GM’s new CEO took to the airwaves on Sunday. If industry watchers had any doubts that Fritz Henderson is cut from the same cloth as his discredited, defenestrated predecessor, Henderson’s appearance on Meet The Press removed them. Like Rick Wagoner before him, Henderson’s facile, vague and evasive responses—re: the epic train wreck known as General Motors—revealed the full genius of the Talking Heads’ lyricists. “You’re talking a lot, but you’re not saying anything,” David Gregory forgot to interject. Alternatively, we could make this Churchillian: Never have so few said so little about so much. Even so, OMG.
There, on national TV, GM CEO Fritz Henderson showed the world (and GM customers) that he’s a craven corporate spinmeister. While trying to reassure everyone about everything, he singularly failed to reassure anyone about anything. In both tone and content, Henderson showed the wisdom of rule number one in How to Succeed in Business Without Really Trying: “get a job in a big firm.”
What GM needs is a CEO who can create root and branch reform. What they got is a man who went out of his way to tell denizens of GM’s poisonous corporate culture that not a single ass is in any danger of being kicked.
No surprise there. Red Ink Rick Wagoner’s hand-picked successor is a caretaker CEO, elevated to his promised position through primogeniture, rather than any talent for crisis management. As planned.
The Presidential Task Force on Automobiles (PTFOA) knew they were going to fire Rick Wagoner before the Treasury Department assigned them email accounts. Steve Rattner and friends had plenty of time to find a Mulally-like outsider ready, willing and able to triage GM ahead of, in the midst of, and after bankruptcy. Clearly, that’s not what the PTFOA wanted. What they wanted was what they got: a patsy.
Henderson is nothing more or less than a powerless placeholder. As the representative of “old” broken ass General Motors, the company’s new CEO is free to tell his company’s new masters how to run the terminally ill automaker. Henderson can advise the PTFOA which national and international brands should survive the forthcoming cull. He can nominate the new product mix. Anything. But the moment Henderson’s recommendations clash with the will of the people, the PTFOA can (and will) turn to him and say “What the fuck do YOU know about it?”
Which is both true and deeply worrying.
Suffice it to say, we could ask the PTFOA the same question with even LESS chance of a satisfactory answer. Although the majority of their members drive foreign cars, the task force has no more idea about successful automotive design, branding, marketing and sales than GM’s current management. If TTAC’s Best and Brightest are still arguing how to “save” GM, what chance do a bunch of politically appointed ex-journalists, lawyers and professional bureaucrats have?
Never mind. Despite their ignorance over industry matters, Barack’s automotive army is large and in charge. And they aim to keep it that way. Surrender power over GM’s fate to a new, independent, charismatic CEO? No way. Not yet, anyway. Not until the Treasury men have done whatever it is they need to do (they’ll figure that out as they go) to “protect the taxpayer.” Oh, and save the planet.
Yes, there is that. Pundits who read the PTFOA’s excoriation of GM’s vaporware Volt mistake the quango’s criticism of a tree-hugging Hail Mary as recognition that GM has to, you know, sell something that people want to buy—even if it’s not an electric car.
Wrong. President Obama’s base demands federal intervention within the evil, electric car killing industry. The feds must reduce global warming, eliminate SUVs and generally get American consumers to do the right thing, whether they want to or not. Believing that PTFOA have subsumed the president’s political agenda to the gods of ROI is, at best, naïve.
As Henderson’s appointment reveals, as the increasing chatter about a “quick” (i.e., non-judicial) bankruptcy indicates, the PTFOA are ensuring that THEY will decide which bits constitute the new, healthy “good” GM, and which bits are shunted into the old, “bad” GM. “Good” as in environmentally and union-friendly, built wherever supportive votes may live (think defense industry). “Bad” as in anything that isn’t environmentally and union-friendly, built outside fertile Democratic voting territory.
It won’t work. At this point, I can’t see GM emerging from bankruptcy as a lean, mean organization, building [at least] two brands’ worth of world class, competitive products.
Perhaps I’m wrong. Maybe the PTFOA will eventually step aside for the next presidential proxy. Maybe he’ll be the savvy kick ass CEO GM needs to survive. Until then, Henderson. As New York Times columnist Frank Rich said, change is traumatic. We ain’t seen nothing yet. Then again, maybe we have.
