GM is re-organizing its corporate structure. It’s putting its eight brands into four divisions under four car czarettes, in a three-three-one-one configuration. For those of you who can’t guess which GM brand will go with which (as there’s no neat, logical way to make these groupings), it’s Cadillac, Hummer and Saab; Buick, Pontiac and GMC; and Saturn and Chevy on their lonesome. “We are further streamlining the organization,” GM’s President of North America announced. “To reduce complexity, align resources to improve the consumer experience and improve bottom line business results." It’s a deeply misguided maneuver.

The problem with GM’s restructuring is patently obvious. What exactly does the Cadillac brand have to do with Hummer? Caddy is supposed to be GM’s upmarket answer to BMW, Mercedes, Lexus and (less charitably) Infiniti and Acura. Hummer offers a limited range of pseudo-military, gas-guzzling off-roaders competing with Jeep, Land Rover and Toyota’s Land Cruiser. Saab– an ostensibly Euro (Nordic?) near-luxury brand– is a better fit with Cadillac. But better doesn’t mean good.

The combination of Buick, Pontiac and GMC (BPG in GM-speak) doesn’t offer even a glimmer of unifying logic. Doctors cars (and a CUV), performance-oriented vehicles and gussied-up Chevy trucks? It’s like lemon maple fudge ice cream. Although no one at GM (or within the automotive media) seems particularly bothered by this bizarre new “sales channel” development, how is the “customer experience” improved by the creation of such an odd trifecta of car brands? 

If the customer-facing side of this concept is dubious to the point of dementia, reorganizing GM to “streamline” the bureaucracy to reflect these shotgun marriages makes even less sense. In fact, by placing BPG and, uh, CSH into twin fiefdoms, GM is reinforcing a mistake of gargantuan proportions, guaranteeing that it will forever remain in branding Hell. Think of it this way…

There is no way GM can create compelling products that sustain eight coherent automotive marques by grabbing a generic anycar off the shelf and tweaking it here and there to fit some pre-determined idea of a brand's demands. In theory, perhaps. In practice, the Saab 9-7X. With large scale intra-brand platform, drivetrain and components sharing, the temptation to cut corners, to dumb-down the possibility of brand-specific excellence for “easy money” or the greater good, is simply too great. Ipso facto.

Consolidating BPG and CSH is bound to accentuate this problem. While turning eight hungry mouths into four must be an orgasmic idea for GM’s Beancounter-in-Chief and his Beancounter COO, it will destroy what little remains of GM’s octo-brand equity and sink the company even deeper into its current morass of mediocrity. That’s because maintaining brand independence is not an administrative issue. It’s the key to excellence.

Great brands– and thus great products– are the result of a corporate culture deeply dedicated to particular way of seeing the world. You can argue about BMW’s realization of its "ultimate driving machine" ethos, but this guiding principle dominates every aspect of the German automaker’s existence. You can see it in the choice of office furniture. The pictures on the wall of their HQ’s cafeteria. The hushed tones in the waiting room. And you can feel it around a corner, even in Bimmer’s most “piggish” vehicles.

Compare and contrast this situation with Saturn. If “what is a Saturn” is a tough question, “WHERE is Saturn” is a logical corollary. BMW may have field ops in Spartanburg and Shenyang, but its heart is in Munich. You could make a coherent argument that the Saturn brand died when they left Spring Hill, Tennessee; a southern enclave whose honesty and friendliness informed the entire company.

Putting Buick, Pontiac and GMC under one roof– whether metaphorically or literally– will rip the heart and soul out of all three brands. In many important ways, they will simply cease to exist. The same Borg-like assimilation will afflict Cadillac, Hummer and Saab, with equally disastrous results.

Greater integration of executive control for these six GM brands is the exact opposite of what The General should be doing to guarantee their survival– if their survival is, indeed, the goal. It will accelerate the process of badge-engineering that has bedeviled the company post Alfred P. Sloan. And, ironically enough, the consolidation of power under two executives will exacerbate the executive infighting that has been the hallmark of GM’s long, slow, painful fall from grace.

If you doubt the accuracy of this analysis, re-read Troy Clarke’s quote at the beginning of this article. While the Prez’ suggestion that GM should “reduce complexity” is about as controversial as motherhood, the main, indeed central problem with GM NA is that its products LACK complexity. Or, more accurately, individuality. How does placing six disparate brands into two new fiefdoms create distinct, distinctive and marketable products? Answer: it doesn’t.

In 280 BC, King Pyrrhus took on the might of the Roman Army– and won. In one of history’s most insightful strategic assessments, the King surveyed the corpse-littered battlefield and concluded, “one more such victory shall undo us.” Since then, the term “Pyrrhic victory” describes a conflict in which a force expends so much energy winning a battle that it loses the war. It’s a lesson General Motors seems determined not to learn. The latest chapter in this continuing saga of self-delusion: the Buick Enclave. The Enclave is a false promise that illuminates GM’s strategic poverty, and its resulting weakness.

By now, Buick should be dead, its resources folded into the remaining GM brands for the greater good. The fading tri-shield is an icon for retirement home parking lots. The average buyer’s age is 65. U.S. sales have tumbled to just under 186k vehicles in 2007, falling by more than 50 percent in five years. In fact, Americans purchased fewer Buicks in 2007 than in 1937, during the Great Depression. Even Oldsmobile was moving more metal when it was axed in 2000.

But a funny thing happened on the way to the graveyard: last year’s launch of the Buick Enclave. The crossover garnered the sort of positive buzz that was once unthinkable for a Buick. The Lambda-platform CUV has earned accolades usually reserved for luxury imports, with waiting lists and inventory shortages to match. It’s not just the fanboys– even the Wall Street Journal, Automotive News and the Guardian has trumpeted its success.

Some of the resulting optimism for the Buick brand is understandable. Enclave buyers belong to a highly coveted pool, sporting an average age of 53 and median annual household incomes of $130k. By appealing to high earners, the Enclave generates substantially higher revenues than its fellow Lambda triplets. J.D. Power reports recent average transaction prices of $38,479, $3500 greater than the mid-tier GMC Acadia and more than $5600 above the Saturn Outlook. Thanks to Enclave’s sales performance, Buick’s overall transaction prices increased 16.1 percent over the year, substantially outperforming the industry average of 0.6 percent.

The actual sales figures, however, are less inspiring. At its current sales pace of about 45 – 50k units per year, Enclave deliveries lag behind such rivals as Lexus RX and Ford Edge, as well as its badge-engineered brother, the GMC Acadia. Those hoping for a Lambda-based home run will need to find another ballpark.

A closer look at the much-ballyhooed inventory shortages reveals that the General botched the Enclave’s launch. The CUV’s initial scarcity was not caused by staggering demand, as GM had boasted. Rather, a parts shortage was the culprit, suggesting a mismanaged supply chain. Moreover, Buick’s previous CUV experience could be a bad omen for the new kid in town. The Rendezvous also initially outperformed expectations before it fell off the charts, fell into a rat hole and died.

Buick’s ongoing plunge is dramatic enough to make the Titanic look seaworthy. Buick’s sedan lineup is speeding toward irrelevance. Sales in 2007 tumbled 23 percent, as the Lacrosse and Lucerne both posted double-digit declines. 2008 promises to be a repeat; year-to-date March deliveries are down almost 15 percent from last year. 

This hemorrhaging poses a palpable threat to the Enclave’s future. The Enclave delivers high-potential customers who are all dressed up with no place to go. The brand is effectively a one-vehicle outpost, incapable of exploiting Enclave’s boomer appeal.

Consequently, Buick’s future rests squarely on the shoulders of the upcoming 2010 Lacrosse sedan. The new car must win over youthful import buyers if the badge is to escape its malaise. Easier said than done. After all, it is the failure of the current Lucerne and Lacrosse that created this dilemma in the first place. A Vegas craps table would offer better odds.

The Enclave is a good soldier, but it was drafted by the wrong army for the wrong battlefield. With its stylish looks and near-luxury positioning, the Enclave embodies just about everything a Cadillac should be. Meanwhile, Cadillac is set to update the SRX and add a second CUV. All this while Chevrolet introduces a fourth Lambda-based CUV that looks remarkably like… the Buick Enclave.

