I once attended a seminar on alien abduction hypnotherapy. When we got to the Q&A bit, I was flabbergasted by the audience’s enquiries. “What do you do if the alien has been in contact with a departed spirit who knew the victim, and used their influence to prevent hypnosis?” “I’d hypnotize the spirit first,” the therapist responded, without batting an eye. Suddenly, I felt very, very alone. Surely, I wasn’t the only person amongst hundreds who thought the whole thing was a patently ridiculous scam. I got that same queasy feeling today, watching my so-called colleagues questioning GM CEO Rick Wagoner about the company’s viability plan. Surely someone would point out that the whole thing is nothing but a patently ridiculous scam. Sigh. Right, let’s get to it then . . .
The 2009-2014 Restructuring Plan—as GM would prefer it called—is 117 pages long. With the help of TTAC’s crack spreadsheet busters, I could engage in a critical analysis of the automaker’s sales projections, cash flow estimates, cost savings, capital spending allocations, debt reduction plans, etc. But that would be like discussing alien breeding habits, and the meaning and use of anal probes. Yes, they did go there. But let’s not.
We’re all rational human beings. We know what GM has to do to stay in business or, let’s go wild, make enough money to pay back the $34b “investment” dragooned from taxpayers by D.C. debt addicts. GM has to take in more money than they spend.
In other words (if other words be necessary), GM has to build something profitable and then sell a shitload of it/them. Those of us with even a passing knowledge of the industry’s recent history and GM’s place within it know that’s just not going to happen. The company’s been outmaneuvered on every front: model, brand, company. Sales, brand share, overall market share. Game, set, match.
Suffice it to say, if the artist once known as the world’s largest automaker knew how to build profitable products, it wouldn’t be begging for one more hit on the federal crack pipe. Ipso facto.
So what makes GM think that this time, it’ll be different?
“Take a look at the products we can do,” Wagoner asserted at the end of the post-$34b PR bomb drop press conference. We haven’t done it a lot, but we can do it, because we kinda did it, a bit, here and there.
For some reason, Wagoner didn’t mention any specific products. Not the Chevrolet Malibu. Cadillac CTS. Pontiac . . . uh . . . . Saying that, I think he mentioned the electric/gas plug-in hybrid Chevrolet Volt at some point, but no one’s buying that. Literally.
OK. Turn to page 63, Appendix D: “Future Product Launches.” Holy shit! “This page has been left intentionally blank.” Surely, they’re not—I mean, they wouldn’t—dedicate themselves to improving what they have instead of chasing The Next Big Thing? After all, on page 16, GM promises to reduce the total number of brands from nine to five, and cut nameplates from 51 to 36.
You weren’t fooled for a second, were you?
Starting on page 64, we get one picture per page of GM’s latest crop of turnaround machines: the aforementioned Chevy Volt, Cadillac CTS Coupe (didn’t they cancel that?), Cadillac CTS Sportwagen (har har), Chevrolet Cruze (didn’t they . . . oh, right, import), Chevrolet Camaro (’nuff said, already), Chevrolet Equinox, new Buick LaCrosse (yes they already make one) and new Cadillac SRX.
Estimated production? Break even point? Profit per vehicle? Nope. But the document lists the most fuel efficient powertrain that will be available—if not the highway miles it will deliver.
Now, page 72. Appendix E gives us bullet points re: GM’s all-important rejigged brand strategy. HUMMER, Saturn and Saab are obvious by their absence. Once that pesky troika of red ink spewers is strategic reviewed out of existence, GM will have four core brands in three sales channels.
You lost me. Let’s try that again. Chevrolet, Buick, GMC and Cadillac will be sold at Chevrolet, Buick-Pontiac-GMC, and Cadillac dealers.
You noticed that did you? Pontiac is now a “niche” brand; it’s only kinda core. More importantly, GM is finally identifying each brand’s market position. Chevrolet = Expressive value. Buick = Sophisticated Quality, Luxury and Craftsmanship. Pontiac = Youthful and Sporty. GMC = Engineering Excellence with Capability and Functionality. Cadillac = Performance Luxury with Aspirational Appeal.
So, how’s that going? I only ask because it’s not. The chances of it suddenly working out for the cash-strapped automaker are about as high as they were before RIck Wagoner guided GM from a death spiral into a nose first landing. Which reminds me . . .
I collared the alien abduction specialist after the seminar. An artist’s impression of a crashed extra-terrestrial spacecraft filled the screen behind him. “What if there aren’t aliens?” I asked the hypnotist, hypothetically. “What if you aren’t really standing there?” he replied. Within seconds, I wasn’t. Unfortunately, when it comes to GM, US taxpayers don’t have that option.