The government has a few basic options.
-Find a buyer for GM, ASAP.
-Attempt a turnaround
-Wait for the economy to rebound enough that GM can be folded without an unacceptable level of economic harm
Finding a buyer is the obvious and most appealing choice, because it involves the least amount of work. But it won’t be easy. It’s relatively easy to marry off Chrysler, which is smaller and an obvious fit for a few players, while GM is a big fish to swallow. It will take a while to find a new home.
Attempting a turnaround isn’t a bad choice if it can work. But it is tricky, and could be expensive. Obviously, it can’t happen overnight, and the risk of failure is high.
Killing the company may be the best choice in the long run, but the timing isn’t quite right. Until an economic recovery is clearly underway, the guillotine would be costly.
In all of these cases, Wagoner had to go. He was a clear impediment to progress, with a combination of stubbornness and incompetence that left little choice but for them to remove him. The only reason to have kept him would have been if the company was immediately shut down or sold off. Since it won’t be immediate, he needs to go.
Meanwhile, Henderson can either hang out until there is a buyer, or else until a replacement is hired. He’s relatively benign and can be shifted aside when necessary.
This move tells me that the government is keeping the turnaround option open, but isn’t fully committed to it. I’m sure they’d rather sell the company, but selling it soon is likely unrealistic, at least if it were to be to a buyer who we can live with politically (translation: not a Chinese company.) My guess is that they will shop it and then find a replacement for Henderson if the prospects of a sale look dim.
Reading between the lines, the task force seems to get the cultural problem. I sure hope so, as most of Wall Street never saw it, and they had decades to figure that out.
How to Succeed in Business Without Really Trying
Bravo. I thought I should get a job at GM when I saw that show for the first time a few years ago. But, you really should not take career advice from musical theater.
I really don’t care what kind of CEO Henderson is. They named him the “intern” CEO for a reason. As soon as Obama can find a new one (Or the 60 days are up and it is time for Chapter 11), Henderson is going to be shown the door.
The PTFOA is hell bent on setting up a “new GM” that still won’t be making vehicles the people want to by. The power base for the current administration is likely to get blown out in the 2010 elections and a lot of the foolishness reversed. Then GM will have a pipeline full of high cost “green technology” vehicles that only the environmentalists and techno-lovers will want.
The “GM Death Watch – the Next Generation” can start as soon as the “new GM” is born.
They named him the “intern” CEO for a reason
Steve Jobs spent the first few years of his second tenure at Apple as interim CEO. He also kicked ass and took names in the first few months.
Being “interim” could give you the freedom to make a lot of necessary, if politically problematic, choices, without the risk of serious internal retribution, or without being left as the one holding the hot potato. That Henderson is acting more like Rick Wagoner and less like Steve Jobs (granted, Apple never asked for a bail-out) is rather telling of the man’s character.
During the interview on “Meet the Press” at least he was honest in how much money he gets as a salary, what he didnt say was how much he gets under the table, more or less.
I agree he was tarred with the same brush as was the outgoing and gone R. Wagoner, they both worked together, so don’t expect much change in the operation of General Motors!
pch-I think the populace is hostile enough more bailouts that this 60 days maybe just to get them used to/educated on the idea of C11 for GM. The factory workers at our plant seem to feel the GM employees have done it to themselves.
Politically BK may beat more bailouts now, even for a Dem.
I’m geussing that C11 is a done deal. But they can’t call it now with out sales tanking further and bloating the inventory even more. So we pretend for two months that it’s an “option”.
Personally, I think sales may dive (more steeply) anyway at GimMe and Cryslur in April (consumers are more aware of the situation than 7 days ago). If it is really nasty the Feds may flush at the end of the month.
Thoughts.
Bunter
I’m guessing that C11 is a done deal.
If it was, then I suspect that Wagoner would still have a job. No need to make changes if the end is near.
Nardelli still has his. He should be the one who is worried.
“Good” as in environmentally and union-friendly, built wherever supportive votes may live (think defense industry). “Bad” as in anything that isn’t environmentally and union-friendly, built outside fertile Democratic voting territory.
