By Edward Niedermeyer
March 18, 2008 -
Angus MacKenzie did everything but call TTAC by name in his essay GM Shares Tumble. So What? Yes, the Motor Trend scribe can “almost hear the Detroit death-watchers rubbing their hands with glee” at the news of GM's stock hitting two-year lows. It's true. Every time GM's share price dips, we light giant cigars, twirl our collective mustache and laugh maniacally. That Mr. MacKenzie sees critical coverage of the auto industry as journalistic schadenfreude goes some ways towards explaining Motor Trend’s increasingly toothless car reviews. But how can MacKenzie, an experienced car hack, justify pinning Detroit’s woes on anyone other than, well, Detroit? Hey, a man’s gotta eat.
What prompted GM's share price slump, said analysts, was a drop in the overall auto market, and worries about future profits in light of disappointing February sales… What the analysts really meant was Wall Street's money men don't think GM's a good bet for making them a quick buck right now. And if the money men don't think a company can make them a quick buck, then it's basically worthless.
This kind of rhetoric– references to unnamed, evil “money men”– smacks of Ye Olde International Jewish banking conspiracy. As populist as such a sentiment may be, it’s unconscionable for a responsible journalist to perpetuate such a well-worn shibboleth.
More to the point, MacKenzie is dead wrong. The short-term thinking that caused GM's stock price to head for the basement came from RenCen— not Wall Street. Nobody from the financial community forced General Motors to squander billions on misbegotten foreign alliances, or destroy its brands, or capitulate to union demands. Nobody told GM’s management to buy Saab and Hummer, or set-up Saturn. The end result of GM’s self-inflicted management failure is a company in deep financial crisis. This is clearly, unequivocally, completely GM’s fault.
In an era when nameless screen jockeys can move billions of dollars at the touch of a computer keyboard, Wall Street's institutionalized ADD has resulted in a feverish short-term view of the auto business. Lengthy product cycles and huge investment costs, combined with a fickle, cyclical, fashion-driven market, are just too damned difficult to deal with.
Sure. Automotive analysts like John Casesa begin looking at the car industry, get bogged down in the numbers and market cycles, throw up their hands and say, “Whoa! That’s just too damned difficult. Forgeddaboutit.” And what of all those institutional investors who’ve stood by The General for decades? In fact, GM was once known as a “blue chip stock,” held as much for its healthy dividend payments (recently halved) as its share price.
There’s one reason this is no longer true: the company’s management has run the automaker into the ground. And why’s that? According to Mr. MacKenzie, it’s all about GM’s pesky quarterly financial reports.
Maybe that's why the world's most successful automakers — Toyota, BMW and Porsche, to name three - are those that have never had to sweat a quarterly earnings call with a posse of skeptical Wall Street analysts ready to trash their stock price when they don't see the opportunity to make that quick buck.
Wrong. BMW files quarterly reports. Toyota files quarterly reports. As does every major automaker you can name save privately-held Chrysler– and we all know how well that’s going. As publicly held companies (save Porsche), ALL automakers have to face the music. Just like GM.
Never mind. MacKenzie is determined to paint GM as a victim– even if he has to undermine his own argument to do it.
Bunkie Knudsen, who ran Pontiac and Chevrolet in the '50s and '60s, reckoned it all started to go wrong when Fred Donner became president of GM in 1958. Knudsen was outraged Donner would insist on talking about GM's stock price, and what the analysts thought about it, at his daily meetings with the heads of GM's divisions. Before Donner, those meetings were mostly about making cars and trucks. After, as the financial engineers took over from the real ones, GM's cars and trucks got worse and worse.
Again, how is this Wall Street’s fault?
Bunkie Knudsen believed in a simple concept: The people in Detroit had to make good cars, and if they did, the people in New York would take care of the stock. After decades of fixating on financial engineering, GM is only now getting back to the business of making good cars. Only problem is, no one in New York seems to care anymore.
Reality check. It’s not “the money men’s” job to “care” about making good cars. That’s GM’s job. This they’ve failed to do, in spectacular fashion. MacKenzie’s finger-pointing at dark forces on Wall Street doesn’t change the fact that GM is in a hole of its own making. Their share price reflects that reality, which GM, like MacKenzie, refuse to face.
[Read MacKenzie's rant here.]
Subscribe to Newsletter52 Responses to “ Between The Lines: MT’s Angus MacKenzie’s on GM’s Sinking Stock Price ”
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POWERED
March 18th, 2008 at 7:34 am
Companies that are run well deliver profits, their share value goes up, investors flock to buy.
