By on July 3, 2008

rickwagonerhummerhx.JPG Rick Wagoner is a lame duck. No matter how you look at it, it's clear that the failing, flailing CEO must go. Next week, The General's Board of Bystanders will meet to "discuss" the crisis. GM's dividend will disappear, triggering fresh anxiety (and some atta boys) from the financial markets and the media. The Bystanders should push Rick out of the RenCen penthouse, to glide to Aruba on his golden parachute. But they won't. They can't. Wagoner walking would be the final straw: an admission that GM's forked. And before he goes, Wagoner's got one more job to do… 

Obviously, Wagoner doesn’t want to be GM's CEO when the artist once known as the world’s largest automaker (a.k.a. the world’s most profitable company) files for bankruptcy. Common sense suggests that Wagoner wants to be IN the lifeboat BEFORE the women and children (i.e. assembly workers) make egress… problematic. Or, preferably, he'd like to be watching the ship sink from the safety of a tax-free tropical island.

Remember that Wagoner’s banked well over $100m in pay and benefits during his tenure at the top. And no, they can’t take that away from him. (His pension is bankruptcy proof.) So, really, all Wagoner has to worry about is his “legacy.” He’s proclaimed that GM has enough liquidity to make it to end of ’08 (woo-hoo!), To leave on a high note, Rick's got to raise some money– say, $15b or so– and then quit before the well runs dry (again). There’s only one problem: who’s going to lend GM $15b?

There are two ways GM could secure that kind of cash. First, they could hock their foreign operations. In a way, that’s already happened. Instead of plowing overseas profits back into overseas operations– to fend off increasingly strong competition– GM NA has been using foreign income to prop-up, indeed, justify, the overall corporate bottom line. We don’t know exactly how much, from where and when this transfer has occurred, but we do know that GM NA sucks. Cash, that is.

Putting a lien on GM Europe, Latin America, et al. would be seven kinds of stupid. Although the same old management mistakes are beginning to take their toll abroad (overlapping brands, too many brands, non-competitive products), GM’s foreign empire is in relatively good shape. But the bottom line is the bottom line. The money raised by the loan would only stave-off a GM NA filing, not prevent it. GM has no high-profit replacement for light trucks to pull its ass out of the fire. When the inevitable occurs, the whole Empire would crash and burn.

The second, more likely strategy: secure federal loan guarantees and then hit-up the banks. As mentioned before, it's virtually a done deal; Uncle Sam (that's you) will back-up the notes needed to keep GM from filing for bankruptcy. It will be the perfect time for Rick Wagoner to leave– even though GM will continue to burn through the money and stay on course for Chapter 11.

C11's a good thing for GM. It's the only way it can prune its bloated dealer network and diseased brand portfolio. But again, Wagoner will do everything he can to NOT be the man in charge when– not if– the deal goes down. All of which leaves GM where we started, 183 episodes ago. Well, not quite…

Back at the beginning, I argued that all eight GM brands should be hived off into separate companies. Since then, Wagoner’s decisions have sucked the life blood (cash, distinctive models, brand equity) out of HUMMER, Buick, Saturn, Saab, Pontiac and GMC. What’s worse, he’s rearranged the automaker's structure to further blur their identities. At this point, no competitor, private equity firm or management buyout group would dare touch ANY of GM's brands.

These days, Cadillac and Chevrolet are GM’s only viable brands, and not convincingly so. Does anyone really think Caddy has what it takes to compete with BMW, Lexus and Audi? Even GM’s fiercest supporters are beginning to understand that the Volt will not be enough to rescue The General. Will the plug-in gas – electric hybrid even be enough to rescue Chevy in the face of the well-established Toyota Prius? The Honda Accord? Hyundai? Anyone? Bueller?

I used to believe that a better, stronger GM would arise from the ashes of Chapter 11. I am now resigned to the fact that it's too late. To use Car Czar Bob Lutz' terminology, all of GM's brands are damaged beyond recovery. Still, some good WILL come of this. Someone will sell something worthwhile in GM's stead. 

Meanwhile, THIS is Rick Wagoner’s legacy: an enormous automobile company without a chance at survival. That pays $1m a week to its employees not to work (not including benefits). That pays $250m a month in interest payments. That bought car divisions it didn’t need and sold cash cows it did. That sank from 29 percent of U.S. market share to less than 19. That wiped away tens of billions of dollars from shareholder value. That lied to itself and the world that it was better than it was.

[NB: This is an updated version of the original post.] 

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62 Comments on “General Motors Death Watch 184: Resignation...”


  • avatar

    Isn’t this GM Deat Watch 184? Lost count already?

