By on August 11, 2009

While General Motors has downsized physically and financially, the nationalized American automaker still suffers from a monumental mental disorder. Today’s F5 PR tornado made that point pellucid. In fact, it’s hard to know where to begin the diagnosis. We might as well start with the “big news” on the vehicle destined to become GM’s Edsel. The General would have you believe that the Chevrolet Volt will achieve 230 miles per gallon in city driving. Yes, well, the Volt is supposed to surmount the first forty-miles on battery power alone. So I make that . . . zero miles per gallon; you know; as it’s not using any liquid fuel. Hey! Anyone remember [former] Car Czar Bob Lutz’s hand-wringing re: the Volt’s gas supply fouling because owners would never use the internal combustion engine? Like that. Quick question: what drugs are these guys on? More accurately, why aren’t they taking their meds?

News flash: General Motors is bi-polar. The company’s currently in the midst of a prolonged manic episode. To wit: on this very day, GM trumpeted the Volt’s [literally] incredible mileage claims AND unveiled a two-year product plan involving twenty-five models AND promised a new Cadillac to best BMW’s 3-Series AND revealed plans for a new internet microsite for its Advanced Design studio (“The Lab”) AND told taxpayers it would increase its $1.81 billion ad spend AND unveiled two new concept cars. That’s after yesterday’s announcement that GM is launching four websites to sell new cars via eBay, albeit in California and not Cadillac. It’s a wonder GM CEO Fritz Henderson didn’t promise to change GM’s constipated corporate culture while he was at it. Oh, wait. He did.

Extreme manic episodes can lead to psychotic symptoms, such as delusions and hallucinations. As it has in this case. The necktie-challenged CEO—Good God, man! I don’t have time to tie a Windsor knot!—clearly believes that he’s going to “do” the cultural transformation thing. And he’s going to do it via . . . committee! Yes, Fritz has appointed an executive committee to wean GM from its reliance on executive committees. A committee that includes the aforementioned aspiring octogenarian, GM lifer and CFO Ray Young, and former Caddy killer and current dealer eliminator Mark LaNeve. Expecting this carefully selected cast of recently elevated (at least in GM time) careerists to reform the automaker is like asking an orthodox Jew to run a Louisiana rib shack.

A person in a manic state has a short attention span. GM may be new (as if), but this symptom is not. How many nameplates is it now, Fritz? Anyone want to dig out Rick Wagoner’s protege’s promise on that score? And while you’re rooting around in GM’s fevered imagination, how about sourcing the press release for the “new” Cadillac STS? HUMMER H3 SUT? Saab anything? How far back do you want to go? Chevy Vega? X-Cars? Always with the promises. Never with the results. Do we really need to analyze the inherent inanity of today’s roll call of make-believe hits to prove the point? OK, then . . .

GM says it’s going to position the new Chevrolet Spark below the Chevrolet Aveo. Is that even possible? What are the chances that Buick will find sales with a car based on the same platform as the Chevrolet Cruze, only more beautiful and slightly longer? Who in their right mind thinks Buick has a future as a full-line automaker, sporting six models (à la Lexus)? Cadillac’s “flagship” XTS is going to be the same size as a Mercedes E-Class? I see fish. They’re swimming in a barrel. My finger grows weary.

I used to believe that GM would end with a whimper. They’d downsize, and downsize some more, and then a bit more, and then, eventually, after a few more mega-suckles on the taxpayer teat, after their market share faded into gray, they’d disappear into some other automaker’s portfolio and die. Now, I’m not so sure. While today’s product announcements are either complete bullshit or the same old bullshit in a new wrapper, and we can discount reports of an increased advertising spend as JALCOS (Just Another Lutzian Crock of Shit), GM seems to be heading for a massive crash.

As always, cash burn is the key. Come September’s financials, we’ll have a rough idea how long GM’s $50 billion federal infusion will last. Obviously, as long GM takes in less money than it spends, the only way is down. Expanding the number of models within the remaining four GM brands will do nothing to delay the company’s next face plant, and much to hasten it. But don’t tell New GM’s executives that. They’re in the midst of a hypomanic episode, joyfully creating plans for reinvention, oblivious to the fact that they’re recycling previous patterns. On the other hand, GM is already living within the confines of institutional care. How great is that?

By on July 24, 2009

When columnist Daniel Howes at the Detroit News gets pissed off enough at GM to write anything other than “we shall see what we shall see,” you know the former bankrupt is doing something very, very wrong. The object of Danny’s ire: the lack of fresh faces at The New GM. “To read the announcement of GM’s new nine-person executive committee, the promotions and the retirements, as I did minutes after it was made public, is to hear the faint strains of Talking Heads singing ‘same as it ever was, same as it ever was’ and to hear more wailing about the chronically clueless GM.” Mind you, Howes isn’t calling GM chronically clueless (that’s our job). He’s angry that “the feds’ pay-and-bonus restrictions essentially make it impossible for CEO Fritz Henderson to woo outside talent for inside jobs.” Woo-hoo! Howes is on the money; out in the real world, $500K doesn’t buy you a reasonable Human Resources manager. But hey, did someone forget the GM stands for Government Motors?

In many ways, GM was born to be nationalized. Over a hundred years or so, the American automaker has gradually evolved to resemble nothing so much as the federal government. Same farrago of competing fiefdoms. Same lack of accountability. Same stifling bureaucracy. Same budgetary constraints (i.e., both too many and none at all). Same global aspirations. Same lack of strategic focus. Same inability to appreciate conditions on the ground. Same inability to make decisions in a timely fashion.

“Reinventing” GM would require massive and sustained root and branch reform; from the top down and the bottom up. Howes [rightly] seizes on Uncle Sam’s pay cap as the central impediment to GM hiring the kind of management that could even begin to refashion its dysfunctional corporate culture. But the curmudgeon fails to connect the dots. The automaker doesn’t want a shake-up.

More specifically, the idea that GM CEO Fritz Henderson’s hands are tied by the Troubled Asset Relief Program’s pay and bonus restrictions is ridiculous. Henderson is a GM lifer. The former Chief Financial Officer. Fellow GM lifer, fellow former Chief Financial Officer, and Ex-CEO Rick Wagoner’s hand-picked successor. Henderson owes his livelihood to the GM status quo. In other words, if Henderson was dedicated to upending the GM’s ossified apple cart, he’d start by firing himself. Since he hasn’t, we must assume that reshuffling GM’s motley crew of proven losers is a labor of love. An ennobling endeavor.

No joke. By convincing the feds to keep GM out of the garbage disposal of a real C11, Fritz has protected the paychecks, pensions and benefits of hundreds of white collar compatriots. Top executives like Gary Cowger and Troy Clarke must have kissed Fritz’s feet when he knocked on their door with the “bad” news. In a genuine bankruptcy, these proven losers would have been ejected from the Renaissance Center without so much as a fare-thee-well (excluding any monies they may have stashed away during decades of serious rooting). You can hear failed Car Czar Bob Lutz’s gleeful cackles echoing through the automaker’s increasingly empty cubicles, as New GM’s new marketing maven tries (and fails) to assimilate his reversal of fortune.

