As thing stand now, All three automakers will present plans for reorganization to the congress by December second. Five days later, Detroit’s caravan of love will kick off its pilgrimage to Washington, where the three CEOs will hold an encore performance of their famed congressional testimony. The reception that awaits them in our nation’s capitol will depend largely on how candid the second round of testimony is, and how viable the new reorganization plans are. Now that everyone is well aware of the fact that they are screwed, Rick, Bob and Alan must convince congress that they can dig their way out. Since GM claims to already have “a plan,” lets take a moment today to speculate on what that plan is… or should be. My feeling is that Wagoner’s credibility is so weak that he has to open with a structured bankruptcy offer to avoid being laughed out of the hearing room. If he agrees that brand and dealer cuts are necessary, GM just might get the bailout. Given his pathological performance thus far though, I’d guess Wagoner’s pride (wait, that’s not the right word) won’t let him. He’ll probably talk up the cuts to truck manufacturing, hype the Cruze and Volt and suggest that maybe the union might give some ground soon. And he’ll jet home empty-handed to start Chapter 11 proceedings. Your thoughts?
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My thoughts are he’ll announce more of the same (some cuts, eliminate plants here and there, sell this off, sell that off, a smattering of the same old same old). All the while hyping how wonderful 2010-2011 will be the with the all new something or other.
My dream is that he’ll step up with a drastic and aggressive plan that is detailed on changing the culture, and the direction of the company, losing brands, plants and dealers.
My dream is that He’ll ask everyone from top to bottom to take a 15% pay cut, senior management a higher number yet. I’d like to see a changing of the board of directors too, with Red Ink giving up Chairmanship.
My dream….Most importantly he’ll put a timeline with firm committments, firm mid point goals with an offer to resign should he fail. No wishy washy, no if the market does this, the dollar does that. firm clear goals, firm clear path.
seems everyone fails to realize this is not a cost issue, it’s a revenue issue. the $25 Billion question is how do we sell more cars, lots more cars? the answer is Return to Greatness.
Is anyone else having that SNL skit start up every time you load the page? At least for me its bugged.
This adequately describes Rick’s “reign of terror”
http://www.despair.com/consulting.html
As for a plan, the first sentence must read: GM will enter Chapter 11 bankruptcy immediately as Rick leaves the company – as for Rick’s golden parachute, it will now be subject to bankruptcy and he will have to stand in line with everyone else to get his money.
From there I would want to see a massive, MASSIVE cut in what remaining executives are making.
Union will have to suffer as well.
Dealerships must die by the thousands.
Only then can we talk about new game-saving models (and on that topic I want talk about solid singles and doubles, not back-to-back game-saving grand slams in the bottom of the ninth).
Oh hell, who are we kidding? It’ll be a money-grab followed by the expected flag-waving business-as-usual garbage.
Yup,
Rick is clueless (thanks, in part, to the cheerleading home press, and the loyal BoD) and needs to go. Short of that GM is screwed.
Rick Wagoner? Denial isn’t just a river in Egypt.
If I were Alan Mulally, I wouldn’t want to be associated with the other two guys. I believe Ford not only has a plan, it’s well on its way to executing it.
GM’s got too much of everything: Brands, dealerships, capacity, liabilities, overhead. It is hard to know where to start.
Oh hell, who are we kidding? It’ll be a money-grab followed by the expected flag-waving business-as-usual garbage.
This I can agree with, and just wait until GM unloads a full volley of b______t otherwise known as PR, at Congress.
IMHO Gm should be ; Chevy ; Caddie ; GMC (heavy duty trucks only) ; and Opal.
Why Opal? B/C the Pontiac and Saturn brands are damaged beyond repair and Opal is already existing and still respected. Opal will be the Europe/style and special niche like Solstice and Sky.
The dealerships can be Chevy/GMC or Cadilac/Opal
Re Rick – I heard an short click of interview with him on the radio a couple days ago – he was planning on presenting the same thing. The mind boggles. He sounded convinced that he had a solid plan they just didn’t hear him the first time.
I’ve said it before but here it goes again…
If Gettlefinger, Mulally, Nardelli and Wagoner had any sense of the moment, they would drive up to the steps of the Capitol in their respective Hybrids, Volts, etc. at noon on the day before they ‘re-testify’ on the Hill and then hold a press conference to announce that:
1: We have agreed to enact the 2010 UAW Labor Agreement on January 1st 2009 thereby launching the new contract savings now and putting us on par with the transplant’s labor costs.
