Contrary to popular belief, panic is a logical reaction to an external threat. When a cornered animal’s fight or flight responses are unavailable or exhausted, acting erratically is its only hope. GM has been showing signs of panic for some time: on-again off-again product plans, vainglorious boasts, mistimed marketing, ill-advised divestiture and more. Recent events indicate that the domestic automaker’s aberrant behavior is escalating; leading, I’m afraid, to extinction. But let’s start with the meta-weirdness and work our way back to specific inexplicability. 

“What should power the world's vehicles in 20 years? How can personal transportation become more sustainable in an age of increasing global competition for resources? What role will the automotive industry play in developing markets?” The PR folk introducing GMNext.com have a firm grasp on the do-or-die issues facing GM. Equally obvious: their employer doesn’t have a coherent plan for addressing them.

Why else would GM open the “debate” to the general public? OK, sure, CEO Rick Wagoner says the site’s about “introducing some of our ideas for addressing critical issues concerning energy, the environment and globalization” to “spark a broader, global discussion on these important topics.” But GMNext’s overarching, underlying message is that the company’s product plans are an ill-defined work in progress. No wonder GMNext.com suffers from the usual GM ADD, promoting everything from OnStar’s Slow Down technology to the Volt’s erstwhile battery.

On one hand, fair enough. It’s an internet world. Power to the people! (As if.) Technology is in flux. React quickly and go with the flow! (As if.) On the other hand, if General Motors doesn’t already have a well-established plan for its future– from next Monday to 20 years away– we know someone who does.

Unlike Toyota, GM is panicking; flailing about; trying to find a way out of truck-heavy Hell. Instead of rallying the troops and heading in one direction, GM’s flying off in all directions, with predictably bizarre results. For example, GM’s “import fighter” is importing and rebadging a Belgian subcompact– and taking pride in the fact that Californians can’t identify it as a Saturn (see: GMNext.com). It's launching a bread-and-butter sedan with a $150m ad campaign– calling the Malibu “the car you can’t ignore”– with only a handful of new ‘Bu’s on the ground.

After dismissing the hybrid Prius as a marketing gimmick, GM’s poured billions into their own gas – electric system– for 5000lbs. SUVs. Meanwhile, after pronouncing that the new Chevrolet Volt will kick the current and next generation Prius’ ass come Spring, GM’s pulled back from the timeline– while continuing to promote the Volt some THREE YEARS before its POSSIBLE launch.

The confusion continues. GM’s just announced that they’ve killed their Ultra-V8 engine project: the new powerplant that would have [finally] replaced the ageing Northstar to power the next generation of GM luxury cars. Are they seriously suggesting that big Caddies– supposedly the standard of the world– don’t need the world’s best V8? Which reminds me: GM’s on-again, off-again plans for a range of rear wheel-drive models remains… undecided.

The last issue brings us to the other hallmark of panic (besides illogical behavior): anger. A panicking animal is suffused with adrenalin. In this case, anger’s afflicting GM Car Czar “Maximum Bob” Lutz, the man who must [eventually] decide on GM’s new drivetrains and platforms in the face of a new, more restrictive legislative environment. 

"Now that we have the 35 miles-per-gallon fuel economy mandate by 2020, I am hoping that in 2008 'Professor Doktor' David Friedman (research director, clean vehicles program, Union of Concerned Scientists) and his 'highly-qualified' band of allegedly concerned, self-proclaimed scientists will turn their energy toward showing the world's automotive industry exactly how those numbers, using existing technology and 'costs of a few hundred dollars at the most' can be attained with a vehicle selection that even remotely resembles the cars and trucks Americans want to buy today.”

The new federal regs represent a sea change in the regulatory landscape that all but the most ostrich-like industry players saw coming years ago. It scarcely seems credible that GM was waiting for the laws to be officially official before deciding on how to meet their requirements, including GM's platform strategy. But that’s the simple truth of the matter. Having waited too long, having no concrete plans for answering the vital mpg questions, Maximum Bob lashes out.

Mr. Lutz’ anger is an astonishing indication of the denial, confusion, paranoia and panic going on behind the scenes at GM. But it’s no surprise. The automaker’s non-existent branding strategy is all the evidence needed that GM is simply lurching from crisis to crisis, without rhyme or reason. While it's true that panic can work to an animal’s advantage– combining energy, surprise and luck to overcome mortal danger– panic is the survival strategy of last resort. After that, nothing.

