Category: GM Death Watch

By on April 16, 2009

As TTAC’s Bailout Watch series heads for the initially improbable quingenta mark, it looks like the GM C11 naysayers are just about all nayed out. In his column, Detroit News Auto Editor Manny Lopez finally admits that a Chrysler/GM bankruptcy is . . . an option. Meanwhile, the self-styled AutoExtremist has thrown in the towel. In fact, Peter DeLorenzo now reckons GM is damaged beyond repair. A PR/marketing guy to the end, DeLorenzo has a solution: change GM’s name. “One hundred years of accomplishment and historic value to the American industrial fabric has been decimated in a matter of months. Once one of America’s corporate icons, GM has now been reduced to being a punchline for a running national joke, and this new car company will have to be unburdened of the GM name, pronto.” A matter of months? Clearly, DeLorenzo hasn’t been paying attention for the last decade or three.

GM isn’t the only one whose name is mud these days. Our neighbors to the north weren’t exactly thrilled when Chrysler told the Canadian Auto Workers to concede, the government to cough-up the bailout bucks or we’ll take our toys and go home. And now Ex-CEO Rick Wagoner stands accused of screwing GM’s Canadian subsidiary to secure taxpayer funding for his employer.

Bloomberg reports that “General Motors said it moved almost C$600 million ($495 million) from a Canadian unit to the U.S. [in March] as part of a deal with banks to strengthen U.S. operations and win government bailout money.”

Anyone remember when freshly-minted GM CEO Fritz Henderson announced the startling news that they didn’t have to draw down “extra” billions by the end of the month to keep the lights on? Apologists put it down to careful husbandry. Well, now we know the truth about GM’s sudden (if temporary) push away from the bailout buffet.

Of course, there’s the small matter of the bondholders left behind by GM’s run on the bank. And boy are THEY pissed.

Aurelius, Appaloosa and five other funds, who hold notes valued at 377 million pounds ($562 million), sued March 2 to have the money returned to the GM unit in Nova Scotia, which in 2003 issued the two series of notes.

The funds claim GM, the parent company, is either insolvent or on the brink of insolvency and knows it won’t be able to honor its obligation to the noteholders.

The parent company “has been or will be unjustly enriched at the expense” of Nova Scotia Finance and its creditors, the funds said.

See you in court? Hello? Chapter 11? Take a number and get in line, bud.

And join Pontiac and GMC dealers. Bloomberg also reports that “people familiar with the [federal] discussions” about GM’s train wreck say that the Pontiac and GMC may/will/might/could get the axe. This as GM’s “Savings Push Deepens.” It has to be asked: Fritz, do you like it like this?

GM’s spinmeisters responded to Bloomberg‘s Wild Ass Rumor with the kind of openness you’d expect from federal employees. “We are continuing to assess our global operations, brand portfolio and nameplates, and will take further actions to more aggressively restructure our business,” Renee Rashid-Merem, a GM spokeswoman, said yesterday. “It’s premature to comment on what those actions could entail.”

GM is talking muy macho for a company about to enter the Mother of All C11s. Ford, on the other hand, is talking softly and offering its dealers a big shtick.

The Detroit News curmudgeon Daniel Howes has finally broken radio silence to reveal that The Blue Oval Boyz have sent their dealers $1K in conquest cash with which to lure fleeing GM and Chrysler customers.

“Domestic intenders for Chrysler and GM have been defecting to Ford and Lincoln Mercury products in great numbers since the beginning of the year,” Amanda DeMouthe, marketing manager for Ford’s Boston, New York, Philadelphia and Washington regions, wrote dealers in an internal memo.

“And as media continues to speculate on the possibility of bankruptcy, those defections will surely continue. Please be sure your teams are aware of this new incentive. It is stackable with Customer Cash, Bonus Cash and 0% APR!”

You want domestic metal cheap? You know where to go. As Mr. Howes reminds us, it remains to be seen if FoMoCo can avoid the same fate awaiting General Motors at the hands of the feds. Meanwhile, everyone even remotely connected with Chrysler and GM is getting hammered, or is about to get hammered.

“Customers ask that question almost every day and they expect you to give the cars away because they say you’re in bankruptcy or soon will be,” New York Chrysler dealer Jonathan Grant tells our Mr. Howes. “This thing’s like a cloud that is hanging over us.”

By on April 14, 2009

The New York Times reports that hecklers are verbally assaulting GM’s booth babes at the New York Auto Show. Worse, the glamor girls are wearing last year’s dresses. Literally. This is not what you’d call death with dignity. This is GM on federal life support, drooling and soiling itself uncontrollably as it waits and waits and waits for someone somewhere to pull the damn plug already. As I’ve asserted in the past few episodes of this series, I no longer believe GM can be revived. The company is brain dead. No matter what cancerous parts of The General’s terminally ill body Uncle Sam’s surgeons separate from the corporate body, GM can’t function as an independent entity. Chevrolet and Cadillac? Building what? For whom? At what profit? Both of those brands are money losers losing market share right now. They may have volume but they ain’t got game. Of course, that’s not going to stop the feds from trying to revive GM. And boy, are they—I mean “we”—going to piss away a LOT of money.

In 37 days the Presidential Task Force on Automobiles (PTFOA) will force GM to file for Chapter 11. A friendly bankruptcy judge will then split the artist formerly known as “the world’s largest automaker” into “good” GM and “bad” GM. “Good” meaning a new(ish) American carmaker, freed from a mountain of debt, pesky union contracts, health care obligations, pensions, unprofitable brands, outdated factories, commitments to Delphi, etc. “Bad” as in all that worthless NSFW piled into one place, where the creditors can squabble with each other over its worth until death do them part.

This the PTFOA will do in the name of jobs, jobs, jobs. Or, more accurately, finding a way to support GM with [your] federal tax money without completely alienating the 70 plus percent of Americans who are against supporting GM with [their] federal tax money.

Politically, the split makes sense—but only if the US government takes an equity position in the “new” GM. See? We didn’t throw billions of dollars worth of your hard-earned money down a rathole. We used it to help GM rise Phoenix-like from the ashes. It’s an investment. Uncle Sam gets to make a new cake and eat it too because GM’s current U.S. Treasury loans (call it $22.8 billion) are secured, backed by all of GM’s assets, including the assets owned by its subsidiaries.

The Fed’s claim on GM is junior only to the existing, secured, revolving credit facility (a pittance at about $5 billion). I repeat: GM’s federal loans are senior to all GM’s creditors, including the retiree trust claims (around $27 billion), GM bondholders ($29 billion) and the trade payables owed to suppliers ($22 billion).

Moving forward, leaving all of those “stakeholders” behind, “good” GM is looking for another $22 billion from the Treasury to fund its future operations. Oh, and an additional $6.6 billion to develop energy efficient vehicles and $6 billion from foreign governments. If Santa leaves all these presents under GM’s Christmas tree, all of this new money would ALSO be senior to existing unsecured creditors, ahead of payments to bondholders, the retiree trust and creditors.

Again, in exchange for their largesse, US (and foreign) taxpayers get a stake in the new, relatively unencumbered “Good” GM. The Treasury Department converts all of its current and upcoming senior secured debt into  junior preferred stock. Ladies and gentlemen, I present to you, American Leyland.

Here’s the worst part: what if it doesn’t work? What if the PTFOA puts the paddles on the new, cancer-free GM and the patient fails to revive? I mean, if consumers are ignoring, eschewing and even heckling “old” GM, why does anyone think that “new” GM will recover or even maintain life-sustaining market share?

To pull that one off, Chevillac would have to steal customers from Honda, Toyota, Nissan, Hyundai, Ford, Mercedes, BMW, Infiniti, Audi, Lexus and all the rest. In five years, maybe. Short term? No NSFWing way. Damaged brands, damaged company. And if this American Leyland plan bites the dust, all of that preferred stock will be completely, 100 percent worthless.

