It's always shocking for any company which has been a leader of the indus-try to lose its position, market share and more importantly the faith of its investors and customers; customers are not buying GM's cars and the stock price is on the way down. Most often such a situation arises out of competitive forces and market situations apart from consumer choices. For GM, for long America's and the world's number one automaker, the ride to the top was smooth. But owing to the tough business environment and with some self inflicted injuries the auto giant is staring at difficult timeslosing its own identity as a carmaker that could make cars for all the demographics of a market. While GM's recent decision of not exercising the put option to acquire the troubled Italian automaker Fiat cost it $2 bn, the drastic change in the US automobile market has seen its sales plummet. The company declared a loss of $1.1 bn in the first quarter of 2005. This is its worst performance since 1992, when it had filed for bankruptcy. Further, the healthcare obligation for GM is also not allowing it to be competitive on account of the costs which have become an obligation for it. The recent downgrading of its stock to junk status by Standard & Poor's, the worlds leading credit rating agency, has only compounded its woes. Though the company has been through this kind of situations in the past, the odds are heavily against it this time.

GM has been facing the heat from its competitors, its core business is not in proper shape as its less reliable and gas guzzling auto models have seen the company lose considerable market share to its competitors. The problems have risen from the company's inability to offer a quality product portfolio to match the customer's preferences, something which its competitors, especially, the Japanese and Korean automakers like Toyota, Honda and Hyundai seem to have understood and implemented. Harley Shaiken, Professor, University of California and a long-time observer of the automobile industry concurs, "GM's key problem is vehicles that don't excite customers." He adds, "Three factors play into this: First, a reputation for poor quality and reliability that linger even when both improved; second, allowing its rivals to gain a technological lead; finally, following rather than leading."

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