2: All three of us have agreed to work for $1.00 until we have a profitable business quarter, and with federal accounting standards imposed so that the Congress can believe our numbers are accurate.
3: If that is not satisfactory we have instructed our BoDs to start an executive search to find our replacements by Jan. 1st 2009.
4: We are instructing our respective HR departments to enact a 20% across the board wage and salary cut to all workers beginning January 1st, 2009.
5: We have instructed our R&D departments to achieve the 2020 CAFE requirement of 35mpg, by 2015, a full 5 years ahead of schedule.
And with that, they would ask for the mercy of the Congress and the Administration to re-consider their loan requests and challenge Congress/Paulson/Obama et al to put forth a better plan by noon tomorrow…but none of them have vision or a sense of the moment…Okay maybe Mulally…but certainly not the others.
It would be neat to see them try it though!!
Brands and dealerships cannot be willy-nilly thrown away. There are contracts and state laws to deal with.
Same on the liability side. Contracts and financial obligations.
These things only go away in a bankruptcy. We’re not talking about enough bailout money to make any of these things happen.
I don’t think Ford is to be let out of this rogue’s gallery. Pretty much all they have done so far is one smart move, borrow/mortgage by the bucketload during times when loans were available. Don’t forget, Ford was the butt of much of the jokes up until only a few months ago.
Jury is still out on Ford.
Mulally has a proven track record at Boeing of turning around another big firm with similar issues. Given he only had one real competitor versus the 6 or so he faces in the Auto industry.
At least their product pipeline seems in touch with reality. Earlier this year while Wagoner was whining about gas prices Ford took the drastic step of converting a plant from F150s to small cars. They have a decent hybrid system developed mostly in house that has proven itself in the real world.
GM to die in its current form. After a texas chainsaw massacre CH11 they could emerge as a healthy company with 8-12% of the market.
I hope whoever owns Jeep next honors the existing warranties. Beware the curse!
Conslaw,
I believe Ford not only has a plan, it’s well on its way to executing it.
That’s why I dumped my hopes for a Camaro and am taking a hard look at the 2010 Mustang.
If GM even thinks about killing the Corvette, they might as well skip Chapter 11 and liquidate. The Corvette is the heart and soul of GM, their big performance flagship, and killing that kills any positive identity for GM as they become Toyota Lite.
Anyone see the below headline:?
GM Ends Tiger Woods’ 9-Year Endorsement Deal
Methinks this has more to do with a certain 12/02/08 appointment in D.C. for Rick Wagoner than it has to do with any alleged defects on Tiger’s effectiveness as a pitchman. I suspect that every line item of spending, or contract commitment, for GM is being reviewed with the question, “Is there anything about this expense to which a Congressman or Senator might either object or use as a reason to deny a loan?”
Since Tiger already has more money than just about everyone except God and Warren Buffet and maybe one or two of Sam Walton’s heirs, I suspect some sharp-penciled bean counter raised his hand and said, “Hey, maybe we should stop paying millions to Tiger Woods, since his outrageous contract doesn’t really seem to correlate to increased Buick sales.”
I expect a steady stream of headlines such as these, all of which are being mass e-mailed by (GM PR staff) to everyone in Washington, and their staffers, and their staffers’ pet poodles, to show anyone paying attention that GM now “gets it” and is “sacrificing big time” in order to come up with a plan in order to justify the loan $$.
Funny how it changes management’s opinion concerning the definition of “ordinary and necessary business expenses” when people deciding on your loan approval find out you flew out in a corporate jet to drop off the loan app…..
These are all just pleasant dreams…and that’s why I dream of dating only supermodels…
That’s the problem with dreams – only the nightmare part seems to ever come true – I’m talking about you first wife!
In all these scenarios someone has to be the first to fold their hands so to speak and make major – never been see before concessions. Bondholders, Union, Managment, who is going to volunteer that kind of haircut?
How come Citigroup didn’t have to come to Congress with turnaround plans and mea culpas?
Maybe it’s because there really are jobs that Americans won’t do and all those folks with 401Ks and stock accounts identify more with bankers than they do with autoworkers.
My prediction is more of the same talk as during the first hearings only with real numbers. It will be look at our reduced cost structure, look at our profitable overseas business, look at the concessions the union gave up, look at the fact we have more cars that get 30 mpg than any other manufacturer. Only reason is because they have too many models to begin with. Also look at the Volt which will revolutionize driving. If only we can get to 2010 we will make it.
Chrysler’s should be the best. What do you tell Congress when you have no product pipeline?