As far as Henderson being “forced” to promote from within, does Howes really think that the CEO considers fast-tracking GM insiders to positions of greater power is bad for GM? Brent Dewar, Chevy’s new VP of Chevrolet, started working for GM in 1978. Bryan Nesbitt, new GM of Cadillac, is a relative piker, but he’s relatively young AND he’s been with GM for eight years. C’mon; these guys are Henderson’s people. Presidential Task Force on Automobiles or not, Fritz Henderson’s desire to protect, preserve and extend his BFF’s careers (to protect, preserve and extend his own) runs so deep it’s instinctive. It’s what GM employees do.

Howes had the strange idea that the New GM would be a new GM. He’s going through the grieving process, as the writer and his fellow cheerleaders realize that GM’s talking a lot, but it’s not saying anything. In fact, the moment Old GM accepted new federal money (and thus ownership) any meaningful idea of a re-imagined GM disappeared. The whole point of the federal bailout: preserve the status quo. And so it has.

New talent? Government agencies—for that is what GM is—are not known for hiring outsiders to create and implement radical change, to improve efficiency and foster accountability. Even in those rare cases where such appointments are made, the existing workers inevitably drag their heels and destroy the outside “virus” before it has a chance to reproduce.

There is only one way GM can truly “reinvent” itself: surrender to the creative destruction inherent in genuine capitalism. It’s an answer that Howes and GM and many, many others find too horrible to contemplate. But it’s the truth.

By on July 10, 2009

General Motors has left bankruptcy behind. The MSM is greeting GM’s graduation with guarded not to say advertiser-sponsored optimism. Meanwhile, the populist backlash has begun. Yesterday, for the first time, I heard a “civilian” refer to GM as “Government Motors.” And then, another. Even if you discount the protest as right wing rhetoric (I was listening to Fox Talk), it’s clear that General Motors is becoming a lightning rod for anti-government sentiment. With tax hikes looming and the federal deficit ballooning, the public is starting to see the “new” General Motors as a symbol of federal impudence, intransigence and impotence. In fact, GM could be President Obama’s Iraq: the Gordian knot that strangles his political fortunes. To fully understand the futility of this financial folly, consider Cadillac.

Cadillac is supposed to be the ne plus ultra of automotive brands: the “standard of the world.” Since its pre-War heyday, Cadillac’s brand management has rivaled Neville Chamberlain’s foreign policy for craven expediency. Cadillac has been a deeply damaged division for decades. In 2007, TTAC’s Paul Niedermeyer charted Cadillac’s decline and fall in gory detail. Since then, the brand’s rep has retreated even further into its last redoubt: the consumer’s imagination.

“We all use the expression ‘the Cadillac of toasters’ or ‘the Cadillac of something else,’” deposed Car and Driver Editor Csaba Csere reassures the Detroit News. “It still means ‘the best of’ to a lot of people.” News flash: my thirty-something appliance guy calls KitchenAid the “Lexus of dishwashers,” without apparent irony. Cadillac’s brand expectations have been unrealized for so long that even the idea of Cadillac as the ultimate object of desire is rapidly disappearing.

This transition reflects reality. At best, Cadillac’s current cars are competitive (CTS, Escalade). At worst, they’re pathetic (STS, DTS, BLS). Somewhere in between, they’re inappropriate (SRX, EXT, forthcoming CTS SportsWagon and Converj plug-in hybrid). None of these Cadillac models are class-leading—never mind world-beating.

Cadillac’s mid-year sales stats tell the tale. At 33,043 units, they’re neck and neck with Acura (32,637), trailing Lexus (44,942) and getting crushed by Mercedes and BMW (65,160 and 75,443 respectively). Meanwhile, Audi’s in hot pursuit (28,347).

Equally disheartening for fans of the Cadillac brand, the automaker’s margins are nowhere near those of its competitors. Cadillac is discounting heavily to move the metal—sending exactly the wrong message about the brand’s inherent “value,” eroding Caddy’s cachet to ever-lower levels. Not to put too fine a point on it, they’re in a death spiral.

There’s only way for Cadillac to recapture faded glory. Cut the crap and build the best. The best no-holds-barred luxury cars. Stylish, no excuses vehicles, meticulously engineered, rock solid. And then they have to create a dealer network that kisses customers’ asses like none before.

Never. Gonna. Happen.

Even if we assume Cadillac’s rebirth could happen—that GM could find the courage to cull Caddy’s cancerous cars and trucks, that it could summon the creative and financial resources needed to be the best of the best—the U.S. government can’t let it happen. It’s the wrong image.

America is not as class-bound as, say, any other country on Earth. But using tax money to cater to high society’s personal transportation needs is about politically palatable as a tax cut for the top two percent of income earners. And that’s before we talk about the product-related demands of the Democratic party’s environmental oath of allegiance. Simply put, you don’t put “the people’s money” into a company that builds leather-lined luxury land yachts sold at ritzy palaces of automotive art.

So why not just let Caddy go? Surrender the top of the market to the Axis of Axles, retreat into the mass and mid-market (with some upscale Chevys badged Buicks) and call it good? Other than the inevitable Cadillac dealer backlash, there’s one main reason the company can’t eliminate Cadillac from their rancid roster: corporate psychology.

Old GM was once the standard of the world: the world’s largest car manufacturer and the planet’s most profitable company. Cadillac represents Old GM’s zenith, its ability to put the world to shame. Like the U.K., GM is not ready to face Empire’s end. Even if Cadillac’s become hopelessly tarnished, even if its crown has been stolen by foreign usurpers, you can’t sell the Crown Jewels! For GM, losing Caddy would be tantamount to admitting defeat.

Sadly, facing reality is the one thing that GM—Old or New—cannot do. All of which means that New GM is not about reinvention. It’s about revisionism. We made a few mistakes, got a bit big for our britches, got battered and bruised by the slings and arrows of outrageous fortune. But we’re good. And soon we’ll be better, better than we ever were. Cadillac will rise again!

Cadillac’s survival, its planned model expansion and move down market, highlights the fact that GM still suffers from the worst kind of hubris: taxpayer-funded hubris.

By on July 6, 2009

So how long before New GM fires Uncle Fritz? In the most pragmatic of all possible worlds, where the Presidential Task Force on Automobiles (PTFOA) looked out for the taxpayers’ $50 billion as if it were their own—Fritz wouldn’t even BE GM’s CEO. Henderson would have been defenestrated along with Rick Wagoner. You know: the ex-CEO who groomed Henderson as his replacement. (How hard is it to connect those dots?) Henderson has assured his place in The Peter Principle Hall of Fame, capping his career as the PTFOA’s toady. And now, best case, he should follow Old GM onto the scrap heap of history. Not a chance.

The fact that Henderson wasn’t terminated with extreme prejudice the moment the United States government assumed complete control of General Motors tells us that Uncle Fritz is no Richard Nixon; the PTFOA will have Henderson to kick around some more. I repeat: the man’s a patsy.