For cannibals craving barbeque, the buffet will not be lacking for choice.

So it’s déjà vu all over again. Instead of acting decisively to rebuild their supreme marque and take it into battle against Lexus, BMW, Audi and Mercedes, GM is dedicating scarce resources to wage a civil war. The Enclave represents an obvious return to the not-so-distant past, when the domestic automaker garbled its branding to grab every sale possible, long-term consequences be damned. 

GM can’t afford this kind of success. In their efforts to rescue every badge, GM is winning some battles– and losing the war. If The General is to survive, it must bury Buick, marshal its forces and move on.

Last Thursday, GM asked the California Air Resources Board (CARB) for "extra credit." Despite the fact that Chevy's gas-electric plug-in hybrid isn't in production, the General's generals wanted the rules modified so the Volt could more fully satisfy the Golden State's Zero Emissions Vehicle requirements. Done. And then, today, GM announced it will build 1000 hydrogen fuel cell vehicles for the same purpose. Only it wants someone else (i.e. taxpayers) to fund 40 hydrogen refueling stations. Once again, GM's reveals its core weakness: ADD.

According to the American Psychiatric Association, people with Attention Deficiency Disorder (ADD) demonstrate "a persistent pattern of inattention and/or hyperactivity, as well as forgetfulness, poor impulse control or impulsivity, and distractibility." As the Brits would say, they "run around like a blue ass fly." GM's CARB strategy is a perfect case in point. It's not ONE strategy: plug-in hybrids. It's TWO: plug-in hybrids AND hydrogen fuel cell vehicles. Of course, if THAT doesn't work, it'll be something else. Just pay the fines? Build an EV-only Volt? Who knows? Not GM. And don't ask, ‘cause they're very, very busy.

You don't have to read many installments of this series to know that GM is all over the show with everything all the time. To wit: GM Car Czar Maximum Bob Lutz infamously dismissed hybrids as a fad. Not long thereafter, GM rushed to produce not one, but two different gas – electric systems ("mild" belt-assist and dual-mode), both on their own and in partnership with other automakers. Cars get the former, SUVs the latter. (For now.) And then GM launched a "moon shot" mission to create an entirely new type of hybrid using unproven technology. But wait! There's more!

At the same time, GM is developing and unleashing hydrogen fuel cell test vehicles, and talking-up the technology– to the point of "unveiling" a hydrogen fuel cell concept Caddy without a powertrain. Yes, "all" GM needs to make hydrogen-powered, zero-emissions (at least at the tailpipe) cars work is $160m of California taxpayers' money for the filling stations. What's that's just $10 per resident or "two Starbucks coffees!" Meanwhile, passenger diesels are not on GM's menu. Until, of course, they are. And then…

Stop! While my Honda minivan was in service, I drove a base (as in cloth seats) Accord. I was amazed by the sedan's four-cylinder engine. It was smooth and reasonably powerful. The five-speed transmission did its thing without fuss. Does GM have an engine to match this? No.

Last year, Honda sold 392,231 Accords. Some 71 percent were four-cylinder models. Even without considering the Ohio-built sedan's German style, American-sized comfort or brand-faithful reliability (discounting excessively darty steering), there's no wonder the four-banger Accord is a popular car in these fuel-conscious times; it delivered well over 20 miles per gallon (EPA 21/31).

GM's Ecotec (Emissions Control Optimization TEChnology) engine is GM's "house" four. It's found in 12 American products, from the Chevy Cobalt to the Satrun Vue. It's not a bad unit. In some installations, GM's engine gets slightly better mileage than the [supersized] Accord. And the Ecotec is more-or-less bullet-proof. But it's no world-beater in terms of refinement, power or efficiency. So what if…

GM took all the billions of dollars it's plowed into hybrids and used them to develop a smooth, more powerful and a more efficient four-cylinder engine? What if they kicked Honda's ass? Don't get me wrong: I have no doubt GM is working on improving its gas-powered four-cylinder engines. They're working on everything else; why not that as well?

As an ADD sufferer, GM singularly fails to understand that the only way you can create a world-beating anything is to NOT do other stuff. Hybrids? Fine. Go for it. Fuel cells? Uh, OK. But not all of it. Because no matter how many engineering divisions or worldwide resources you have; "throw it against the wall and see what sticks" is the worst of all possible development strategies. Or, more simply put, just because GM CAN do something doesn't mean they SHOULD.

GM should have spent its money developing what it had. They should have refined and improved their mainstream Chevrolets, Buicks and Caddies– rather than "investing" in new brands (Saturn, Saab, Hummer), new vehicle genres (SSR?), new models (dozens) and new technology (complicated powertrains). But it didn't. The mess you see today is the result.

So the only remaining question is this: is there enough time left for GM to stop messing around, focus its energies, strengthen its brands, recapture lost momentum and stay in business? Judging from the torrent of news coming from RenCen these days, I don't think we'll ever find out. Unfortunately, it seems clear that only bankruptcy will provide the Ritalin that General Motors needs.

General Motors is about to report a massive sales decline for the month of March. GM’s management will acknowledge the loss, blame it on the general downturn in the U.S. new car market, point to a few successful models and move on. Later, the American automaker will report it’s burned over a billion dollars in the last financial quarter. GM’s management will blame the market downturn (again) and the strike at American Axle. The top brass will admit that GM’s turnaround is… delayed. But at no point will they accept responsibility for their plight. Well, why would they?

If I’ve said it once, I’ve said it 169 times: GM’s corporate culture lacks accountability. Despite the fact that the scoreboard clearly shows that the automaker is receiving a dramatic drubbing at the hands of any number of fitter, better and stronger competitors, no one at the top level is willing to step up to the plate. No one takes responsibility for missed opportunities (dozens of vehicles dying on the vine), flawed strategy (FOUR Lambda-based crossovers?) and blatant screw-ups (Fiatsco?). The company is populated by Teflon suits.

In this, of course, GM is not alone. You could make an excellent case that The General’s generals operate under the same CYA mandate that insulates our elected representatives from their failures and broken promises. You could also argue that GM suits suffer from the same misguided and inherently self-destructive sense of entitlement that characterizes America’s political pressure groups. I’m not saying our culture of blame is to blame for GM’s blame-free culture. But the automaker’s attitude reminds me of nothing so much as my local, all-powerful teacher’s union.

Like the Rhode Island Federation of Teachers and Health Professionals, GM’s upper management truly believes that everything they do is for the greater good. Their real mission: consolidate their power; protecting jobs is job one. Though both groups pay lip service to the “end user,” neither is willing to live or die by any qualitative metric. And both depend on PR and spin for their survival, without any real understanding that their actions– and inaction– create an unending stream of mediocrity. 

For decades, industry analysts have blamed the United Auto Workers Union (UAW) for their employer’s lousy margins and poor product quality. (Read Arthur Hailey’s Wheels’ for the historical correlation between union members’ imperviousness to dismissal and GM’s crap cars.) Although robots have largely solved the product quality problem, the worker-biased (not-to-say empowering) grievance procedures remain– and continue to prevent substantive progress on the factory floor. But this union power pales in comparison to GM management’s unassailable, like-minded brotherhood.

Did I say like-minded? Perhaps cookie-cutter would be a better term. GM CEO Rick Wagoner is a lifer who rose to the top through the GM’s accounting department; moving from Chief Financial Officer to Chief Operating Officer to CEO. His hand-picked successor, freshly-minted COO Fritz Henderson, was also a GM lifer who also rose to the top via the accounting department; and also attained the position of Chief Financial Officer. Career doppelgangers at the pinnacle of power at GM? How much more inbred– and insular– can a company get?

Is there any surprise that GM has eight brands stuffed with badge-engineered products when its executive roster is filled with badge-engineered executives? I’m serious. Uniformity of management leads to uniformity of decisions leads to uniformity of product. When all the people in charge are all asking the same questions, they’re all going to get the same answers. And the same answers lead to the same decisions which lead to the same results, again and again.