@ Ronnie Schreiber: because Hank Paulson is buddy buddy with all the Wall St crowd and the banking industry. Gotta back your cronies – just like the Board of Bystanders supports Rick Wagoner. Congress pre-authorized him to have Carte Blanche with the funds and the financial world.
The number of brands and dealers isn’t the issue. Those are not significant drivers of GM’s costs. Cutting them, even cutting them drastically, would not substantially improve cash flow.
After all, GM does not pay dealers’ costs. Dealers pay dealers’ costs.
What GM does need to cut, which in many cases means renegotiate, is anything that keeps it from being profitable at the current level of sales. This means workers, shifts, plants, and the guaranteed volumes in parts contracts.
The need a smaller, more flexible blue collar workforce that works for less money. And they need pay cuts for the white collar staff as well.
Sorry, Buickman, but a bunch of sales gimmicks isn’t going to suddenly get people to buy cars again. You view of the world is very much constrained by where you have lived it, in the showroom. You’re every bit as myopic as the GM execs you criticize. Some of your ideas are good ones, but none of them are game changers.
I think we’ll see a very different tone coming from Rick Wagoner, but that’s it. He’ll pay lip service to some crucial issues facing GM, but only offer token efforts to change them, i.e.:
(1) Brand restructuring
He’ll say they’re axing HUMMER(how green of him) and possibly announce plans to sell SAAB, but that’ll be it, at most. If he’s really desperate, and we’re really lucky, he’ll offer up Buick as a sacrifice, which would make sense, because the over-65’s that buy Buicks are too concerned about their retirement accounts to shop for a new Lucerne.
(2)Labor
He’ll offer a massive cutback of the workforce, but not more than GM would have had to do anyway due to the drop in demand for vehicles across the board. We won’t see Wagoner acknowledge GM’s impending loss of market share.
(3)New vehicle design
Look at my shiny new Volt! Isn’t it pretty? Just ignore the fact that it’s over-priced, designed with the belief that fuel prices would be twice what they currently are, and that no one believes that GM can design such a complicated piece of equipment to function reliably.
(4)Management
I think we really will see meaningful pay cuts for management, but only because Jetgate focused national attention directly on management perks. But don’t expect these cuts to be drastic and don’t expect their golden parachutes to be touched. I’m sure the more sensible people in GM management are going to wait for the bailout money to come in and get out while the getting is good.
The only thing that Rick won’t address that he should: the dealer network. Furthermore, I have a feeling that Congress doesn’t really want to hear him address. If he starts shutting down unnecessary dealers, we’re talking about lost jobs and money in every electoral district in the country. I have a hunch that most of the members of Congress have a dealer or two on their donor lists. Furthermore, who wants a closed dealer in their district? A big, empty lot next to a busy highway to remind everyone in the district that government Congress failed to protect a powerful symbolic representative of American industrial might?
What I’d like to see? Here’s a wish list:
(1) GM is paired down to three brands: Chevrolet (family cars, econo-boxes, and musclecars), Cadillac (GENUINELY upmarket cars), and Isuzu/GMC (commercial vehicles).
(2) An even bigger cutback to keep them more in line with the smaller market share they’re going to have once they finish restructuring.
(3) An end to brand engineering, an infusion of cash into vehicle interior design.
(4) Upper management works for $1 until GM sees black ink, and a suspension on any payouts for retirement packages for upper management until the company sees 4 consecutive quarters of profitability. Or, preferably, most of management is replaced.
(5) All of this done in a pre-packaged CH.11.
I heard an short click of interview with him on the radio a couple days ago – he was planning on presenting the same thing. The mind boggles. He sounded convinced that he had a solid plan they just didn’t hear him the first time.
Mr. Clueless is in for a haircut, then. That should be entertaining.
Sad state of affairs that this guy should be the public face of GM. He is obviously not going to take one for the team.
Time for C11, then…
If GM had filed Chapter 11 they day Mr. Farago published Death Watch Number 1, they might have had a chance. Now, it is too late. Liquidate.
P.S. RF, you should collect the Death Watches on a single page as a monument to a bygone era.
ERJR:
“Chrysler’s should be the best. What do you tell Congress when you have no product pipeline?”
http://www.allpar.com/model/upcoming.html
@NOLAKen –
“If he’s really desperate, and we’re really lucky, he’ll offer up Buick as a sacrifice.”
Whoa there. Isn’t Buick in the middle of a renaissance? This isn’t your father’s Buick, after all.
They even have a hip, young, inoffensive black athlete endorsing them. Lucernes and Enclaves should be flying out of showrooms!
Oh, wait a sec…
I’m impressed with the Chrysler 4.2 V6 Diesel.