    As for the article, I wouldn’t be opposed to Tricky Dick’s resignation. The whole fresh blood thing may work out with Ford…

  • avatar

    ferrarimanf355 : Isn’t this GM Deat[h] Watch 184? Lost count already? I know what you're thinking. Did he fire 184 shots or only 183? Well, to tell you the truth, in all this excitement, I've kinda lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you've got to ask yourself one question: Do I feel lucky? Well, do ya punk? Meanwhile, headline amended. 

  • avatar

    Great, now I have my morning Dew spat all over my monitor. Thanks. ^_^

  • avatar
    hltguy

    The photo says it all, while the head of Toyota could proudly stand in front of a Prius, the head of GM stands in front of a 5 mpg land boat.

  • avatar

    hltguy : The photo says it all, while the head of Toyota could proudly stand in front of a Prius, the head of GM stands in front of a 5 mpg land boat. To be fair, the head of Toyota could also stand in front of an FJ Cruiser.

  • avatar
    factotum

    Back in early June, the 24-7 Wall St. Bankruptcy Odds Watch had GM at 1 in 30 of filing BK. F at 1 in 35. (American Airlines, for some perspective, was 1 in 2.) What do you think the odds are now?

  • avatar

    Yes – GM is showing up for battle with bows, arrows and cavalry against tanks, machine guns and radar directed artillery.

    Don’t ever put accountants in charge of a company — they have absolutely no understanding of synergy, complementarity or disruptive technology development.

    GM will be taught in schools, as a huge “Here be Dragons” case.

  • avatar

    RF, you have a typo in the third-last paragraph (BWM instead of BMW).

    WRT the subject of Wagoner’s resignation, do you have info from anyone (i.e. “Deep Throat”) that it’s imminent/likely, or is it just speculation?

  • avatar
    Captain Tungsten

    Actually, I think we are living Roger Smith’s legacy. Wagoner just hasn’t yet been able to fix the colassal mess that Roger left. He may not be able to.

  • avatar

    ChrisHaak: RF, you have a typo in the third-last paragraph (BWM instead of BMW). You eagle-eyed bastard. Can you please send correx to my personal email? This makes me look so jejune.

  • avatar
    netrun

    @factotum

    Love that link! What’s really scary is that those odds are only for the companies filing in the second half of this year. So if you take the long view, the odds of them filing goes up almost exponentially…

    As much as I would love to see Red Ink Rick get shot out of his seat, I’ll still be surprised if he gives up the best gig he’ll ever get. He’s a GM lifer who whose only attention after he steps down will be as the butt of jokes. My guess is he’ll hang on and take his ever increasing pay and muddle along like he has the past ten years.

    Once in BK, Rick might bring on Steve Miller (if he ever gets done messing up Delphi) as a helping hand. But I don’t think Rick’s ego will let him go from CEO to couch potato.

    Thing is, you have to start from the standpoint that Rick really thinks he’s doing a great job and no one else could do better. Then it becomes clearer that he’s not going anywhere.

  • avatar
    Ronin317

    Robert Farago: To be fair, the head of Toyota could also stand in front of an FJ Cruiser.

    Ahh yes, but the head of Toyota also wouldn’t be proclaiming that vehicle as the savior, or counting on it to prop up the company’s sales and profits. Actually, most of the other car companies, Chrysler included, know a niche market when they see it. GM hasn’t a clue…

  • avatar

    Ronin317:

    Actually, most of the other car companies, Chrysler included, know a niche market when they see it. GM hasn’t a clue…

    Are you talking about the Camaro? Enclave? Astra? Hybrid SUVs? Hybrid pickups? 9-3? 9-5? 9-7? G5? G8? XLR? Volt? What?

  • avatar

    @Captain Tungsten :
    July 3rd, 2008 at 12:40 pm

    Actually, I think we are living Roger Smith’s legacy. Wagoner just hasn’t yet been able to fix the colassal mess that Roger left. He may not be able to.

    I think you’re right, Captain. But he’s been on board a number of years, and had several opportunities to find a new path.
    His accountant’s eye took him down the destructive paths of cross-platform brand destruction and high-margin models. That was avoidable, IF they had been willing the cede the “world’s largest carmaker” spot.

  • avatar
    Stingray

    If this man REALLY resigns and another, not beancounter, but a SOLID Engineer with knowledge of the business takes the boat….

    It’s still toast.

    I hope RW really steps out, because, as we say here: está cagando la jaula. Completely.

    Maybe if he leaves, there’s still a chance.

  • avatar
    Ronin317

    EH, good point, Mr. Farago. Well played, sir.