Alternatively, the PTFOA could put GM into Chapter 7 and let someone try to make a go of whatever bits are make-a-go-able. And if politics demand it, Uncle Sam could spend that $34.6 billion worth of additional funds sending every UAW worker and supplier employee and Detroit-area pump jockey a big fat check.

Assuming (as we must) that common sense has nothing to do with this, the flip side is the really scary bit. What are the feds willing to do to “protect” their (your) investment in GM? As the “investment” gets larger, so does the pressure to make sure it doesn’t fail. The PTFOA has already fired GM’s CEO, gelded its Board of Bystanders and manipulated the bailout bill to send the automaker tens of thousands of sales. What’s next?

Whatever it is, you can bet it won’t benefit the American consumer.

By on April 6, 2009

GM’s new CEO took to the airwaves on Sunday. If industry watchers had any doubts that Fritz Henderson is cut from the same cloth as his discredited, defenestrated predecessor, Henderson’s appearance on Meet The Press removed them. Like Rick Wagoner before him, Henderson’s facile, vague and evasive responses—re: the epic train wreck known as General Motors—revealed the full genius of the Talking Heads’ lyricists. “You’re talking a lot, but you’re not saying anything,” David Gregory forgot to interject. Alternatively, we could make this Churchillian: Never have so few said so little about so much. Even so, OMG.

There, on national TV, GM CEO Fritz Henderson showed the world (and GM customers) that he’s a craven corporate spinmeister. While trying to reassure everyone about everything, he singularly failed to reassure anyone about anything. In both tone and content, Henderson showed the wisdom of rule number one in How to Succeed in Business Without Really Trying: “get a job in a big firm.”

What GM needs is a CEO who can create root and branch reform. What they got is a man who went out of his way to tell denizens of GM’s poisonous corporate culture that not a single ass is in any danger of being kicked.

No surprise there. Red Ink Rick Wagoner’s hand-picked successor is a caretaker CEO, elevated to his promised position through primogeniture, rather than any talent for crisis management. As planned.

The Presidential Task Force on Automobiles (PTFOA) knew they were going to fire Rick Wagoner before the Treasury Department assigned them email accounts. Steve Rattner and friends had plenty of time to find a Mulally-like outsider ready, willing and able to triage GM ahead of, in the midst of, and after bankruptcy. Clearly, that’s not what the PTFOA wanted. What they wanted was what they got: a patsy.

Henderson is nothing more or less than a powerless placeholder. As the representative of “old” broken ass General Motors, the company’s new CEO is free to tell his company’s new masters how to run the terminally ill automaker. Henderson can advise the PTFOA which national and international brands should survive the forthcoming cull. He can nominate the new product mix. Anything. But the moment Henderson’s recommendations clash with the will of the people, the PTFOA can (and will) turn to him and say “What the fuck do YOU know about it?”

Which is both true and deeply worrying.

Suffice it to say, we could ask the PTFOA the same question with even LESS chance of a satisfactory answer. Although the majority of their members drive foreign cars, the task force has no more idea about successful automotive design, branding, marketing and sales than GM’s current management. If TTAC’s Best and Brightest are still arguing how to “save” GM, what chance do a bunch of politically appointed ex-journalists, lawyers and professional bureaucrats have?

Never mind. Despite their ignorance over industry matters, Barack’s automotive army is large and in charge. And they aim to keep it that way. Surrender power over GM’s fate to a new, independent, charismatic CEO? No way. Not yet, anyway. Not until the Treasury men have done whatever it is they need to do (they’ll figure that out as they go) to “protect the taxpayer.” Oh, and save the planet.

Yes, there is that. Pundits who read the PTFOA’s excoriation of GM’s vaporware Volt mistake the quango’s criticism of a tree-hugging Hail Mary as recognition that GM has to, you know, sell something that people want to buy—even if it’s not an electric car.

Wrong. President Obama’s base demands federal intervention within the evil, electric car killing industry. The feds must reduce global warming, eliminate SUVs and generally get American consumers to do the right thing, whether they want to or not. Believing that PTFOA have subsumed the president’s political agenda to the gods of ROI is, at best, naïve.

As Henderson’s appointment reveals, as the increasing chatter about a “quick” (i.e., non-judicial) bankruptcy indicates, the PTFOA are ensuring that THEY will decide which bits constitute the new, healthy “good” GM, and which bits are shunted into the old, “bad” GM. “Good” as in environmentally and union-friendly, built wherever supportive votes may live (think defense industry). “Bad” as in anything that isn’t environmentally and union-friendly, built outside fertile Democratic voting territory.

It won’t work. At this point, I can’t see GM emerging from bankruptcy as a lean, mean organization, building [at least] two brands’ worth of world class, competitive products.

Perhaps I’m wrong. Maybe the PTFOA will eventually step aside for the next presidential proxy. Maybe he’ll be the savvy kick ass CEO GM needs to survive. Until then, Henderson. As New York Times columnist Frank Rich said, change is traumatic. We ain’t seen nothing yet. Then again, maybe we have.

By on April 3, 2009

I view the government’s intervention in GM’s business (or lack thereof) as automotive ebola. But we can all agree on one thing: the president’s decision to fire GM CEO Rick Wagoner was a no-brainer. Giving the Harvard MBA and GM lifer millions of dollars to guide GM to viability was like letting Al-Qaeda run a liberal arts university. Now that Wagoner’s gone, his supporters are notable by their absence. That’s because deep-sixing Red Ink Rick was the right thing to do. It was also the easy thing to do. While the MSM is lionizing Steve Rattner, the head of the presidential quango that defenestrated the GM CEO, the Obama administration’s wallow in the GM quagmire is just beginning.

There is no longer any doubt that GM is headed for bankruptcy. The GM C11 gestalt is growing by the day, of which there are only 56 left. The question is no longer “if” GM will file but “how.” Yesterday, GM’s federally elevated Chairman of the Board, Kent Kresa, signed his name to a plan unofficially called “Good GM, Bad GM.” In this scenario, the government would split GM into two companies, “old” (bad) and “new” (good). GM’s best bits would become part of the unencumbered business. The remaining dreck would be sold or liquidated.

It’s a good idea—in theory. Separating the potentially profitable wheat from the same old chaff would be a relatively rapid way to reinvent the American icon. But there’s a good reason why this practice isn’t the norm: someone’s got to decide which part of GM is Michael Knight and which part’s his evil twin Garth.

In a normal bankruptcy, management creates a recovery plan. A federal judge (or judges) rules on the plan, and then oversees its execution. The judge can demand forensic accounts, call witnesses, order asset sales, protect assets, etc. Yes, yes, Delphi; the former GM parts maker that’s been in Judge Robert Drain’s bankruptcy court since the late Pleistocene era. But that doesn’t obviate the main advantage of a judicial bankruptcy process: someone without an axe to grind has the power to make sure that creditors and other “stakeholders” aren’t screwed.

Lest we forget, GM is [still] a vast, sprawling enterprise, with thousands of dealers, suppliers, workers and former workers. Both here and abroad. All dependent on various parts of GM’s business for their survival. A triage-trained bankruptcy judge decides the least bad options for all concerned.

Now imagine the Presidential Task Force on Automobiles (PTFOA) deciding which bits of GM fall into the “good” (life) or “bad” (death) column.

First of all, the separation poses a huge philosophical conundrum. What is the new GM and why? If you subscribe to the theory that Chevrolet and Cadillac are the only GM brands worth saving, what of GMC, which accounts for a large chunk of GM’s truck biz? Kill or consolidate?

Viability means profitability, which requires both situational awareness and dedication to a specific competitive advantage (a.k.a. a unique selling point). The PTFOA’s recent report said the money-making GM of the future would build and sell reliable, practical, safe and fuel efficient vehicles. Must. Choose. One. Oh, and WTH does any of that have to do with Cadillac?

Secondly, on a more practical level, holy shit. GM has assets all over the world, with enough overlap to keep bean counters busy for decades (as it has). So which vehicles will these “good” brands sell, and where will they be made? Will the new GM only build vehicles in the U.S.? Given that some of the best/most profitable GM products are fabricated outside of the United States, an America-first approach would put the “good” GM at a huge competitive disadvantage.