GM was not run well. Unfortunately for GM management, there are other automakers, operating in the same period, that have been run well, whose share value has risen, and to which investors flock.
Take away the spin from GM and you are left with a shell.
March 18th, 2008 at 7:47 am
My Father worked with Semon Knudsen at Cadillac from 1939 to early 1942, and maintained a friendship for 35 years. He was right.
March 18th, 2008 at 8:10 am
I do worry about the mentality of the United States. Do people TRULY believe that GM’s woes are NOT its own fault?
We’ve said it for so long on TTAC, it’s hard to see how no-one else can see the problem. GM’s woes are nobody else’s fault except GM’s. Years of mismanagement with nobody being held accountable. Case in point is Rick Wagoner’s flirting with FIAT, which cost it $2 billion. Now if you or I were to cost the companies we work for 10% of that price, we’d be out of the door! Yet, GM just swept it under the carpet and no-one was held accountable.
Another GM folly was the insistence of “golden parachutes” for top management. This was a disaster from the beginning. If top management were going to walk away from GM, irrespective of whether GM succeeded or failed, with millions of dollars, where’s the incentive for them to succeed? Again, lack of accountability.
GM, despite other car companies doing the opposite, are blaming the current credit crunch for the poor performance. It never seems to be GM’s fault, yet when they deliver a meagre profit or improvement in market share, management are quick to reap the rewards. Anyone remember, GM posting a surprise sales gain in spetember 2007? Mark LaNeve said “The myth of import superiority is being destroyed”*. What about now? When GM’s market share is eroding fast? Where’s Mark LeNeve saying “GM’s in trouble and we’re responsible?”.
Toyota, with their falling quality, recently (and openly) admitted that they are going to do something about it and who said it? The CEO! Toyota knew there was a problem and they are fixing it. GM, on the other hand, have a quality perception problem, what do they do? Give longer warranties? Go on an advertising offensive? No. They whine about how it’s the “customer’s problem”.
Short term thinking, lack of direction and a toxic corporate culture is what is killing GM. Until, these problems are solved, GM won’t make the cars they need to survive.
If journalists believe that GM’s woes are the result of negative publicity from other journalists, then they are in deep trouble……
* = http://money.cnn.com/2007/09/04/news/companies/autosales/index.htm
March 18th, 2008 at 8:16 am
Here is a blast from the past:
Nattering Nabobs of Negativism.
March 18th, 2008 at 8:26 am
The auto companies made the mistake many years ago of managing the companies to provide for the union and their members that insisted on job security. The company is there to build product, and if you don’t build product there will be no company and no jobs.
March 18th, 2008 at 9:01 am
Blame the media. Blame Wall Street. Blame everyone but the source of the problem: GM itself.
MT = More Trivia = irrelevancy
March 18th, 2008 at 9:16 am
The views of “this little group of men” who “live and work in the geographical and intellectual confines of Washington, D.C., or New York City,” Agnew noted darkly, “do not represent the views of America.” He inscribed himself in history, and in famous-quotation anthologies, forever, when he said, “In the United States today, we have more than our share of nattering nabobs of negativism. They have formed their own 4-H club—the hopeless, hysterical hypochondriacs of history.”
I wonder what Agnew would have made of GM’s woes.
March 18th, 2008 at 9:26 am
Excellent editorial Edward. You’ve really nailed it. In many ways the slow demise of Clueless Motors looks a lot like the path the likes of MT are on. What’s that cliche, ‘Misery loves company’ Well both GM and MT make a great team as they go down togather.
March 18th, 2008 at 9:33 am
Good op-ed here. Wall Street’s obsession on the next quarter is extremely unhealthy, and has, in my opinion, brought far more bad than good to our economies.
This said, using Wall Street as a scarecrow to hide GM’s self-inflicted woes is pretty ridiculous. The proof of GM’s poor management are literally roving (or rather, rotting) in the streets.
Wall street has moved from being a meter of the economic health of companies to being a den of compulsive, short term-oriented gambling addicts, and along with WS the whole nation. That’s what got us in the current mess. But the only way it can directly affect the management of a company is if activist shareholders push for quarterly objectives at meetings as opposed to longer-term objectives. As far as I know, it really wasn’t the case for GM.
As for MT, it’s the first “buff book” I’ve stopped reading, 3 years ago.
March 18th, 2008 at 9:42 am
It is kind of ironic that Angus is in a similar predicament to GM. MT hasn’t written a accurate road test since I was 7 . When I was 7 I believed everything I read.
I thought Angus was going to bring some good old British honesty to the pages of MT. Because MT has been so bad for some many years I never even bother to “flip” through it to see how Angus is doing.