  • avatar
    mel23

    I wouldn’t be surprised if some of the bystanders haven’t encouraged Ricky to go. They’ve been taking some heavy shots lately, and might be worried about some personal liability down the road. So ditching this loser, however late, might be used in their defense. Also, there’ll be a lot of anger when the ship finally sinks, and scapegoats will be sought, maybe to the extent of clawing back some of the misplaced loot or at least cutting off/reducing future payouts. Rick might hope he can be below the radar by then. If he were a ‘real’ politician he might even have accepted Christ as his personal savior, etc.

  • avatar
    msowers1

    When GM files, Ford and Chrysler will follow very quickly because GM will have a competitive advantage in the ability to shed works and overhead that is required for any of these companies to survive.

  • avatar

    bye Rick, should have happened years ago. hope they come after you with indictments.

  • avatar
    KatiePuckrik

    Funnily enough, the hypothesis that “Red Ink” Rick will resign before GM files Chapter 11, is a perfect “poster child” for one of GM’s downfalls.

    At Toyota, Fujio Cho (the architect of Modern Toyota and father of the Prius (Don’t ask me who the mother was)) was stepping and a replacement CEO was needed. Akio Toyoda wanted the job and lobbied hard to get it. In the end, he didn’t get the job. The Board of Directors (BOD) and top brass concluded that Akio was too young and inexperienced for the CEO position. They, therefore, gave him a VP position and started to train him up for the CEO position, but in the meantime, Katsuaki Watanabe took the job.

    In short, Toyota pick the right people for the right job for the right reasons. Akio Toyoda could have used his “family’s” influence to get the job and the BOD could have let him have the job to further ingratiate themselves with the Toyoda family but they didn’t. They said he wasn’t ready YET, but with training, he can be.

    For somewhere like GM, that attitude doesn’t exist. Everyone goes to the same golf club or they all knew each other from Harvard or Rutger’s. If GM ran on “The best person for the job”, the deathwatch series wouldn’t exist.

    GM have too many executives with the mentality of “What about my career?”. Which is why fiefdoms and managers blocking (potentially) good ideas because it doesn’t benefit them are breeding like rabbits at GM. This stifles (mainly) the engineers who are world class, but can never get their ideas into practice because some manager vetoed it because they liked some other project (i.e Buying SAAB and Hummer, the FIATsco, setting up Saturn, etc).

    I’ve said before that “Society would move forward a lot quicker if people didn’t worry about who got the credit.”

    GM could learn a lot from that saying….

  • avatar
    Pch101

    I believe that it’s too soon for Wagoner to resign. I could see the following scenario playing out —

    The 2008 year-end financials are going to be really ugly. At that point, GM will have to begin in earnest on putting a bailout plan together.

    This will not be doable without federal involvement. The credit crunch is probably going to get worse between now and then (I suspect that the Dow is in for a bit of a tumble as the commercial real estate markets begin to get hit, and this oil bubble isn’t quite ready to pop just yet), so there is going to have to be a deal that includes loan guarantees from Uncle Sam and some equity being given to the creditors.

    At that point, they are going to have offer Wagoner’s head up on a platter in order to give the plan credibility. I’m guessing that he’ll get it right around the time that the numbers are released, probably just a little before. The new guy will be the new white knight who can save GM from itself the horrible economy, and will justify the new cash coming in the door.

    We’ll see what happens. A lot of things could happen. Who knows, maybe they’ll come up with a story for Wagoner to stay. I put low odds on that, though — that increases the likelihood that it looks like good money after bad, and nobody outside of GM will be in the mood for that.

  • avatar
    Kevin

    I think the only answer is for GM to be bought out by some Chinese state-owned corporation. Bwa-ha, wouldn’t THAT be a story!

  • avatar
    bill h.

    Quote: “Instead of plowing overseas profits back into overseas operations to fend off increasingly strong competition, GM NA have been using foreign income to prop-up, indeed, justify, the overall corporate bottom line.”

    Sounds similar to what our Feds do–using the Social Security surplus to make the overall Federal Government budget deficit look less disastrous than it already is.

    ‘What’s good for General Motors….’

  • avatar
    hltguy

    Mr. Farago: “To be be fair, the head of Toyota could stand in front of an FJ Cruiser”, good point, and I am sure he may, as soon as the head of GM stands in front of the GM equivalent of the Prius.