Which, of course, leads us to the most important thumbs-up, thumbs-down consideration of all: politics. In a judge’s case, there is no political consideration. He or she is beholden to no single constituency. In contrast, the PTFOA. Anyone who thinks that this politically appointed body will be ready, willing and able to set aside partisan politics to look after the taxpayer’s best financial interest is woefully naive.

If nothing else, we’ve not heard the last of the United Auto Workers (UAW). So far, the union’s done all that they could do to “help” GM: nothing (i.e. no major concessions). The next step: make sure the PTFOA looks after UAW members’ interests in the pre-pack process. And while that’s happening, political markers are already being called in. How many pols with a GM factory in their jurisdiction have PTFOA boss Timothy Geithner in their sights? I’m thinking . . . all of them.

So here’s my idea: the PTFOA calls in GM’s federal loans. GM files for Chapter 11 protection. A bankruptcy judge does his or her thing. The feds (that’s you and me) provide debtor-in-possession financing (I’d prefer C7 but no one asked me). Fair enough?

By on March 31, 2009

Most auto industry observers have lauded President Obama’s decision to defenestrate GM CEO Rick Wagoner and his Board of Bystanders. Their logic is as simple as one, two, three. One: U.S. taxpayers have “loaned” The General billions of dollars. Two: GM’s management failed to provide a viable viability plan to return the money. Three: the presidential putsch protects America’s “investment” in General Motors. Yes, well, protect THIS. When GM files for bankruptcy 59 days hence, $17.4 to $19.5 billion worth of taxpayer money will disappear down a rathole, never to return. That’s a conservative estimate of the total amount of federal “loans” and grants and God-knows-what that will be wiped out the moment the judge signs GM’s C11 papers. Oh, and after we kiss that cash goodbye, U.S. taxpayers will provide the cratered car maker with debtor-in-possession financing. In other words, more money. And who’s to say that money will ever be repaid? What’s the end game? Is there one?

President Obama justified his intervention in the American automobile industry with a vision of a revitalized General Motors. (Chrysler not so much.) With Uncle Sam’s help, GM will one day rise again. It will produce the clean-running, high mileage vehicles of the future, built right here in the U.S. by yada yada yada. Seriously? Does anyone seriously believe that a post-Chapter 11 General Motors will build and sell products that will be the envy of the world?

Post-C11, GM will trim down to two brands: Chevrolet and Cadillac. Costs will be cut to the bone. The United Auto Workers’ power will be denuded. Legacy issues? Banished. Bloated dealer network? Decimated. GM may even emerge from C11 with a Mulally-like leader and a fiercely independent and intelligent Board of Directors; ready, willing and able to reinvent GM’s poisonous corporate culture. And then . . . GM will face a leaner, hungrier, larger Honda, Nissan, Toyota, Hyundai, VW and Ford.

Good luck with that.

Once upon a time, GM could have entered bankruptcy, cleaned its own clock and survived. The talent locked-up inside the artist formerly known as the world’s largest automaker could have been refocused, redeployed and redirected. But CEO Rick Wagoner couldn’t see the diem, never mind carpe it. His delay and denial made GM’s recovery both more expensive and less likely.

Amongst other Shiva-like maneuvers, Wagoner created four sales “channels” for GM’s eight stricken car brands, trading internecine warfare for outright paralysis. As resources diminished, the key question—who makes what for whom when, where, why and at what price point—became a Gordian knot. “Why” became “why not” became “whatever.” A Cadillac sports wagon? You betcha. GM’s last next big thing, the pedestal-dwelling plug-in hybrid Chevrolet Volt, is the poster boy for the company’s headless chickenism.

And now, nothing. GM Car Czar Bob Lutz has retreated into the shadows, counting the days until he collects his bankruptcy-proof pension, watching as the company’s creative process (such as it is) slips into chaos. Meanwhile, GM’s Best and Brightest have left the building. The Presidential Task Force on Automobiles (PTFOA) rightly ripped Red Ink Rick’s ridiculous rabble a new REDACTED, but their “restructuring fact sheet” makes one wonder about their ability steer a course into the future. What’s the plan, Stan?

“The new GM will have a significant focus on developing high fuel-efficiency cars that have broad consumer appeal because they are cost-effective, have good performance and are reliable, durable and safe.” PC it may be, but that hardly sounds like an ideal recipe for world-class Cadillacs. Which leaves Chevrolet. Trying to play catch-up with battle-hardened, technologically adept, customer retaining competition.

Again, good luck with that.

Fifty-nine days from today, GM will file for C11. Chevy and Cadillac will eventually emerge from the rubble. The chosen ones will survive until they come off the federal teat. They may even survive after that. But they will be damaged brands—welfare queens tainted by their association with the federal government. Even if Chevrolet and Cadillac create world-beating products with industry-leading customer service, they will have the stench of corruption. Their logos will be a malodorous reminder that they achieved their success off the backs of the American taxpayer, rather than honest labor.

OK, maybe that’s a bit much. Americans love a comeback kid. And what late 1940s industry expert could have predicted that his fellow countrymen would elevate Japanese brands to the top of the family and luxury car sales charts? But do we really have to pay twice for GM’s resurrection?

If General Motors had filed for Chapter 11 when they coulda shoulda, no tax money would have been harmed in the making of this [entirely theoretical] renaissance. As it currently stands, there is no end point. Sure, Chrysler repaid its loans way back when and . . . oh dear. Despite all that government help they’re in a bit of mess now aren’t they? You know, in a DOA sort of way. So maybe, just maybe, government assistance is a form of assisted suicide. Perish the thought.

By on March 29, 2009

General Motors CEO Rick Wagoner is set to resign his position tomorrow. The timing of Wagoner’s departure is clearly symbolic. It’s meant to signal the nation that it’s OK throw bailout billions GM’s way because it’s a new day. Well, there’s a new guy at the top, anyway. Which may or may not be true, depending on whether or not Wagoner’s hand-picked successor and virtual clone Fritz Henderson inherits the job. If Henderson gets the nod, the symbolism of Wagoner’s defenestration will be far richer than its architects intended. For it will confirm the growing suspicion that the president’s mantra of hope and change is heavy on the hope and light on the change. And while that plays out, Wagoner’s resignation will eventually be seen as a way point on a journey of self-destruction, rather than a turning point on a bridge to . . . nowhere.

This is not the place for a post mortem examination of Rick Wagoner’s career as a GM lifer. There is no need nor room for debate about Wagoner’s negative impact on the artist formerly known as the world’s largest automaker. By any objective metric—market share, profitability, share price, capitalization, anything—Wagoner’s tenure at the top was an abject, epic failure. In fact, I pronounced Wagoner R.I.P. three years ago, in March 2006. I said it then, I’ll say it now: it’s too late to save General Motors. General George S. Patton himself could rise up from the dead, slap a few of Wagoner’s soldiers, assume command and fail. All Wagoner’s replacement can do, indeed should do, is prepare the automaker for bankruptcy.

Wagoner leaves GM buried [barely] alive under a Himalayan mountain of debt, much of it his creation (under the guise of lowering operating costs). The company which once held the title as the world’s most profitable corporation now carries some $46.5B worth of debt. President Obama could add 20 or 30 or even 50 billion dollars in “loans” for GM tomorrow. He could force a 100 percent debt-for-equity swap for ten cents on the dollar amongst GM’s bondholders. He could dictate that the United Auto Workers accept stock in lieu of ANY contribution to its Mother of All Health Care Funds. And it still wouldn’t be enough to extricate General Motors from its current predicament.

GM has been and will continue to be an over-dealered, under-funded mess. Its brands are a complete disaster. Even the brands with some remaining psychological equity—Chevrolet and Cadillac chief amongst them—are suffering from bailout backlash as Americans grow angry at the increasingly obvious black hole that is Bailout Nation. With a handful of notable exceptions (mainly because they ARE exceptions), GM’s products are not competitive. And, lest we forget, the U.S. new car market is still contracting violently, with millions of unsold units just waiting for their makers to give up, sell them at any price and further depress sales and profits. In short, GM currently has zero opportunity for relative or absolute growth.