Mr Jenkins at the WSJ editorial page thinks the same basic scenario will play out.
I sure hope not. Turning GM into Government Motors and then Democratic Motors will not be good for the nation or GM.
COMING THIS SUMMER
General Motors Deathwatch 2: The Second Series
Birth and Death of the “New” Government Motors
At a Theater Near You
DON’T MISS IT!
… ahem!
One of thed problems with a turnround (with or without C11), is the damage it could do to the others – Ford and the transplants. At this stage does the US really want to cause a Jap auto company to fail because of ‘unfair’ practices by agovt-supported GM? The world is near enough to protectionism with the US giving anyone an excuse. France is already mumbling about WTO because of the existing bailout.
PTFOA’s grand experiment into national industrial policy, whereby an untenable political agenda is forced to collide with the realities of profitable car making (and selling), will have predictable results akin to the Manhattan project: A nuclear explosion where the end products are the total incineration of billions of taxpayer bailout bucks and GM itself, and the resulting economic and political fallout.
Of course, it’s not like this is the first time this has been tried. The Brits nuked their indigenous car industry in much the same fashion back in the ’70s. But who are we Americans to learn anything from history?
“THE” problem is that there are SO many inescapable problems.
Realize that 15 million units aint gonna happen in the US anymore. Will be lucky to hit 10. And that missing 5 is by and large coming outta Detroits hide. Now are they going to make products that pretty much compete globally and may be exported(yeah right) or do they think that theyre going to build more acres of unsalable crap?
Dealers are screwed on many levels…lack of product, lack of “gotta have it” product, prospects drying up or dieing, no financing for said product or customers, lots of animosity from all of the above.
Waggoner, Lutz, UAW, etal pimped the golden goose for so long that now its DEAD. How is anyone going to get another egg out? Maybe wish for another goose or another wish?
“David Gregory forgot to interject.”
Gregory is a huge disappointment. Tim Russert set a high bar for quality interviewing, and David isn’t even in the same league.
never has so much been said by so many uninformed. The automobile business is far more complicated than anybody here seems willing to acknowledge. GM will survive despite all you are trying to do to kill it. Funny how this site doesn’t like you “flaming” the site or it’s commentators but everyone is free to “flame” GM and promote their favorite import. What’s the difference between a porcupine and a Porsche?
@John Horner:
Gregory was the best they had… says a lot about what’s happened to NBC. Chuck Todd would have been a better choice, but not much better.
@SSR1212:
The auto business is no more complicated than many other business. The problem with GM and Chrysler is that their products are not selling in enough quantity at a price that makes these companies profitable.
“GM will survive despite all you are trying to do to kill it.”
Sure, at the teat of the taxpayer.
I saw David Gregory interview John McCain last summer. Poor old John couldn’t even draw in a breath to respond before Gregory interjected his own answer to the question. I mean, he was so rude and clearly agenda-driven it make O’Reilly seem like a graduate of the Miss Manners school of TV Journalism.
I saw Sunday’s interview with Mr. Henderson too. Gregory was as facile as any media servant of the new regime should be – I guess.
All great theatre, this. Hide your money!
I can’t see GM emerging from bankruptcy as a lean, mean organization
The automobile business is far more complicated than anybody here seems willing to acknowledge. GM will survive despite all you are trying to do to kill it.
No, the car business isn’t that complicated. You simply have to make enough cars that consumers will buy and do so at a profit. GM hasn’t been able to do that for years. That is as simple as it gets.
SSR1212,
Hang around SSR1212 and you will find that many here on TTAC including the ones commenting on this topic are VERY imformed on the auto industry. GM attracts a lot of flaming because it deserves it. GM may survive in some form but it will not look anything like it is now, nor should it. Consider also that while you will see much critism of GM from people on this site, it does not always mean that they are happy about the demise of a great American company. It has become obvious to me over time that most of GM’s biggest critics are also saddened to see it’s decline. The reasons are many and varied but the demise of GM and Chrysler is nothing short of a national disgrace.
I’ve personally gone out of my way TO buy GM. I come from a GM family, if you will. And somewhere along the way, when you’re faced with a blown head gasket or a blown transmission…you come to the conclusion that you are getting royally f’d.