Fritz didn’t decide to kill thousands of GM dealers. Fritz didn’t decide which GM brands to keep. Why would he? They’re family. White collar cull? Heaven forfend! We’ll use attrition. Mr. Henderson, it’s Congressman Barney Frank on the other line, asking for a stay of execution for a GM parts distribution facility in his constituency. Mary, why didn’t you forward this to the PTFOA? If I told you once—Barney! Hi! What’s that? I’ll check. Rest assured, I feel your pain. [Joke deleted].

Anyone harboring illusions that Uncle Fritz is large and in charge should note: Henderson didn’t take the stand and tell federal bankruptcy court that New GM had to be created by July 10—or die. It was Harry J. Wilson, a heretofore unknown member of the PTFOA. “We have no intention to further fund this company if the sale order is not entered by July 10,” Mr. Wilson told Judge Gerber. “It’s better to cut one’s losses.”

One’s losses? Hey Bub, those are MY losses you’re talking about. Anyway, who talks like that? Not Uncle Fritz. In fact, let’s pay a little attention to the man behind the curtain  . . .

“Prior to joining Silver Point in 2003, Mr. Wilson was a principal in the private equity business at The Blackstone Group, where he completed a number of private equity investments and leveraged buyouts,”youthinc-usa.org reports. “Mr. Wilson began his career in the Investment Banking Division at Goldman, Sachs & Co., where he worked in the Energy & Power group on a range of merger and corporate finance transactions.”

Hang on; the same Blackstone Group that competed with Cerberus to buy Chrysler? Yup. Although my wife destroyed my tin foil hat whilst heating-up some chicken nuggets, it’s clear that’s a cabal of investment bankers—led by Steve Rattner and Ron Bloom—are deciding the fate of the artist known as the world’s largest automaker. While Barack Obama has publicly stated his intention to “let GM run GM” [presidential paraphrasing], nothing could be further from the truth. Uncle Fritz is so not The Man.

So why keep him around? First, remember that the general public couldn’t give a damn who’s running GM. In fact, they’ve never heard of Uncle Fritz. If they see him on the tube, well, he looks nice. Avuncular. Credible. Non-threatening. So why not?

Second, as GM’s former CFO, Henderson is an excellent pencil pusher. If you were a member of the PTFOA and wanted to grab some numbers upon which to base your otherwise uninformed decisions about the automaker’s fate, Henderson’s the go-to guy. He couldn’t save GM if his life depended on it, but Uncle Fritz knows his onions.

Most importantly of all, Fritz is a terrific fall guy. If/when GM’s NA sales fall [further] into the trash, the PTFOA can throw Henderson on the pyre. The President has taken new steps to put General Motors on the path to profitability; a management shake-up is on its way!

The PTFOA should, of course, dump Henderson now. What better way to celebrate New GM’s birth, to draw a line under Old Skanky GM, than offing the bureaucratic bumbler who helped bring The General to the brink in the first place? Passing the torch PR, and all that.

Yes, well, who would replace Uncle Fritz?

As TTAC’s Ken Elias has pointed out, there are only a handful of auto executives capable of running GM, even in its truncated form. The number who could turn the ailing American automaker around is even smaller. And none of these talents is likely to do so for $500,000: the salary cap dictated by Congress for TARP (Troubled Asset Relief Program) recipients. Also, any CEO who’d take on the job (for real) would want independence from the PTFOA. And the PTFOA can’t have that, now can they?

So Uncle Fritz will soldier on. Or not. Either way, GM is unlikely to receive the one thing it needs to survive: leadership.

By on July 1, 2009

General Motors is launching a fourth of July sale: “Buy and Say Goodbye.” From July 1 to July 6, the bankrupt automaker’s offering 0% financing for up to 72 months on “most” of its dead brand walking Pontiac models and “some other vehicles.” More specifically, “select 2009 and 2010 vehicles in dealer stock including Chevrolet Silverado and GMC Sierra regular, extended and crew cab light-duty pickups; Chevrolet Suburban and GMC Yukon XL SUVs; Chevrolet Impala; and the Pontiac models: Vibe, G3, G5, G6 and G8.” But wait! There’s more! “Many other vehicles will have reduced rate financing of 0 percent for up to 60 months for well-qualified buyers. A full list of current offers, conditions, and eligible vehicles, is available at: http://www.gm.com/shop/currentoffers/.” Not yet it isn’t. So that’s number six on our list of reasons why this sale is dumber than toast. Counting down . . .

5. Blowing Bubbles — Isn’t this exactly the kind of fiscal irresponsibility that led to GMAC’s 11th hour, backroom bailout, not to mention the previous, company-killing new car bubble? In its defense, GM says the “Buy and Say Goodbye” sale’s six year loans are reserved for “well qualified buyers.” Yeah, right. What are the odds that beleaguered/doomed GM dealers are going to turn away the last possible customers for moribund metal? Anyone for anyone with a pulse deals again? How about rolling that backwards SUV into the deal! Sure! Look how well that worked out the first time! Or is the old “bait and switch” routine? Sorry, you don’t qualify for zero percent, but let’s talk. Either way, is this how a federally financed, [soon-to-be] taxpayer owned automaker should behave?

4. Damp Squib — Yes, GM’s got to do something to get rid of the dealers’ “rabbit in the python” inventory problem. If they can goose their sale numbers so that the newly nationalized automaker smells less like crap coming out of bankruptcy, so much the better. But wouldn’t it have been more effective if GM had offered cash on the hood—OK, lots more cash on the hood—than trying to entice car buyers with cheap loans? Hello? Consumer confidence is lower than an ant’s abdomen. Didn’t GM get the memo about Hyundai and Ford’s “if you get fired” guarantees? The exact same people who want/need six year loans are either how-low-can-we-go FICO folk or shit-scared of losing their jobs. So . . . good luck with that.

3. Another Bottom Line Boondoggle — The “Buy and Say Goodbye” sale reaffirms GM’s rep as America’s discount car company. To paraphrase Robin Hood’s merry men in Shrek, that’s bad; that’s very very bad. Still, it can’t be helped. More importantly, the sale continues GM pattern of obfuscation (an obfuscatory word for “misleading”). As Buickman has ranted for years, GM has so many special offers it’s virtually impossible for dealers to ascertain which discounts apply to what vehicle for whom. The bottom line: nobody knows the bottom line. Zero percent on what? This gimmick may mop up the remaining four-square suckers, but it runs completely counter to CEO Fritz Henderson’s transparency pledge. No surprise there.

2. The Timing Sucks — While car companies and Fourth of July sales go together like Rick Wagoner and a Gulfstream G4 (Dammit, I miss that plane!), now’s not the best time for GM to launch a Fire Sale, however fleeting. Surely someone at GM knows it has one chance to draw a line in the public’s mind between “Old GM” and “New GM.” Oh, wait, they’ve already done it! So, if the New “reinvented” GM is already a-born, whose sale is this anyway? Is it New GM’s garage sale or Old GM staggering to its grave? And why is it only 72 hours? What’s New GM going to do with the old vehicles that Old GM doesn’t sell? Not discount them? Sorry, guys, your customers are trained. Once again, GM shows its propensity for feeble half-measures.