Quote : “ I once attended a seminar on alien abduction hypnotherapy. ”
I can’t seem to get past that first sentence for some straaaaaange reason…
“I once attended a seminar on alien abduction hypnotherapy.”
It takes a real man to be able to confess that to his readers.
“I felt very, very alone. Surely, I wasn’t the only person amongst hundreds who thought the whole thing was a patently ridiculous scam.”
Um, you were the only one there who wasn’t an alien.
tparkit:
Ah.
Well, I have seen a UFO, but I don’t know if I’ll ever see one again, or see GM ever turn a profit again.
Rick Wagoner and the rest of his gang aside, the fact that we are so close to loosing what was once one of our greatest industrial engines is a damming inditement of this country. If this is the way we allow our industrial base to deteriorate (along with steel and all manner of other industrial and knowledge jobs) we deserve to become the next Briton… So much for the “American Century.”
I’m not surprised about the news. I hope this triggers something in D.C to end this embarrassment. If this doesn’t show the public that these companies have no plan or viability, I don’t know what will.
@ Chris123:
Unfortunately the old saying is true, you don’t know what you got till its gone.
Some of us already know it’s gone, so we know what we had and can appreciate it.
Yes, Pontiac is a “niche” brand, if that means taking a Cobolt and making a G5 out of it. Then, “niche” has a new meaning when we talk about Corvette and Camero as “express value”.
Oh, wait I think I see a whole fleet of “niche” vehicles coming from GM, each one has it’s own special “Marketing Team”. That’s what makes them special.
Seems that Ricky and the Gang still think that they know what the consumer wants, even before the consumer does.
“Turn to page 63, Appendix D: ‘Future Product Launches.’ Holy shit! ‘This page has been left intentionally blank.’
Well, of course it was left blank. Future product launches is terribly important strategic information and access to it must be limited to those who have made a sizable financial investment in the company. Oh, wait … Nevermind.
Re: Bobby F’s alien abduction –
What’s up with aliens and anal probing? I mean come on, if you have the technology to travel the galaxy then surely they have better medical equipment.
Unless, perhaps they’re here not to study us but rather, to party.
Earth must be viewed as some sort of intergalactic Subic City – circa 1970.
@Dr. Remulac :
I agree with you on that. I may not be that old, but my background is in tech – and I lost 5 years of my career in the .bomb implosion… My wife’s family is from Pittsburgh and I see lots or corollaries between what happened to pervious generations and now to us X’ers. I learned from my depression generation grandparents not to complain but I am angry, and this is another symptom of the illness that we did not cause but have to suffer through.
Americans is a young country so we’re often on the first of everything.
First government, first major car company, first big newspaper, whatever.
We don’t get that just because GM dies it doesn’t mean that the car industry is dead. It’s just a company. I don’t view this as the end of the industry, so much as the death pangs of some obsolete companies. What the new order will be is very much up in the air.
France is on its what, 4th or 5th republic, with two or three monarchies in between. It’s still France. England has been conquered many times, it’s still England.
Despite the common perception that America doesn’t make anything anymore, it in fact makes twice as much as it did at the reputed height of our industrial prowess. http://www.federalreserve.gov/pubs/bulletin/2008/pdf/Industrial08.pdf page 13
Whats dying are old companies, old unions. It isn’t the end of the country, it isn’t the end of our industrial capacity. Really, its the dawning of a new day and hopefully we can be a better country without these bloated behemoths destroying billions a month in value. It’s going to be terrible to watch, but really it’s probably for the best.
The emperor has no clothes. I really hope that DC can see through the chutzpah that GM and Chrysler are peddling. Enough is enough; let them die!
Why would any youths want a Pontiac? The sports cars are way out of the price ranges of most youths and the rest is made just for Hertz. It seems to me that Buick and Cadillac are going after the same market. The same can be said for Chevrolet and Pontiac. RF where would I find one of these alien abduction specialists? I need a good laugh.
Gee, it only takes 117 pages to turn GM from a moribund maker of mostly mediocre metal (that’s alliteration, folks) to a cutting edge manufacturer of products that everyone wants. So what’s GM’s excuse for not coming up with the 117 pages 30 years ago when there was still something to save?
So I would gather that TTAC has issues with GM’s re-structuring plan? I’m not that surprised. After all, there is a rabid audience here dedicated to GM’s demise. Due to the extreme economic conditions, most of you may well get your wish. And please stop with the nonsensical gibberish about GM’s falling sales. Aren’t we cognizant that everyone’s sales are spiraling downward?
For the record, the free marketer in me says stop with any government intervention in business. Let the market decide who survives. If GM fails, then an entrepenauer can step in and pick up where they left off.
I’m just so tired of the rooting against the domestics. It is sick.