  • avatar
    CliffG

    Aruba Baby! I have no idea if it is tax free, but I have heard that it is very nice. And Ricky can afford it. Is Takeo Fukio available? Ah, Honda-san. Too bad GM made a decision years ago not to let those icky engineers too close to the CEO’s office. Alas RF, you are correct, what is at GM that is easily correctable? Nada. But, you forget about one lender, the WSJ had an editorial on it yesterday, the gov’mint. Can The Messiah or the other guy really allow GM to fail for want of a mere $10 bil. or so? Who wants Michiganers’ votes more?

    Maybe Wall Street will finally figure it out, hey, what happened to those commenters who said that the (formerly, relatively) high stock price of GM indicated that us bears were nuts? But politicians are another breed and don’t have to spend their own money. Time to start the Government Bailout Series. I am sure some clever wag can come up with a reference to British Leyland that will make it catchy.

  • avatar
    ihatetrees

    At this point, no automaker, no private equity firm, no “management buyout” group would dare touch ANY of GM’s brands.

    The Corvette has to be worth something…
    The questions are ‘Who would buy it?’ and ‘Would their cars sell afterword?’

  • avatar

    ihatetress:

    The Corvette has to be worth something…

    The Corvette is a model, not a brand. Except in Europe. Don’t get me started…

  • avatar
    Redbarchetta

    As much as I think Rick should go him leaving now wouldn’t be fair. The captain who set the coarse for the iceberg should go down with the ship not be the first one to his own personal rescue capsule. I know he would still leave with a ton of money when GM files his name and legacy needs to be damaged for what he has done.

    I really don’t think there is any saving GM at this point, even with a government bailout it will just postpone it. He has just wasted precious time doing all the wrong things. Without any substantially profitable and very well selling products the ship is going down and we all know they don’t have anything they can replace the SUV/truck profits with that the market wants right now. Unless the government keeps feeding them money for the next decade or more their done. Short sighted thinking and business as usual.

  • avatar
    50merc

    I’ll vote for Wagner’s departure if that allows more pictures of cheerleaders.

  • avatar
    truthbetold37

    This pisses me off. I knew in 2000-2002 this would happen. GM doesn’t make money on small cars. I knew that when the truck market crashes and people start buying cars it was game over. Even if GM sells one Cobalt for every truck they would have sold it’s actually worse than selling nothing because it’s negative profit. Of course being a “dumb contract employee” at the time, there way no way a “genius MBA GM employee” would listen to me.

  • avatar
    Verbal

    Robert, if this is true, you’re ascribing Japanese-executive levels of accountability to Wagoner. There will be no ritual hara-kiri in GM HQ.

  • avatar
    John Horner

    GM seems destined now to follow British Leyland and be parted out. The problem is, who wants the parts? I suppose we will someday see Chinese cars with once proud names like Buick and Oldsmobile on them just as you can buy consumer electronics with names like Zenith and RCA … but they will have nothing to do with the historic companies.

    GM, Ford and Chrysler management squandered the chances they were given since the disaster of the 1970s and their self-serving MBAs have sucked the life, and cash, out of the companies.

    Remember the “voluntary” import limits on Japanese cars which were supposed to buy Detroit breathing room to get it’s act together? Remember the Partnership for a New Generation of Vehicles which was supposed to position the 2.8 for efficiency and competitiveness? All of those efforts were pissed away at a drunken SUV-truck profit party. Now, here we are again with high fuel prices and a rapid market shift to efficient cars. Thirty years on and Detroit is no better positioned to deal with the realities of 2008 than it was in 1978. Damn sad.

    Ford still gets my vote for most likely to barely survive, but it is a horrible battle of attrition right now.

  • avatar
    TireGuy

    You make a very convincing case, and from the very beginning. I did not understand the rise in GM’s share price in the last 12 months, but now it seems that many people have understood where this is going.

    The desaster is: if this really happens, GM will take down quite some other companies. Suppliers, GMAC, banks, the american economy?

    GM deserves its fate. But it would be preferable if they never file for bankruptcy, but would just continue to melt.

  • avatar
    ZoomZoom

    50merc :

    I’ll vote for Wagoner’s departure if that allows more pictures of cheerleaders.

    I was going to suggest a TTAC version of the “Page 3 Girl,” but that wouldn’t be very PC of me, would it? Maybe the ladies would like their own page with the day’s young buck mechanic, just to equal things out!

    I can tell you right now why MT, C&D, and all the other buf rags are headed South. Other than the lack of transparency, that is. No pictures of pretty ladies!

    Look, they’re all full of cars and old farts! Who wants to see that page after page? No offense to old farts, of course, but just consider Jill Wagner for a moment. (okay, moment’s up!) Contrast the current mags with those “Tuner” type mags, which all seem to have lovely young things on the covers every month.