Given this hopeless morass, Wagoner’s resignation comes at the worst possible moment. It will fuel the boundless, baseless optimism which led to the first $17.4B GM bailout (not including a share of the Department of Energy’s $25B retooling loans or the $1B GMAC-related loan). Of course, that’s the entire point: Wagoner’s sword-falling routine gives the Obama administration and his Presidential Task Force on Automobiles something “concrete” upon which to pin their empty message of future auto industry transformation. What’s more, with Wagoner out of the way, the president can amp-up his electric car and high mileage dreams. See? We’re not subsidizing the same old SUV-building bastards. We’re reinventing the car industry!

What’s the bet Wagoner will announce his resignation without a single mea culpa? His statement will be as short as it will be meaningless. Seed-sowing, torch passing, foundation building—no matter what the metaphor, the underlying message will be “I prepared GM for the success to follow.” The fact that there will be no success to follow is neither here nor there. The feds’ willingness to keep GM on taxpayer funded life support means that Wagoner will be enjoying the fruits of his labors—including his bankruptcy-proof pension—even as those who inherit his legacy of his incompetence struggle to extricate anything of value from the inevitable corporate carnage.

I can’t decide whether Wagoner’s career at GM is Wagnerian, Chekovian (Cherry Orchard), Millerian (Death of a Salesman) or Shakespearean (King Lear). In the final analysis, it’s all of the above. And as long as we’re going down the literary path, Wagoner is the ultimate Hollow Man. Although news of his resignation arrives with something of a bang, the company Wagoner guided will not end with equal force. Thanks to the men at the top of the GM pyramid it will end with a whimper.

By on March 26, 2009

You knew this would happen.  Whenever things go wrong or come to an end we can’t help but look back and try to figure out why. To look for that one pivotal event that changed the course of events forever. So what did it for GM? When did it happen? After careful analysis I pinpoint their demise to the 3.8L V6 (a.k.a the 231) of the 1970s.

First, the runners up and why they didn’t make the final cut.  The Corvair certainly garnered a lot of bad press for being “Unsafe At Any Speed.” For all of its bad points, including the gas fired heater, it just wasn’t that bad of a car. Furthermore, it was a niche vehicle and never sold in enough numbers to really cause any permanent damage to the then-mighty GM.  Remember, in the 1960s GM was responsible for selling over 50% of the vehicles in the US.  Many look back at the Corvair as nothing more than an experiment that didn’t work.

Fast forward to the early 1970s. GM introduces the Vega, its response to the fuel efficient imports, just in time for the oil embargo of 1973. To say the Chevy Vega was ill-conceived is an understatement. First, the GM hierarchy dismissed the warnings of their engineers that an aluminum engine block needs cast iron liners. Then they outsourced cheap Japanese steel that turned to aluminum foil after just a few winters. It was clearly a losing situation for GM as they got bogged down spending millions sidelining cars to replace engines and recalling others to replace fenders.

So why didn’t the Vega make the final cut? Truth be told it just wasn’t the meat of the market for GM then. Furthermore, the public was just starting to accept little cars that ran on four cylinders and many didn’t believe a four cylinder could be durable enough to hold up in the long run anyway.

Which brings us to our winner: the 3.8-liter V6. Or the 231, as it was more commonly known back then (it was more common to refer to engine size in cubic inches not liters). It quietly appeared on the scene then gained wide spread use in 1978. That year saw a major redux across the A-body line: Oldsmobile Cutlass, Pontiac Grand Prix and the Buick Regal. These were General Motors’ bread and butter products and they were wildly successful. And it is here that GM makes its final, fatal collision; the corporate Titanic hitting the metaphorical iceberg.

GM sent these cars out of the factory with a multitude of quality glitches of which 231 engine issues were no small part. The oil pump was poorly designed, causing the oil pressure to sink dangerously low. By the time the consumer figured out something untoward was happening, the engine was apt to have blown a bearing or, worse, seized up. Game over. If your 231 engine didn’t throw a bearing, there were transmission “issues.” Cracked springs in the suspension. Rear wheel cylinders that fell off of their backing plates. All of this pushed many in the public towards their GM repair shop, and then, imports. The rest, as they say, is history.

Looking back, GM should have jumped in and cleaned up this multifarious mechanical disaster with honor and swiftness. At the time, they had enough cash to make all their customers whole. It would have been an extremely expensive PR disaster, but pretending there wasn’t a problem sealed their fate with hundreds of thousands of former loyalists.

GM tried to run from the warranty claims. Worse, they continued producing the 231 well into the 1980s. In the years that followed, it was mostly more of the same. GM sent out V8s with soft camshafts, torque steering X-cars and Fieros a quart low on oil. As the quality issues stacked up, GM’s market share deteriorated.

In the 1990s, they had one last chance. Cash rich from the SUV craze, GM could have re-invested the profits into their cars to make them mechanically-bulletproof world-beaters. Sadly, they squandered on brands and products and deals they didn’t need. And so here we sit in 2009, trying to bail them out, trying to figure out how to turnaround a submerged leviathan.

The astute reader will have noticed that I’ve left out the Chevrolet Monte Carlo, the other model built off the A-body and a major player in 1978. The Monte Carlo also had a 3.8-liter V6. But that engine was derived from a Chevrolet design: it had 229 cubic inches, not 231. Those two cubic inches helped make the 229 much more sprightly. And durable. If GM had used the 229 in the rest of their divisions . . .

Imagine that: two measly cubic inches could have changed the course of GM forever. Then again, I doubt it. When a company can’t recognize, admit and correct its mistakes, it’s a rudderless ship bound to hit something, eventually.

By on March 15, 2009

I’ve been been having a “difference of opinion” with my step-daughter’s fifth-grade teachers. For some reason, they’ve decided to give Sasha homework deadlines and let her sort out her own schedule. Unfortunately, no one taught her self-directed, off-site time management. Not surprisingly, except for the deadline itself, Sasha’s “planner” was empty: she had no idea how long assignments would take. She couldn’t prioritize her work or organize her home life. Mind you, she had goals: finish her homework, get good grades, make it to middle school. But she didn’t have a workable plan. Remind you of anyone?

Last week, GM announced increased production for the second financial quarter. The company’s spinmeisters claimed the jump relates to models that are selling well—as opposed to the tens of thousands of vehicles choking dealer lots or waiting to choke dealer lots. In truth, in today’s moribund new car market, nothing GM builds is selling well enough to justify a 45 percent production increase. So what, pray tell, is GM’s strategy?

Who knows? GM’s “viability plan” is like Sasha’s planner: big empty spaces leading up to large, laudable goals. GM knows it has to cut labor costs, swap debt for equity and cull and/or refocus brands. It knows it has to build cars that people will buy at a price that earns the company a profit. It knows it has to return to profitability to pay back its loans. But it doesn’t have a coherent, measurable plan for how to get there from here.

Any such plan would have to ape Sasha’s new homework system, with little tick boxes for every assigned task in every subject every day of the week. If GM wants us to believe the plug-in electric/gas hybrid Chevy Volt is The One, they must give us the way-points on the road to Damascus. How much, when, leading to what profit?

RenCen would never go for it, for one simple reason: the new system would introduce accountability. It’s a concept that’s entirely antithetical to GM’s modus operandi.

And so, true to form, GM is headless chickening out. The company is running around in random patterns, trying to achieve . . . something. Anything. They’re canceling and restarting development programs. Negotiating union concessions that aren’t. Building and not building and then building vehicles. Killing but not killing brands. Asking for a $2 billion advance on its next bailout bonanza, and then withdrawing the request. Pleading for Euro-bailout bucks while talking about spin-offs.

I half expect GM CEO Rick Wagoner to slap a Yellow Zowie on his head, lean into the cameras and say, “Somebody STOP me!”