Yes, I used to be the one at work who would say “You know, GM cars/trucks really AREN’T that bad!!”….until *I* was the poor sucker staring a shit-eating grin across the counter asking for $1000+.
Never again. I’m still driving it…but it will be my last. No amount of “loyalty” has ever been returned to me…either in the way of a financial break on repairs or even so much as an ounce of gratitude.
At GM, the company runs of one belief and one belief only: “Take as much as you can…and now!”
F ’em, they are done…self-inflicted suicide is always a disgrace.
I have a simple question.
If the existing GM management is selling cars that nobody is buying (hence GM being on the verge on bankruptcy), is it really such a bad thing to force GM to make different cars that people may or may not buy?
Or are we defending GM’s right to make as many Hummer H2s as it wants, regardless of the consequences?
As someone that has a dog in this fight,I,m thinking its a little early,for Fritz bashing.
Mr Henderson has been CEO for what,a week?As the
DW points out,he serves at the pleasure of the PTFOA.
Fritz is an unknown quantity.When he was number two man,of course he supported whatever position t Rick W, took.Who the hell wouldn’t?I believe that Fritz is more than a Rick W clone.
I’ll give him 30 days.At that time we will all know what Fritz is made out of.My guess,a lot of folks will be suprised.
I will reinforce the car industry is much more complicated then most understand.
yes, you have to sell enough cars to make a profit, but being an automaker requires much more overhead then most industries. Customers buying auto, usually based on some emotional decisions. Right now the industry is 3x over capacity. That’s a lot of excess capacity that needs to go away.
Last summer was an absolute indicator of why the govt should not be making product decisions. When fuel costs soared, the populace switched from trucks and SUV’s to small cars at an unprecedented rate. A 0.1% shift in market sales in one month would be considered huge, and all the automakers were seeing shifts upwards of 10%… a 100x change. What was incredibly telling, when fuel costs crashed, the market switched back to their old habit, albeit with much smaller sales. The green quintessential perfect car, the prius, is seeing some of the largest sales drops of any car. New cars take 3-4 years at any mfg, try planning for the future 3-4 years later, especially when the entire worlds economy is imploding. Ford got lucky with a visionary who recognized having all your eggs in one basket is not conducive to longevity. But, it’s not showing up in the sales, yet. With Honda and Toyota seeing huge sales drops and receiving govt funding, when will see the cry for their heads and demand their employees pay be cut?
I was a bit surprised to see the March sales numbers drop as far as they did, had expected to see some leveling out. Maybe Shiff is right, we are no where near the bottom.
What’s so frustrating, the “southern” auto industry had hundreds and hundreds of millions thrown at them to become established, and yet it’s sacrilegious to throw any money at the D3. Wall street may have created the rich, out of vapor money, but it was the mfg base that created the middle class.
First, I like Fritz. second, he didn’t answer many questions directly or convincingly. thought Gregory did okay.
Wagoner and the BOD have allowed the situation to become seemingly hopeless. But with the national and even global economy sinking without significant improvement from the efforts made so far, it seems reasonable to try to avoid or at least ameliorate the additional load likely to be imposed by total stoppage of GM, it’s suppliers and others involved. The sad fact is that nobody knows how to fix any of these disasters. It’s easy to say ‘let it crash’, but then we’d be bitching that ‘they’ should have done something.
It’s odd that folks expect more from GM leadership. They aren’t the stakeholders.
The bondholders, board of directors, shareholders, UAW are the stakeholders. (US government isn’t really.. they are just helping to pay for the funeral for a dear friend who died penniless)
Implicitly all of these stakeholders decided one by one to not fix GM. They all made conscience decisions that it’s not worth fixing.
Ask yourself why any of these stakeholders didn’t just take over GM and “run things right”?
GM isn’t the problem.. Chrysler isn’t the problem.. Too many auto companies and too much production capacity are the core root causes of everything else.
Give GM $5B, shut down Toyota, Honda, Ford and Chrysler and GM will have paid back the government loans, paid off all debt and have billions in the bank faster than any of you can imagine.
Not that I have any information or that the government cares what my tax money is spent on but…
I think the Grand Plan is to find a way to have UAW people build nice green cars and try to ram them down the throats of all of us.