    I’m just wondering, what if this extends to the car companies’ own dire situations? Didn’t somebody comment once that the displays at the auto shows this year were…somewhat “lacking?”

    I know, I know, you must first have a product people want. I get that, really! I’m just offering food for thought, that’s all… ;)

    A happy Independence Day weekend to my fellow countrymen/women.

  • avatar
    AGR

    Imagine if a few years ago GM would have hired Wolfgang Bernhardt when he was available.

    Big mistake!

  • avatar
    naif

    i think the man from toyota can stand where ever he would wish. he is the one with all that money in the bank.

  • avatar
    jerry weber

    To Bob Farago, I remember many editorials ago about Gm, certainly more than a year ago you had a complex expo on the gm cash situation. The crux of the idea was that gm was showing 10 million as surplus that was actually money needed in the checkbook just to pay current bills. Without this figure, the reserves were about 1/3 less and no where near a cushion buying time as the Gm management kept telling everyone they had. So here we are with four terrible months back to back, and GM has burned through the greater part of their reserves. To those that say too many columns for the end of GM, who was right? As for the dizziness of Wall Street, it was only this week that they called the GM 18% drop for June a victory because they had predicted 28% decline. Make no mistake about it GM has a long tradition of reaching into the incentive bag to gain market share. (they invented the concept and forced the others to drink the cool-aid) If you don’t think that 0% for 6 years is a costly perk, to keep the sales deficit to 1/2, then think about this; To make all of those sales in the last week you not only have to make the rate, you have to give it to everyone with a pulse. But, what is one more unfunded liability to a corporation that specializes in collecting them all under one roof.

  • avatar
    jurisb

    Gm is not one company with management problems, Gm is paradigm of US precision manufacturing. it is the essence of capitalism to squeeze out juices of old platforms and stamping benches and workers as long as possible. it worked, as long as there were the same domestic players around. When ninjas entered with their agile and scrupulous attitude to every single detail whether gap tolerances or material resistance, detroit trio got into problems. The biggest car company in meta universe has to rebadge korean cheap subcompacts. Now entering peace treaties with indian tatas and whoever from whatever bangladesh is ready to buy the hooker, Gm dodges the real engineering better than long coat sartorial Keanu from The matrix. everything that is worth something within GM is usually stamped and engineered by foreign people visioned in their hard work and levitating above their own plateau of abilities.Yes I believe that impalas door sills and armrests are US stamped. But I hardly believe that latest caddy or Buick radios with their precise fit of buttons would be a GM inside job. Sooner would believe 9-11 an inside job. But this cancer is nationwide, whether cd players, phones or anything else that demands precision movements, usually fails if faces competiton from abroad, from anywhere abroad.An always the same symtoms- always—
    POOR DIVERSITY, POOR FIT AND FINISH, OBSOLETE TECHNOLOGY, LONG OVERHAUL CYCLE, TOO HIGH FOREIGN CONTENT.
    Am I talking about cars? could be. could be equally about trains trucks, hi -end stereos or anything else dealing with indutrial precision stamping.

  • avatar
    happy-cynic

    I think it is ironic, that GM spends millions of dollars lobbying against CAFE standards. It is the “Get the government of our back” mentality. Now that fuel costs are through the roof, they have no products in NA that people want. And now that they are suffering, who are they looking to help save their bacon. Yep, the Feds

  • avatar
    peteypablopaz

    Which will we see first; GM Death Watch 200 or filing of bankruptcy? I’m taking 2 to 1 odds on Ch. 11.

  • avatar
    Steven Lang

    “Gm is not one company with management problems, Gm is paradigm of US precision manufacturing.”

    I’ll have to respectfully disagree here. Most American manufacturing is actually the exact opposite of this. What you’re referring to has to do with consumer goods in a few select industries.

    The octopus that GM is could be given a lot of new blood if the following happened…

    1) State dealer laws are changed to reflect the needs of the 21st century… not the early 20th.

    2) GM is able to rid itself of everything but Chevy and Cadillac within the next three years.

    3) The automakers are given a program that is equivalent to what the Japanese receive through MITI.

    4) A new management team is given carte blanche to make the needed changes inside GM (this may be the most difficult component of all)

    5) GM and their parts suppliers are given the financial footing needed to make this transformation.

    There are at least several hundred other ingredients needed to change the current recipe. But GM North America will simply not survive if these five goals aren’t met in the next 18 months.

