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 [email protected]). 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?

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32 Comments on “Editorial: General Motors Death Watch 237: The Dog Ate It...”


  • avatar
    grifonik

    A a 45 percent production increase!? Seriously? Wow! They better hire more union labor quick!

    I’m guessing they see some huge latent pent up demand for their vehicles just over the horizon. Maybe they see something we don’t?

    Hmmm… maybe there is a law about to be released that taxes automotive imports 5000%, bans used car sales, and provides every US citizen with a $50K tax credit for every GM vehicle purchased.

    Or… they just took a really big hit on the crack pipe and said “F#$% it! Let’s go for broke!”

  • avatar
    mtypex

    No doubt that taking off the pin was a major meeting discussion topic, if not a meeting in and of itself. Right, Buickman?

  • avatar
    Captain Tungsten

    Don’t get too cranked about “45%” until you know what it is 45% of…

  • avatar
    jurisb

    wow, have those 2.6 million workers laid off last year already found a highly paid job? have those last month 600 000 people who lost jobs found already new jobs? Has Us industry turned around on the dime and created so many hihgly paid and skilled jobs that Gm can already prop up production? When did I miss the news?Whom does Gm plan to sell their vehicles? KfC managers?

  • avatar

    GM is flawed but not incompetent. If the company was completely dysfunctional it wouldn’t be able to make the usual suspects when people cite competitive GM product. The fact is that their design and engineering teams have come up with the better part of a showroom full of competitive products. The CTS, Malibu, Lambda CUV, G8 & Silverado would be a strong lineup if they all were in the same showroom.

    GM’s corporate bureaucracy and a corporate culture that discourages risk taking or outside the box thinking is the problem.

    It’s almost ironic that bean counters are the source of most of GM’s gaffes, but then money managers haven’t been doing a great job outside the auto industry either.

  • avatar
    truthbetold37

    There is a Southpark episode, very GM-esque

    The kids discover there are underpant gnomes. They steal your underpants. They follow the gnomes to their treehouse. The ask the gnomes why they steal underpants. “Profit!” they say. There is a chart on the wall:

    Step 1: Steal underpants
    Step 2:
    Step 3: Profit!

    There is no #2.

  • avatar
    KatiePuckrik

    I have to say, Mr Farago has a point.

    It doesn’t matter what the 45% is.

    Every car in GM’s line up is falling and falling heavily. So, logically, if all of GM’s models are falling, what can possibly justify the 45% increase?

    There’s only 2 things which springs to mind:

    1. Fleet sales. GM are so desperate for sales that they are upping their sales to fleets. Really, at this point, residual value is the least of their worries.

    2. Channel stuffing. If GM make enough cars and successfully manage to force them on dealers, then, they might be able to kill some dealers off.

    There is, of course, a few flaws with this plan.

    Upping production means:

    – asking their staff to work 45% more than they are, after laying off their colleagues. Not the best thing to boost your staff’s ailing morale.

    – asking suppliers for more 45% more parts, at a time when supplier/GM relations are at a low point.

    – tying up capital they don’t have, on cars they don’t need.

    As I said in an earlier post:

    Forget it, Katie. It’s Chinatown….

  • avatar
    Pch101

    GM never learns from its mistakes. It seems to be a matter of company policy to set goals that can’t be met, which result in products that people don’t want being built in large quantities, whose failure results in yet more incentives, new “turnaround plans,” plant closures and finger pointing at the outside world.

    For decades, GM has used its legacy sales, cash reserves, assets and GMAC to disguise its problems. Now that the bottom has fallen out of all of those, we’re left with the last inevitable step of nationalization. Without a complete cultural makeover and new management, the company doesn’t stand a chance.

    If the company was completely dysfunctional it wouldn’t be able to make the usual suspects when people cite competitive GM product.

    These good products are a tiny proportion of the overall pool of vehicles, which are generally mediocre or less, and not particularly reliable. I’d stop looking for the silver lining, as you need silver-tinted glasses to find it.

  • avatar
    wmba

    Robert:

    I think you have stated the problem with GM in a hundred different ways. I agree with most of your points, particularly about the management incapabilities of the company. I seriously think that without aides, the management at GM, alone, could not organize next Sunday’s picnic. They are that pathetic.

    Why their BOD hasn’t done anything is more than passing strange. The present gadding about this way and that of Wagoner’s team is like the death throes of an animal.

    The real problem is that while TTAC and its readers know this, as do many industry insiders, nobody else seems to give a damn.

    So your writing, whilst erudite, for the most part falls on deaf ears.

    Do you email your editorials to the task force or to your elected representatives? Because preaching to the converted will have no effect I can think of, unfortunately.

  • avatar
    Dave

    This is GM showing that their viability plan is working – GM, and other carmakers, book revenue and profit when they gate release the vehicle, whether it’s actually ‘sold’ as a normal business would define it or not. Also, they don’t pay their suppliers for xx days so they have increased revenue, but not the associated cash outlay (they have the cost because that’s booked as incurred) But they have the cash!