First come public purchases to get the factories going, tax dollars buy cars there. Then punishing the transplants through either taxes on their product or tax credits for government produced cars.
There are other insidious tricks a government can pull when it has a stake in one player. This is the danger in this venture, we are turning over a large amount of our economy to the government. And it will not stop with GM. After all, there are other companies lining up for free money too.
Sad. Cadillac was on the verge of… something. Oh well.
@pch101
-Wait for the economy to rebound enough that GM can be folded without an unacceptable level of economic harm
I believe you have the answer.
Suffice it to say, we could ask the PTFOA the same question with even LESS chance of a satisfactory answer. Although the majority of their members drive foreign cars, the task force has no more idea about successful automotive design, branding, marketing and sales than GM’s current management. If TTAC’s Best and Brightest are still arguing how to “save” GM, what chance do a bunch of politically appointed ex-journalists, lawyers and professional bureaucrats have?
Is their chance really any worse than a GM lifer and a loyal board of bystanders? Sure, I suppose we’d all rather nominate Lee Iacocca to run GM, but between GM lifers and the G-men, I’ll go with the G-men. I don’t see how they can screw it up any worse than the GM-men.
Wrong. President Obama’s base demands federal intervention within the evil, electric car killing industry. The feds must reduce global warming, eliminate SUVs and generally get American consumers to do the right thing, whether they want to or not. Believing that PTFOA have subsumed the president’s political agenda to the gods of ROI is, at best, naïve.
Part of his base, as mentioned here almost daily, is the UAW. You really figure most of those guys are tree huggers who want EVs and to kill off the SUV? In the larger sense, his “base” is the slight majority of voters who preferred him to McCain. You really think a majority of this country are crunchy granola green weenie types? This silly sort of stereotyping doesn’t help to analyze the situation correctly.
All BO wants to not have GM crash right at this moment, when the economy is in the tank. Secondarily he’d like it to survive and fight again another day. He may only get his first wish, but there is no sinister plot to foist EVs on an unwilling public.
Henderson is nothing more or less than a powerless placeholder.
This I think is correct.
As for picking the good and bad parts, I think that’s pretty easy. I would guess 90% of the B&B think the good parts are Chevy/Caddy. I’m guessing the PTFOA will come to much the same conclusion.
Is their chance really any worse than a GM lifer and a loyal board of bystanders? Sure, I suppose we’d all rather nominate Lee Iacocca to run GM, but between GM lifers and the G-men, I’ll go with the G-men. I don’t see how they can screw it up any worse than the GM-men.
You’re starting from a false assumption: that it’s OK for the feds to be running a car company. That it not a safe assumption. More than that…
If a GM lifer and his loyal board of bystanders run a car company into the ground, so be it. At least they are making their boneheaded decisions on behalf of the people who own the company. People whose goal is/was making money.
(Lest we forget, this they were supposed to do by building cars that people wanted to buy and maintain at a profit. In other words, they were supposed to run the company for the benefit of their customers. Win – win, in theory.)
If a government agency runs a car company, they are beholden only to their boss, who is beholden to the electorate. Unlike the people who USED to own GM, the electorate and, by extension, the elected officials running the show, have goals unrelated to profit and loss. That’s not good for GM or their “stakeholders.” It lets them continue to take their eye off the ball: the consumer’s self-interest.
Part of his base, as mentioned here almost daily, is the UAW. You really figure most of those guys are tree huggers who want EVs and to kill off the SUV? In the larger sense, his “base” is the slight majority of voters who preferred him to McCain. You really think a majority of this country are crunchy granola green weenie types? This silly sort of stereotyping doesn’t help to analyze the situation correctly.
First, the UAW are in the tank for the Democrats. What are they going to do, convince their members to vote Republican? Second, the UAW couldn’t give a shit WHAT they build, or if it makes a profit, as long as they get their pay and bennies to build it. Third, Obama ran on a green jobs for Michigan and the midwesy, anti-SUV, pro-fuel efficient, anti-global warming, pro-CO2 regulation, reinvent Detroit platform.
I do not think the majority of Americans are tree huggers. But Obama has his mandate. And his mission.
