Friday, May 13, 2005

My Plan to Save General Motors

There has to be a plan, because without one GM is a dead-man standing and has no chance whatsoever of surviving in the marketplace. 


Generations of executive hubris are to blame.  Don’t let anyone tell you it’s the foreign competition.  Hubris, saving their corporate asses and not rocking a boat that badly needed new directions are the reasons they’re in such suddenly shallow water and in danger of going aground. 


All that’s past history.  Now to the plan.


  • General Motors, over a period of five years, gets totally out of the automobile manufacturing business.  Close down, sell off, consolidate assembly lines and leave Detroit for a hugely slimmed-down corporate headquarters in New York.

  • Keep the brands (Chevrolet, Pontiac, Buick, Cadillac and GMC) and by all means keep the dealership network in place.

  • Offshore the manufacturing. 

  • Then watch as the stock recovers and GM nameplates repopulate the American roads.

In order to re-achieve brand differentiation and bring back the buyers who want a Cadillac to be more than a glitzed Chevvy, subcontract Caddy’s design and production to Honda.  Essentially, it will be a Lexus with its own signature body design and interior, a few proprietary goodies thrown in.  A hell of a fine car.  Market and sell the new Cadillac through the existing dealership network.  It’ll make ‘em all smile to finally have a great car to sell that’s worthy of the emblem.  Chevrolet goes to Kia (along with Opel) and GMC to Kia’s parent, Hyundai.  Toyota gets Buick and Pontiac.  Saturn gets sold to the highest bidder. Saturn and its manufacturing facilities are probably still worth something.


Actually, when I say ‘off-shore the manufacturing,’ it’s more symbolism than fact, as a good many Japanese and Korean brands are now manufactured in the United States at tax-deferred facilities nearly everywhere but Detroit.  How long has it been since GM had any kind of a break on a new plant, much less a tax break.  So, this kind of off-shoring could (and would) bring manufacturing jobs back to the US in a whole string of new, efficient, cutting edge facilities that would bring a welcome halt to the relentless loss of paychecks to foreign countries.


Getting out of manufacturing may require a bankruptcy on GM’s part to suit union, health care and pension strangleholds, but there are worse choices in the alternatives.  Better  to manage a bankruptcy now than be hauled in, kicking and screaming, a few years down the road.  At the moment, General Motors is cash-rich but that window won’t be open long as market share dwindles and pension and health plans spread chaos across the balance sheet. 

A bold move now could forestall the death of a thousand cuts.
On the other hand, GM is not known for boldness and there’s a lot of corporate history that augurs against making the right move in a timely fashion. The failure to imagine is the greatest possible failure to stockholders and employees.


But if Bob Lutz wants to chat over coffee, I’m available.


1 comment:

  1. I find it interesting that Volkswagen is in danger of making the same mistakes as GM has made in it's car business. Any smart buyer knows that the Skoda has the same platform, engine and support network as Audi and VW, so why buy an Audi or VW if the only differentiation is trim level and body design?
    I remember working for Budget Rent-a-Car in Canada as a teenager and having a US customer come in to rent a car. I offered him a Toyota Corolla which by all means is a good little car, he refused it based on it being foreign so being a cheeky and knowledgeable little shit, I offered him the current Chevy Nova. If you remember, the Chevy Nova of that time was a rebadged Corolla built in the NUMMI plant in the US. He thought the Chevy was a much better car when in fact it had a much lower trim level than the Corolla. Oh well.
    Have you noticed quite recently how GM has rebadged Daewoo cars in the European market as Chevy? I don't get it. Chevy as a brand carries no prestige over a Daewoo here.
    I really have very little respect for the US automotive industry. They deliberately killed off the Beetle by forcing catalytic convertors on cars that didn't need them in order to boost sales of their inefficient V8's and rather than invest in producing North American small cars, circumvented CAFE rules by rebadging Asian cars rather than investing in some R&D. Which, of course, forced the Asians upmarket to take over the midsize and luxury market. They've dug their own grave.

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