Great piece, RF.
This crap is making Enron look honest. And the next time a bank exec is called before congress about pay, he should say, “What about Rick Wagoner?”
I mean, holy crap, most media accounts of this soup sandwich are as non-judgmental as the Heaven’s Gate Cult reporting.
Too bad Hale-Bopp won’t be back for a while. There’s a lot of auto execs in Detroit who need to take that ride.
So “Government Motors” just did it’s first “5 Year Plan”. How Soviet of them.
All three of them (wagoner, henderson, and the other guy)are an embarassment to the business schools they attended.
It makes you sick because you realize that you’ve been wrong all this time.
Most of the commentators are not rooting for the demise of the Big 3. Many of us are enthusiasts and would love to see a healthy American car industry. However, they need to do it without my friggin tax dollars.
Yes, let’s reward them for failure. Why, we do that already with today’s children. It’s not about results but about the process. You tried your best and that is all that matters, here’s $22 billion.
I had been thinking that Chrysler is dead, but GM could survive. I don’t think I believe that anymore. I think they are both dead. If the Feds keep shoving money at them, they will collect it, but they are dead. Over. Done. Pau. 30.
They have no reason to exist. Shut them down and auction off the assets.
@ Bridge2far
In some respects I agree with you, there is an element of blood-lust going on, perhaps I’m guilty of it myself. But, as an outsider, it’s hard to argue that the situation has not gone beyond farce.
There seemed to be plenty here that accepted that job preservation was a worthy goal in the climate, but quid pro quo GM should be advancing real changes.
GM management don’t get it; there’s a fundamental flaw par 3, pp 9 “11.5 – 12m”. Even in December that was an insolvent number for them. They can’t fight back from year after year of losses or ‘break even’.
The reset point needs to be MUCH lower.
The underlying hoax in all of this is political.
At no point in the public discourse about GM or the domestic automakers has a realistic number for recapitalizing a specific company been mentioned. The numbers tossed about by the politicians don’t approach what it would require to put even GM on a sound financial footing, one that would enable them to invest the necessary capital in new product development and stay alive until that new product could start making money.
Of course, that level of investment would be pointless without eliminating the causes of GM’s current circumstances, most particularly including the UAW and the bloated benefits they’ve exacted, and of course all of the debt they’ve taken on – including the Bush bonanza of taxpayer largese.
That’s why Chapter 11 should have been the solution long ago. Given that the government would likely be the source of debtor in possession financing if GM were now to do a Chapter 11, there really is no reason to believe Chapter 11 could work for GM, now. The government is not going to provide money to GM in a setting in which the UAW is eliminated.
So, we are left with the taxpayers being stuck with keeping GM afloat, because the government won’t do anything that the UAW doesn’t want. GM may still go Chapter 11 to wipe out the bondholders, but I would suspect the lawsuits on that will last for a decade as the bondholders sue the government for taking their property interests without either process or just compensation.
If the government comes through with the requested largese – and it seems that it’s a done deal that it will – then Wagoner will have succeeded in getting the government too committed to ever change course. GM will continue to suck funds, with no change in management or outlook.
This was actually an incredible opportunity, one handed to Obama on a silver platter by Bush. Obama could have done something intelligent and imaginative, one that imposed a specific mechanism for restructuring within Chapter 11, one that recognized preserving the industry was more important than preserving the UAW or GM’s management, and that preserving some jobs is better than eventually dooming the entire workforce.
But, again, Obama didn’t drop the ball. He hasn’t even noticed that there is a ball.
It has also become abundantly clear that GM and the UAW assumed from the outset that no government would have the courage to tell them no, and that Chrysler figured they’d be able to get a share of the table scraps just for the asking. No doubt Ford has stayed out of this, to date, because letting the government into Ford would, given the Class A, Class B stock which gives the family complete control with very much less than majority ownership, would mean the family would lose control over the company.
Those who enjoy irony can at least take sollace in this:
GM told Congress a little over a year ago that there was no way the domestic auto industry could afford the mileage standards Congress proceeded to impose, anyway.
Now they won’t have to. Congress will be paying for that. It’s almost like Congress paying for its own mistakes.
Except for the part where it’s not really Congress what’s paying.
“Chevrolet = Expressive value. Buick = Sophisticated Quality, Luxury and Craftsmanship. Pontiac = Youthful and Sporty. GMC = Engineering Excellence with Capability and Functionality. Cadillac = Performance Luxury with Aspirational Appeal.”
You have got to be kidding.
GMC = Chevy trucks with a nose job. How do you get “engineering excellent” or “professional grade” out of that? The brand statement must not conflict with reality.
Cadillac, performance luxury? WTH did that come from? Cadillac is not a performance brand, and the attempts to recast it as one only lead to lower sales.