1. Worst. Sale. Name. Ever. — “Buy and Say Goodbye”? WTF? The marketing geniuses at GM decided to meld their Fourth of July fire sale with a pitch for Cash For Clunkers custom. Hence the “Say Goodbye” bit. But who’s going to make that connection? And even if they do, the more obvious meaning remains: Say Goodbye to GM. Quick! Buy a car ’cause we’re about to take a dirt nap. Alternatively, “Buy A Car and Piss Off.” In fact, “Buy and Say Goodbye” has to be the worst name for a marketing campaign in the history of the world, ever.

As any recovering entrepreneur will tell you, there’s only one way to run a “going out of business sale”: discount the merchandise by a fixed percentage across the board. And call it by its real name. That GM’s suits couldn’t grasp this fact tells you all you need to know about their future prospects.

By on June 25, 2009

Communist witch hunters called Americans who supported the battle against Francisco Franco before World War II “premature anti-fascists.” In other words, they were right for the wrong reasons. There’s a lot of that going around these days. For example, Chrysler and GM’s claim that they need to cull dealers is spot on. But trimming overheads, as the automakers claim, ain’t it. [See: number three after the jump.] By the same token, it’s also true that New GM is doomed to failure. But not for the seven reasons that Seeking Alpha sets forth. Still, Jason Mathew’s analysis is worth a closer look . . .

1.) $1400 in per vehicle costs went untouched to ensure re-election and voter satisfaction rather than shareholder value

Not exactly. GM’s “reinvention” is facilitating a rapid decrease in the number of GM employees (despite Senator Stabenow’s “jobs, jobs, jobs!” pro-bailout rallying cry). Many of these disappeared have agreed to buyouts that limit their pensions. In any case, as the employee count decreases, as the old guard shuffles off to the great assembly line in the sky, GM’s pension costs are going down. Pension costs for retirees come out of the pension, not GM’s bottom line. For whatever that’s worth.

2.) Bankruptcy court ruling did not establish labor rate parity with Toyota (TM) or Honda (HMC)

GM’s direct labor wages were already close to parity with the transplants. As TTAC’s Ken Elias taught us many, many moons ago, the domestic automakers set the bar for automotive assembly workers’ hourly pay. GM’s real excess labor costs: the Other Post-Employment Benefits (OPEB) paid out to GM’s massive retiree base (e.g. health care). The real labor problem: highly paid workers who don’t contribute bupkis to production (thank you UAW work rules).

3.) Reducing dealer count will have nominal impact on GM’s cost structure yet significant downside impact on market share

Dealer count, market share, dealer count. Chicken egg chicken. GM needed to cull dealers to eliminate overlap, lower inventory costs and kill brands (to focus branding, products, marketing, etc.). In theory, less inventory on the ground should reduce GM’s carrying costs, reduce bureaucracy (improve accountability) and speed-up cash flow/turnover.

Any way you look at it, there are too many GM dealers to support the bankrupt automaker’s diminished—and diminishing—market share. What’s not clear: whether GM can sell the same number of vehicles (at retail) with fewer dealers. Or, if you prefer, what is the right number of GM dealers? I’m not sure I’d want the same GM suits who were working the old dealer system without complaint to establish the new one. In fact, it’s a really bad idea.

4.) Government and UAW as majority owners = poor management

Ya think? But the United Auto Workers (UAW) likely won’t have, nor do they desire, a strong influence on GM’s management. For one thing, the UAW doesn’t want accountability. The more it interferes, the less it can bitch and moan and (when needed) duck and cover. They’ve done just fine without saying anything about GM’s current plans. Why start stopping now?

Besides, the UAW’s “independent” union health care VEBA owns GM stock, not the UAW itself. The UAW has publicly stated that it just wants to get full value for its stock and cash-out ASAP. Believe it or not, I believe them.

[Seeking Alpha's scribe would have been better off just saying "Government = poor management" and be done with it.]

5.) GM will be at a strategic competitive disadvantage with no ability to financially engineer sales with 0% loans and extend consumers credit

Wrong. GM will not be at any disadvantage in this regard; GM pays GMAC for those financially engineered deals, and the government more or less owns both organizations. Bottom line: if GM wants to hold fire sales, toe tags sales, zero percent deals, cash back specials and get America rolling promotions, you, the taxpayer will pay for it.

6.) GM Europe operations will only get worse, supply base is weaker than the U.S. and surviving brand equity is weak

Huh? GM’s off-loading its European operations to someone at some point soon. Or not. Either way, the corporate mothership is busy washing its hands of the whole deal.

7.) 35-MPG energy requirements in 2016: GM currently has one vehicle that meets that standard today

First of all, loopholes. Lots and lots of loopholes. Secondly, do we seriously expect the Feds to put its $50 billion investment in GM and Chryco at risk by regulating GM (a.k.a. themselves) to death?

The real problem for New GM is the same one that led it to its first bankruptcy: it doesn’t know how to make the products that Americans want to buy at a sufficient profit to take in more money than it spends. In other words, it can’t compete. To think that a government-run GM can make that happen when a privately held GM could not is the worst sort of folly. The folly for which I have to pay.

By on June 23, 2009

I can’t decide whether GM’s “reinvention” will fail through government action or inaction. On one hand, I share the commonly held belief that GM’s product portfolio will be skewed towards small cars, to satisfy the Obama administration’s love of all things green and beautiful. Even without express orders to do so, GM’s craven executives will seek to please their elected overlords’ politically-driven desires. On the other hand, paralysis. The last thing GM’s cumbersome, dysfunctional management needs is another layer of command and control—especially one where accountability is measured in votes and patronage, rather than dollars and cents. The tendency to do nothing slowly, as is the way of all government, is great. If I had to guess which way this is going to go, I’d say both.

There’s a superabundance of evidence that the Obama administration will actively intervene in GM’s affairs. First and most incontrovertibly, the feds are on the brink of nationalizing the company, assuming a sixty percent share of “New GM.” In fact, the administration’s promises to be a “hands-off” owner reminds me nothing so much as Rasputin’s philosophy: sin is the key to redemption. We have to be hands-on to be hands-off. You have to wallow in sin to know the value of repentance. We had to fire the CEO to find a CEO who could operate effectively without government influence. Same deal.

More metaphorically, the feds have broken their interventionist cherry. Why not continue to fuck with GM? The government’s already bobsledding down that slippery slope; from appointing the entire GM Board of Directors to killing brands to killing dealers. The Presidential Task Force on Automobiles (PTFOA) says the changes are necessary, but that it will back off when post C-11 GM finds it sea legs. In this case, momentum speaks louder than words. Once a pattern of behavior is established, continuing it is easier than changing it.

Ah, yes, change. In announcing its one trillion dollar health care reform package, the Obama administration is once again showing us its willingness to enter a realm formerly reserved for free enterprise. Just as Obama wants a federal health care program to go toe-to-toe with private insurers, a federally owned GM will be soon be competing with privately held automakers.

