Small Biz: Lessons to Learn From GM Revamp

When your company faces disaster, is it better to slash costs quickly or pour precious cash into a potentially blockbuster -- but risky -- new product?

General Motors(GM Quote - Cramer on GM - Stock Picks), the nation's largest car company, is betting on both, and that could provide some useful lessons for small-business owners.

Few industries are in a tougher position these days than the Big Three American automobile manufacturers GM, Ford(F Quote - Cramer on F - Stock Picks) and Chrysler. Last week, GM stock hit its lowest level in more than three decades, surely a stomach-churning milestone for everyone in the company's executive suite.

Given the skyrocketing gas prices of the last few months, combined with a nationwide credit crunch and a possibly imminent recession, GM is finding it harder than ever to sell cars. But the company is not going down without a fight. The way CEO Rick Wagoner is tackling the company's many challenges provides a case study for any company navigating a crisis.

"I give General Motors an A plus," says John Wolkonowicz, senior automotive analyst for North America at Global Insight in Lexington, Mass. "They're doing a lot of things right in the most difficult environment of the company's 100-year history."

The key is GM's two-prong approach to its problems. On the one hand, the company is making quick fixes that cut costs immediately. At the same time, they're funding the Volt electric car, a product that could transform the entire industry.

(Of course, GM had an electric car before and abandoned production of it, and for a long time relied on huge, gas-guzzling cars for profits, while treating smaller, fuel-efficient cars almost as throwaways.)

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