Here’s the thing. GM has finally woken-up to the crisis of their own creation. They now have that “sense of urgency” that analyst Mary-Ann Keller called for several years ago (when the excrement was striking the wind generator). As a result, Rick Wagoner’s mob are doing what they’ve always done– only faster. Their (tail-chasing) downsizing effort is accelerating. Their product cadence is quicker (thanks to re-badged imports). Their PR department's launching new ad campaigns and slogans at an even more furious clip. It’s more haste, less speed.

Ford and Chrysler hired outsiders to reverse their sinking fortunes. Whether or not Alan Mulally or Bob Nardelli has enough time and/or expertise to save the domestic automakers from oblivion is an open question. But at least FoMoCo and ChryCo are trying something new. GM is still ruled by the same man who sees no problem having a bankruptcy-proof pension while asking his workers to take a hit for the team to avoid bankruptcy.

Of course, there will be a reckoning. While the teachers’ union can still use their political muscle to maintain power, GM’s management has lost touch with (and sight of) its constituency: its customers. The "base" has left, and they’re not coming back. No one within GM management may take responsibility for this loss, but they are all to blame.   

“Not making a car like the Prius was a mistake.” In recent days, GM’s Car Czar has amped-up his pro-hybrid rhetoric, including this mea culpa. Clearly, Vice Chair Bob Lutz’s enthusiasm for gas – electric products has undergone a volte face, inspired by his fatalistic conclusion that only alt power can satisfy federal regulators’ mandates for increased fuel efficiency. But in his newfound zeal, Maximum Bob is rewriting history. In the interests of truth, let’s set the record straight.

“We had the technology to come out with a hybrid at the same time as Toyota… In hindsight, it was a mistake… We made the mistake and we won’t make it again” (ABC News). 

Lutz is referring to GM’s 1996 EV1, whose release predated the Prius by a model year. More specifically, the year after the Prius began its long, slow, difficult march into the automotive mainstream, GM introduced several alt power variants of their all-electric EV1 at the Detroit Auto Show. They displayed a diesel/electric parallel hybrid, gas turbine/electric series hybrid, fuel cell/electric and compressed natural gas low emission internal combustion engine EV1.

With the benefit of hindsight, it’s easy to say GM should have developed the EV1 as a gas – electric hybrid. But the EV1 was NEVER designed as a mainstream vehicle. It was produced solely to satisfy the demands of California’s Zero Emissions Vehicle regulations and, latterly, PR. The exotic powerplants the EV1 could have been offered were blue sky. Besides, it’s quite a leap to think that GM would have backed the right horse in this alt power race when, in fact, they didn’t.

In contrast, Toyota chose one environmentally-friendly technology and stuck with it– through three years of development and many more thereafter. Right from the start, the Synergy Drive-equipped Prius was designed to be both scaleable and affordable. In terms of price, range, convenience and comfort, the dumpy first generation Prius was irrefutably more of a “real world” vehicle than the 90-miles-per-charge EV1.

“Lutz said being late to the market with hybrids has cost GM billions in sales because it lost its image of having superior technology” (Detroit News). “I think the company has learned when you step out and do bold things, you win” (ABC News).

Truth be told, GM hasn’t had an “image of superior technology” since the mid-fifties. Since then, GM’s half-baked efforts to cultivate “superior technology” have destroyed its image, wounded its rep and shed sales. Corvair, Buick aluminum V8, Vega, the Wankel rotary engine, Cadillac V8-6-4, Oldsmobile diesel, X-car FWD, plastic intake manifolds— GM’s list of abortive cutting edge technologies is long and depressingly consistent.

GM has not learned from this history, and if it has, it’s learned the wrong lesson. In its attempt to recapture the technological high ground, GM has developed four hybrid systems, all of which are bold, none of which is commercially viable. GM could stick with one system and try to use economies of scale to generate a profit. But it hasn’t. Once again, it’s chasing a new technology.

“GM’s initial estimates of 60,000 to 100,000 annual Volt sales could grow five-fold, Lutz said, adding that the car is a ‘game changer’ on par with the Ford Model T.” (Detroit News).

The Volt has absolutely nothing in common with the Model T. Henry Ford’s “game changer” was all about the rationalized production of a quality, economical low-cost car. The affordable, reliable Model T was the most profitable industrial undertaking the world had ever seen.

The $2500 Tata Nano is a “game changer” on a par with the Crazy Henry’s Tin Lizzy. To suggest that the $40k-plus Chevrolet Volt (or the forthcoming $48k plug-in Saturn Vue) will revolutionize transportation and save GM’s bacon is the worst kind of hyperbole: the kind that deceives its originator into self-destructive delusions of grandeur.

“I don't think it would be a vast overstatement to say the Volt is in many ways symbolic of a renaissance in the American auto industry” (Bob Lutz, Wired).

Lutz is re-writing history in advance. While it’s often said that history is written by the winners, it’s equally true that propaganda is written by its losers.

In any case, the U.S. auto industry has already experienced its renaissance— in the transplant factories dotted across the South. Volt or no, GM will never– can never– recapture the market share its shed over the last five decades.

(Lutz comparing the Volt to the moon shot) “Yes. That's a good analogy. If it doesn't work, it's not fatal. But if it does work, it will be sensational” (Wired).

The history here is apt. The moon shot was a hugely expensive and unsustainable exercise in national pride that enriched its subcontractors but not its “investors” (i.e. taxpayers). The Volt will eventually appear. But it will not save GM. It will be a historic achievement marking the end of GM's history.  

Yesterday, Justin and I caught wind of GM Car Czar Bob Lutz' private pow-wow with bloggers attending the New York Auto Show on GM's dime. Christopher Barger, GM's Director of Global Communications Technology, barred our way. "It's invitation only," Barger announced. "Thirty-five is the limit." I asked Barger if he was TTAC-aware. "Sure, you guys hate us." So I waited in the hallway and collared Maximum Bob. I introduced myself and asked permission to attend. "Do we know these people?" Lutz asked. "Do we like them?" "It's up to you," a stunned Barger replied. We were in. 

Lutz sat down and warmed-up the hopeful handful by dissing bloggers. "It's getting to the point where there will be millions of bloggers, each with one reader… himself." But seriously folks, it's great to be here with the little people. Incredibly a couple of the attendees laughed on cue, and seconded their own irrelevance. Without asking a single question, Justin and I were left wondering what alternative universe we'd infiltrated, looking at each other with painfully, soon-to-be permanently arched eyebrows.

As promised, I was there to ask the tough questions that my obsequious colleagues wouldn't dare ask. The thing of it is, Maximum Bob doesn't need a journalist provocateur to say things that any attentive automotive scribe would find outlandish, inane, mis-informed, deluded, strange, contradictory or just plain weird. You put a microphone in front of this guy and boom! The winner of TTAC's first annual Bob Lutz award stops making sense.

We've already chronicled Lutz' "the planet will save itself" exchange with a bright-eyed blogger, whose upbeat demeanor made My Little Pony seem like an HBO miniseries. We've already blogged the Car Czar's self-professed subversion to his marketing mavens' desires. We've reported on his abandonment of the $30k Volt, and any near-possibility of profit for same. All this before I could raise my hand.

In fact, as I furiously scribbled notes on the bon mots dropping from the mouth of God's gift to automotive journalists, I got a feeling for Maximum Bob's basic beef: GM's Car Czar thinks the world's gone nuts. Talking about the "political solution" hatched by Washington legislators to raise fuel economy standards to 35mpg, Maxi Bob was saddened by their inability to grasp the cost to consumers of these more fuel efficient cars. "They're like this," Lutz said covering his ears with his fingers. "lalalalalalalala."

It was a highly ironic moment. Here was the man [supposedly] in charge of GM's global product plans accusing the federal government of childish detachment from reality. And the more Maximum Bob talked about these costs of compliance– $3500 to hybridize the majority of GM's products– the more it was apparent that Lutz was living in a vacuum. GM's Car Czar never made any mention of his employer's competitors.