“It would have helped to have a little bit of sunshine.” What a strange statement. Not “General Motors is prepared to weather the economic downturn ahead.” More like “Darn it! Just when we got our new picnic blanket spread out, it’s started to rain!” But then GM CEO Rick Wagoner is a GM lifer, a Harvard-trained beancounter, a man whose self-effacement hides a genuine lack of leadership. “We look forward to the sunny days,” Wagoner continues. “But realistically we can’t plan on it for next year.” So what IS GM’s plan?

Rick Wagoner took GM's helm on May 1, 2003. Despite an arterial spray of red ink, the former CFO refused to set a timetable for a titanic turnaround. In fact, from that day to this, Wagoner has never publicly declared ANY hard targets for returning GM's North American operations to profitability. Not sales per dealer. Or profit per vehicle. Or total turnover. Or market share. Or, God forbid, profit. Nothing.

GM is a public company, with tens of thousands of shareholders and workers. Why haven't these "stakeholders" held Rick Wagoner's feet to the fire and demanded a quantifiable turnaround plan? We need only look at Carlos Ghosn’s Nissan revival to understand the importance of clearly defined targets in a crisis. We need only look at GM to understand what happens when a Board of Bystanders allows upper management to drown out all opposition by playing "Crisis? What crisis?" at full volume.

For one thing, if you don’t have quantifiable goals, you don’t have accountability. Internally, this leads to bad decisions which lead to… more bad decisions. Incompetent managers fail upwards. The same people who brought over the Pontiac GTO from Australia are bringing over the Pontiac G8. The same marketing mavens who counseled potential Saturn buyers to “Rethink American” now counsel them to “Rethink,” while their own status remains quo. In GM’s land of the blind, the no-eyed man is king.

Externally, the lack of accountability frees Wagoner’s mob to justify GM's declining fortunes without a single mea culpa. Over the years, they’ve dismissed “bad news” as politics (unfair currency exchange), inherited burdens (union health care), economic factors beyond their control (housing market downturn, rising gas prices), and the sad but temporary result of their brilliant master plan (reducing incentives and fleet sales). The bad news continues. As do the excuses.

GM's favorite "excuse" is actually simple misdirection. Again and again, Wagoner and Co. point at “The Next Big Thing” and predict "sunny days" ahead. In consideration of GM's $2.1b annual ad budget and their own ignorance, the mainstream press propagates this "bright shiny object" spin– and ignores the mediocrity blighting all of GM's eight U.S. resident brands and the vast majority of its 51 product portfolio.

The media’s willingness to give GM a pass on hard targets, to simply buy into GM’s “pay no attention to that market share loss behind the curtain” ploy, never ceases to amaze me. The Associated Press’ interview with Wagoner is a perfect example; it lays out the CEO's “strategy” without any serious inspection. 

“Wagoner said ‘the deal’ topped the reasons people bought a GM vehicle in 2004. Now, thanks to stylish new models like the Cadillac CTS sedan and Buick Enclave crossover, the company says exterior styling tops the list, followed by value for the money. ‘I don't want to mess with that. I want to keep building on that,’ he said.”

Huh? Smack dab in the middle of GM’s Toe Tag Christmas sale, just when the company is loading massive incentives on its products and advertising nothing BUT the deal, Wagoner says his customers are now buying GM vehicles based on style rather than price. Where’s the supporting data for that assertion? Even if we accept this as some kind of cunning plan, what does it mean for GM's future?

Forget it. Style isn't GM’s new secret weapon. GM’s chronic Attention Deficiency Disorder– enabled by a leader who refuses to draw a line in the sand and take responsibility for his company's sinking fortunes–  tells us that the automaker will be off chasing the next Next Big Thing just as soon as sales and/or hype over the Enclave/CTS/Malibu subsides.

The truth is, without real leadership, without a CEO with a clear and clearly expressed sense of direction and urgency, GM doesn’t stand a chance. For those of you who think Wagoner has sufficient situational awareness and decisiveness to get the job done, I leave you with his response to a question about the impact of new federal fuel standards.