All BO wants to not have GM crash right at this moment, when the economy is in the tank. Secondarily he’d like it to survive and fight again another day. He may only get his first wish, but there is no sinister plot to foist EVs on an unwilling public.
That’s not what BO said in his press conference. He specifically expressed his administration’s desire to see GM (oh and Chrysler) return to greatness (sorry Jim). You’re free to read between the lines (a TTAC speciality), but I warn you that projecting your own common sense onto a politician or a sinecure of bureaucrats is an inherently risky proposition.
I would guess 90% of the B&B think the good parts are Chevy/Caddy. I’m guessing the PTFOA will come to much the same conclusion.
Insufficient info. What is Chevy? Rebadged Korean imports? Canadian-build Camaros? Federally-subsidized plug-in electric gas Volts? Does Chevy get orphaned Saturns/Opels? GMC trucks? As for Cadillac, the idea of BO administration overseeing a car company making elitist luxobarges is patently ridiculous.
Bottom line: the PTFOA is not a carmaker. The PTFOA is a carmaker. Either way, how does GM win?
SSR1212
i agree with you %100 on all aspects of your comment. i see a lot of astroturfing here.
I do not think the majority of Americans are tree huggers.
I have to disagree with this. I think, given a choice, we (Americans) would choose to save resources. I look forward to the next generation of turbo/diesel/hybrids.
But Obama has his mandate. And his mission. You forgot vision. And he brings all three.
Detroit needed this make-over long ago. Sadly, its coming with a pound of pain.
/I’ll put away my Kool-Aid now
I also watched Henderson on Meet the Press. I came away with the thought that “this guy is NOT a car guy!”. Not once did he mention what types of cars GM would build for the future. It was all spin. Get rid of him.
You’re starting from a false assumption: that it’s OK for the feds to be running a car company
In fact, the government has a fairly good record at temporarily taking over distressed companies, cleaning them up and selling them back to the private sector, such as ConRail. Not a perfect record, but not any worse than “Chainsaw Al.”
The assumption that Obama wants to take over GM to force the public to buy “green” vehicles is just a ridiculous “dittohead” fantasy.
Talk about Obama derangement syndrome…
Anyway, Henderson is there to babysit until Chapter 11. Not bad work if you can get it.
I actually think the ONLY reason Rick W got fired is because there was a no-brainer replacement available. The PTFOA wanted to look like they were being tough without actually having to take the responsibility of finding a successor. The fact that Rick had a mini-me ready to go was actually his undoing.
Also, I’m surprised you didn’t mention On-the-Fritz’z comment that he was keeping his $1.3M salary because he had already “sacrificed enough.” Nice.
@Robert Farago
“Bottom line: the PTFOA is not a carmaker. The PTFOA is a carmaker. Either way, how does GM win?”
The PTFOA’s abilities notwithstanding, their only sin was in failing to sack the GM BoD and the entire management team. GM has a well-documented (on this site, even) cancer of the head; removing the Wagonerion pimple at the top of the cancer did not remove the disease.
GM has demonstrated that they have a body of people capable of designing and manufacturing excellent automobiles, union issues aside. GM “wins” when they get a motivated group of managers whose job is to produce the best products in the world. If we taxpayers are investing in a car company, and W solved that for us, we are now faced with a choice to keep the people who know how to do it and replace those those who brought them to the brink, or just let it go down the drain.
I don’t know if there are enough talented people around who are willing to take a stab at this, but I do think it’s worth a shot and even with my money.
In fact, the government has a fairly good record at temporarily taking over distressed companies, cleaning them up and selling them back to the private sector, such as ConRail. Not a perfect record, but not any worse than “Chainsaw Al.”
Correct. Rather than repeating the bad government Reagan chant, we should judge this by what specific business and strategic management decisions are made, rather than whether they fit into a preconceived ideological political mold.
I am not exactly thrilled to pieces by the thought of government overseeing the operations of an industrial or consumer products company. Under normal circumstances, I would oppose it on principle. But these are not normal circumstances and drastic measures are needed, given the financial nuclear bomb that went off last year. I say that not because of any love for General Motors — I don’t have any — but because of issues that extend well beyond GM.