More to the point. Lutz was operating from the principle that GM could do whatever the Hell it wanted and consumers would simply have to suck it up. No, that wasn't it, exactly. It was more like GM now has its hands tied by the feds. The American automaker will respond– grudgingly– with expensive technology. And THEN U.S. consumers will simply have to suck it up.

In that sense, Maximum Bob seemed to be paving the way for The Mother of All Excuses: the politicians drove us out of business. "The Tahoe two-mode hybrid costs about $7k more than the standard model," Bob said. "That doesn't even come close to paying for it." The clear implication: WTF can WE do about it?

So I popped the question. "You and Rick Wagoner recently received a re-raise. What is your pension package and is it bankruptcy proof?"

"You're not seriously asking the man to discuss his personal pay are you?" the until-this-point silent Barger interceded.

"It's a matter of public record," I countered.

"I don't know my exact pension," Lutz said. "I'm a short term employee this time around."

"Is it bankruptcy proof?" I pressed.

"I have no idea," Lutz replied. "I never spent an hour of my life looking at my personal finances."

And then we were back in lalalalalala Land, with Lutz revealing that owners of the Chevrolet Volt will have to start their internal combustion engine once a month; it will probably run on batteries the whole time and the gas could foul. And the plug-in Vue will cost $48k. And all GM hopes to do with the Volt is… not lose money. And then Bob Lutz was off to tell someone else that GM's brands are all, now, in good shape.

But before Lutz left the bloggers, the man made one quick aside. "I need to go check if my pension is bankruptcy proof."

Truer words have never been spoken.

Media-wise, the new Pontiac G8 is a hit. Obviously. The Aussie four door conforms to the pistonhead paradigm: a powerful, rear-wheel-drive sports sedan. According to the jobbing journos flown to a first-class California hotel to test the new machine on local roads, the G8 GT isn't aesthetically offensive, goes like stink and handles well. While hooning hacks are celebrating the return of the [imported] American muscle car, they seem to have forgotten the fact that the muscle car is dead. As is Pontiac. And, by extension, GM.

The Dodge Charger is the obvious, indeed inescapable, template for the Pontiac G8's prospects. While enthusiasts may balk at the comparison– citing important [to them] differences in power, handling, interior fitment, etc.– the G8 and the Charger live in the exact same niche. They sell at the same price, offer the same driven wheels configuration and boast the same aggressive style. Last year, the Charger sold a not-inconsiderable 119,289 units.

The billion dollar question: can the G8 make those numbers, or better? Although the initial plan is to import limited numbers (20kish) of G8s, given the cost of production, there's only one way this car will ever make money for GM: if it sells in sufficient volumes to justify larger, and more local, production. At least that WAS the plan…

The Pontiac G8 may find some measure of sales success simply by stealing buyers from the Charger and its other logical competitor, the Chrysler 300. But even if the G8 scams 20 percent of these two ‘merican-style machines' customers, the Pontiac can't thrive on defectors alone. To make its nut, G8 buyers have to come from… somewhere else.

The chances that loyal/satisfied owners of transplant sedans will opt for the new Pontiac are small. While the new G8 may embody the erstwhile carmaker's old "excitement division" selling point, Pontiac destroyed that brand equity decades ago in a torrent of poorly-built, badge-engineered cars and minivans. In spite of (because?) the flame-out success of the Solstice roadster, Pontiac has no cachet upon which the G8 can draw. The company itself has moved on to a new motto: "Pontiac is car." How great is that?

So what about SUV escapees? Perhaps the G8 will tempt mainstream truck buyers to return to the large American-style cars of their youth. For years, pundits have predicted that SUV refugees will eventually opt for comfy sedans (remember Ford's Year of the Car?). Unfortunately, lackluster large sedan sales lead us to conclude that most SUV escapees are "trading down" to slightly more fuel-efficient CUVs or "all the way" to four-cylinder sedans.

Truth be told, the most likely customers for the new Pontiac G8 are consumers considering another GM sedan. What's the bet people looking at the Chevrolet Impala and/or Buick Lucerne/Lacrosse and/or a lower-spec Cadillac CTS will opt for a G8? In other words, once again, cannibals loom large in GM's sales schemes. 

Alternatively– and this is the best case scenario– the overall market for the G8-type of vehicle will expand. In a shrinking new car market beset by rising fuel prices, any hope that the audience for a relatively thirsty rear-wheel-drive sedan will suddenly enlarge is destined to remain unfulfilled. The fact that sales of the Dodge Charger and the fleet-bolstered Chrysler 300 are flat does not bode well for the Pontiac.

While the G8 may get off to an auspicious start (the thrill of the new), it's highly unlikely G8 sales will have "legs." The Pontiac G8's "killer app" is American muscle. But it should be remembered that the V8 variant accounts for just 24 percent of the Charger's total sales (24,630 vs. 90,659). So, while the G8 GT offers remarkable bang-for-the-buck, the "normal" V6 version will make or, more likely, break this car.

Yes, the G8 V6 is rear wheel-drive and significantly faster than the Charger V6. But the bread-and-butter model G8 is slower than both the V6 Accord and V6 Toyota Camry. The base Pontiac's sloth leaves the Australian-built sedan with no appreciable advantage for the average American sedan buyer. 

In fact, when it comes to evaluating the "average" G8, the average U.S. car buyer couldn't care less about horsepower, driven wheels, handling or speed. They want brand rep, reliability, comfort, a competitive sticker price and maximum fuel efficiency– and not necessarily in that order.

Speaking to that point, The base Pontiac G8 gets 17/25mpg. The Honda Accord V6 gets 19/29; the six-pot Camry clocks-in at 19/28. And anyway, six-cylinder Accords and Camrys do NOT account for the majority of the models' sales. They are easily and completely outsold by variants with more fuel efficient four-cylinder engines; which the G8 doesn't offer.

Not to put too fine a point on it, the Pontiac G8 is the wrong car at the wrong time for GM. Whether or not there's any profit in importing a $30k car from halfway around the world, what GM really needs to survive is a single, highly competitive four-cylinder sedan. Instead of adding the G8 to their line-up, GM should have improved what they had.

In 1968, a book called The Peter Principle argued that large organizations promote employees past their proven abilities, until they reach their natural “level of incompetence.” As a remedy, Dr. Laurence J. Peter suggested a rigid corporate caste system. For example, a talented accountant could rise within his field to become the company’s The Chief Financial Officer (CFO). And that’s it. Promoting the successful beancounter to the head of the company risks evoking The Peter Principle, and threatens disaster. Or, in the case, of GM, creates it.

It’s ironic. As a Harvard-trained MBA, Rick Wagoner possesses the exact forensic accounting skills needed to prove that he's been a lousy Chief Executive Officer. While we can debate whether or not GM's former CFO has “set the stage” for GM’s “turnaround,” any halfway decent pencil pusher will tell you that General Motors’ financial health has deteriorated rapidly during Wagoner’s administration.

When Rick Wagoner became GM’s CEO in June 2000, the automaker’s market capitalization was $36b. The previous year, it banked a $6b profit. Today, GM’s market capitalization is $19.21b. Last year, the company lost $38.7b. Yes, the majority of the ‘07 red ink spray was a “paper” loss involving deferred tax credits (which will never be taken). So call it a $1.6b hit. And don’t forget that GM has lost billions of dollars over the last three years while selling off billions of dollars worth of assets and adding tens of billions of dollars in debt. GM’s currently paying more than $2.6b per year in interest. 

When Wagoner took the helm of what was then the world’s largest automaker, the company’s North American market share stood at 28.2 percent. GM’s freshly-minted CEO promised a return to a 30 percent U.S. market share. In the last eight years, GM’s piece of the American pie has shrunk to 22.7 percent. If you remove sales to rental fleets, government agencies and customers within the GM “family,” GM’s American market share may well be in the teens.

And speaking of shares, yesterday afternoon, GM was trading at $22.35 per share. That’s down 48 percent from the $43.20 per share peak set after the “landmark” United Auto Workers’ agreement. Taking a longer term perspective, in May 2000, GM was trading at over $90 a share. At the turn of the last century, GM paid stockholders dividends worth .50 a share. Since 2006, GM has paid its stockholders .25 a share.