"I do think the challenge is really twofold. It's not just, 'Can you get the technology?', but 'What happens if people don't want to buy it? That is the question mark that concerns me, but we'll have plenty of time to play that out."

Last November, all GM’s eight U.S. brands lost ground. As the automaker’s pretty much shot its vehicular wad, the falling stats have convinced many industry observers that GM’s turnaround is back in turnaround. Of course, there isn’t a turnaround to turnaround. Not now, and not in the last forty years. Since the sixties, GM’s market share has been on a downwards trajectory. In 1962, The General owned over 52 percent of the U.S. new car market. Today, The Big 2.8 combined can’t muster a simple majority. There’s a reason for that.

GM’s inability to see the big picture has led to its downfall. The irony is stunning– the carmaker that was once the world’s largest has proven itself to be the least capable of anticipating the large scale forces controlling its destiny.

For example, how did GM fail to see that the light truck boom was about to go bust? Years before Hurricane Katrina hit, the canaries in the coalmine were singing like Ethel Merman. Gas prices aren’t cheap! Gas prices aren’t cheap! If nothing else, the fact that Toyota, Honda and Nissan were eating GM’s passenger car lunch should have signaled management that the transplants knew something about making popular products– and money– that GM didn’t.

Never mind the inadvisability of GM putting all its eggs in a body-on-frame shaped basket. GM’s success in the car business depends on its ability to see ahead of its five year model cycle– which is often longer and should be shorter but that’s another story. It’s a sad state of affairs when a company with 99 years of automaking experience and virtually unlimited financial resources can’t predict trends as well as a bunch of pistonheads yakking on the internet. 

Whether it’s due to executive hubris or bureaucratic bloat or both, GM has been flying blind for decades. More to the point, they’re STILL in the dark. Saturn gets a sports car. Cadillac gets a sports sedan. Buick gets GMC’s crossover. GMC gets Buick’s crossover. Saab gets bupkis. Chevy doesn’t get Pontiac’s El Camino, while Pontiac gets Saturn’s Aura/Chevy’s Malibu. If a decision is only as good as the information it’s based on, well, garbage in, garbage out.

Even if you set aside the ongoing series of duds failing to fill GM’s sales ledger, there’s no indication of a far more important “awareness” turnaround at RenCen. At the moment, GM blames its American doldrums on the general economic climate; the “falling tide sinks all boats” excuse. This GM genuinely believes, despite the fact that domestic boats are sinking a lot faster and farther than the transplants’. But worse, far worse, they’re telling the world that the tide will raise them up by the end of next year.

As Blogging Stock points out, GM expects the key driver of their profitable pickup truck sales– the U.S. housing market– to recover in 2008. In a recent article in the New York Times, GM execs said they expected the American housing market to pick up in the second half of 2008 and that “the industry would finish that year in better shape." Try and find an independent observer who agrees that the downturn will be over in six months. Most experts agree that we’re looking at a two to three year slump. Where will THAT leave GM?

Without a pot to piss in. Say what you will about the brilliance of the new Cadillac CTS or Chevrolet Malibu or Buick Enclave. Tell me that the new Chevy Volt electric – gas plug-in hybrid is the future of automobiling as we know it. I’m not going to dismiss their prospects out of hand. But the thing of it is, at this point, they are an irrelevance. GM’s eight brand hole is so deep and so wide that no one, two, three or half dozen vehicles can fill it.

Just as GM suffered defeats on all eight brand fronts in November, their survival depends on making advances on all eight brand fronts in the future. To do that, GM has to be smarter, faster and sharper than it’s been in its entire corporate history. To think GM can pull off an octo-brand turnaround with the same management that has singularly failed to anticipate future trends, that says it's waiting for the new Energy Bill before finalizing its products plans, is even more delusional than expecting the housing market to magically right itself. 

How’s this for a long term view, from a Business Week article dated May Ninth, 2005: “The only question is whether that reckoning comes in the next year, if models developed by Vice-Chairman Robert A. Lutz fall flat; in 2007, when the union contract comes up for negotiation; or perhaps in five years, when GM may have burned through its substantial cash cushion.” So really, we only have part three of the prognosis to go.

