The Truth About Cars
GM’s at the cliff’s edge looking deep into the chasm and sees…nothing. How pathetic. Here’s a company with $150b in annual revenues and all they can say is “give us the money or else.” How lame is that? Frankly, it speaks to the complete lack of leadership and direction at this company. GM has not advanced one shred of evidence that it knows what to do if it goes onto the government welfare roles. In fact, all we’ve heard is “more of the same” restructuring and downsizing that’s been completely ineffective to date in stemming the tide. That dog just won’t hunt. But if GM’s Board of Directors and executive managers had a clue, this is what they would do heading into the showdown with Congress…
First, outline a demonstrable plan for the road to recovery. Something akin to the plan laid out by Ford. A strategy whereby we have an idea of what products we can expect, realizable market share goals, and a stated return to profitability. To date, all we’ve heard from GM is nothing more than downsizing, the Chevy Volt and better products are on the way. If you think about it, GM’s been playing this tune (sans Volt) for more than thirty years.
The plan has to address all of the shortcomings found in the company today. Let’s look at these by major area of interest:
Brands – GM’s trying to field a roster of brands that have little meaning to the public. Eight brands for a 15 percent retail market share doesn’t compute. GM needs to pick two or three brands and then develop, foster and love them with unique vehicles. It’s too costly to support GM’s minor brands, even if they’re commingled in “sales channels.”
Dealers – If GM cuts brands, it also loses those dealers. So what? Franchise laws protect franchisees from many actions of the franchisors, but they don’t guarantee future outcomes. Nothing stops GM from outlining a five-year or even ten-year termination play. The dealers will sue. Let them. Let them join a class action suit; GM will just drag it out forever in court. By that time, either GM will be a stronger company with the ability to make some payoff to these franchisees or it won’t. That’s a risk that needs to be taken, now.
Financial Creditors – Cram-down! Put it out there now. Make them take a whole bunch of newly issued stock now in return for an 80 percent cut in debt obligations. They can’t count on government money to pay them off, and they’ll be lucky to recover 20 percent in a bankruptcy anyways. And there’s zero chance they’ll ever get ahead of the government in standing if GM does get a bailout; the government always collects ahead of everyone else.
UAW – United Auto Workers boss Ron G. needs a wake-up call. Big style. He’s hoping his Democratic pals in Congress will come to his aid and protect his flock. Too bad he’s barking up a very small tree. He forgets that big swaths of this country are anti-union, and those Southern Senators would like nothing more for the UAW to go down in flames and stop trying to organize their foreign-brand assembly plants.
GM should scrap the Mother of All Health Care Funds (a.k.a. VEBA) now; it can’t afford the big upfront payment required. Instead, GM should unilaterally reduce hourly retiree health care payments. Make these retirees suffer with the same crappy HMO care the rest of us get. Let’s keep in mind that salaried retirees get nothing now for health care (except a modest boost in pension payouts as an offset).
Rick Wagoner - Gone. He hasn’t done the job. Stop pretending that Red Ink Rick knows what to do – because he doesn’t. In fact, it’s not clear the guy has ever done anything that set a new direction for GM besides his “foresight” with regard to its China JVs. It’s always been more of the same: praying that the next “new” rig from GM would be the spark that lights the fire of American consumers. Find an outsider as CEO with strong industrial experience, a person appointed to be czar who can break down GM’s muddled and stifling bureaucracy.
Board of Directors - Toast. They should resign too before they get dumped. Better to die with your head attached than sacrificed in shame on the altar of bankruptcy. They’ve allowed this charade to go on way too long. Since the current shareholders are going to get massively diluted anyways, they won’t be able to control Rick’s puppet board any longer. Instead, the financial creditors should pick nominees for the Board using their newly-issued stock as leverage.
Bailout - Stop whining. Stop blaming everyone and anything but yourselves for your current predicament. You look stupid as a company. GM should stand up and tell the truth we’ve all known for years: their problems are entirely of their own making. Man up!
There’s an old adage told by aviators all over the world. When your airplane is in trouble, do something, anything, to change the outcome. Doing nothing and you’re sure to hit the dirt. Right now, GM’s doing nothing besides begging– and not getting much sympathy. Maybe it is time to roll the crash trucks?
