.D. is Emeritus Professor of Management at Tulane University. In addition to his university service, Cook has experience in senior management positions. Among those he has been for over thirty years, president and lead designer at thestyle.com Professor Cook began his academic career as a doctoral fellow at the Marketing Science Institute and Lecturer at the Wharton School. He moved to Cambridge, MA as Associate Director of Research when MSI was acquired by the Harvard Business School. He served six years as an Assistant Professor of Marketing at Chicago Business School before joining the Tulane faculty. Visit his blog: customersandcapital.com.

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