GM Craters: "Business Historians and Plain Old Second Guessers Will Have a Field Day"

Robert Farago
by Robert Farago

Folks, when Alex Taylor III bails on GM, it's all over bar the shouting. In his most recent article for Fortune [via CNNMoney] , Three Sticks puts down the pom-poms and gives GM a mighty good shellacking. "The news coming out of Detroit is getting worse, and unlike in past years, there will be no full recovery. Analysts are betting that General Motors will be forced to take emergency financial measures this year that could hamper its competitiveness for a long time to come… This stunning sales decline means that GM is continuing to burn cash at a fearsome rate – perhaps $1 billion a month by some estimates. Rod Lache of Deutsche Bank figures that GM will consume as much as $19 billion in cash over the next two years. Since it began the second quarter with $23.9 billion on hand and needs $10 billion to $15 billion to keep the lights turned on, that leaves a big hole." Yes, Alex, a VERY big hole. A hole that's an extremely slimming shade of black. How black? "In GM history, 1992 is generally considered the worst year of modern times, with multiple plant closings, huge losses and the shunting aside of CEO Robert Stempel. Now it looks like 2008 will have that beat." And then some.

Robert Farago
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  • Friedclams Friedclams on Jun 20, 2008

    Right on, jurisb. Where is the outrage? America's industrial potential is being wasted for lack of leadership.

  • Michael Karesh Michael Karesh on Jun 20, 2008

    The number of brands is not the problem. It's just something that's easy to grasp, so people focus on it. Manufacturing, labor, and legacy costs have placed a huge burden on GM, one any execs would have had trouble dealing with. Wagoner is still running things because more headway has been made against these costs than many people thought was possible. New product development has been another weakness. They've made much headway here as well. But the factors I wrote about in my Ph.D. thesis probably continue to hinder them.

  • Pch101 Pch101 on Jun 20, 2008
    The number of brands is not the problem. It’s just something that’s easy to grasp, so people focus on it. The number of brands is absolutely a problem for GM, because the higher quantity increases the sprawl of the management bureaucracy, encourages corporate fiefdoms and feeds badge engineering and cannibalization. It's a bad business model for a mainstream car maker. It can work for soap and cereal and toothpaste and other consumer products where finely honed niching is possible, but for cars, it is ultimately a losing proposition. You can tightly niche the very high end, but not the bottom and the middle where most of the market is.
  • Menno Menno on Jun 20, 2008

    daro, the union workers at Studebaker South Bend Main came out of work about 2 weeks before Christmas 1963 for their lunch break and were met by TV cameras (which was really a big deal back then). The union hadn't told them yet, that Studebaker was closing down before Christmas. Many of the workers scoffed and laughed at the TV people, stating "Studebaker is going to be here when both you and I are dead." Wrong.