And a Cummins too.
Now if they put that in a Dakota pickup or a Durango, that would really turn heads. Oh… yeh, ahhh, forgot for a minute this is Chrysler. The diesel will go in full size Rams?
I like the stats on the new 4.2 litre diesel V6.
Now if Chrysler would put it into Dakota pickups, they might have a WINNER.
seems everyone fails to realize this is not a cost issue, it’s a revenue issue. the $25 Billion question is how do we sell more cars, lots more cars? the answer is Return to Greatness. -Buickman
I’m afraid I have to agree with Mr. Karesh here. Yes, given the current cost structure GM would only need to sell twice as many cars as they currently are. But since many factors will prevent that, including the overall market contraction, its not a likely scenario.
Throughout the deathwatch series it was clear to most that brand dilution was the nexus of GM’s decline. It was their desire to maintain 8 brands that lead them to so blatantly badge engineer. Why did they desire 8 brands? Could it be that the huge dealer network was the only way to park all they cars they were basically mandated to produce. In any event, cut dealer contracts in order to cut brands. Take every penny that you would spend on making a car like the Malibu or Cruze a multi-brand vehicle (i.e. rebadging) and spend it on making the vehicle the best in its segment.
I’m preaching to the choir here, but again, the nexus of GMs problems is the number of brands/dealers/overgrown size. They simply are not right-sized for the current and future market.
One thing that I’d like to see prioritized is some strategy for changing the corporate culture at GM.
The posts and comments listed below make it clear to me that, even if sensible plans like Farago’s or NOLAKen’s were to be enacted, the existing culture would ensure that the company would be back in trouble within a decade or two.
GM Mindset
Dysfunctional Power Dynamics
Stanford Student’s Talent Wasted at Ford
Ford is a prime example. They had a top-notch exec in Petersen in the 80’s & early 90’s, and a decade later they were back in trouble.
The only thing I can think of is to break the company up into its constituent parts and hope that some of them survive. Restructure GM, making separate companies out of Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, Saab, Saturn, GM Asia, GM Europe, GM Powertrain (for engines etc currently shared across companies), and God-knows-what-else-I’m-forgetting. And don’t let the companies combine for 30 years or longer.
Besides (hopefully) destroying the company culture, it would be a convenient way to avoid having to shutter brands and/or dealerships. Instead, let the market do the dirty work.
There may be many better ways to change the culture, but that was the only one I could come up with.
I don’t know why everyone rags on Wagoner. Man’s a bloody genius.
Have idiots pay you billions for crap cars that depreciate down to the value of their intrinsic steel, glass, and gasoline in their tank after 6 years.
Remove hundreds of millions of dollars of shareholder equity for yourself and your Board buddies while also enriching the unionista fatcats to keep their mouths shut.
Never set hard targets so you can never be held responsible for failure. Smile for the cameras at CNBC.
Tell your customers they’re idiots to complain about their crap cars; JD Powers initial quality is all that matters and it’s a perception gap, that’s all.
When the jig starts getting dicey, sell everything that’s not nailed to the floor. When the jig is up, go beg for more money, while preparing to unfurl your golden parachute and float away to retirement in style.
Greatest CEO in American history. They could make Wall Street II: Motown based on this man’s story.
“The only thing I can think of is to break the company up into its constituent parts and hope that some of them survive.”
That might have been an ok idea in 1970, but there is nothing to split up now. The brands only exist as marketing foo-foo dust and the quasi-independent divisions are long gone. Over the past several decades GM has cost rationalized itself to oblivion.
Never, ever let the bean counters run a manufacturing company over the long haul.
There is no game changer that makes it possible for these companies to suddenly jump to the top of the pack.
The best you can hope for is a temporary fix to avoid bankruptcy, followed by a continued decline in market share. A further increase in market share for Toyota, Honda and other foreign companies seems inevitable.
That’s just fine with American consumers and so that’s just the reality America will have to learn to live with.
It is both a revenue and cost matter.
Revenue and market share will return with compelling new product. Wolfgang Bernhard s/be pursued like a invitation to the Playboy Mansion. The customers will readily pay premium prices when premium products are created. It’s that simple and that hard. It’s impossible if GM, in particular, cuts product development and/or relies on existing, in house talent.
Cost reductions can come from many sources, but having too many dealers isn’t the problem. It’s manufacturing-based: labor costs, too many lines, and inefficient engineering that doesn’t share platforms and components. Corporate jets may be more symbolic than costly, but Iaccoca flew commercial, and he knew a thing or two about selling to Congress.