The rationale underlying Obama’s intermingling of private and public organizations: Something must be done! As Obama said today, “the status quo is untenable.” GM can’t fail. Health care can’t fail. Same deal. Here’s another quote:

The German and American New Deal may have been merely whatever Hitler and FDR felt they could get away with. But therein lies a common principle: the state should be allowed to get away with anything, so long as it is for “good reasons” . . . It represents the triumph of Pragmatism in politics in that it recognizes no dogmatic boundaries to the scope of government power.

Author Jonah Goldberg is dismissed as a right wing crank by his many detractors, but there’s no getting around the fact that president Obama is shunning free market principles to boldly go where Chrysler’s previous elected saviors didn’t dare go before (federal loan guarantees are a far cry from public ownership). The conflict of interest in is inherent. The same government that regulates the entire automobile industry will now have an enormous stake in one of its biggest players.

This will undoubtedly lead to unwelcome distortions, and, ultimately, disaster. Because even as the feds attempt to literally reform GM, they will be unable to institute the dramatic changes GM needs to survive. It’s not just a matter of political meddling, of which there will be plenty. It’s also a question of corruption.

If you think GM’s previous Board of Bystanders was incapable of policing GM’s arrogance, stupidity and sloth, wait to you see what won’t happen when Uncle Sam is paying the bills. Actually, there’s no need to wait. In today’s New York Times, we learn that the United States trustee overseeing GM’s bankruptcy case (another layer of management) called the fees collected by GM’s bankruptcy consultants “staggering” and “excessive.”

In one year, Alix Partners and Evercore soaked the taxpayer to the tune of $130 million, including a $17.9 million “success fee.” Oh and an as-yet-unknown “discretionary fee” with “no boundaries in amount and scope . . . calculated in an unknown manner.”

As anyone familiar with government procurement knows, that’s small beer. Suffice it to say, in this regard, New GM will not be a microbrewery. Anyone who thinks that the feds will cancel these fees—or institute the kind of product planning, brand building and financial controls that New GM needs to earn a profit—is as delusional as a government that thinks there will be a graceful exit strategy for this unbridled adventurism. There’s but one way out of this mess, and the Obama administration isn’t even looking for the door.

By on June 19, 2009

That’s not exactly what GM CEO Fritz Henderson said to BusinessWeek, as part of the bankrupt automaker’s charm offensive. The exact quote was ”I know I have to re-prove myself.” So, just as there’s a “bad” GM (the one that latched onto the federal teat) and a “good” GM (the other one that latched onto the federal teat), there’s now a “bad” Fritz Henderson (the one who weaseled his way to the top of GM’s dysfunctional corporate culture) and a “good” Fritz Henderson (the one who wants to reform the stultified system that spawned him). As we say in these parts, good luck with that. Those of our Best and Brightest who’ve seen large companies try to reform their not-so-wikkid ways will recognize the resulting lip service . . .

In the meantime, Henderson is tackling GM’s glacial decision-making process. A couple of four-hour meetings have been cut in half. Gone are the “premeetings,” when the agenda for the real meeting was set. “I don’t have time for that,” Henderson says. Delegation, never GM’s strong suit, is now an imperative. In early April, just after Treasury made him CEO, Henderson and several executives were discussing whether to add some pricey features to a future Buick model. Some wanted to save a few bucks while others figured they needed to step out and show consumers that the brand is truly upscale. After some debate, Henderson turned to Buick-GMC boss Susan Docherty. “You’re the vice-president of Buick,” Docherty recalls him saying. “Make the call.” She opted to spend the money, and that was fine with the CEO. “Fritz is creating a culture where we don’t need 17 meetings,” Docherty says. “In the old GM, we would have to hear from everybody.”

A couple of points . . .

1. Did Fritz have a pre-meeting before the meeting to decide whether or not to lose the pre-meeting before the meeting that eliminated the pre-meeting? What’s that about SEVENTEEN meetings? Is that hyperbole or “out of the mouth of bankruptcy babes”?

2. Where are the consultants? Promoting this kind of stuff—both internally and externally– is what helps America’s consultants afford/drive BMWs. Oh here they are!

Last month, Henderson hired Booz & Co. consultant Jon R. Katzenbach to help make GM’s middle managers less risk-averse and more willing to make decisions. Katzenbach and his team have begun scouring the company for mavericks adept at getting their ideas past a recalcitrant bureaucracy. Katzenbach asked each department chief to name five candidates. In most cases, he says, they aren’t top managers or people on the fast track. Typically they have toiled at GM for a long time and know how to game the system. The plan is to make their attitudes and work habits the norm, not just a rarity among the few who will buck the system.

Did I say “good luck with that” already? But rest assured that Booz & Co. understand automobiles. Well, engines. OK, “empathy engines.” Katzenberg’s paper is full of piercing glimpses into the obvious, but one of his bullet points is worth repeating vis à vis GM. “A fundamental misunderstanding, by a company’s executives, of the real nature of the customer experience their company provides.” How does Mandark laugh again? Haa ha haa, haa ha ha ha ha!!!

You want to talk about self-delusion?

In a June 1 blog post to employees, Henderson asked for suggestions and criticism. Several workers said people are afraid of challenging the status quo. When pressed in an interview on the culture of fear, Henderson said he gets criticism all the time, and then added: “I’ve never had a situation where people were afraid to speak up.” Maybe so, but that doesn’t mean managers further down won’t discourage new ideas from their underlings.

A perfect example of using “maybe so” to mean “you’ve got to be fucking kidding me.” Translation: Henderson is so insulated from genuine criticism, so drunk on GM Kool-Aid, he thinks he’s drinking coffee. A point which BW can’t resist making. Ish.

Henderson also says GM’s product planning group is just fine. Yet it has routinely missed major trends and rarely sets them. GM’s top-selling Chevrolet division, for example, is just this year launching decent crossover SUVs; rivals have been selling them for years. Plus, the product planners’ indecisiveness has led to many delays on new programs. It’s not that GM’s designers and engineers can’t work fast. They often wait for the “numbers dummies,” as GM product adviser Robert A. Lutz calls them, to hash over the research. By the time the green light comes on, GM has missed the moment.

So Lutz blames GM’s culture for his own failure. No wonder they’re keeping him on; he’s just stupid enough to blow the lid off of GM’s global incompetence. Of course, by thy bankruptcy thy shall be known, guys.

By on June 13, 2009

I had an interesting conversation with PCH101 about New GM’s governance. Like many observers, the TTAC commentator is not ready to dismiss The Presidential Task Force on Automobiles (PTFOA) out of hand. I, of course, am. Have done. Will do. But before I do (again), consider PCH101‘s logic. He credits the PTFOA for clearing out the deadwood: finally ridding the failed automaker of the troublesome man who guided the company on its final descent into bankruptcy. He also believes that the 25-member PTFOA is a better bet for GM than the original plan for federal oversight: a car czar. “I remember a study in B-School that concluded a committee of managers without any direct experience in an industry made more effective decisions than a single autocratic insider.” With all due respect, crap. And completely irrelevant.

