Former GM CEO: Apple has 'no idea what they're getting into'

Dan Akerson, who was the CEO of General Motors from 2010 through 2014, is sceptical about Apple getting into the car business, according to Bloomberg.

“If I were an Apple shareholder, I wouldn’t be very happy,” said Akerson. “I would be highly suspect of the long-term prospect of getting into a low-margin, heavy-manufacturing” business.

Akerson pointed to the iPhone’s high profit margin. The gross margin on the iPhone 6 is about 73%. (Gross margin is the sale price minus cost of manufacturing. Actual margins are quite a bit lower because you have to add in sales and marketing and other costs.)

GM’s gross margin in Q4 2014 was 14%, according to Bloomberg.

GM’s ex-CEO said outsiders usually make the car business sound easier than it is.

“A lot of people who don’t ever operate in it don’t understand and have a tendency to underestimate,” he said.

If Apple really wants to sell a car, it has probably considered the risks. It would have to sell to the luxury market (like it has with the iPhone) and deal with much longer replacement cycles than the iPhone has.

In fact, modelling its business after BMW’s would be the easiest path to success. Unlike GM, which is huge but has relatively low margins, BMW is a mass-market luxury brand — both large and highly profitable.

It’s not clear if Apple would manufacture the car, but Steve Zadesky — the man in charge of Apple’s secret car project — has reportedly been looking for a manufacturing partner in Austria.

That’s wise. Akerson suggested that a soup to nuts car business could be difficult for the iPhone maker.

“They’d better think carefully if they want to get into the hard-core manufacturing,” he said. “We take steel, raw steel, and turn it into car. They have no idea what they’re getting into if they get into that.”

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