By on December 2, 2008

If you need proof that GM’s management hasn’t changed, consider the fact that the company is preparing not one but two rescue plans for Congress, The automaker claims it needs both a public plan and a top secret “for their eyes only” brief because sharing “proprietary information” in a public forum could be “problematic.” Total hogwash. There is only one reason GM won’t let the public view detailed information about its future– it doesn’t have one. With or without a look at the fine print, the truth remains: GM’s restructuring plan as presented to Congress will never work.

GM’s 10 to 12 page public document will cover, in broad strokes, the changes the otherwise and in any case C11-bound carmaker promises to make in return for some $12b worth of government loan guarantees. We already know most of what the document will include: a long-range vision of fewer brands and dealers, UAW concessions on the JOBS bank, and a “plan” to do a partial debt for equity exchange with its bondholders. We might even get to see a pro forma balance sheet and income statement that “proves” the plan works. We will definitely see GM’s PR maestro Steve Harris’ hand, ensuring that the headlines offer journalists a vision of Zion from the top of the RenCen.

Bullshit. Without specifics GM’s public plan is a sham. It’s a PR exercise designed to convince Congress that GM has “gone back to the drawing board” while hiding the truth of the company’s prospects (such as they are) from those of us who earn a living dissecting these “promised land” statements. There will be nothing in the public report that will prove that GM has the capacity to restructure in such a way to become profitable.

As always, the devil is in the details. Yes, brands will be dropped. But the termination will occur as already planned: over time, not immediately. And those brands chopped will be part of an existing sales channel; dealers will lose a franchise, not their dealership. More specifically, Pontiac will die–- leaving most dealers with Buick and GMC. Saab and Hummer go away, leaving Cadillac to stand on its own. Saturn will be “re-energized” somehow, not killed. Add that up and it’s a whole lot of nothing. Literally.

Yes, the JOBS bank will disappear. United Auto Workers boss Ron Gettelfinger finally got the message that most Americans find it beyond ridiculous that union workers get 95 percent of their salary for doing nothing. The part we won’t see: JOBS bank members will get paid to not get paid not to work. Think of it as forced buyouts instead of voluntary; which also conforms existing attrition plans. As for the Mother of All Health Care Funds (a.k.a. VEBA), the UAW will agree to delay the $7b payment due– in lieu of immediate shortfall health-care compensation. Congress will miss the nuance of shifting a balance sheet liability to an operating expense.

Yes, there will be debt exchange. In theory. GM will say it needs federal money now to buy time to arrange the exchange. But there’s not a chance in the world that GM has gotten agreement from those bondholders in the two-week period since the disaster on the Hill– especially as GM’s plan for a restructuring won’t work. In any case, we’ve already written (and Porsche’s CEO agrees) that GM would have to surrender the company to the hedge funds if any such exchange takes place. GM’s dead if they do, dead if they don’t.

The secret plan we won’t see will prove to those knowledgeable about such things that GM’s new new new new new new turnaround plan can never work outside of bankruptcy. But those in-the-know will keep their mouths shut. All we’ll get are headlines about the “New GM.” Proof that GM is and will be making the “hard decisions” necessary to achieve profitability. Executives taking pay cuts. Dealers calving-off worthless brands (while still trying to flog “badge engineered” copycats from Chevrolet and Cadillac). A new, more compliant UAW.  And bondholders “indicating” willingness to do an exchange-– without it actually being done.

Congress is about to risk $25b of OUR money on GM and their cross-town frenemies. We need to contact our representatives and demand that they give us the whole GM recovery plan, nothing less. Let the public see the fine print and render OUR opinion. Maybe the plan will contain some details we didn’t think about. Maybe it offers a remote chance of working. But given GM’s history of unrealized promises of turnarounds and great new products, the secrecy indicates that the truth is both unprofitable and unpalatable.

[If you have access, please email the “secret plan” to [email protected]]

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24 Comments on “Editorial: General Motors Death Watch 222: The Truth Will Out...”


  • avatar
    jaje

    The D2.8 and UAW will propose changes that should have been implemented back in the late 80’s / early 90’s.

    The D2.8’s business model and the UAW’s perception are built on the premise that new car sales will never contract and GM would always maintain a certain number of sales. This paradigm is flawed from the outset and unsustainable – you always have to have flexibility and smart management – 2 things sorely missing from the D2.8 and the UAW.

  • avatar
    BostonTeaParty

    Wheres the issue with 2 reports, if i remember rightly didnt all 3 CEO’s talk about business confidentiality at some point during the circus meeting? So wheres the issue if the future plans they want to show they want to keep secret from the other 2 but also the Japanese and Korean manufacturers. I guess today we call it business sense. Again a way overeaction. But i guess when banks can be given billions unquestionably with no recourse or payback made clear, then why should everything be crystal clear up on the hill?

  • avatar
    Boston

    I can understand why they would want to keep some things confidential. Future product plans and potential buyers for brands are 2 that I can thank of off the top of my head. I can’t believe that they don’t have a plan at all. I can believe that their plan sucks, is poorly thought out, and wouldn’t be executed well anyway.

  • avatar
    dwford

    It will be fun to compare GM’s bullshit plan, to Chrysler’s “we never intended to have a plan, so here’s some nonsense we threw together” plan to Ford’s actual plan.

    Unfortunately Congress probably won’t be able to tell the difference.

  • avatar

    this all could have been avoided had Wagoner given RTG a chance. he refused to listen or try any part of the plan.

    tried and true ideas formatted and presented by GM’s top salesman are rejected as without merit by the CEO responsible for Tens of Billions in losses.

    now might be the time to call your Congressional representatives and let them know there is a plan for GM and it’s called Return to Greatness. tell them to visit http://www.GeneralWatch.com and see for themselves.