This is my first General Motors pre-obituary. I’ve never penned one because I never liked having to face the reality that GM's killing itself one bone-headed decision at a time. But in carmaking as in any type of proto-warfare, turning a blind eye to stupid mistakes doesn’t make things any better. In the past few weeks, GM has made three product announcements that are so head-shakingly absurd they’ve earned themselves the starring role in a GM Deathwatch. Strike one…

GM has announced that it will be importing the Holden Ute– a modern day Chevrolet El Camino– to the U.S. The Ute’s based on the same Zeta platform underpinning the upcoming Pontiac G8, which has already been fully developed for the Australian market (where such vehicles are tremendously popular).

On the face of it, this is excellent news. Without even having driven the new Holden Commodore/Pontiac G8, you can count on it being an excellent sport-sedan. A modern rear wheel-drive platform, powerful V6 and V8 engines, up-to-date transmissions and strong prices all add up to a winning combination. A cute UTE would be icing on the proverbial cake.

Unfortunately, GM is going to sell this pickupish vehicle as a Pontiac. GM Car Czar Maximum Bob Lutz addressed this issue squarely between the [cross] eyes. “If we do the Ute…it could be the most enthusiast-positive decision to bring back the El Camino. But you look at their lineup and Chevy has too many vehicles.” Er, no. Chevy has too many poor selling vehicles. Although I can hear more “American Revolution” snickering, and I’m sure the Holden Ute holds plenty of hoon potential (light back ends making drifting even easier), the imported Aussie flatbed should be a Chevy. We build excitement. Pickup. No.

Strike two…

When the idea of importing a Holden sedan as a new Pontiac was first mooted, GM acknowledge the profit-busting exchange rate problems involved and said they’d be building the new G8 here if it sold well, as soon as possible. Back in February, MaxiBob told Automotive News that bringing over the G8 was a “transitional phase. It permitted us to get the car quickly and for a minimum of investment.” The unions (then in contract negotiations) breathed a sigh of relief as Lutz assured “It’s highly likely we will begin to produce [the Zeta-platformed Pontiacs] in North America.”

Fair dinkum. Let's get the first ever G8 into the American market ASAP. This week “probably will” became “probably won’t.” Gary Cowger, GM Vice-President of Global Manufacturing and Labor Relations, said there are “no plans at this point” to move production to North America. This despite GM’s excess plant capacity in the U.S. and Canada, which will build the Zeta-based Chevrolet Camaro.

Building the G8 in the States is the right thing to do. Holden Australia will have no problem recouping its manufacturing investment in sales to Australia, New Zealand, the Middle East, and China. The benefit to building Pontiac G8s in NA? GM doesn’t run the risk of slim profits or red ink losses as the American currency slides further down in value. Oh, and there’s the little matter of not pissing-off the UAW that GM just somehow persuaded to not revolt (yet).

But let’s give Mr. Lutz the benefit of the doubt. Perhaps when he was talking about adding U.S. production for “global rear-drive architecture” he really meant ANY rear-drive platform– not necessarily Zeta. Because hey, GM has announced that it has another, smaller rear-drive platform, this one called “Alpha" (rear wheel-drive from Z to A). Small, cheap, lightweight, rear wheel drive? It’s music to my ears.

Strike three… the music turns to noise.

The first two brands that receive Alpha cars are the worst two choices in GM’s stable. One is Cadillac, which we’ve already carpet-bombed for deciding to erode its image with an even cheaper car than the CTS. But the news of the week: the second company to get the Alpha platform would be… Chevrolet.

Last week Motor Trend “revealed” that Chevy, not Pontiac, would get an Alpha car. Since that’s totally schizophrenic (didn’t Lutz say Chevy “has too many vehicles”?), a GM fan fired off an email. Lutz allegedly responded that the Motor Trend claim was "Totally untrue. Don't believe everything you read on the internet! Valuable advice! Even in politics…or esecially! [sic]." 

Note to Bob: Motor Trend blew the story. The internet is how you’re setting the record straight. Anyway, I’m not buying it. By thy duds they shall be know. Clearly, the Car Czar has no clear idea of which GM brand should get what and why. While rear-wheel drive is an enthusiast’s dream, unless GM sorts out its “global” production plans and domestic branding, great products will only go so far. In fact, not far enough.    