This series has chronicled the myriad of missteps during Wagoner’s tenure at the top. Lackluster products. Incoherent branding. Mistimed, muddled marketing. Production problems. Catastrophic supplier relations. Abject capitulation to union demands (including a VEBA worth more than GM's market cap). Suffice it to say, Wagoner has never publicly declared a hard target for GM’s return to profitability. He is the unaccountable accountant.

GM apologists maintain that Wagoner’s made the best of a bad situation not of his creation– forgetting that his minions missed the switch from SUVs to CUVs and cars. Instead, they point to the CEO’s relentless cost-cutting, a handful of “proper” cars (e.g. Cadillac CTS, Chevrolet Malibu) and forthcoming Hail Mary (e.g. the Chevrolet Volt). The fact that Wagoner’s radical downsizing hasn’t realized any savings and the new products haven’t stemmed GM’s market share slide is, supposedly, a short term issue.

Without a target for profit, who can argue the point? Is it even worth arguing? Ultimately, a company’s culture– not numbers on a balance sheet– determines its long term success or failure. 

Rick Wagoner began his career as an analyst for GM in the New York Treasurer's Office in 1977. He has hasn’t worked a single day outside of General Motors. So it’s no wonder that Wagoner hasn’t had any impact on GM’s corporate culture. The automaker is still a nest of vipers. Well, dozens of nests of vipers; all competing with each other for resources. The company lacks teamwork, coordination, esprit de corps and, I would suggest, a strong moral foundation.

That’s the GM Rick knows. That’s what he protects. After all, it’s protected and rewarded him. Just yesterday, GM’s Board of Bystanders re-raised Wagoner’s annual salary to $2.2m. He will also receive 165,563 shares from GM’s “long-term incentive plan,” 500k stock options and 75k restricted stock units. The board also agreed to pay Wagoner an addition $3.52m under GM's Annual Incentive Plan– if the company achieves an unspecified performance target. And then there’s Wagoner’s bankruptcy-proof pension, health care, cars for life, etc.

By any reasonable metric, Rick Wagoner has been a disaster for General Motors. By appointing ANOTHER Harvard trained GM lifer and former CFO to replace him, Wagoner has assured a legacy of upwards-failing executive incompetence. But it would be completely unfair to say that Rick Wagoner has been a failure as GM’s CEO. He’s the single best example of The Peter Principle of our time.

In the comments section below the most recent General Motors Death Watch, natredde asserted that the series' longevity argues against its existence. “Calling it a Death Watch after having the time to write 165 articles is silly… Somehow I think being on GM Death Watch 2752 wouldn’t necessarily add a lot of legitimacy.” As a student of GM history, I’ve been keeping my own private GM Death Watch for decades. It was suspended (at number 2751) when I discovered and joined TTAC. But the challenge of adding legitimacy to number 2752 was simply too great to resist.

Corporations don’t “die” in the human sense; failed executive stewardship along with changing circumstances causes them to be restructured (voluntarily or involuntarily via Chapter 11), sold, stripped and/or flipped. They’re reincarnated as very different entities than their creators originally intended. Think IBM, Kodak, Xerox, RCA, Zenith and a host of other once proud, high-flying household names. None of these companies are “dead” per se. But there’s no question that they’re mere shadows of what they once were, or could have become.

For example, IBM’s pioneering and potentially dominating personal computer business didn’t “die” when it was sold to China’s Lenovo; it began to wither in 1981 when IBM foolishly gave away the rights to its operating system to Microsoft. In the same sense, GM is never going to just roll over, die and disappear.

While it’s impossible to predict GM's final disposition, General Motors will never again be what it once was: the world’s largest and most profitable automaker. And as we monitor The General's transformation, again, it's important to note that the company began its long, lamentable decline several decades ago. But if I had to identify the company's zenith, the point at which it began to fall from its lofty perch, I would peg it at 1947…

GM Death Watch 1: Cadet RIP

In 1947, GM killed its Cadet small car program, after spending millions on development. In response to surveys showing that urban Americans wanted smaller, less expensive and more efficient and functional cars, GM set out to create the definitive modern small car. GM’s Financial Operating Committee, based in New York, refused to authorize the funds to put the Cadet in production. They feared the program wouldn’t provide the automaker’s [then] customary 30 percent return on investment.

On this day sixty years ago, GM began to die. The whole premise of its success was based on the ever-more rationalized manufacture of full-sized cars (and trucks). When GM refused to accept a less than full–sized profit on a small car, it sealed its future. To this day, GM has never had a successful, profitable small car program.

GM Death Watch 7 (1948): Inflation is Our Best Friend 

Prior to WWII, Alfred P. Sloan’s management of GM was based upon extracting continuous improvements in costs and manufacturing efficiencies, while providing an ever-improved product. The rise of inflation after WWII (and Sloan’s exit from the CEO position), allowed GM to simply keep raising prices. One executive, Donald Brown, sounded the alarm: “[I am] deeply concerned over the dangers of managerial inefficiencies creeping in due to the ease with which abnormalities in costs and expenses can be offset by price increases.”

This was the era when GM management became lazy, when the process of identifying and rewarding superior managers for their performance in finding efficiencies was tossed overboard, forever.

GM Death Watch 26: The Billion Dollar Cover-up

Riding the wave of the mid-fifties economic tsunami, GM announced a one billion dollar profit for 1955– the first for any corporation in the world. Hidden in the depths of GM’s financial statements was an ominous admission: return on investment (ROI) has been steadily declining since 1950 “due to declining efficiencies.”

GM Death Watch 31: Wheeler Dealer

In 1956, GM President Harlow Curtice unilaterally extended dealer contracts to five years, making it much more difficult to cancel inferior dealers. Curtice’s rationale: placate dealers furious for having unwanted cars forced upon them. Former GM President Alfred P. Sloan was aghast at the deterioration of “the once respectful and mutually-beneficial relationship with dealers due to GM’s heavy-handed tactics.”

GM’s tactics led to Congressional hearings and franchise laws that overwhelmingly favored dealers, making it extremely difficult and expensive to shed dealers and eliminate divisions. Forty years later, it cost GM over a billion dollars to shut down Oldsmobile.

Public awareness of GM’s decline only began in the mid-eighties. But by that time, forty years of rot had taken its toll (as well as providing fodder for some 1462 Death Watches). If it hadn’t been for the SUV boom of the nineties, my DW series would likely have ended with number 2107 in 1993, when GM came precariously close to bankruptcy.

So the chronicle of GM’s decline and metamorphosis continues, here on TTAC’s e-pages. Judging from the current situation, it’s much too soon to start a Death Watch Death Watch.

As GM's fortunes head for their inevitable denouement, it's time to pause and reflect on the deal that revolutionized the American automaker's labor relations. I speak here of the multi-billion dollar bribe paid to the United Auto Workers (UAW) to cut their sky-high wages and benefits down to size. In exchange for a new Voluntary Employees Beneficiary Association (VEBA) health care trust, the union accepted a two-tier wage system. At a stroke, Motown became competitive with the transplants, while the UAW protected its members' health care benefits for all time. In theory.

Until now, analyzing the agreement was impossible. After the strike-busting health care deal was announced in September, GM and the UAW asked for– and received– a legally binding blackout on final negotiations.

Last Thursday, the UAW sued GM in U.S. District Court. The “non-hostile” lawsuit is designed to secure court approval for changes to the union's health care coverage for 500k or so GM retirees and spouses, as well as thousands of current UAW workers. If the court approves, the new health care VEBA will commence in 2011.

Thanks to the suit, crucial details of the deal are finally coming to light. According to court records, GM has agreed to pay $33b to $36.5b into the trust. Although the figure is in line with expectations, it's an epic financial burden.

[For perspective, GM’s current market capitalization is $13.6b. As of December 31, 2007, GM claims that its total current liquidity– cash, marketable securities and readily available assets from the current VEBA– is $27.3 billion.]

At the moment, we don’t know the exact timing or formula for GM’s contribution to the VEBA– other than the fact that it includes varying levels of cash and notes convertible into stock. But we do know that GM has agreed to make up to 20 annual $165m “backstop payments” to the VEBA if its funding level “can’t provide current benefit levels for at least 25 years from the date of the required payment.”