  • avatar
    Geo. Levecque

    It was just on the TV ie Ford’s Plan, it said by 2011 they would be selling 14 million vehicles! Glad to see they have a good Crystal Ball for the future?

  • avatar
    Jerome10

    Yeah, I’m gonna have to disagree with you on this one. I can 100% understand keeping things under wraps. You can’t give out all kinds on internal information (perhaps there is info on upcoming vehicles, powertrains, asset sales, wages, etc) that you just can’t have out there in public, and for all your competitors to see. Same with financials. They want to make sure its clear they are in trouble, but they don’t want to spook the markets because the numbers are worse than everyone was thinking they were.

    This is all fine with me. And I’m sure they do have a plan. Whether it will work is the real question.

  • avatar
    Conslaw

    GM’s secret plans, from the blog of a close friend.

    GM’s Top 10 Strategies for Using Your Taxpayer Bailout Money

    I have an advance copy of GM’s plans to use the $25 Billion in bailout money to get out of its financial mess. Here they are:

    10. Forex Trading
    9. Canadian Lottery
    8. “Come on Seven!”
    7. Vega II
    6. You see, there’s this oil minister in Nigeria . . .
    5. Improve Hummer fuel economy 10%
    4. Baseball cards
    3. Short sell stock in Chrysler & Ford
    2. Convert unused factories to ostrich farms
    1. Everybody’s last resort, hire coach Larry Brown

  • avatar
    MikeInCanada

    Does anyone want to bet how long it will take before the “Private” plan get’s leaked and becomes the “Very Public, WTF Plan”?

    I’m betting that we’ll be reading everything in this Friday’s edition Wall St Journal.

  • avatar
    miked

    @Jerome10 – Granted there are good strategic reasons for a company to want to keep some stuff secret; however, if they’re going for public money, then the entire plan should be made public.

  • avatar
    guyincognito

    I would be amazed if the plan GM presents includes shutting down brands. I can see them showing SAAB and Hummer as being for sale, but I don’t think they will talk about shutting down Pontiac or GMC or Saturn.

  • avatar
    gamper

    Yeah, GM’s private plan will be private for as long as it takes for a congressman’s aide to scan it and hit send.

  • avatar
    JeremyR

    Buickman, you keep talking about “Return to Greatness,” and while many of the 20 steps seem to be good ideas, I don’t see how they address GM’s fundamental structural issues (e.g. too many brands, too many dealers).

  • avatar
    pnnyj

    Today’s news: Pontiac brand to be phased out, Buick/GMC dealers otherwise unchanged

    Tomorrow’s news: General Motors proudly introduces the ALL NEW midsize Buick G6 sedan and hardtop-convertible, the fuel efficient Buick G5 sedan and coupe and the economical and fun Buick G3 sedan and GMC G3 5-door “crossover”

  • avatar
    Martin B

    They will pay Red Ink Rick 95 percent of salary on condition he does nothing.

  • avatar
    Engineer

    Here’s what I don’t understand: The cheerleaders faithfully keep repeating the party line: “GM was turning the cruise liner around, but then it ran into the iceberg of the financial disaster…” Somehow, nobody in the MSM thinks of asking: “Name one metric that proves GM was turning the ship around?” Journalism, eh?

    Of course, the hardened cheerleaders would reply: “We have more models doing X, Y or Z than anyone else!”

    Earth calling GM: too many models is part of the problem, not the solution…

  • avatar
    Honda_Lover

    BTW, Ford has some NICE vehicles in Europe. Too bad they don’t sell them here.

  • avatar

    WOW.

    The last time I saw the “red books”, “black books” routine was at a proposed restaurant sale. I’m amazed to see that same scam for a major car company. For those who don’t know, the red books are the ones you show the government. The black books are the ones where the cash sales are recorded.

    What gall.

  • avatar

    will anyone ever admit what the true cost of producing a car is ????

    It would be easier to build a nuke ! The plans are probably more available.

  • avatar
    GS650G

    Too bad our elected leaders know next to nothing about running car companies. But they do know how to spend our money.

  • avatar
    jkross22

    Good thing our representatives will see through the BS and not give failing companies with failed business plans money they will piss away in months. Good thing they learned from the recent bailout of banks that giving money for nothing doesn’t work.

    I’ll sleep better at night knowing our elected representatives truly have the public’s best interest at heart.

  • avatar
    GS650G

    Good thing our representatives will see through the BS and not give failing companies with failed business plans money they will piss away in months. Good thing they learned from the recent bailout of banks that giving money for nothing doesn’t work.

    I’ll sleep better at night knowing our elected representatives truly have the public’s best interest at heart.

    Sarcasm at it’s finest

  • avatar
    50merc

    speedlaw: “will anyone ever admit what the true cost of producing a car is ????”

    No one knows. No one, that is, who doesn’t know a particular vehicle’s direct labor hours and materials requirements, production volume (to calculate the amount of general overhead to be apportioned among a quantity of vehicles), and how a given production volume affects labor rates (does it require overtime?) and production expense (rate of wear on tools and machines, die replacement, etc.).

    But in GM’s case, it appears the answer is “too much.”

  • avatar
    rcguy

    As anyone familiar with the GM Canada operations will tell you, the cloak and dagger secrecy is common with GM. Financial reports are never made public, including profits/loses.
    The CAW has to negotiate concessions but claim that GM has made profit every year in the past ten years (accept 2002) in Canada.

    GM officials refuse to confirm.

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