But, no. Quite the opposite. The Presidential Task Force on Autos (PTFOA) seems hell-bent on enabling GM’s cultural predisposition to throw NSFW against the wall, run back to avoid the splatter, and then see what sticks. Otherwise, the PTFOA would have joined German and Swedish ministers and demanded that GM revise their turnaround plan, instead of journeying to Motown for Volt joy rides.

In today’s Boston Globe, scribe Jake Bennett uses GM’s fabled “29″ pin—an inter-executive admonition to GM suits to recapture 29 percent of U.S. market share—to make the same point: goals without careful implementation and constant, rigorous monitoring are an excellent way to completely screw up everything. Ipso bloody facto. Last time I looked, the management style practiced by Rick Wagoner’s mob had led the American automaker straight onto federal welfare.

Still, it’s worth pausing to contemplate the possibility that CEO Jack Smith’s commitment to restoring General Motors’ US market share to 29 percent (already down from over 39 percent) helped drive the automaker towards high volume, low profit fleet sales; anyone-with-a-pulse financing, ill-advised hook-ups with foreign automakers and all the other Wagoner-led fiatscos. Perhaps GM’s road to hell had a little sign on the median reminding the Powers That Be that “the ends justify the means” (right next to “Kiss Ass and Cover. The Millions You Earn Will be Your Own.”).

I’d like to know when those “29″ pins fell out of fashion at RenCen. When did they give up on that company-wide goal? Did the pins hit the bin when GM’s market share fell below 25 percent? Twenty-two? Twenty? At some point in GM’s decline and fall, did someone high up in the organization actually say “Take off that stupid pin Larry”? Or was it more of a group think deal, where Rick left his “29″ pin in the dresser drawer and his boys got the message? Did anyone think to replace the pins with . . . something? Something specific?

I’d like to see an actual “29″ pin (jpeg to Was it made of bronze or lead? Has it tarnished during the last nine years? Was the number inlayed? Where was it made, the US or China? As I try to teach Sasha, if you don’t respect your work, why should anyone else?

By on March 6, 2009

Despite General Motors’ epic slide into Chapter 11, or perhaps because of it, its defenders are busy re-writing history. It’s the Poseidon Adventure redux: a huge, well-run ship overwhelmed by a sudden, terrible force of nature. Except this ship will eventually right itself. In truth, GM really is the Titanic: a badly built vessel helmed by men blinded by short-term greed and long-term hubris headed for Davey Jones’ locker. Make no mistake: GM CEO Rick Wagoner had the chance to return GM to dry dock, repair the company’s flaws, and make it across turbulent seas. But then Wagoner is a GM lifer—his cowardice is both genetic and institutional. What’s the mainstream media’s excuse?

This is the day after GM’s auditors told the world that the automaker may not be a “going concern.” It’s also the day the MSM has finally come to grips with GM’s utter ruination at the hands of its tacitly incompetent management. Or not.

For example, Daniel Howes’ column in the Detroit News is the same as it ever was. Although Howes chastises “the skeptics, the deniers and the deluded” for not facing the truth about GM, and his tone has switched from enthusiastic cheerleader to horrified bystander, he still believes that GM has a future– under Uncle Sam’s taxpayer supported wing.

“[The auditors' report] also should remind the White House just how perilous a GM failure could be for their friends in labor, voters in the industrial Midwest and a fragile national economy.”

As John McEnroe used to say (before CBS signed his paychecks), you CANNOT be serious. Mr. Howes has been carrying the can/pouring the Kool-Aid/providing aid and succor/kissing the ass of these GM C11 deniers for years. This morning’s minimum opus proves he still doesn’t get it: GM is toast.

It’s bizarre. An MSM industry insider reckons the auditors’ report declaring GM kaput will help his hometown heroes confront the reality of GM’s bottom line—so they can avoid the reality of GM’s bottom line. Get out of denial to jump back in. At the taxpayer’s expense. Without anything remotely resembling a coherent and believable “return to viability” plan.

It may arrive as a piercing glimpse into the obvious, but even after GM’s “we’re NSFWed” SEC filing, the agenda-driven MSM continues to view GM’s death throes through the prism of their pre-existing prejudice.

NPR’s The Takeaway interviewed me this morning about the “automotive bubble.” Host John Hockenberry seemed more concerned with the Obama Administration’s electric car future than the fact that “big bad” GM (as opposed to naughty truck-building Toyota) is going away.

Sad but true: MSM’s failure to “move the needle” in its understanding and presentation of the scope, scale and immutability of GM’s perils has enabled the company’s outrageous call on the public purse. In fact, it’s increasingly clear that both GM and the MSM see down as the new up. The worse the news, the greater the justification for the feds to hang another multi-billion dollar bag on Motown’s IV pole.

Just this morning, GM admitted that its request for an additional $30B federal “loan”—on top of the $13.4B already pissed away—won’t be enough to dig it out of its hole. You heard right. Please sir, may I have some more? (As spoken by Frank L. “Bobo” Marrapese Jr.) There’s no way GM could have gone public with this admission without a mostly complacent MSM. In a world with a properly informed and skeptical media, GM’s begging bowl would have been smashed to pieces.

I repeat: where is the media reporting on this fresh, unsustainable assault on taxpayer largesse? In the Detroit Free Press’ case, they’re chewing the fat with GM’s CFO. The Freep reports that Ray Young claims to be “monitoring the situation closely.” Not to worry; Young had “planned for a weak first quarter.” Huh. Does that mean GM intentionally low-balled their initial suckle request?

CNNMoney isn’t bothered. The simply parrot GM’s PR spinmeister’s Fastlane Blog defense of the company’s long term future. The New York Times also isn’t interested in ripping GM a new one. “The [SEC] announcement does not mean bankruptcy is imminent. But it underscores how difficult it will be for GM to successfully complete the restructuring plan that it filed with the Treasury Department last month.”

Hang on . . . didn’t Young just say GM can’t complete their restructuring plan as written?

Meanwhile, the Wall Street Journal continues its descent into the journalistic abyss. Once again, they’re basing a story on “a person close the matter.” This time he’s saying GM’s open to a government-sponsored C11. Yeah right.

When GM finally files for C11, the MSM will continue the spin. They won’t even blink when GM asks for tens of billions for debtor-in-possession financing. The tough questions—which should have been asked five years ago—will once again go unasked.

Too big to fail? As far as the media’s concerned, the answer’s yes. Even when it’s no.

By on March 4, 2009

Moral relativism is inherently childish, as demonstrated by my eleven-year-old. “You don’t make Lola take her plate into the kitchen.” Any assertion that her sister’s age removes her from the obligation meets with a derisive snort. In fact, Sasha reckons she’s a victim of a cruel, capricious system. “It’s not fair!” she cries, storming off—until I threaten to yank her poker chip pay. Then, grudgingly, she does what needs doing. All of which reminds me of GM’s PR “narrative.” As their sales dip by half, they cry “Everyone’s sales numbers are a disaster! You can’t blame US for this mess.” And then they walk off and we clean up (i.e., pay for) their mess.

GM’s bondholders and union leaders “get it.” They know that GM lives in a world where actions don’t have consequences. No matter what The General does or doesn’t do, no matter what they build or don’t build, kindly Uncle Sam will keeping throwing them chips.

And who do you think scoops up those plastic pieces at the so-called bargaining table? Why the bondholders and union leaders, of course. When it comes to securing “their” stake, General Motors and its camp followers have learned that whining speaks louder than action.

“These are obviously unsustainable levels which are causing almost every major auto manufacturer across the world to look for government aid,” GM’s chief sales analyst Michael DiGiovanni said during a post-February sales numbers conference call.

See! Nobody else has to file bankruptcy! You want us to go C11? I hate you! I wish you were never born!

Plug your ears for a second and think about that. General Motors has just publicly admitted that they’re no longer a viable business. And no wonder.