In other words, GM is planning for failure. Of course, they’re not the only ones. According to UAW Vice President Cal Rapson, “Since the money for our benefits will be paid up front, our retirees will have important protections in case of changes in GM's financial condition."

Yes, well, who’s going to protect UAW members from their own union’s malfeasance? Under the terms of the agreement filed with the court, an 11-member committee will run the GM VEBA trust. The court will pick six members; the UAW International President appoints five, who "may be removed or replaced, and a successor designated, at any time by written notice from the UAW International president." All members must adhere to a code of ethics that bars them from holding a “substantial interest” in any company doing business with the trust. There's no word on committee members' compensation. 

Supposedly, the fact that a majority of VEBA administrators will be court-appointed “outsiders” will protect union members' health care coverage. Under the trust agreement, participants and beneficiaries will be "reasonably informed as to how the trust's assets are used and cared for" on an annual basis. In practice, one need only look at GM’s Board of Bystanders to understand the pitfalls of relying on "independent" overseers.

And GM’s Board is a model of probity when compared to the UAW's long, sordid history of corruption. The National Legal and Policy Center’s website lists 84 cases of UAW/CAW corruption, involving millions of dollars. The links only go back to 1998, and who knows how many cases of corruption weren't uncovered?

In short, anyone who believes that the UAW will keep its mitts off of the $36.5b VEBA does so in the face of common sense and a firmly established record of criminal behavior.

But even if you discount the possibility that the VEBA may be ransacked by UAW bosses and their cronies, who’s to say that this union-intensive GM VEBA committee will be effective? Lest we forget, GM is paying the trust pennies on the dollar– significantly less than the company's total anticipated health care costs.

There’s only way for the VEBA to maintain the current of health care coverage: improve efficiency. That’s a fancy way of saying the VEBA administration will have to cut costs, either by eliminating waste and fraud or finding new ways to "economize" on members' health care. What are the odds? And what are the odds that health care costs won’t continue to skyrocket, outpacing any efforts to rein them in?

And despite the UAW’s claim that GM’s health care VEBA will be front-loaded to protect union members from a GM Chapter 11, the court records tell a different tale. “Whether benefits or participant contributions would have to be adjusted by the VEBA trustees thereafter will depend on many factors, including whether GM remains financially viable so it can make the required payments on time.”

There’s no question that the UAW – GM VEBA agreement was a game-changer. But it is NOT a game winner. GM's eventual labor cost reduction will not, by itself, lead to competitive products. Meanwhile, UAW members’ health care now depends on its leaders’ integrity AND GM’s business acumen– neither of which should instill confidence in the rank and file who spent their lives building security for themselves and their dependents.

In the world of hybrid-drive technology, far-sighted development can pay huge dividends. Just ask Toyota, whose sales of Hybrid Synergy Drive-powered vehicles passed the global million-unit mark last year. While Nissan is licensing Toyota's Synergy Drive for its Altima Hybrid, GM has passed on proven success in its pursuit of two-mode hybrid technology with BMW, Mercedes and Chrysler at their joint Hybrid Development Center in Troy, Michigan. Smooth move or just another example of GM throwing good money after bad? Yup, you guessed it.

The main reason for the cooperative approach on hybrid technology: the inherent complexity of the two-mode hybrid system and its correspondingly high development costs. At low speeds, the two-mode hybrid system operates in virtually the same manner as Toyota’s Synergy Drive and other “single mode” hybrids. The package uses one electric motor for drivetrain assist and another for power generation. It’s in the second “mode” of the system is where things get crazy… and expensive.

At higher speeds and heavier loads, an intensely complex twin-clutch system interfaces two sets of planetary gears with the two electric engines to create both stepped and continuously-variable transmission modes. The system moderately improves efficiency by routing power mechanically rather than electronically.

Coupled with “displacement-on-demand” technology (which shuts down cylinders under light power use), GM claims their system improves combined EPA fuel efficiency on full-size SUV's like the Tahoe/Yukon by as much as 25 percent. But the high development costs and technological complexity add about $10k worth of sticker shock over a stock Tahoe. It would take a whole lot of driving for an owner of a two-mode hybrid SUV to recoup the “hybrid premium.”

Even if GM sells tens of thousands of hybrid SUVs, it’s doubtful they will recoup their share of the investment in its development. But the only thing worse than overpaying for overcomplicated, under-performing technology is watching as your former development partners ditch you and innovate your technology into obsolescence. 

While GM has jumped right in to the market with two-mode Yukon/Tahoe models for '08 and is gearing-up for more models, BMW is planning on releasing only two two-mode hybrids. What’s more (or less), they’re only selling their X5/X6 two-mode hybrids stateside. Beyond that tepid effort, the chances increase daily that BMW will join Mercedes in washing its hands of two-mode technology entirely. Bimmer and Merc are jointly developing a lithium-ion battery based mild hybrid, touted as a cheaper and more efficient alternative to GM's two-mode unit.

Why wouldn't the Germans dump the two-mode system? With clean diesels on the way, and the BMW mild hybrid diesel coming down the pike, BMW and Mercedes are likely nursing a severe case of two-mode buyer’s remorse.

By any reasonable standard, GM should be too. Although part of the two-mode’s appeal lies in its advantages in truck, SUV and other high-torque applications which hold the promise of reinvigorating GM's flagging bread-and-butter truck sales, once again a simpler solution lies well within reach.

The General's recently released Duramax diesel V8 delivers a nearly identical 25 percent reduction in fuel consumption as the two-mode hybrid. Thanks to its particulate filter and NOX after-treatment system, the Duramax oil burner meets 50-state, 2010 emission standards. While the Duramax doesn't grab the green-friendly headlines which seem to motivate every GM efficiency development, it does provide 310 hp in a package the size of a small-block gas V8, with comparable noise vibration harshness levels, without the two-mode’s colossal price tag.

It is precisely on the point of profitability that GM’s green dreams have been faltering. Rather than cut bait and fish, GM is once again displaying copious quantities of its patented arrogance and preference for PR over hard graft and long-term thinking.

Not to put too fine a point on it, GM is ignoring the old maxim: when you’re in a hole, first, stop digging. The automaker is continuing to spread its hybrid efforts thin with its (rushed and compromised) mild hybrid Malibu. It continues to pursue the hugely expensive, untried and untested Volt electric – gas plug-in hybrid. And it refuses to abandon its two-mode snafu. Meanwhile, Toyota is plugging away at its Synergy Dive, steadily lowering costs, bringing the fuel efficient drivetrain within the price range of similarly capable gas engines.

GM remains held captive by its unrealistic goal of creating a truly revolutionary drivetrain. Like a degenerate gambler with a shrinking bankroll, GM seems convinced that ever bigger risks are the key to emerging from its decades-long neglect of fuel efficient vehicles. Rather than chasing the big score, GM would be far better off ceding the hybrid market. If it can’t satisfy new federal corporate average fuel economy regulations using traditional technology, it should join Nissan and license Synergy Drive from Toyota. That way it could concentrate its time and resources on restoring its branding and quality, and, thus, its fortunes.

"Managing expectations." It's a term near and dear to the hearts of the people who pull our politicians' strings. Increasingly, it's the rhetorical weapon of choice for executives seeking to maintain their grip on America's large corporations. While there's nothing wrong with casting your company's efforts in a positive light, the danger is both simple and lethal. When a company's culture becomes based on hype, it loses its ability to react to reality– both good and bad. It becomes lost in the fog of war. One such company is GM.

Last Tuesday, GM CFO Fritz Henderson did something his boss, CEO Rick Wagoner, has refused to do throughout his entire tenure at the top. Fritz set a deadline for GM NA's return to profitability. Well, not a deadline, exactly. More like an estimate. Actually, make that a prediction– with caveats. Anyway, in the now-familiar post-bloodbath (a.k.a. financial results) conference call with industry analysts, Fritz said General Motors' North American operations should be solidly profitable by 2010. Or 2011.