    Sure, this is a short term thing, but does anyone believe that they are planning any further out than the next 90 days now? As for affecting future profits – you got to get to the future before you need to worry about detail like profit.

  • avatar
    johnny ro

    I think Dave is onto the correct interpretation.

    They have to have submitted a viable viability plan by March 31 or no more cash, although the feds are somewhat likely to let any deadline slide.

    To meet that deadline they need more than a viable plan, they need good news. They need to get GM into the news with some good news for Congeresspersons’ populace to read about and feel better about tax dollars going into what we know as the smaller of the two black holes (AIG absolutey dwarfs GM as a black hole).

    So expect GM to keep on track broadcasting that things are good and getting better and they have a plan to make it even more so, like they have been saying for so long on their long slide into oblivion.

  • avatar
    rohman

    Step 1: Build a bunch of crap.
    Step 2: Chapter 11.
    Step 3: Screw vendors and UAW.
    Step 4: Profit!

  • avatar
    Pig_Iron

    Captain Tungsten: Don’t get too cranked about “45%” until you know what it is 45% of…

    Does it matter at his point? It’s only sixteen days to report card day. and 1st quarter wrap up.

    Ronnie Schreiber: GM is flawed but not incompetent.

    Uuuuuuh…?

    wmba: Do you email your editorials to the task force or to your elected representatives?

    Good idea copy them to the PTFOA starting at GM DW #1.

  • avatar
    Geo. Levecque

    This might be a little off topic, but I thought I heard somewhere that GM had issued a recall on most of there vehicles from the Acadia on down, due to a serious problem with the gear shift? Has anyone heard anything?

  • avatar
    mikey610

    RF –

    IIRC, the ‘push for 29’ was based on the previous years 0.1 % increase in market share – something like 28.0 to 28.1 This was the first year of non-declining market share in something like 30 years and of course led GM to believe they had finally reached the inflection point on the ‘check-mark’ graphs they had been showing to everyone for years.

    It reminds me of the ‘Malibu/CTS’ mantra of today. They have convinced themselves that every future product is now going to be as ‘successful’ as these two products(not sure I would even call them home runs), when there is every reason to believe that this will NOT be the case.

    But the mentality is the same…
    1. take a tiny amount of good news,real or perceived
    2. Extrapolate to all products, because of course that’s a good idea
    3. Profit! Or maybe, um, plan to profit would be a better way to explain it…

  • avatar
    George B

    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?

    Possible Crazy GM strategy:
    1) Project a sales increase for the “viability plan” for congress.
    2) Pull all 2009 production forward early into the 2nd quarter, run factories at normal relatively efficient production rate, and stuff the channel.
    3) Secure more funding from congress to keep the company running for a few more months.
    4) After the pulled forward 2009 cars are built, shut down production and prepare for chapter 11.
    5) GM upper management, having extracted all they’re going to get, resign before the inplosion. Screw you guys I am going home.
    http://www.youtube.com/watch?v=ZEKTSO1scaI

    The UAW can’t really threaten to strike when all the cars GM needs are already built. Suppliers can’t withhold parts for non-payment if GM doesn’t need more parts. Government can’t recall the loan if the money was already spent. Lawyers fight over the wreckage.

  • avatar
    Dynamic88

    It’s almost ironic that bean counters are the source of most of GM’s gaffes, but then money managers haven’t been doing a great job outside the auto industry either.

    Anyone else getting the impression that MBAs are the scourge of the earth?

  • avatar

    “The CTS, Malibu, Lambda CUV, G8 & Silverado would be a strong lineup if they all were in the same showroom.”

    Not so fast. According to Consumer Reports GM’s newer models still get only average or below average reliability.

    This reliability result (assuming it’s true) still implies a mediocre company that won’t be able to fix its image.

  • avatar
    thalter

    Quite frankly, I don’t know why GM’s stock is trading at anywhere above $0, because that’s exactly what the shareholders will be left with when all this goes down.

  • avatar

    If the company was completely dysfunctional it wouldn’t be able to make the usual suspects when people cite competitive GM product.

    These good products are a tiny proportion of the overall pool of vehicles, which are generally mediocre or less, and not particularly reliable. I’d stop looking for the silver lining, as you need silver-tinted glasses to find it.

    Actually, if GM didn’t have a plethora of brands to feed with product and if the good cars weren’t diveed up to the various brands, they’d have the makings of a strong lineup. If the ‘Bu, CTS, G8, Enclave, Corvette and Silverado were all under the same brand it would be a competitive lineup.

    My point is that GM is capable of and building competitive product. The majority of the cars you say are mediocre or worse are a few product cycles old at this point. I think the above mentioned vehicles (which just about everyone acknowledges are competitive product) are better examples of what GM can do at this point in time than the cars you say are mediocre.