When GM first suckled from the federal teat, their loan request was based on grabbing their “usual” share of an estimated seasonally adjusted annual sales rate (SAAR) of 11m vehicles. February’s SAAR clocked in at 9.8m. Oh, did you mean retail sales? That’s 7.5m. Nissan’s CEO figures SAAR will drop to 8.5m.

Bottom line: GM is too big to survive in such a small market, never mind the weakness of their products.

You could make a case that the precipitous sales drop was due to the unforeseeable collapse of the credit market. You could argue there was “no way” GM could have predicted these terrible times (although I won’t be joining you in that belief). But clearly, indisputably, GM should have known the way the winds were blowing back in December.

So how come GMNA’s Best and Brightest’s “worst case scenario” wasn’t even close to reality? Either GM management was woefully ignorant of their own business, or they were lying to Congress to minimize their [initial] call on the public purse.

After ten years charting this company’s course, watching as the crew plowed it straight into a killer iceberg (that a faltering economy has now revealed in all its terrible glory), I’d have to say GM’s misinformation was based on willful ignorance. And cowardice.

These are tough times. Times that try a man’s soul. What GM needs, what we all need, is true grit.

True grit refers to the character of a person who can look at their perilous situation without flinching, then devise a realistic plan to deal with it. Sometimes, the odds are insurmountable; even the best possible plan is doomed to failure. And then a person with real character does what has to be done; whatever they can do. No matter what the personal cost.

It’s no coincidence that The Alamo is one of John Wayne’s best-loved movies. It’s no coincidence that GM is bankrupt, without anything like a coherent plan to file for C11, reinvent itself and save what can be saved.

And here’s the missing puzzle piece: the aforementioned willingness to make a personal sacrifice.

Last year, at The New York Auto Show, I asked GM Car Czar Bob Lutz if his pension was bankruptcy-proof. I was really asking if he was personally committed to saving GM. Lutz’ derisive prevarication, followed by his recent retirement, answers that question once and for all.

In fact, GM’s management team are like a bunch of eleven-year-olds, willing to do most anything, blame anyone, to avoid accountability for the mess they’ve created. By the same token, they refuse to take responsibility for cleaning it up.

Unfortunately, it’s is no longer their problem. It’s ours. BUT, contrary to growing sentiment, it’s not our job to let management walk; take control and clean the god damn table ourselves.

GM is not our child. We can’t afford to feed it and take care of our own family. Nor should we let GM’s parents avoid responsibility for their own progeny. We’ve served them a hot meal. We’ve done more than our fair share. It’s time to show GM the door. Anything less is simply enabling and encouraging bad behavior.

By on February 25, 2009

It’s not a question of if GM will file for C11. GM blew past “if” a long time ago. By the turn of the century, the artist formerly known as the world’s largest automaker was doomed. Still, if they had greeted Y2K by mortgaging everything (à la Ford) and used the cash to buy out dealers and kill brands and ditch models and pay off the UAW and . . . nah. By the time The General re-launched their refreshed GMT900 SUVs in May 2005, the gig was up. By that point, GM should have been in C11. In this alternate universe, GM might have had enough cash—their cash not our cash—to make it out of bankruptcy. Now, I’m not optimistic. But one thing’s for sure: this Death Watch series is, like GM, on its last legs.

The filing’s timing has nothing to do with finances: profit and loss, cash flow, capital investment, depreciation, amortization, tax schedules, that sort of thing. The moment GM cashed its first government check, its fate ceased to be a matter of commercial reality. The corporation that was once the world’s largest company, the world’s most profitable company, had instantly and irrevocably reduced itself to nothing more (or less) than a political football.

The fact that Uncle Sam’s $13.4 billion federal loan didn’t even stretch to March 31st, never mind through the end of 2009 as promised by GM CEO Rick Wagoner, is neither here nor there. GM is now, for all intents and purposes, an off-shoot of the US government. And that means GM’s on government time.

Hence the reason why GM isn’t in receivership, despite failing to satisfy the loan’s conditions (UAW concessions, a massive debt-for-equity swap amongst existing bondholders and a credible viability plan). Never mind. We’ve got a presidential task force. Meanwhile, how about a bridge loan to take GM from their current bridge loan to . . . another bridge loan.

No surprise there. You can’t very well create a new layer of federal bureaucracy without giving it a chance to do something. Witnesses must be called, lawyers consulted, inter-departmental advisors indulged, papers perused, confabs held, policy statements written, copies circulated for approval, etc. And that’s after the appointees are appointed, assistants hired, stationary commissioned, website created, budgets drafted, alliances formed, careers fortified, etc.

If the Presidential Task Force on Automobiles simply cried “basta!” and called the loan, they’d have nothing to do. A federal bankruptcy judge or judges would take over. What would be the point of that?

In fact, doing the right thing would be the exact wrong thing, politically. First, it would make the Obama adminstration seem impulsive. They just got started! Second, it would make the Obama administration seem weak. It would be a throw-in-the-towel tacit admission that the economy is in even worse shape than they won’t admit it is, and there’s not a damn thing they can do about it. Third, a C11 filing would require even MORE money from Uncle Sam than GM is currently requesting.

I’m not talking about a GM C11′s impact on the economy. Nor am I referring to the Bloomberg report pegging the legal costs of GM’s bankruptcy at a cool billion dollars. Truth be told, if the federal government is going to bankroll The General’s bankruptcy—and how could it NOT provide debtor-in-possession (DIP) financing given that there’s this presidential task force occupying precious DC real estate—the real cost of ressurrecting GM will finally emerge.

Remember: no matter how well Uncle Sam puts Humpty Dumpty back together again, the feds will have to keep GM going until the economic recovery. A year? Two years? I’m thinking $100 billion. Easy.

A USA Today poll released today reveals that 75 percent of Americans are now against loaning Detroit automakers more tax money. Just two months ago, 61 percent of the public were pro-bailout. Consider the magnitude of that swing and imagine how John Q. Public will feel if the true cost of keeping GM in the game were suddenly revealed.

How and when will that number swing back towards federal intervention for Detroit? It can’t and never. Uh-oh. Rock, GM. Obama, hard place.

Politically, there is but one answer: continue the bailout buffet diet of little (in some bizarre sense of that word) and often. In other words, “loan” GM just enough operating cash to remain in their current, zombie state. At least for now. At least until March 31st.

By then, the American public may move beyond not wanting to support GM to not giving a damn. The feds can then slip and drip: let General Motors slip into C11 without much public outcry, and then continue the drip feed under DIP.

Here’s the real bottom line: with or without DIP, GM will continue to be tied to the feds with an umbilical cord made of piano wire. The worst is yet to come.

By on February 17, 2009

I once attended a seminar on alien abduction hypnotherapy. When we got to the Q&A bit, I was flabbergasted by the audience’s enquiries. “What do you do if the alien has been in contact with a departed spirit who knew the victim, and used their influence to prevent hypnosis?” “I’d hypnotize the spirit first,” the therapist responded, without batting an eye. Suddenly, I felt very, very alone. Surely, I wasn’t the only person amongst hundreds who thought the whole thing was a patently ridiculous scam. I got that same queasy feeling today, watching my so-called colleagues questioning GM CEO Rick Wagoner about the company’s viability plan. Surely someone would point out that the whole thing is nothing but a patently ridiculous scam. Sigh. Right, let’s get to it then . . .

The 2009-2014 Restructuring Plan—as GM would prefer it called—is 117 pages long. With the help of TTAC’s crack spreadsheet busters, I could engage in a critical analysis of the automaker’s sales projections, cash flow estimates, cost savings, capital spending allocations, debt reduction plans, etc. But that would be like discussing alien breeding habits, and the meaning and use of anal probes. Yes, they did go there. But let’s not.

We’re all rational human beings. We know what GM has to do to stay in business or, let’s go wild, make enough money to pay back the $34b “investment” dragooned from taxpayers by D.C. debt addicts. GM has to take in more money than they spend.

In other words (if other words be necessary), GM has to build something profitable and then sell a shitload of it/them. Those of us with even a passing knowledge of the industry’s recent history and GM’s place within it know that’s just not going to happen. The company’s been outmaneuvered on every front: model, brand, company. Sales, brand share, overall market share. Game, set, match.