Now that's saying something. GM North America is currently in complete turmoil, verging on chaos, heading towards meltdown. It's losing market share, production capacity, skilled workers, profitability (incentives are up) and, most of all, cash money. If you exclude the mother of all tax credit write-downs (which placed GM's '07 losses at $38.7b), NorAm dropped $1.5b last year. Not bad? Lest we forget, that number was propped-up by the sale of the Allison Transmission unit for $4.3b.

Speaking of fire sales and clever accounting, Fritz claims GM has $27b in cash and "cash equivalents" in the kitty. Take away $10b for life-sustaining cash flow, and GM is only $17b away from empty.

GM's cash conflagration continues unabated. Despite dramatic downsizing, the American automaker still has enormous overheads: advertising ($2.6b per year), research and development, factory modernization, pensions, health care, administration, servicing its massive debt ($2.9b per year) and, of course, executive compensation.

If we presume that these costs are holding steady– at least until the new labor agreement yields significant reductions– GM's $6.8b '07 loss (with Allison removed from the equation) indicates that they've got two-and-a-half years to turn the ship around– or go down. In other words, if Fritz isn't right, if GM isn't "solidly profitable" by 2011, they will be bankrupt.

Of course, this also assumes there won't be any "exceptional" calls on GM's cash pile. Heading into a major industry downturn, that's about as safe as assuming that the IRS will forget that you're legally obliged to file a tax return.

For one thing, bankrupt parts supplier Delphi, is looking for a billion dollar plus cash infusion. If GM's former division doesn't find the financing, well… Chrysler's unresolved Plastech debacle shows how vulnerable GM's assembly lines are to a parts disruption (a.k.a. renegotiation/extortion). A quarter of Detroit's main parts suppliers are teetering on the brink of bankruptcy. Even if GM's suppliers simply ask for their money up front, The General's liquidity would take a massive hit.

And then there's GMAC. Since GM sold 51 percent of the lender to Cerberus, The General's former cash cow has cratered. GMAC just posted a $724m fourth-quarter loss; the ResCap mortgage-lending unit bled $921m worth of red ink. If ResCap collapses, creditors may pierce the veil and sink GMAC. Meanwhile, cheap GMAC loans to high risk debtors are a thing of the past, which pulls the rug from under one of GM's main weapons in its war on excess inventory.

And that brings us to the income side of the ledger. While GM boosters view the new Cadillac CTS, Chevrolet Malibu and GMC Acadia as evidence that the automaker has got its NorAm product-related shit together, it most decidedly does not.

As nice as they are, these vehicles are not class-leading import conquerers. Sure, GM's finally woken-up to the fact that they have too many brands  (eight), products (49) and dealers (6750). But their "throw the losers (Buick, Saturn, Pontiac, Saab) into a gulag and starve ‘em to death strategy" is a long-term play that will make things worse– before they get worse. No matter how you slice it, GM needs LOTS of turnover the keep the lights on.

Post corporate fire-sale, you could consider GM's brands its only remaining asset. If so, the company is already dead. Aside from Hummer, none of GM's brands has a clear remit or a coherent product line. There is overlap, cannibalization, confusion and chaos. Fleet sales aside, you can't sell products in a highly competitive environment without proper branding.

So, Fritz, how IS GM going to become solidly profitable by 2011? "We need to step on the gas on how we are performing in the market." At the moment, in terms of market share, branding and overall product desirability, GM is going backwards. Stepping on the gas will simply accelerate that process. Right until they hit something. That's the only realistic expectation.

Back in the eighties, a GM executive congratulated a colleague who worked for the Cadillac brand. “Well done for reaching 300k sales.” The Caddy man was having none of it. “We didn’t sell three hundred thousand Cadillacs; we sold three hundred thousand Buicks.” The remark was prescient in two ways. First, it acknowledged Cadillac’s ruinous move “down market.” Second, more importantly, it reflected the fact that Caddy’s success was Buick’s failure. GM was already descending from a well-ordered familial hierarchy into the madness and chaos of cannibalism.

Alfred P. Sloan’s motto “a car for every purse and purpose” established the framework for this descent. Sloan encouraged GM customers to work their way up from cheaper to more expensive brands. When GM’s brand delineations were rigid, when there was a steady supply of customers at the bottom of the ladder, the system worked beyond Sloan’s wildest dreams. GM was the world’s biggest carmaker AND the planet’s most profitable company. 

Today, GM’s overlapping brand and product portfolio has rendered Sloan’s system meaningless. GM’s eight brands compete with each other for business with similar if not virtually identical products. Saturn Aura, Chevy Malibu or Saab 9-3? Chevy Traverse or Saturn Outlook? Or GMC Acadia?

Honda killed the Prelude when the S2000 came out, then killed the RSX when the Civic went up-market.  Toyota killed the Celica when the Scion-tC arrived. While all of these cuts had something to do with lowered sales, they were more about preventing cannibalism. Conversely, GM doesn’t seem to want to cut anything.

GM’s CUVs are selling reasonably enough, but their SUVs are still out there, somewhere. As GM’s shrinking market share proves, their CUV sales haven’t been anywhere near large enough to compensate for the drop in “traditional” trucks. Even if they were, GM’s unibody CUVs are more expensive to produce than their body-on-frame predecessors. Downsizing customers are downsizing GM’s profit margins, Big Style.

On the face of it, this CUV on SUV cannibalization seems logical and unavoidable. GM’s SUV customers are abandoning the genre anyway, so why not keep them “in the family?” Better some profit than none. But the counter-argument is far more compelling. Overlapping products dilute or destroy the central brand message. Product development and marketing resources are spread paper thin. This kind of cannibalism makes its practitioners weak, and lazy.

New vehicles always draw customers away from rival products. The cars that suffer the most are the least “competitive” in or near that market segment. Unfortunately for GM, they often own both the next big thing AND the tired old timer. Note how the Malibu push mirrors the Impala’s fall. And the Saturn Aura’s. And the Pontiac G6’. And God knows what else.

Sadly, GM executives seem completely oblivious to the problem. The new CTS may be a hit product, but no one in the organization seems to have stopped and considered the fact the bright shiny newcomer will consume Caddy customers who may have (for some reason of other) hankered for a pricier DTS or STS. By the same token, the rear wheel-drive (RWD) Pontiac G8 could well be an exciting ride, but if it’s too exciting, it could steal sales from both the (RWD) CTS and the now po-faced front wheel-drive G6. And God knows what else.

Dealers are active conspirators in all this. Whenever a hot product appears at a rival brand, they demand a “tit for tat” version. This leads to badge-engineering, which further divides the sales pool, which ensures that any successful new car will eat its “father” (or uncle) first. It’s a vicious circle that dooms all its participants to eternal feast and famine.

As GM’s recent history proves, there will always be a “bright spot” in the bigger, bleaker picture. Some vehicle will always be relatively healthy– as it feasts on its predecessors, ancestors and weaker siblings. The success of a new model builds executive careers down at RenCen, but it does the company no good. With GM’s lack of build flexibility, the automaker ends-up overworking 25 percent of its plants while idling another 25 percent somewhere else. 

GM’s not the only example of auto industry cannibalism. Chrysler’s four-door Wrangler has been eating away at the Liberty, while the Compass, Nitro and Patriot all nibble on each other as they vie for the same sort of customers. VW has some issues in the US market (bumping into Audi) and much worse ones back in Europe (SEAT/Skoda). But GM is crazy with cannibals.

There is but one way to end this misery. GM must either return to the kind of rigid brand/product discipline of Sloan’s day, or declare bankruptcy (to void dealer power), kill all but two or three brands and THEN return to the kind of rigid brand/product discipline of Sloan’s day. There is no other alternative.           

In the old fairy story, con men convince a naked sovereign that he’s wearing fine clothes. Applying that cautionary tale to General Motors is not as straightforward as it seems. Is GM CEO Rick Wagoner aware that the enormous automaker is tumbling towards bankruptcy? Or is he living in a dream world, demanding that his "kingdom" admire his invisible finery? Whether Wagoner’s deluded or deluding, his ”GM Statement on Turnaround Plan” indicates that GM is still buck naked.