  • avatar
    jerry weber

    ToSteve Lang, I only disagree with your comment that the hardest part of your turnaround scenario would be chaning the GM culture. The hardest part would be changing 50 different State franchise laws. To gewt Federal help ala Chrysler in 1980, you need to lobby one place. With the disfunctional State governments it’s fifty. Plus, big as GM is, say in Pennsylvania where I live, who do you think would have the clout in Harrisburg to alter State franchise law? It would be in this case the Pa. Assoc of car dealers or whatever they are called. They are after all the reason the laws are so tough on the franchisors in the first place. If your want World War lll, just go to every State capitol and start trying to re-write the franchise laws in a manner that would go against the local dealers (as in trying to close non productive ones)in that State. If you want to find out where the bodies are buried, that’s how.

  • avatar
    Steven Lang

    Jerry Weber, this could actually be done on a Federal level… and then it would more or less be up to the supreme court whether this would be considered illegal or unconstitutional.

    I’m really surprised that the folks here actually believe that GM WANTS to have eight different brands for the North American market. For over 20 years GM’s management has merged the dealer networks, in part, because eight independent brand dealerships seemed to be absolute lunacy. It has easily cost GM tens of billions of dollars in lost profits, excessive cost expenditures, and in overall reputation as well.

    This arrangement needs to end above all others.

  • avatar
    mel23

    Steven Lang:

    If GM has wanted to ditch brands for 20 years, why haven’t they just accelerated the starving they’ve done in recent years? Looks like the the dealers would have folded to me. I admit I know nothing about any liabilities they might have incurred, but it’s hard to tell the difference between a poor result with honest but incompetent effort behind it vs. intended bad and/or very limited product.

  • avatar
    Steven Lang

    “why haven’t they just accelerated the starving they’ve done in recent years?”

    Hmmm… Saab and Saturn have been pegged as far down the proverbial R&D hole than any mainstream brand I know of short of Mercury.

    Then you have the merger of Buick – Pontiac – GMC dealerships throughout most of North America. Buick has gone from 10 models in 1991 to only 5 in 2008. GMC has gone from 11 to 6 in the same period of time, and Pontiac has declined as well (especially in terms of market breadth).

    Chevy and Cadillac have received a lot of good attention, but here’s the catch. If the other brands along with Hummer weren’t around, GM’s ability to compete based on these two brands alone would enable them to offer far better products to consumer. The need to market and equip all of these brands with their own styling and engineering tweaks is literally costing GM several billions of dollars and plenty more in overall reputation.

    GM needs to kill this excess baggage… and the only one that may help them in the end will likely be Uncle Sam and perhaps the 21st version of CREEP better known as the Supreme Court.

    I would welcome it. The trustbusting of the early 20th century needs to be carried on to ‘cartel’ busting for the 21st. Everything we buy these days is a frigging joke compared to what’s available in the rest of the world (cell phone plans, cable, insurance, health care.) Just name the entrenched interest and you’ll find millions of Americans paying through their noses to fund the unspoken collusion between them and well compensated government officials.

    Unfortunately I do not think that Obama will have advisers that are knowledgeable regarding the auto industry at all. The only two fellows from Harvard Square that even know a lick about cars got their degrees from MIT. But the powers that be will certainly have powerful players who will want the new POTUS to play ball, and they will make sure that their allies in Congress and beyond get their way with him.

  • avatar
    jerry weber

    The idea of getting rid of brands is not new. We only have to look at olds to get a test case. I forget the financial hit GM took on this but maybe a study here would tell me the complexities of brand crashing. As to Congress superceding the States on franchise law, it is probably the only way it could be done, however there is a catch. Since the 50 States would individually and collectively fight this proposal right through Congress and the Supreme Court, would GM still be here when the edict finally became law? I can’t see that happening for 5 years. As to government bailouts, it will be pointed out by the opposition that buying more time for GM to right itself is not an option anymore. The last time it was done Chrysler had only comotose Ford and Gm to compete with. Now with the moving target of the auto business, both in the amount of companies selling product and their relentless sure footed way of building on success, how does GM re-establish itself? The enemy to all of these scenarios is father time. It is not on the side of any of the domestic producers.