OMG. Branding is about the image of a product in the customer’s mind and takes a long time to build. GM’s latest restatement of its internal brand navel-gazing is just more of the same BS.
So what will the post GM et al world look like without more bailout money as bankruptcy finally happens?
Small towns across the country will have no new car dealers at least for awhile. Larger towns will have fewer dealers. Some repair parts for older models will become hard to find.
Employment in the auto business both in manufacturing and retail will fall. Tax revenue for the government will fall. Drains on the government for unemployment assistance will increase.
The value of used cars from the defunct producers will drop. This will be in addition to the ongoing drop in house prices. The drop in domestic used car prices of the defunct brands will drag down sales for the imports due to the competition. A used Buick might be a better deal than a new Camry if the price is low enough.
It seems to me that the failure of the domestics will not be good news for many. Those who predicted it long ago can jump for joy that they were correct, but for the rest of us it is pretty sad.
@ 97escort
What you write is true but all those things are happening now, it’s just a matter of degree.
With the current non-Ch11 course of action, there is a stalemate, consuming scarce public money, with little structural change, which will have longer term consequences.
Chevrolet = Cheap, and a smattering of Corvette
Buick = Ritalin in a hospice
GMC = Buyers so tenaciously loyal to a brand consisting of rebadged Chevys that GM won’t/can’t kill it for fear of losing their business
Cadillac = CTS + Escalade
@Dr. Remulac,
Well, I have seen a UFO, but I don’t know if I’ll ever see one again, or see GM ever turn a profit again.
I think the odds are better you will see another UFO first…
@Everyone Else,
GM – 117 Pages, $22Bn
Chryco – 177 Pages $5Bn
I didn’t read (grade) the reports but there seems to be a disparity there. I hope this isn’t graded on a Bell Curve.
Of course, that level of investment would be pointless without eliminating the causes of GM’s current circumstances, most particularly including the UAW and the bloated benefits they’ve exacted…
Except that the UAW is at Ford too. I’m not sure Ford will make it, or even has a chance in this environment, but it was profitable before the overall economic collapse, and would be viable in normal times. As often happens, the powers that be wait too long to bring in competent management when a crisis hits.
@ bridge2far:
I hardly consider myself as part of a “rabid audience here dedicated to GM’s demise.” I grew up with GM cars; my user name is from a cherished ’55 Chevy my family had decades ago.
I love going to classic car shows and gazing upon the GM that once was. Unfortunately, it is no more. The company hasn’t made a dime since 2004, well before the current economic meltdown. It can’t survive in its present form, and we taxpayers shouldn’t have to foot the bill to compensate for all the mistakes the company made over the past 35 years.
I see UFO’s every day. Airplanes are always much too high for me to identify them.
RF, I gotta ask – what were you doing at an alien abduction seminar?
Toxicroach I agree completely with you. And am I the only one who has noticed that the overwhelming majority of UFO sightings occur in exactly the same part of the country that has the worst outbreaks of the meth epidemic?
mel23: I’m not sure Ford will make it, or even has a chance in this environment, but it was profitable before the overall economic collapse, and would be viable in normal times.
If I recall correctly, Ford had one profitable quarter before the market collapsed. So I wouldn’t call the company “profitable” based on that one quarter.
What page listed how American consumers are supposed to believe their 20-35K investment is a wise one from a TCO and resale perspective? Are gas guzzling Caddys and Camaros supposed to be the next big thing, or is it a battery powered spaceship with a range of maybe 40 miles?
Cars are flipping expensive and represent a huge loss from a financial point of view, no matter what you drive. Chevy needs to be lean and mean with low ownership costs boosted by high gas mileage. Add in a reliable platform ( and GM CAN do this) and wait 3-5 years. You should see decent resale, provided the rental market is not oversold.
I don’t see this happening even with my tax dollars.
“GM has to build something profitable and then sell a shitload of it/them.”
They already did that with pickups and SUVs, didn’t they? What did they do with the profits from those? Does anybody honestly believe that GM can continue with the current management and structure, and somehow become profitable with bailout bucks?
Rick won’t leave until he will be remembered as the guy who saved GM. By that time the company may have just a 15% marketshare.
toxicroach :
February 17th, 2009 at 10:58 pm
Whats dying are old companies, old unions. It isn’t the end of the country, it isn’t the end of our industrial capacity. Really, its the dawning of a new day and hopefully we can be a better country without these bloated behemoths destroying billions a month in value. It’s going to be terrible to watch, but really it’s probably for the best.
Thank you for that, toxicroach. Amen. With all the hand-wringing over what the Big Three are supposed to represent, reality gets lost. Change is eternal.