Suffice it to say, if the artist once known as the world’s largest automaker knew how to build profitable products, it wouldn’t be begging for one more hit on the federal crack pipe. Ipso facto.

So what makes GM think that this time, it’ll be different?

“Take a look at the products we can do,” Wagoner asserted at the end of the post-$34b PR bomb drop press conference. We haven’t done it a lot, but we can do it, because we kinda did it, a bit, here and there.

For some reason, Wagoner didn’t mention any specific products. Not the Chevrolet Malibu. Cadillac CTS. Pontiac . . . uh . . . . Saying that, I think he mentioned the electric/gas plug-in hybrid Chevrolet Volt at some point, but no one’s buying that. Literally.

OK. Turn to page 63, Appendix D: “Future Product Launches.” Holy shit! “This page has been left intentionally blank.” Surely, they’re not—I mean, they wouldn’t—dedicate themselves to improving what they have instead of chasing The Next Big Thing? After all, on page 16, GM promises to reduce the total number of brands from nine to five, and cut nameplates from 51 to 36.

You weren’t fooled for a second, were you?

Starting on page 64, we get one picture per page of GM’s latest crop of turnaround machines: the aforementioned Chevy Volt, Cadillac CTS Coupe (didn’t they cancel that?), Cadillac CTS Sportwagen (har har), Chevrolet Cruze (didn’t they . . . oh, right, import), Chevrolet Camaro (’nuff said, already), Chevrolet Equinox, new Buick LaCrosse (yes they already make one) and new Cadillac SRX.

Estimated production? Break even point? Profit per vehicle? Nope. But the document lists the most fuel efficient powertrain that will be available—if not the highway miles it will deliver.

Now, page 72. Appendix E gives us bullet points re: GM’s all-important rejigged brand strategy. HUMMER, Saturn and Saab are obvious by their absence. Once that pesky troika of red ink spewers is strategic reviewed out of existence, GM will have four core brands in three sales channels.

You lost me. Let’s try that again. Chevrolet, Buick, GMC and Cadillac will be sold at Chevrolet, Buick-Pontiac-GMC, and Cadillac dealers.

You noticed that did you? Pontiac is now a “niche” brand; it’s only kinda core. More importantly, GM is finally identifying each brand’s market position. Chevrolet = Expressive value. Buick = Sophisticated Quality, Luxury and Craftsmanship. Pontiac = Youthful and Sporty. GMC = Engineering Excellence with Capability and Functionality. Cadillac = Performance Luxury with Aspirational Appeal.

So, how’s that going? I only ask because it’s not. The chances of it suddenly working out for the cash-strapped automaker are about as high as they were before RIck Wagoner guided GM from a death spiral into a nose first landing. Which reminds me . . .

I collared the alien abduction specialist after the seminar. An artist’s impression of a crashed extra-terrestrial spacecraft filled the screen behind him. “What if there aren’t aliens?” I asked the hypnotist, hypothetically. “What if you aren’t really standing there?” he replied. Within seconds, I wasn’t. Unfortunately, when it comes to GM, US taxpayers don’t have that option.

By on February 14, 2009

A mainstream carmaker has no business building niche products. Literally. For one thing, they’re hardly ever profitable. For another, even when they are, their profits are relatively insignificant. And most importantly, “halo cars” are four-wheeled glass and steel versions of Dumbo’s magic feather. They lead manufacturers to mistake cause with effect: if we build this, we must be good. In fact, any automaker that focuses its creative, financial and corporate resources on a halo car risks forgetting how to do what it did to get those resources in the first place—and an eventual plummet towards the circus floor. The Chevrolet Corvette may be only one of GM’s magic feathers, but it’s the most famous and, therefore, visible. GM should kill it, STAT.

Next week, GM’s heads head back to the bailout buffet. They’ll try to convince your elected representatives to provide another heaping helping of taxpayer bucks (a.k.a. federal loans). Both the company and its camp followers [sic] will, once again, concentrate on the numbers: union wages and benefits, bondholder debt-for-equity swaps, VEBA payments, the old SAAR, the projected SAAR, the car SAAR, who’s SAARy now, etc. And why not? As a Harvard MBA, General Motors lifer and former CFO, GM CEO Rick Wagoner never met a balance sheet he couldn’t dress-up for a party—even if it’s a freaker’s ball.

Which brings us back to the ‘Vette: the freaker’s ball pace car. The Chevrolet Corvette is a singular machine, a modern throwback that offers more bang for the buck than Marietta’s Bullet Stop. An enthusiast who buys one is beyond reproach, in the same sense that a homeowner who restores a Victorian pile deserves nothing by kudos. And? The Corvette is a brand anomaly; it’s as much a Chevy as a Cayenne is a Porsche, only less so. Again, the Corvette is awesome machine in and of itself. But out and outside of itself, it makes no sense.

Do Chevrolet products need a personality? Of course not. The Malibu is the proper template. It’s a car. Good mileage, reasonable price, adequate comfort, reliable (fingers crossed), not ugly. Value. While pistonheads worship at the temple of Bowling Green, Chevy buyers are busy bowling. They’re working class people who can’t afford a sports car, never mind one that costs $50K+. The new ‘Bu and old Impala are their best case scenario.

The only possible defense for this great landing at the wrong airport: symbolic value. “America’s sports car” and all that. Which is why Wagoner should announce its termination.

“Ladies and gentlemen, as you know, General Motor’s future hangs by a thread. The decisions we make today mean life or death for this great American enterprise. We take our responsibility seriously. GM can not—will not—shy away from the unpleasant parts of this monumental task.

“We have therefore decided to re-examine our entire brand and product portfolio, to decide which brands and vehicles can help us survive, and which vehicles and brands we must abandon to ensure our survival.

“It is with great regret that I must announce that General Motors will no longer build the Chevrolet Corvette.

“We here at General Motors are proud of the fine men and women who have designed and built this vehicle for generations of appreciative enthusiasts. But General Motors must leave no stone unturned in our pursuit of profitability. We must address our problems and shortcomings with unflinching honesty, and do whatever it takes to correct them.

“As part of this process, we are refocusing the Chevrolet brand. Chevy will now offer a limited range of entry-level automobiles. Each one of the brand’s three models will provide class-leading quality, comfort, fuel economy and value.

“The Corvette is a world class sports car. But it does not fit our mission-critical effort to restore Chevrolet, and thus GM, to profitability. We take our obligation to repay the generosity of the American taxpayer seriously. If we must sacrifice the Chevrolet Corvette to satisfy our obligations, we will do it.

“At some point in the near future, as soon as we can, the Corvette will rejoin GM’s fleet as a Cadillac. It will be a different car, with the same goal: to give enthusiasts the world’s best and most thrilling sports car, bar none. An all-American product.

“For those of you disappointed by this news, I’d like to point out that we are redoubling our efforts to deliver the plug-in Chevrolet Volt, a hybrid vehicle that will reinvent the way Americans drive. It’s a new kind of product that will help us refocus Chevy on what made the brand America’s most popular car brand.

“I thank you for your time and understanding. Rest assured that as painful as this is, the Corvette’s sacrifice will be GM’s gain.”

By on February 10, 2009

As the maximum era draws to an end at GM, there’s no shortage of praise for the Bob Lutz-led product turnaround. Cars like the CTS, Lambda CUVs and the Chevy Malibu are said to represent a new day in quality and design for the General. And without a doubt, they are all consistently better cars than GM has made for years. But for all their accolades and fawning reviews, these vehicles actually represent a relatively small fraction of GM’s offerings. Though marketing executives wail from the Renaissance Center that consumers aren’t understanding the alleged sea change in GM products, there are still more GM vehicles you can ignore (to borrow GM’s marketing phrase) than you can’t. Automotive atavisms occupy GM’s entire lineup, but the contrast between Chevrolet’s D-segment offerings, the Malibu and Impala tells the whole story. And it isn’t pretty.

