General Motors Death Watch 79: The Vision Thing
When the Chairman and Chief Executive Officer of the world’s largest automaker tells his shareholders to think long-term, there’s only one word for it: sell. Yes, I know. The General got itself into this death spiral by thinking short-term: investing its precious resources in a dead genre guzzling, buying brands instead of investing in existing ones, pushing pushrods, rebadging anything that wasn’t nailed down, and so on and so on stretching back forty years. But Wagoner’s no corporate visionary. What he’s really saying is hang on boys and girls, a bunch of bad shit is about to go down.
Those of you who haven’t had their memories erased by GM’s MIB will recall that The General placed all its bets on the success of its high-profit GMT900 SUV’s. Despite a nice little takeoff, sales are flying low. The trucks are starting to pile-up at dealer lots– as is just about everything else save the Hummer H3 and Pontiac Solstice (which can’t pile up because GM still can’t figure out how to make them). In short, even Wagoner knows that it’s going to be a long hot summer. “We’ll need to be patient,” Wagoner said. “There will be some challenging months in total sales… But it will pay off in the long term.”
Wagoner’s “steady on boys” message was a tacit admission that GM's journey around the toilet bowl is gaining momentum. In May, GM’s turnover dipped 12.4%. The General’s market share shrank (again) to 22.5%. Viewed in isolation, these “results” are catastrophic. Compared to Toyota (+17%), Honda (+16%) and VW (+35.6%), it’s the Four Horsemen of the Apocalypse watering their mounts. "It was certainly a challenging month for us," GM's chief market analyst Paul Ballew admitted on Friday, with characteristic understatement.
With escalating gas prices cooling the market, sucking-up discretionary income and raising interest rates; with a rising tide of unsold GM vehicles, with nary a blockbuster in sight, with management reaffirming its decision to forgo a repeat of the Fire Sale for Everyone discount campaign, there’s no reason to believe GM sales are set for a major improvement anytime soon. "As the industry shifts to cars from trucks, that works to our disadvantage," Bellew stated. As GM’s lineup is bereft of the small, efficient cars fuelling its competition’s gains, what WILL work to GM’s advantage during these dark days?
Rabid Rick would have you believe it’s cost cutting. At the shareholder pep rally, Wagoner proudly proclaimed that GM is on track to trim $7 billion in “structural costs.” Yes, well, most of Wagoner’s “cuts” are nothing more than deferred payments. Recent union buyouts may look better than paying workers a salary and benefits not to work, but the savings aren’t as “real” as not paying them anything not to work. All those lump sums– including health care deals, plant depreciation costs and other “incidentals” (e.g. a multi-billion dollar pay-off to Delphi’s intransigent union workers)– have to come from somewhere, sometime.
While Rabid Rick says he’s “positioning GM for sustained profitability, not just short-term profits,” the only thing that can save GM from sliding into bankruptcy is… short term profits. So what’s Wagoner’s specific plan to generate life-sustaining revenue? "All brands are not created equal," Wagoner said, ignoring decades of cross-brand badge engineering. "We can turn that to our advantage." In other words, brands rule! (Who knew?) Referring to Pontiac and Buick, Wagoner said “we'll probably have fewer models under each brand and make them more focused brands."
Did anyone else notice the word “probably” in that sentence? Are we to conclude that Wagoner’s plans for these failing brands are still under development? Beyond that, Wagoner’s remark illustrates one of the most frightening aspects of his tenure at GM: an abject failure to put forth a large-scale strategy for a GM turnaround. Plant closings here, job cuts there, re-badged Opel Saturns, “value pricing,” flex fuel vehicles– there’s no overarching vision of what GM needs to become to survive and thrive. Wagoner’s constant use of the word “turnaround” tells you that his ideal is nothing more than a return to what was. It’s not even back to the future; it’s back to the past.
Clearly, Wagoner doesn’t “get it.” He doesn’t understand that The General needs something more than money to withstand the current shitstorm– a crisis he won’t even recognize in public. GM needs an idea. A bright, bold vision of a profitable future. GM shareholders may be toothless, but its “stakeholders”– suppliers, workers, dealers and customers– need that vision thing to believe that GM is better off out of bankruptcy than in. Without it, quite simply there’s nothing to be done. Wagoner’s inability to stand in front of the faithful and inspire them to aspire to reinvention condemns them all to failure.
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