What’s GM’s single largest problem? Uncompetitive vehicles? Yes, well, there is that. Dead brands? Sure. Too many dealers? Doesn’t help. But it’s executive torpor that’s the root cause of the automaker’s longstanding inability to take in more money than it spends. The automaker has far too much bureaucracy, and all of it’s deeply dysfunctional. Ipso facto.

In fact, GM’s management ethos is so obviously broken it’s become a PTFOA talking point. Despite President Obama’s semi-pledge to kinda keep his distance from GM’s [hand-picked] executive team, PTFOA jeffe Ron Bloom recently promised to tackle GM’s moribund culture in a non-interventionist way (presumably).

Good luck with that. Before we calculate the odds, let’s be clear about the problem.

The majority of GM’s executives don’t care about the customer. They may pay lip service to the people paying the bills (before the U.S. taxpayer stepped in). But their day-to-day decisions are not motivated by a desire to provide GM customers with the best possible products and services.

Their single, over-riding concern is . . . themselves. Their career. Every decision that GM’s suits make is made with an eye to protecting and (perhaps) extending their territory within the automaker’s byzantine structure. CYA is their modus operandi. “Yes” is the operative word.

No surprise there. That’s how they got where they are in the first place. Case in point: VP of sales and marketing for GM North America Mark LaNeve.

From 1981 to 1995, LaNeve worked his way up Cadillac’s executive ladder. When he assumed the General Manager’s job, LaNeve knew Caddy’s survival depended on remaining resolutely upmarket. “Young people should aspire to owning a Cadillac,” LaNeve said back in the day. “They shouldn’t be able to afford one.” And then LaNeve joined the corporate mothership. He did what had to do: “modify” his beliefs. Go along to get along. STFU. Entry-level Caddies arrived without debate or delay.

Actually, it’s worse than that. GM’s suits don’t even care about the company. Yes, even now. Especially now. If anything, Chapter 11 means they’re even LESS motivated than before. Think of it this way: if GM’s overlords screw the pooch (again), what are the feds going to do? Declare bankruptcy?

PCH101 believes the PTFOA will, eventually, clean house. Even if we accept the idea that all the president’s men kept a GM insider at the helm in order to fire him in favor of a genuine reformer who will eliminate and/or replace, say, 25 percent of GM’s upper management, the bigger picture still sucks.

“Hands-off” or not, the 25-member PTFOA adds another level of bureaucracy above the existing GM bureaucracy. If each PTFOA member fires off fifty emails a day, that’s 1,250 more internal comms per day. The PTFOA also has a staff. Meetings. Agendas. Targets. Reports. Memos. The federal quango is a shadow governing body for a company that needs less management, not more.

True story: New GM is inherently worse than old GM. And it’s going to get worse from here.

At the moment, Ron Bloom and Steve Ratter are running GM well. I freely admit that President Obama’s minions are outperforming GM’s previous administration. (Of course, Captain Kangaroo could do a better job than the last mob, and he’s dead.) If the PTFOA orders the night of the long knives at RenCen, if they clear the forest of deadwood, I’ll publicly acknowledge the appointees’ collective wisdom.

And then what? By the time the PTFOA’s new brooms fail to sweep GM to a rapid turnaround—a virtual impossibility given the depth of GM’s decay and the car biz’s timelines—Bloom and Rattner will be long gone. Leaving . . . what? Administrative kudzu.

If President Obama wanted to save GM, he should have let it fail. There’s only one way to change deeply-ingrained habits: pain. GM’s management will not change its slavish devotion to its fundamentally inefficient way of doing business until and unless it’s more painful for them to keep doing what they’re doing than to do something else.

By making bankruptcy painless for GM’s upper echelons, by adding complexity rather than removing it, the President has effectively sealed GM’s fate.

By on June 12, 2009

Matthew 6:24: “No man can serve two masters; for either he will hate the one and love the other, or he will be devoted to one and despise the other.” Applying this biblical admonition to General Motors, it’s clear that the federal bailout will accelerate rather than retard its ultimate demise. The automaker’s corporate culture was dysfunctional before the feds took the reigns back when its over-compensated suits made sure that failure was impossible (and not in a good way). Now that GM employees must answer (at least in the theoretical sense) to both management and politicians, it’s twice as screwed-up. As I indicated in this morning’s Wall Street Journal Op-Ed, the political interference with the company’s operations is already underway. Well of course it is. And it will continue. As will GM’s descent into oblivion. Simply put, there’s no way GM can get its house in order when Uncle Sam is the landlord. SNAFU × 2.

Today, GM CEO Fritz Henderson reported for work. In and of itself, that’s about as bad a sign of GM’s ongoing failure as you could get. Lest we forget, Henderson is old-school GM: the former CFO who watched the company’s balance sheet go tits up. Henderson is also guilty by association: the hand-picked successor to GM’s phenomenally failed CEO (also former CFO) Rick Wagoner.

The fact that Henderson made it to the top of GM diseased corporate caste system is all you need to know about his suitability as a turnaround artist. Inmates. Asylum. Administration. That sort of thing.

This stout defender of GM’s status quo emerged from yesterday’s meeting with The Presidential Task Force on Automobiles (PTFOA) proclaiming that his job was safe. Ish. While Fritz expects to remain large and in charge of the small and getting smaller automaker as it exits bankruptcy, “nothing’s guaranteed.” How . . . reassuring.

In a familiar sort of way, it’s the same set of weasel words PTFOA jefe Ron Bloom used to hedge his promise not to keep plowing taxpayer money into the quagmire increasingly (and accurately) known as Government Motors. Am I the only one bothered by the fact that, despite having not one but two masters, GM’s strategy is still in flux?

I reckon two things are certain: GM’s death and your taxes. GM and its new presidential overlord are doing all they can to counteract that politically unpalatable reality, trying to make it seem as if there’s hope for change. Their latest attempt to give wing to these (recurring) delusional flights of fancy: the new Chairman of GM’s Board. GM supporters seized on former telecoms magnate Edward Whitacre’s appointment as a sign of “fresh” thinking.

Back on planet Earth, why the Hell interim BOD director and PTFOA lackey Kent Kresa picked a man without any automotive or manufacturing background is an interesting question. As in “clueless old white guys that not-so-interim GM CEO Fritz Henderson can con with a spreadsheet for $50,000, Alex.”

“He was someone who [PTOFA chief] Steve Rattner knew, or knew of,” Mr. Kresa told the New York Times, by way of explanation. And now Kresa says he’s searching for other board candidates “who have been involved in companies where there has been a dramatic change in the marketplace.” Oh, I know! What about the guy who put Kodak in the shitter?

No, wait; he was on the last GM BOD. And I guess Kresa’s looking for candidates who saw a dramatic change in the marketplace and reinvented a chronically unsuccessful company with a huge, bumbling bureaucracy into a leaner, greener, faster, smarter and enormously profitable participant in same. (Experience working for politicians a plus.) He just forgot that last bit.