  • avatar
    golden2husky

    anything else that demands precision movements, usually fails if faces competiton from abroad, from anywhere abroad.An always the same symtoms- always—
    POOR DIVERSITY, POOR FIT AND FINISH, OBSOLETE TECHNOLOGY, LONG OVERHAUL CYCLE, TOO HIGH FOREIGN CONTENT.
    Am I talking about cars? could be. could be equally about trains trucks, hi -end stereos or anything else dealing with indutrial precision stamping…

    This is a joke, right? We could debate the improvements, or lack of improvements made in domestic cars all day, as there is plenty of ammo for both sides of that battle. Lets address your blanket statement that pretty much can be summed up by saying that America makes movies and music, but not much else. High end stereos? How about Krell or Mark Levinson (yes the brand that is in Lexus), Pink Triangle, Spectral? I could go on. American companies have a very large share of the high end market. Sorry, Sony, Denon, etc is not even remotely high end audio. Even the once mighty Nakamichi has failed to move from analog tape machines to the digital world. American speakers are considered some of the world’s best. Audiophiles, by the way, are very fussy when it comes to fit an finish. Industrial equipment? American brands have a very large world presence in medical equipment, electrical distribution/generation, robotics, test equipment, avionics, to name a few. America has no problem competing in the cost no object arena. America fails in the price sensitive consumer market, where once proud brands prostituted themselves by producing product wherever they could shave off a few bucks. There simply is no way America can compete with workers in China. Nor should we.

  • avatar
    mel23

    The fact that GM birthed Hummer blows a hole in the theory they’ve tried to reduce brands. Whining isn’t a solution. I don’t know the history of dealership growth of Saturn, but killing it with fewer dealers would have been cheaper than with more. I think the problem has been poor management across the board. Detroit Diesel was a mess when Penske bought it; ditto the American Axle facilities, and I think they were losing money on the locomotive operation. Somehow, over and over, others can make a go of something the GM CEOs couldn’t. And no matter how sorry Wagoner’s performance has been, he’s still in the job. No doubt some of the workers could be better, much better in many cases. Same goes for the dealership body, but nothing could compensate for continuous failure at the top. After all these years, GM still has no answer for the Civic.

  • avatar
    Steven Lang

    “Since the 50 States would individually and collectively fight this proposal right through Congress and the Supreme Court, would GM still be here when the edict finally became law? I can’t see that happening for 5 years.”

    In practice it would work the other way. The franchised dealers would have to sue in order to get the legislation overturned. I have no doubt they would do that to the fullest of their capabilities.

    “After all these years, GM still has no answer for the Civic.”

    They do and did. I would go so far as to say that the Astra’s primary competition is the Civic. The Pontiac Sunfire was also a sporty alternative that really tried to compete with the Civic. It wasn’t a bad vehicle for the real selling price of that time… but it certainly was no Civic.

    “The fact that GM birthed Hummer blows a hole in the theory they’ve tried to reduce brands.”

    The fact that they spent billions closing up Oldsmobile, merged three brands into one ‘dealership’ and virtually starved all of them except for Cadillac and Chevy, makes me think otherwise. If it weren’t for the franchise laws Saturn, Saab, Buick and Hummer would already be history.

  • avatar

    Wow I guess some of you people think that the rights of some are simply greater than the rights of others. Kind of like how some local governments have used eminent domain to seize valuable private waterfront property for the purpose of letting another private owner develop it into a condo or a casino.

    So the answer is for the Feds to step in and abolish those pesky rights of private small business owners because it benefit’s the big company. Why don’t we have the Federal government just seize the dealers and close down the excess ones. Isn’t that what you are advocating. I hate dealers but please complaining about the fact that people have private property rights and will fight for those rights al pesky state franchise laws is kind of scary. My parents fled communist China in 1949 it’s a slippery slope to start down when we advocate taking someone else’s property rights away simply because we deem it beneficial to GM. Maybe we should all have our homes seized and they can auction them off with proceeds to go to GM, maybe that would save GM too.

  • avatar
    jerry weber

    I didn’t advocate siezing franchises by law, in fact argued it won’t happen. What I do think will be necessary is for GM to make some kind of good faith offer to some dealers to buy back their franchises. The dealer could refuse, but like the GM workers who took buyouts to retire early, he would at least know he is at risk staying on with GM if the corp. goes C-11. The negative of a franchise is that it is only as valuable as the parent organization. Right now, some American dealers have just closed as the franchise was not saleable and the operational losses to great. If the downturn continues much more of this will happen. It’s just that the downturn and fuel crunch hit’s GM as hard a small local dealer. GM won’t be able to outlast the weakest of it’s dealers.

  • avatar
    John Horner

    “others can make a go of something the GM CEOs couldn’t”

    No lie. Fiat is doing very well on it’s own now, thanks in part to the $2B divorce settlement it got from GM. But the question is, why couldn’t GM make a success of Fiat with that same $2B?????

    The. Management. Sucks.

  • avatar
    Steven Lang

    Jerry has nailed it. But the fact of the matter is that GM is more or less beholden to dealers as an ‘exclusive’ distribution channel for new cars and that certainly has to change if GM is going to survive.