So far, the task force has accomplished a fair bit. They’ve accurately diagnosed the problem, and have begun the process of rolling the right heads. Whether this will work remains to be seen, but if we judge them by their actions, then I’d say so far, so good.
If they deliver on their promises, the task force will be overseeing many initiatives that are similar to what this website has been recommending for a long time. At this point, quibbling over who carries out the mission strikes me as a flawed argument.
The private sector failed to get it done, despite ample opportunities to do so. If the government ends up looking better, or at least equally flawed, don’t fault the government for being imperfect, but the private sector for being too shortsighted and susceptible to its own forms of cronyism and office politics to sort it out.
pch101, to the extent that it was a good thing that Wagoner got canned but a bad thing that it fell to the government to do it, I agree with you. On the rest of it…well, we’ll see.
RF – another excellent commentary.
Could the folks who post support for Fritz Henderson be fellow GM execs – nuzzling up for a promotion? Only equally delusional people would come away from watching the interview on “Meet the Press” with a favorable impression.
Maybe they are related to Fritz… in any event, he is clearly incompetent to be CEO of GM. He might do well as “Manager of Pencils”, in the Paper Department but other than that, he is in way over his head.
My question is why did David Gregory not challenge the non-answers and evasions?
Pch101 :
April 6th, 2009 at 2:58 pm
Finding a buyer is the obvious and most appealing choice, because it involves the least amount of work. But it won’t be easy. It’s relatively easy to marry off Chrysler, which is smaller and an obvious fit for a few players, while GM is a big fish to swallow. It will take a while to find a new home.
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Well, it’s very easy to find a buyer of GM. It’s very hard to find a buyer of GM+UAW.
Well, it’s very easy to find a buyer of GM. It’s very hard to find a buyer of GM+UAW.
I suspect that the executives at Opel or Saab would not agree with you. Things have been lonely over there.
cardeveloper :
April 6th, 2009 at 7:00 pm
Ford got lucky with a visionary who recognized having all your eggs in one basket is not conducive to longevity. But, it’s not showing up in the sales, yet. With Honda and Toyota seeing huge sales drops and receiving govt funding, when will see the cry for their heads and demand their employees pay be cut?
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1) It’s not showing, because of all the bailouts that GM received (which served as sales discounts). Currently, GM receives $10k bailout for every car produced. If the Fed can give GM $100k bailout per car, GM would be invincible.
2) How much government funding did Honda receive? When? Where?
3) Honda just cut the pay of every Honda employee.
Pch101 :
April 7th, 2009 at 6:03 pm
I suspect that the executives at Opel or Saab would not agree with you. Things have been lonely over there.
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Simple. Either GM expects too much, or the local government put a string on job protection.
Otherwise, I will bid $100 for the Saab logo, and fire all the workers. Done.
But I guess someone will outbid me.
Simple. Either GM expects too much, or the local government put a string on job protection.
Your analysis would be more credible if it involved some recognition that the entire rise and fall of the industry doesn’t revolve strictly around unions.
The Germans sell cars for beaucoup shekels, even though they have some of the highest priced workers on the planet, with deals that make the UAW look like pussycats on catnip.
Cerberus bought Chrysler — OK, they took it for free — even though there was a union.
GM has numerous issues, and the dying union is fairly low on the long list of woes. It’s not wonderful, of course, but it isn’t a make-or-break problem, as NUMMI, Daimler and Cerberus have all made clear.
One of the main problems with selling GM as of today is that it is just too big. It needs to be shrunk into a manageable size in order to make it easier to swallow. Its capacity is substantially greater than anyone who might possibly acquire it.
Another is that nobody (or at least nobody in countries that we like) has any money or credit to buy it. Given today’s credit markets, they will require a consortium of buyers and/or government assistance, either in the US or abroad, to swallow such a big fish.
A buyer of GM’s North American business would have the challenge of creating a portfolio of brands and cars that people would want to buy, while selling enough trucks in the meantime so that they are able to go the distance. This won’t be easy; Toyota, Honda, and Hyundai aren’t going to kick back and relax while the competitor catches up.
Meanwhile, the European market is mature and saturated, with even more competition than North America. That limits the audience that might entertain an acquisition of Opel, as the deal has limited upside.