Not that it really matters. A board chairman is, at best, a watchdog. (You might say Whitacre is a lapdog, but I couldn’t possibly comment.) Even if Eddy W. understands that culture eats strategy for lunch and caps Fritz’ ass, it must be remembered that GM’s Board of Directors is merely a front for the Powers That Be.

The PTFOA is the real BOD. They are the masters to whom the bankrupt automaker’s employees—which includes Whitacre—must answer.

So, ultimately, it must be asked: what the fuck do THEY know about the car business? I know: it’s not a new query. But it’s one that remains unanswered, even as GM continues to suck-up taxpayer billions and realign itself for the future.

By thy deeds thy shall be known. Only one problem: the deed required is a complete rehabilitation of a car company that’s screwed its customers for decades. Even if GM built a Camry and Lexus-killer, it would take them another decade and at least another $100 billion to recover their missing marketplace mojo.

Given the “dramatically changed” US auto scene, no one but the feds would sink that kind of cash into a GM-shaped money pit. And neither should we. That’s not a politically palatable conclusion, but it’s the God’s honest truth.

By on June 8, 2009

General Motors is at war with itself. Thanks to a staggering, though not unexpected, lack of decisiveness, GM’s management has managed to completely alienate its major, public-facing “stakeholder”: GM dealers. Without the guys on the sharp end moving the metal, General Motors might as well declare bankruptcy and surrender the keys to the executive washroom to a 25-member federal quango led by Washington insiders with no manufacturing experience whatsoever. Oh, wait. In fact, GM needs its dealers even more now that it’s a zombie than before, when it was also a zombie (but didn’t know it). And of all the items of GM CEO Fritz Henderson “to do” list, not throwing GM’s entire US dealer network into chaos should have been somewhere near the top. I want to say something about a “race to the bottom,” but I’ll let you connect those dots.

Last week, GM CEO Fritz Henderson faced a Spanish Inquisition from the company’s paymasters. Senator Rockefeller wanted GM’s former CFO to explain his rationale for cutting over 2000 dealers from the roster. Fair enough, right? If you’re going to unleash a political shitstorm by shit-canning a large, politically-connected, highly litigious, battle-tested, lyin’, cheatin’, boozing, whoring, testosterone-fueled group of GM “customers” (the dealers are the ones who actually buy the cars from GM), then you want to make sure you have your proverbial ducks in a row.

Oops! Fritz forgot his Ross Perot-ian “We’re In Deep Shit for Dummies” charts back at Days Inn. Or did he leave them on the plane? Rick friggin’ Wagoner just HAD to fly to D.C. in the Gulfstream to beg for bailout bucks, the bastard. Senator Rockefeller also wanted an actual list of dealers culled. Damn! I must be wearing a different jacket! Anyone remember the scene in Raiders of the Lost Ark, where Indy casually shoots the scimitar flailing baddie? GM’s the dope with the flashing steel.

THIS is how the new, “smarter” GM rolls? It gets worse. On the same day that Henderson failed to defend the company’s decision to downsize its dealer network, Fritz granted eleven axed dealers a reprieve—without revealing the exact methodology used to separate the wheat from the chaff. Yeah, that’s a good idea: play favorites. That’ll REALLY piss off the disappeared. And if that didn’t do it–which it did—GM’s crafted a new state-trumping franchise agreement for their remaining dealers that makes slavery seem like an oral contract.

According to Automotive News, New GM’s New Deal with its new dealers puts the “con” into “draconian.” To remain a part of “the family,” all GM stores must agree—in writing—to increase sales by 10 percent (maybe twenty), carry larger inventories, eliminate non-GM brands from their showrooms, upgrade dealerships, maintain high customer satisfaction scores and STFU if a new GM store locates more than six miles away from their dealership.

In other words, GM’s new contract includes a “just shoot me now” tick box at the bottom.

Sell more vehicles? The fact that GM’s market share has been on a downwards trajectory since the last century (news flash: the company is now bankrupt) should tell the corporate mothership a little something about how easy it is to sell GM vehicles these days. Hang on; shouldn’t GM make better products before they “force” dealers to sell more cars?

By the same token, what’s with the dealership upgrades? GM stores are hurting for cash. Wait, let me guess. The feds are going to provide loans (or loan guarantees) so that GM dealers can put Ford, Toyota, Honda, Hyundai, etc. dealerships to shame. Because Uncle Sam believes that rewarding losers is really just “leveling the playing field,” and when it comes to debt, more is always better. Meanwhile, pay no attention to that $1 million per dealer HUMMER upgrade fiasco. That was then. This is crazy.

As for the mandate to “maintain” consumer satisfaction scores (a.k.a. CSI), it’s Big Mac time. They CANNOT be serious. GM’s CSI scores have been a complete sham since they were first foisted upon their retail operations. I’ve got two words for anyone who thinks otherwise: Bill Heard. And another two: blind eye.

If GM was actively trying to screw-up its future, they couldn’t do it more effectively than they are right now. Saying that, I have every confidence that GM will somehow find a way. Let Barney Frank fuck with your plant closing plans? Sure! Piss away resources on a new green car that can’t compete with Toyota’s last generation hybrid? To paraphrase Albert Einstein, “employing the same people to do different things is the definition of eternal insolvency.”

Meanwhile, remember Fritz Henderson’s pledge to We The People promising transparency as it “reinvents” itself to repay our hard-earned tax money? How’s this for opaque: dealers are prohibited from discussing the agreement with anyone other than employees or business partners without GM’s expressed written consent.

Dead automaker walking.

By on June 4, 2009

Sorry to bang on about Fritz Henderson. But, well, there he is. Again. Still. With every passing post-C11 day, the GM CEO is sealing his position as the “Uncle Walt” of the federal automotive bailout. With every news conference, media suck-up and, now, congressional inquiry, it’s increasingly clear that Government Motors’ masters aren’t going to give GM’s mustachioed public face the old heave-ho anytime soon. Or, more accurately, soon enough. Let’s face it: the Presidential Task Force on Autos should have sent Fritz his walking papers on the same day they defenestrated his mentor: GM’s last CEO. In and of itself, this failure to excommunicate is enough to abandon all hope of the zombie carmaker’s resurrection (which is an inherently ridiculous idea anyway). Drilling down deeper, we hit nothing but sewage.

Since assuming the position (so to speak), Fritz has abandoned his faster, deeper, oh baby! mantra. He now has one message about “new” GM for its new owners (that’s you!): leaner, greener, stronger, smarter. Astute readers will notice that this is actually four messages, only the first of which makes any sense.

Leaner? That’s what happens when your market share collapses like a dwarf star. Spinning GM’s formerly bloated now emaciated soon to be lifeless corpse as some kind of egg-white eating athlete fools no one save GM’s own corporate flunkies (nothing new there). Americans equate large with successful. Why shouldn’t they?

Greener? Who gives a shit? I know that American industry, the MSM and public school teachers have been selling “green” this, that and the other thing for nearly a decade. But I reckon anyone who wants a “green” automobile is driving a Prius. And that’s pretty much that. Placing “greener” as new GM’s number two priority smacks of financially fatal, congress-pleasing political correctness.