    I think that there is enough talent on the design and engineering side that a reinvented General Motors with a radically changed corporate culture can be a successful car company, assuming that the recession ends and annual sales climb above 10 million.

  • avatar
    Usta Bee

    Maybe they plan on increasing car production 45% so they can make more money off the liquidation sale of the company ?.

  • avatar
    Captain Tungsten

    “45% of what” does matter. GM Q1 production was down 57% vs. last year, sales were down much less than that. Net result? Inventories are reduced.

    GM Q2 production, though increased over Q1, is still down 37% vs. a year ago. Production increases in Q2 because sales naturally increase in spring. Even if the days-supply number is 120 days, that means the inventory turns over in just over a calendar-quarter. And that is across the board, sales of “hotter” vehicles will turn over faster. Which ones to make, and how many? Beats me. But these are the decisions that automakers have to make now, it is just as bad business to have no product to sell to a willing customer.

  • avatar
    Mc

    Mr. Farago,

    I remember those 29% button dropping off people’s shirts at the Ren-Cen when we fell below 25% as you said. It seemed to be a quiet thing. I recall “profitability” suddenly becoming the key measure at that point.. instead of market share.

    The pressure to take back “29%” and the later the pressure to increase profitability seemed to induce teams to engage in a whole series of counter productive “shot cuts”. First there was over production and massive incentives to do “sales drives”.. and then later the squeeze on supplier’s to rapidly cut costs…. by using cheaper and less reliable materials.

    Lower resale values and cheaper materials seemed to work against the 29% goal and profitability astonishingly quickly.

    Mc

  • avatar
    yankinwaoz

    Here is your graphic for explaining GM’s recovery plan.

  • avatar
    Mc

    As far as GM having a recovery plan to present… I wonder if it is really possible for GM to create a real workable plan country by country.

    It seems there may be a Canada plan, South Korean plan, a European Union plan, a Mexican plan, and US plan too. Each country will want their own deal. Will these plans/deals together make any sense on the macro level? I don’t know how one company could possibly be run under 5 different plans.

    Maybe the US, Canada, the European Union, the South Korea, and the Mexican governments need to sit down together and solve the GM problem with one agreement, one bailout, one reorganization… one something?

    Just a thought.

  • avatar
    zoneofdanger

    Oooh – I want one of those hot La Crosses! I will look really sharp at my assisted living center.

  • avatar
    agenthex

    I think that there is enough talent on the design and engineering side that a reinvented General Motors with a radically changed corporate culture can be a successful car company, assuming that the recession ends and annual sales climb above 10 million.

    Sure in theory just about anything is possible when you have a corp with such vast resources. In reality you have to ask yourself if it’s plausible.

    The first step to any recovery is to at least be able to honestly evaluate the situation, which no official source from these companies have shown.

    Even assuming such a monumental task is carried out, the timeline for change in product and subsequent consumer expectations will be very very long. The question is, even in this best case scenario, how much are people willing to spend to subsidize this. Any realistic dollar figure will likely be greater than just buying Toyota or Honda or both.

  • avatar

    Bill Lovejoy showed me the 29 pins when they first came out. now Bill is a wonderful guy, no one nicer. trouble is that he was clueless about how to sell autos. tried to reason with him and warned that unless GM radically altered their marketing, his pins would end up in the trash as share would drop to twenty relatively soon.

    today, it matters not how much the feds pour into GM even though I would claim we are making relatively desirable products. the problem continues to be that we have the absolutely worst marketing of any retail business in the world and that is what is killing us. we don’t support brands, don’t offer products to fit brands. instead we manufacture cars based on available plant utilization and/or architecture allowances. we don’t support our dealers properly and have severed meaningful relationships with our clients over the years.

    the answers are not that difficult. in fact, Return to Greatness would bring rapid and dramatic improvements. it’s the complete fault of management (at the top) that GM has declined. under Wagoner the results don’t change, just the excuses. he needs to go and soon. then rational and executable ideas need to be implemented. otherwise, even the Federal Reserve can’t afford to continue backing GM since the downside is bigger than AIG.

  • avatar
    gslippy

    Obfuscation is a successful strategy for many politicians.

    GM is attempting to appeal to politicians, not the general public, and not even the car market at this point.

    They may as well be the world’s largest producer of toilet paper – we may ‘need’ such a product, but not their product. Their obfuscation tactics are designed to convince us otherwise.

  • avatar
    Dynamic88

    Re: Goal setting, and the “29” target.

    http://tinyurl.com/ckhjkz

  • avatar

    This reminds me of the article I read about Jackie Gleason. When he had his own show in the early 1950s, the script would say something like “Jackie enters stage right, does something funny.”

    When you have talent, you know what you need to do and you can leave the plan blank and still get results. When you don’t know what you are doing, leaving it blank is just leaving it blank.

    John

  • avatar
    The Anam Cara

    “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?”

    this website?

    i kid. i kid.

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