"We're delivering on the turnaround plan we established in 2005, and have exceeded expectations on virtually all counts," Wagoner proclaimed.

Welcome to Wagoner’s world, where you can announce that you’ve exceeded your expectations without revealing them. In truth, Wagoner has never set hard targets for GM’s recovery. Not sales. Not market share. Not even a return to profitability. If GM doesn't say where they’re going, why should we believe they’re getting there?

Even a brief look at GM’s declining sales, lost market share and red ink-stained balance sheet reveals that Wagoner’s a legend in his own mind. GM’s decline is a trend that started before the unspecified 2005 “turnaround plan,” that’s continued unabated since its implementation. But never mind that, because “We've set a strong foundation that we can truly build on. We're encouraged by our progress in revitalizing our product portfolio, strengthening our brands, reducing structural cost and growing the business globally.”

Hang on; a few well-received products do not a turnaround make. For one thing, the Chevrolet Malibu, new Cadillac CTS and Lambda-based Crossovers may be media darlings, but none qualify as a runaway sales success. That's especially true as The General screwed-up the supply chain for all three cars, leaving dealers SOL. Lest we forget, GMNA is still juggling eight brands and 49 products (not including discontinued models still for sale or variants). Even if you spot GM five hit products, well, you do the math.

And while we’re at it, GM’s product portfolio is still truck-heavy in an increasingly truck-aversive domestic market. Using the EPA definition of a truck, 28 of those 49 products qualify. That’s 57 percent. Trumpeting the fact that [some of] the vehicles within GM’s product portfolio are “revitalized” is equivalent to boasting that you made a perfect three-point landing at the wrong airport. And that’s without questioning GM's trucks' diminishing profitability.

But we’re really off in “admire that naked man’s clothes” territory when considering Wagoner’s assertion that his administration has strengthened GM’s brands.

Chevrolet is gas-friendly to gas free (if you consider a diesel pick-up “gas free”), but it still sells everything from a rebadged Korean econobox to a $60k sports car without any unifying concept. Saturn asks potential buyers to “Rethink” without giving them anything coherent to think about. Cadillac, the supposed standard of the world, lacks a credible flagship– and looks set to fall further down market. What is a Saab? Does anyone care? Near-luxury Buick is near death (unless you’re in China). Buick's most aggressive competitor, GMC, is re-positioning itself as an upmarket Chevy. Which is what again?

Pontiac is in a Holden pattern, repositioning itself as an importer of rebadged Australian rear wheel-drive sedans. Meanwhile, it sells a farrago of rebadged Chevies (which is what again?), a couple of Toyota and Saturn homonyms and… the Grand Prix. Of all GM’s eight brands, weak-selling Hummer is the strongest; albeit one that’s a politically or gas conscious buyer's anti-matter.

If "strengthening brands" means eight automotive “companies” offering a range of mostly lackluster products that overlap each other in niche, price, engineering and style; products that don’t as a whole adhere to a clear branding strategy, mission accomplished. 

So all we’re left with is “reducing structural cost.” As GM’s NA market share is shrinking, and cost-cutting is GM’s Beancounter in Chief’s forte, you’d expect progress on that front. But it should be remembered that all this cost reduction adds to GM’s mountain of debt. The bill for all those employee buyouts and plant closures will eventually come due, and GM’s forthcoming $29.9b VEBA contribution ain’t chicken feed neither.

As for “growing the business globally,” GM North America was, is and will be a financial sinkhole. It will continue to swallow-up all the profits GM can generate abroad– until GM’s Board of Bystanders will be forced to cut North America loose (i.e. declare Chapter 11) to save its European operations.

If you’re happy to admire the Emperor’s new clothes, the “GM Statement on Turnaround Plan” will inspire reverence. But let me draw your attention to one small statement therein. Wagoner promises to “build GM's advanced propulsion leadership position.” For Wagoner to even IMPLY that GM is the leader in advanced propulsion, or SUGGEST that they’re going to build that leadership from scratch, moves beyond hubris into an entirely new realm of fantasy. News flash: the Emperor is naked.

[Read the “GM Statement on Turnaround Plan” here.]

In 1962, President John F. Kennedy made a pronouncement that made a lot of people think he'd lost his mind: "We choose to go to the moon in this decade." According to GM's Vice Chairman of Global Product Development, Chevrolet's gas-electric plug-in electric hybrid is GM's moon shot. Wired magazine recently sat down with Bob Lutz and asked the Car Czar what would happen if the Volt doesn't succeed. "What if Kennedy hadn't pulled off the moon shot?" Bob wondered aloud. "If it doesn't work, it's not fatal. But if it does work, it will be sensational and it will have the same sort of symbolism." The U.S. put a man on the moon by the end of the decade, as promised. What are the chances the Volt will appear in a Chevy showroom by 2010?

Ever since the Chevy Volt burst forth from the 2007 Detroit Auto Show, "Maximum Bob" has been feeding an adoring press a steady diet of sound bites on the Volt's technology and timetable. The statements are frequently contradictory, usually unrealistic and subject to frequent change.

It began in March of last year, when Lutz promised a running Volt prototype by the end of 2007. A test mule with the Volt drivetrain crammed into an existing model would have provided reasons to be cheerful, part one. But it wasn't to be. In November, Bob revised his estimate: "Let's wait for the Easter Bunny."

In January, GM revealed the Volt's development team was having problems getting the mission critical, new technology batteries for testing from one of their suppliers. Recently, GM said that they'll have appropriate lithium-ion batteries "ready to demonstrate" by June (of this year). The reason for the new date? "Acceleration issues." We now learn that a Volt equipped with the current state-of-the-art batteries would require a full minute to amble from zero to sixty miles per hour.  

And that's just the technology. When Bob first mooted Chevy's Plug-in Electric Hybrid (PHEV), he pegged the PHEV's price point at a Prius-competitive $30k. As soon as the Volt team realized what a suitable lithium-ion battery pack might cost, GM announced that they were considering leasing the battery packs for around $100/month– to keep the "total" price within reason. Easter Bunny or not, GM hasn't said whether or not they're still pursuing that particular hair-brained scheme.

Now the $30K selling price seems to be going the way of Jamie Lynn Spears' virginity. Speaking to Wired, Backpedalin' Bob stated "it doesn't look like that's going to be possible." The Volt's price "might get there on the second generation, and they say if they had a lot more time they might be able to cost-optimize it [but] I don't want to wait for cost optimization. I'd rather come out in 2010, and if it costs closer to 40 than 30, well, that's too bad." Too bad for the customer…

No matter what the final price, we still don't know when we might finally see a Volt on the road. At the beginning of this saga, Lutz claimed the Volt would be humming along in 2010. Then, at last year's Los Angeles Auto Show, Lutz said the Volt would hit the streets by November of '08. Now it's 2010. Or not. Apparently, November 2010 has become GM's "internal target." "You don't know what you don't know," Lutz told Wired. "Could it go later than 2010? Yes."

Deadline, schmeadline. Maximum Bob's still pumped on the Volt. He crows that it's "symbolic of a renaissance in the American auto industry… If we pull it off successfully, it can really put us back at the top of the heap of automotive technology instead of being called laggards that are being left behind by the Germans and the Japanese." That is, unless a Japanese manufacturer doesn't quietly introduce a fully-realized plug-in electric hybrid first, as Toyota's CEO has just promised to do. 

Even IF GM rolls out a Volt by 2010, even IF it offers better performance than the next generation PHEV Prius, even IF it can compete with the segment leader on price, even IF it sells well, even IF it proves to be a reliable automobile, even IF it continues to sell, GM's Car Czar has already destroyed the Detroit automaker's credibility. And here's the real problem: the Volt probably won't do any of these things. 

John F. Kennedy entered the space race saying a moon shot "will be done in the decade." GM has refused to fully  commit itself to any deadline for the Volt, making the Hail Mary PHEV's appearance a moving target. Why? To avoid responsibility. And it is that difference– the difference between a culture of genuine accountability and GM's culture of endless streams of false, unrealized promises– that hobbles the Volt, and has brought GM to its knees.