Stronger? Does Fritz seriously expect US consumers to consider buying one of its products—or, more to the point, not not consider buying one its products—because $50 billion worth of taxpayer subsidies has bolstered Government Motors’ bottom line? As a homeowner with a big ass mortgage, I’m here to say that The Mother of All Re-fis is not an indication of Government Motors’ financial strength. Deficit financing, indeed.

Smarter? Anyone with a horse in this race (that’s you!) wants to know if GM’s “new” management (i.e., the old management) is going to make the same dumb-ass decisions that led it to complete collapse. Parsing the propaganda, do GM’s federally-funded spinmeisters mean smarter as in “intellectually superior” or “politically astute”? Either way, no.

The Henderson administration’s breathtaking lack of intellectual firepower was on display at yesterday’s Senate hearing re: GM dealer closures. The CEO singularly, spectacularly failed to make his case.

A smaller, more healthy dealer network reduces GM’s costs, primarily related to support we provide for information technology systems, dealer and sales person incentives, field sales, service and training, service parts, and advertising. This support costs GM roughly $1,000 per vehicle, or a multi-billion dollar expense.

Note Henderson wants a “healthy” dealer network, instead of a “profitable” one (“profit” replaces “bankruptcy” as new GM’s new “Voldemort”). Also notice that the Fritz seems be asserting that the less cars GM sells, the more money they make. When pressed on his pretzel logic, Fritz said the dealer closures would lower the aforementioned dealer costs by . . . $100 per car.

Henderson isn’t an idiot. He just plays one on TV. We can debate the wisdom of GM’s dealer cull, but showing up at The United States Senate without a compelling explanation of how his team ran the numbers leading to the politically-charged confrontation that led to the public hearing is either the height of hubris or just plain dumb. Anyway you look at this we lose.

Henderson’s squirming would be funny if someone else was paying for it. Particularly galling: Fritz began his statement with a promise of transparency and fealty to the United States taxpayer—and then resisted Senator Rockefeller’s request to turn over a list of dealers slated for closure. His rationale was almost as well engineered as a Chevy Aveo; “We’re giving them a 12-to-15-month window to decide what to do with their business.”

Crap. Now where’s the goddam list? Meanwhile, we’re forced to listen to a refrain which makes an alcoholic’s promises of sobriety seem credible. ”This is our last chance to get it right,” Henderson said, and not for the first time. “To fix permanently those parts of the business that have diverted us from consistently building winning cars and trucks and the consumer experience to match.”

Crap. If only this was GM’s last chance to fix their business (you know; since the last last chance). They’ll be back, if only because their top man somehow got the idea into his head that GM was diverted from its success. In other words, we were doing everything right except what we were doing wrong. Hey, what do you expect from a dead CEO walking?

By on June 3, 2009

GM CEO Fritz Henderson has filed a deposition with the federal bankruptcy court [download here] pleading for a 363 motion that would create the “new” zombie GM from the corpse of old debt-ridden GM. “In the face of the global meltdown of the financial markets, and a liquidity crisis unprecedented in GM’s 100 year history, there is only one way to maximize the value and permit the survival of GM’s business and save hundreds of thousands of jobs associated with not only GM, but also its vast supplier and dealer networks: these chapter 11 cases and the prompt approval of the 363 Transaction.” While I don’t expect Fritz to say “GM has entered this crisis due to epic mismanagement of which I am a fundamental part,” it strikes me as odd that this blame avoidance arrives on page three. Isn’t it a bit early to say “it’s not our fault?” Apparently, early and often is the strategy here.

On page 5, again with the “it wuzzn’t me”:

Recent events, however — including both international competitive forces and the worldwide recession that has resulted in an economic contraction and dislocation not seen since the 1930s — have led to the dramatic financial distress of the world’s largest automotive company.

And again on page 6:

Most recently, GM’s sales have been materially affected by the overall decline in domestic automobile sales, which continued unabated given the deteriorating economy and financial markets. The Seasonally Adjusted Annual Rate (“SAAR”) of automobile sales for the United States industry declined from 15.6 million units in January 2008 to 9.8 million units  in January 2009, which is the lowest level since 1982. This affected all domestic OEMs, but GM in particular.

And again on the bottom of page 6:

As a result of the economic crisis, in November 2008, the Company was compelled to seek financial assistance from the Federal Government.

And again on page 16:

While foreign OEMs enjoyed, among other advantages, lower wages and far lower annual healthcare and benefit costs, the Company’s obligation to support pension benefits and provide healthcare and life insurance benefits (OPEB) for its former employees increased exponentially, even as its revenues eroded because of a drop in market share and the downturn in the national and global economy.

And again on page 18:

Notwithstanding significant progress in cost reduction and increased efficiency, competitive pressure on GM was exacerbated by (i) substantial increases in the price of crude oil to nearly $150 per barrel during 2008, which precipitated a sharp downturn in driving and sales in the large vehicle segments in which GM was dominant and most profitable and (ii) a sharp decline in the global economy, including substantial increases in unemployment and a freeze-up of consumer and business lending. The resulting drop in new vehicle sales led to a steep erosion in GM revenues and, in turn, significant operating losses.

And again on page 19:

Even as fuel prices stabilized and moderated to some degree during the fall of 2008, the Company faced sharply deteriorating economic conditions during the second half of 2008 and the first quarter of 2009, which can only be characterized as the worst economic downturn and credit market environment since the Great Depression. Significant failures occurred in America’s financial sector — including the forced sale or liquidation of two of America’s five largest investment banks, the crippling of the nation’s largest insurance company, the conservatorships of both Freddie Mac and Fannie Mae, and the financial distress of two of the nation’s ten largest banks. The financial market crisis not only affected large institutions, but also affected consumers, as both income and financing for buyers and lessees of automobiles evaporated.

And again on page 21:

Thus, the combination of the sharp run-up of gasoline prices with its direct impact on the Company’s most profitable vehicle segments, rapid declines in the housing/mortgage/credit sectors, the freeze-up of equity and debt capital markets, and the lowest levels of consumer confidence in nearly thirty years, had an unprecedented effect on the automotive industry generally and GM in particular.

This is the same page that contains the money shot:

Under these extraordinary conditions, the Company’s liquidity rapidly eroded to a level below what was necessary to operate the business. Consequently, GM had no choice but to reach out to the U.S. Government for financial assistance.

And again on page 36:

As discussed below, the deepening economic crisis has affected not only GM, but also the thousands of direct and indirect suppliers and vendors that provide components, products, and material to the Company. In light of the credit crisis and the rapid decline in automobile sales, many of the Company’s suppliers are unable to access credit and are facing growing and serious uncertainty about the prospects for their businesses.

I don’t think this is spin. The zombie now known as Government Motors doesn’t even know why it died. Henderson and his minions continue to believe they’re victims of circumstance. Even worse, I’m not sure GM’s First Step in its $100 billion recovery program is important anymore—and not in the way that Motown’s zombie cheerleaders might imagine.

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