It’s no coincidence that the Malibu is, above all others, the poster child for a GM turnaround. Its clean styling and high-quality interior give it an edge in the first impressions game that GM hasn’t enjoyed in decades. More importantly, it brings an impression of actual effort to the crucial mid-sized segment, a category that was long ago ceded to the CamCord legions by such W-bodied luminaries as, well, the Lumina.

But the W-body and its parts bin of horrors lives on. Though the “Malibu Classic” has gone to the great rental lot in the sky, the Impala remains a rolling reminder of a time when the term “GM midsized” meant cheap, bland and unreliable. GM’s current fleet queen boasts a shake, rattle and roll interior, with all the aesthetic delights of a cheap pocket calculator. And let’s not even discuss the old-school wallow that the Impala calls handling. Place the Impala and the Malibu side-by-side and the contrast in impressions couldn’t be greater.

And yet, the Impala sells far better than the perception gap-changing ‘bu. In fact, the Impala is by far GM’s best selling car, with 265,840 sales last year. That’s more than the entire Pontiac car lineup, and nearly the volume of Saturn, Buick and Cadillac cars put together. The Malibu is well behind with 178,253 units sold last year, despite relentless hype and giant ad budgets.

Of course, none of this should come as much surprise to the experienced GM watcher. It is, after all, a long-standing GM tradition to offer long-outdated models as a cheap fleet sale booster. But not only is GM supposedly trying to cut back on fleet sales, unlike the Classic before it the Impala actually sells at retail too. Oh yeah, and GM has been propping up Malibu sales with fleet deals as well.

So while publicly denouncing fleet sales, GM is keeping its fleet queen in the public eye by keeping the roomier Impala’s retail price relatively close to its marquee Malibu. So when shoppers arrive at a Chevrolet dealership to look at the mid-sized offerings, both sides of General Motors are there to see: the sleek (but snug) Malibu or the roomy but dismally old-school Impala. And if you work with the best fleet percentages we have for 2008 (about 50 percent of Impala sales and about 33 percent of Malibu sales went to fleets), it turns out that more people are buying Impalas, even at retail.

This raises a number of interesting questions about the value of GM’s supposed product-led turnaround. If the Impala sells better than the Malibu at retail, despite its aged underpinnings and staid looks, was Bob Lutz’s enormous paycheck and frequent outbursts worth the investment? Class-competitive styling, interiors and platforms cost a considerable amount of money, and based on the numbers it seems that loyal GM customers aren’t particularly swayed by them. For all its accolades, the Malibu looks to be not only less popular than its fleet-flooding cousin but less profitable too.

And so we arrive at the real question: why do GM customers seem to prefer the aged and uncompetitive Impala to its acclaimed Malibu? In his hilarious address to the White House Press Club, Stephen Colbert quipped that President Bush’s 30 percent approval rating meant that though the metaphorical glass is only two-thirds empty, the last third is usually backwash. And the implication that Bush’s constituency represents all the ugly stereotypes of American culture also applies to GM’s midsized predicament. After decades of foisting uncompetitive cars on the American public, choosy shoppers no longer even consider GM a source for high quality vehicles, a fact proven by KBB’s 2008 “most researched” list.

And as long as Impalas and Malibus share lot space, GM’s cries of “perception gap” will continue, as the brand image is confused by two such divergent approaches to the midsized segment. The Malibu is fighting an uphill battle to convince now-loyal Toyota and Honda customers that the bowtie brand can offer quality, and sales momentum isn’t helping. And with GM pricing a fleet version of the Malibu considerably cheaper than the Impala, it’s also only a matter of time before that model loses its luster to the fleet residuals curse. And since its sales and profitability are already worse, the damage has already been done.

By on February 9, 2009

Bob Lutz was not the worst thing to happen to General Motors. He was the second worst thing after CEO Rick Wagoner. Lutz’ legacy will not be the critically acclaimed vehicles attached to his name: the Cadillac CTS, Buick Enclave, Chevrolet Malibu or Pontiac G8. It will be the fact that GM’s vice chairman of global product development annihilated whatever remained of GM’s brand-related equity. Bob Lutz ran General Motors into the ground.

Lutz’ career at GM proves the old adage that if you are not part of the solution, you are part of the problem. Oh hell, Lutz was the problem. Within weeks of Lutz’ elevation to Car Czar, TTAC sounded the alarm. In one of his earliest interviews, a reporter asked Lutz about Volkswagen’s prospects. Astoundingly, GM’s Car Czar couldn’t name more than three of VW’s brands.

While you might expect the identity of the German automakers’ divisions to catch out a pistonhead at a pub quiz, Lutz was the newly-appointed head of development for the world’s largest automaker. If Bob Lutz didn’t have mental access to this type of competitive information, how could he possibly craft a coherent strategy for GM?

Lutz apologists flew to his defense. This quickly became a habitual practice. In subsequent years, the automotive media focused its attention on Lutz’ mal mots: his allegedly recidivist views on the auto industry’s place within society. The so-called “crock of shit” problem was actually thinly-disguised admiration.

The press painted Lutz as the straight-talking, cigar-chomping representative of an earlier time, a time when V8 engines—and GM—ruled the earth. And they loved him for it. What the media missed: how often Lutz’ opinions about the car business were ill-informed, misguided and just plain wrong.

This is the hugely compensated automotive executive that today called the Pontiac GTO “my proudest accomplishment.” After all, “That’s the car that got us convinced that we could use the global product development scheme. Up until then, no one had tried anything like that.”

Maximum Bob is, once again, flat out wrong; the “world car” idea is as old the auto industry itself. Worse: the Australian-built GTO was an abject failure. The GTO lost GM tens of millions of dollars, squandered precious development resources and drove yet another Lutz-shaped nail into Pontiac’s coffin.

You could, however, make the case that the GTO was the quintessential Lutz-mobile: a romantic expression of his personal taste that fell flat on its face. A product that Lutz quickly abandoned in search of . . . the next big thing. Wash. Rinse. Repeat. For models within brands AND the brands themselves.

Lutz never developed anything remotely resembling a coherent, focused and determined product development strategy. Automotive Attention Deficiency Disorder characterized Lutz’ tenure. Everywhere you looked, GM under Lutz was a company typified by frenetic indecisiveness. The rear wheel-drive Zeta platform program was on-again, off-again no less than seven times.

In 2005, Lutz described Buick and Pontiac as damaged brands. The media thought it a “come to Jesus moment,” withdrawn to serve GM’s PC PR needs. But it was Lutz himself who had damaged the brands. And it was Lutz who continued to kick the brands when they were down. Lutz was guilty of sins of commission (a staggering stream of badge engineered mediocrity) and omission (a singular failure to define a profitable brand remit for ANY of GM’s divisions).

Lutz’ epic incompetence was matched only by his swagger and bravado. His enablers ate it up, adding to Maximum Bob’s egomaniacal ignorance. The fact that the media perpetuated Maximum Bob’s nickname without irony—a moniker I invented in a moment of disgust—shows you the kind of bubble that protected and extended Lutz’s befuddled sphere of influence.

Although, saying that, one wonders how much power Bob Lutz actually held within the loony labyrinth of backstabbing RenCen bureaucrats that is General Motors. Did Lutz argue for the Chevy Traverse or just let it happen? Did the Powers That Be appease Lutz with his pet projects (e.g., the Pontiac Solstice) so they could do whatever they wanted to maintain the dysfunctional status quo upon which they depended?

There is no question in my mind that Bob Lutz’ resignation was motivated by personal greed. Let’s not forget Lutz’ reply to the [first] suggestion that he take a haircut to show his devotion to the team: “I already gave at the office.” By stepping aside now, the man who scoffed at the question “Is your pension bankruptcy proof?” is making damn well sure it is.

Like so many failed American executives, Lutz will not personally suffer for having ruined the livelihoods of tens of thousands of his underlings. He will sleep well, eat well, travel luxuriously and, worst of all, continue to receive the respect of his peers. He doesn’t deserve any of it, as history will one day decide.

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