I keep returning to it, but the core of the problem is producing vehicles people are willing to get in line for. Style, performance and fuel efficiency are not necessarily incompatible anymore.
I predict the domestics will receive aid, but they’ll be back for seconds after six months, or less. In this economy, the margin for error is thong-thin. My advice to the Detroit 3: Please surprise us with bold plans. Or C11 may seal an unwanted fate.
An upside to this Detroit 2.8 demise storm: With the imminent death of D 2.8, this means all their products become collector’s items right? I’m willing to buy GM as a Souvenir.
@ NOLAken
To point #3 of your post…you knock GM for attempting to design a vehicle with high fuel costs in mind, yet that’s one of the very reasons they’re in the situation they’re in to begin with. Everybody has been critizing them for not planning and forecasting the future well enough (like when gas did go up dramatically, sales of trucks tanked and everybody bitched at GM for not having seen the writing on the wall). Now they’ve at least (sort of) discussed a vehicle to address that, and you knock them for it. Granted, the Volt is a ridiculous attempt at addressing fuel economy in light of it’s astronomic price tag, given you can go down to your friendly neighborhood Toyota dealer and pick up a nice Prius for almost half the cost of the Volt. And THAT’S part of the real problem…developing the right vehicles for their intended markets. Most people will by-pass the $40k Volt on their way to, oh, just pick any other vehicle in that price range.
The price of fuel will go up again, it’s only a matter of time. But will GM (and Ford and Chrysler) “get it” and roll out appealing vehicles with excellent fuel economy that the average Joe can actually afford? Get that right, and they’re on the road to recovery!
GM should eliminate all brands except Chevrolet and Cadillac. The factories and dealers building the other brands cars will be closed and dealers will be shuttered. If there are laws against it then they will need money to buy the dealers out.
Everyone needs to accept 10% market share or less.
We won’t not buy import brands so imagine GM, Ford, Chrysler, Toyota, Honda, Hyundai/Kia and Nissan all sharing a large chunk (say 80%) of the market equally and the rest having the other 20%
I’d say make “fuel-efficient” cars with top quality but I wouldn’t go overboard. Make it just one per company. Fuel prices are more often low than high and the vast majority of Americans prefer a car that is of a certain size or larger.
Some more ideas;
eliminate the Camaro and close that plant
make a better version of the Equinox
make a better version of the Colorado
get the Cruze out ASAP, even if the first ones need to be imported.
make the Pontiac G8 the new Impala
As a PR exercise, this trek across the Rust Belt is a smart idea, and obviously something that they should have done in the first place. It would have been quite a stunt for the Big 2.8 to have set up an impromptu mini car show for the congressmen, offer them test drives, etc.
It would have been even smarter had they also brought with them a few of the blue collar guys from the line (Joe the Riveter) and a couple of small business owners down the street from the plant (Joe the Bar Owner and Jill the Florist) so they could have shared their tales of woe, in order to hit the Main Street angle that’s so popular these days. The taxpayer in me would have mocked them, but the business guy in me would have been nodding my head, applauding whoever orchestrated the event.
While I strongly agree that GM has far too many brands, the fact is that state franchise laws prevent them from dumping brands. It cost GM more than $2B to dump Oldsmobile, and they are still fighting lawsuits from dealers.
Rick’s just hoping that every one is gonna start buying YuSubabaHos because gas is $133.9 (at least it is at the gas station across the street from me).
That’s The Plan.
I think he is communicating with Pelosi right now on how much to ask. There will be something, not even resembling solution to the problem: Volt promises and some crap about achieved already level of quality. There will be more threats to economy if GM goes Ch 11. And magically he will get the money. His attorneys are negotiating right now who will get what out of this bailout: how much will go to which campaign fund (congressman, senator), and how many votes UAW will deliver. That’s the plan, there was never another one and you can’t invent restructuring plan in 2 months, much less 2 weeks.
Mr. Wagoner has been marinating in the GM culture for too long to bring about the change necessary to save GM. You are asking him to do something that is completely beyond his ability. He literally cannot imagine doing anything differently, and really does see GM (and, by extension, its management) as being the victim of external forces.
GM needs an outsider to clean house, but who would want to take the helm at this point…?
YuSubabaHos? WOW… I haven’t laughed that hard in… forever.
ferrarimanf355,
Thanks, I’ll be here all week. It’s a different show at 11 o’clock. Don’t forget to tip your waitresses, they’re working hard for you too…
BTW- That was a brainfart/typo. It’s supposed to be YuSuburbaHos. Hope that’s at least as amusing.