You could shut down the union tomorrow and replace every line worker with Starbucks barristas, and still struggle with it. You try selling non-UAW-built Aveos, and sell how well you do with it.
Pch101: You try selling non-UAW-built Aveos, and sell how well you do with it.
Selling Aveos? Why don’t you ask us to do something easier, such as turning lead into gold…
Pch101 :
April 7th, 2009 at 7:05 pm
Your analysis would be more credible if it involved some recognition that the entire rise and fall of the industry doesn’t revolve strictly around unions.
The Germans sell cars for beaucoup shekels, even though they have some of the highest priced workers on the planet, with deals that make the UAW look like pussycats on catnip.
Cerberus bought Chrysler — OK, they took it for free — even though there was a union.
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We are not discussing the rise and fall of the industry. We are discussing the rise and fall of Chrysler, relative to other car companies.
No German brands have been sold in recent years. (VW was sold, but to another German company. The context didn’t change.) So your German example is void.
Chrysler was valuable with the factories and brands. Cerberus got it for free, indicating that the union was a negative value.
If UAW wasn’t the blocker, why don’t Obama & Co. just auction off GM with no strings attached?
The real blocker is UAW, which equates Obama’s re-election.
What’s up with all of this whining about the President “running” GM? This place is starting to sound like a bunch of sour grapes Republicans who are ticked off thet Grampy McCain lost the election. The people spoke in the last election and replaced the idiots who brought us this crummy economy. People will buy cars again when they feel confident they won’t get fired from their job. That’s the bottom line. Until then, we can all sit here and pontificate about the fates of GM and CHrysler, but the fact is when the populace has regained confidence (and kept or got a new job) they will buy cars from whoever the hell is left building them. How about this for all the anti-union comments: let’s have non-union Chinese workers build cars and if you think quality is bad now – you’ll want the UAW back.
No German brands have been sold in recent years. (VW was sold, but to another German company. The context didn’t change.) So your German example is void.
Not on point. The issue here is that high wages don’t prevent car companies from making cars that command high margins and generate profits. A Daimler worker gets high wages, and his employer pays them by selling Mercedes vehicles at high prices.
Detroit sells vehicles at low prices with steep discounts. That’s a losing strategy. A company with high costs has to make up for them by finding a way to pass them through. Go drive a Sebring, and you can see why that they aren’t able to do that.
Cerberus got it for free, indicating that the union was a negative value.
That’s an odd and inaccurate way to interpret the deal.
Chrysler is losing money, because it builds stuff that people don’t want and sells it at low prices. Top-line revenue compares poorly to the profitable competition. Drive the cars, and it is easy to see why that is.
If UAW wasn’t the blocker, why don’t Obama & Co. just auction off GM with no strings attached?
You should look at their balance sheets. They have plenty of strings attached in the form of secured debt and bondholders, along with abundant exposure to the credit default swap market. One doesn’t simply snap one’s fingers and sell an entity with few revenue generators and plenty of creditors.
Your analysis remains poor and tunnelvisioned in its lack of scope. As noted above, a buyer would require tens of billions in working capital to buy these companies. As bad as they are, their main hurdle is not the existing liabilities but the ability to fund future operations and achieve profit. That’s particularly true in an economic environment in which revenues will be poor for some time, and commercial credit difficult to obtain.
Even if you could buy it for $1 without any liabilities, you’d still have to have $50-100 billion at your disposal to buy a company such as GM and make it go the distance. Getting rid of the union would solve little or nothing; you still need to develop, build and sell cars.
As bad as they are, their main hurdle is not the existing liabilities but the ability to fund future operations and achieve profit.
That’s not necessarily true, since they’re part of the same equation. Liabilities mean less with growth, but given that the auto industry is quite mature, any buyer should care.
These things often get pushed under the carpet because financial “analysis’s” of such deals tend to be overly optimistic in projecting the future. After all, there’s less money in doom and gloom.
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The real blocker is UAW, which equates Obama’s re-election.
I’m glad you set everyone straight on his strategic swing bloc.
I guess they could always vote for the other party. I mean, why give a shit about employment when you can bash on gays and brown people or other things of that nature.