How Will GM's Bankruptcy Affect the Auto Industry?

You may be old enough to remember the heyday of American-made automobiles. Gas was plentiful and cheap, cars were big and powerful and the economy was booming. Then things – as they always do –changed. Gas became more expensive and even scarce. Cars needed to be more fuel efficient and handle our changing two-income lifestyles. Imports started rolling in to fill a need that the American car manufacturers hadn't quite yet realized.

And still things continue to change today, with the economy struggling, gas hitting more than $4 a gallon and American car companies rolling out cars that most Americans can't afford and don't want. Think about it – out of the last dozen or so car advertisements you saw trying to entice you to buy by offering large incentives, how many were for imports? You don't have to try to persuade people to buy what they're already buying.

In the midst of all this, GM has declared bankruptcy. The bailout attempt last fall didn't work – whether it was ill advised is water under the bridge. What we have to deal with now is the reality that one of the Big 3 – an American car manufacturer once though invincible – is in the hands of the federal bankruptcy court. What does this mean for consumers? And what does this mean for the auto industry?

For starters, GM is downsizing, with only the GMC, Buick, Cadillac and Chevrolet lines remaining. Pontiac, Hummer, Saturn and Saab will likely be sold to help boost the company’s flagging stock. GM says they’re committed to continuing to serve their customers and honoring their warranties, but already a number of dealerships have closed, making it harder for those who need service or who want to buy GM vehicles to find what they’re looking for.

It's too soon to tell whether or not the bankruptcy process will succeed in reducing the bloat that GM has been carrying and turn it into a lean, consumer-satisfaction driven entity. It’s also too soon to tell whether or not consumer confidence in GM will ever return.

But more importantly, this development has to shake the auto industry to its very core. GM was one of the Big 3 – unassailable, or so it seemed. The lesson for the auto industry is one that other industries have been learning for a while now. You can't tell the consumer what they want to buy – you have to listen to what they want and give them what they need. You’ve got to be nimble and able to respond to changing needs and demands.

In other words, you've got to give people the cars they need, rather than trying to create desire for the cars you want to make. And you've got to do it without so much industrial bloat – on both the corporate and manufacturing levels. And, perhaps above all, you’ve got to provide the quality and customer satisfaction people expect from today’s producers. If you can't do that, it seems likely that this bankruptcy won’t be the last we see in the auto industry.