    In terms of buyouts, GM already did that with a fairly small Oldsmobile network and it was not cost effective. This type of arrangement usually works better if another dealer simply gobbles up the territory and GM helps smooth out this consolidation process.

  • avatar
    vento97

    Sherman Lin:
    My parents fled communist China in 1949 it’s a slippery slope to start down when we advocate taking someone else’s property rights away simply because we deem it beneficial to GM.

    You’re preaching to the choir, brother!!! My mother left Communist Cuba in the 1950s. Needless to say, if our parents didn’t leave their respective countries, you and I wouldn’t be here on this forum today…

    If this country completes the slippery slope to Socialism, My wife and I will be the next couple featured on the HGTV show, “House Hunters International”…

  • avatar
    ZoomZoom

    vento97 :

    If this country completes the slippery slope to Socialism, My wife and I will be the next couple featured on the HGTV show “House Hunters International”…

    I have seen that show, and liked it. But I doubt if a suitable alternative even exists anywhere else on Earth.

    I’ve often thought that the new pilgrims will likely be space travellers…

  • avatar
    RogerB34

    “To be fair, the head of Toyota could also stand in front of an FJ Cruiser.”
    True, but Toyota could dump their gas hogs and still have vehicles consumers would buy. GM head would showcase flora and fauna.

  • avatar

    @RogerB34

    I guess it’s also fair to mention that Toyota makes money from every single car it sells … while GM loses money on every single car it sells.

    Imagine if GM set up shop today – and offered a prospective customer 0% financing for 72 months, with a substantial reduction of the sticker price. As the company in this scenario is completely new, you won’t have any history to go by, but the nature of the offer would lead you to ask:
    “What’s wrong with the cars?”

    That’s Mr. Wagoner’s legacy.

  • avatar
    Campisi

    See you at GM Death Watch 200.

  • avatar
    jerry weber

    To Campesi, you may not get your wish of 200 death wishes. The end game is closer than that for GM. Getting rid of Wagoner now is just too late. The cash is running out faster than the left and right turns the Titanic has to make to avoid sinking. As to what is wrong with cars that carry either a several thousand dollar rebate or no interest for 6 years? The answer is they will have no resale value. The heavy discounting is the other shoe of the selling too many of a model to the fleets. Cadillacs and Lincolns (at least the flagship sedans) have been selling at 5-10K dollar discounts for years. They also go in half of retail (a phony number anyway) in two to three years. After that, unlike some other cars they continue to plummet to single digits by five years. To a greater or lesser extent, this is the blueprint for most GM cars, and the buyers who look at payments when trading feels this as the out money or difference he must pay. This number is greater than the buyers of other especially some Japanese makes pay when they trade. Thus, the refrain of the foreign dealer is take your lumps and unload your Detroit iron now, get one of our shiny high residual models and then never look back to those losses again. It’s a powerful selling tool.

  • avatar
    Campisi

    To Jerry Weber,

    Getting to GM Death Watch 200 isn’t a wish as much as an inevitability. See you there.

  • avatar
    Deepsouth

    We all know that they…the domestics.. have for gotten about product. It’s just ALL deal spin. The domestics..all of them ..have to lure you in w/the deal not the desire. This is what the downfall of domestic product has done to me. I am a sales manager at a family owned small chain. In the last 3 weeks, I have lost 3 sales people due to lack of income.One retired, two others have just left. I now work with a complete inexperienced staff. None have college degree. The true talent has moved to other product lines. The average flat on a new car is $100.00 and spending an afternoon with a customer for that is no longer appealing for the average man working on commission. I have seen FIVE…5…count ’em five Ford deals go out in the last year within 20 miles of our store. We are just surviving by the skin of our teeth. We treat people w/respect but they don’t won’t us to make a profit. They seem to take glory in beating us down. The other day, I saw a profit cap sheet on a new 48-k SUV..it was $12.13 and then we had to pay the salesman flat. The fall out is here for the domestic car dealer. It’s real and I’m living it. I invite any of the staff..of TTAC..to come to our floor..for a week and see what we go thru to sell product.

  • avatar

    As a happy bmw owner, I’d say the current CTS is very close. Whether it is as bulletproof as the BMW is something to be seen at 160,000 miles.

    The Caddy SUV was nice. Almost bought one, but the dealer body scared me off. One didn’t really care and the other tried to sell me a leftover flood car, denying it when I pointed out the grit under the cleaned carpets and the rusted seat rails.

    Acura sold an MDX that day.

    The caddy dealers WERE the loud suit, cigar chomping stereotype.


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