Bob Lutz is a gift. The Car Czar’s uncanny ability to spout uninformed, arrogant nonsense makes analyzing GM’s corporate confusion a slam dunk. Unfortunately, the mainstream automotive press prefers to proffer a protest-free platform for Maximum Bob’s maximum BS. So be it. We can still read between the lines. In this case, Automotive News [AN] blesses us with a bit of Maximum Bob raw. It’s deeply worrying stuff.

AN begins by asking Lutz how the new Malibu can overcome its rep as a daily rental car. 

A lot of the advertising is designed to take that head-on. We're not going to erase that perception gap in this generation. People are still going to go to the Toyota store and are still going to get a Camry. They're not going to care that most of the models are no longer recommended, and they're not going to care about all the quality problems. It's a learned response. That's going to be hard to erase.

Lutz begins by feigning glasnost: we here at GM are not afraid to take on previous reputation with brand new most excellent automobile. And then Lutz commits marketing’s cardinal sin: insulting the customer. If you don’t consider the “perception gap” an inherently demeaning concept– our cars are as good/better as theirs; you’re just too stupid/bigoted to know it– Bob’s no-holds-barred attack on Camry buyers’ loyalty should convince you.

Earth to Bob: don’t diss the customers you can’t afford to miss. And is it me or does Bob’s idea of “erasing” Camry buyers’ “learned responses” sound way too 1984 for a car guy plying his trade in a free market? As he has so many times before, Bob seals the deal with outright ignorance; Consumer Reports dropped one of Camry’s three models from its thumbs-up list (the V6). “Most” Camry models remain recommended.

So, Bob, what will happen to GM's recovery if sales of the car you've touted as the Camry-killer misses its mark? 

It's not a make-or-break car. We expect it to do moderately well, and we expect it to be recognized by the media as one of the best mid-sized cars out there. We expect that not all but some import intenders will come back to this car or try it for the first time.

Huh? if the new Malibu is not GM’s make-or-break car, what is? Is this the same Malibu that Maximum Bob told Edmunds that "in terms of fits and finishes, gaps, interior quality and so forth, you’re going to find the Malibu is equal to, I think, the Camry. And with the V6 engine, it outperforms it and I think it outhandles it. It also outbrakes it. I believe personally, subjectively, that it’s more fun to drive. And we do have a price advantage”? Now it's "one of the best" that will do "moderately well?"

Has Maximum Bob run out of hot air gas? AN picks-up the bad vibe (so to speak) and runs with it. What's it gonna take to make GM profitable in North America?

We've made a major move with the labor agreement. What still remains to be done is getting better net pricing or better transaction prices on the cars, which means lower incentives. But the environment is pretty difficult right now because I think we're facing an increasingly weak market. The market has to come back a little bit.

Part A of Bob’s reply is boilerplate bluster. Part B is completely out of character for Maximum Bob. We know what we need to do but we can’t do it because the market sucks. We’re going to keep our heads down and wait.

Coming from GM's CFO after yet more market share decline, the statement wouldn't merit a second listen. Coming from GM’s Vice Chairman of Global Product Development, this wiggle room makeover is a shocking Volt from the blue. If Maximum Bob’s no longer GM’s dopey-headed cheerleader, what the Hell’s going on down there?

To cheer him up, AN asks Bob if the Chevy's hybrid Hail Mary is a goer. Bob reckons it's an ipso facto-mobile; if the Volt wasn’t doable, why would GM even try? (Note to Bob: you’re got 400 engineers on the job, not 200.) And yet…

So is there a possibility next spring when we have our first cars and we drive them, the batteries don't live up to our expectation or they don't accept the charge as quickly as we'd like or they don't deliver quite the range; they deliver 35 instead of 40 miles? That is a possibility. Right now, we don't think that will happen. Even if it does happen, it's an engineering problem that we will solve through further development.

Further development. It’s what GM does best! Just look at the… the…. In any case, it seems clear to this industry watcher that someone or something has knocked the wind out of Maximum Bob’s sails. Could it be reality? Jim Farley-esque really real reality? Stranger things have happened. Wait. No they haven’t. Expect Bob to return to form and/or– as we have been predicting for quite some time– a shit storm of epic proportions.

[The Automotive News interview with MB is available (by subscription) here.] 

GM touts their new Chevrolet Malibu as "The car you can't ignore." I've driven the new ‘Bu. It's a handsome, well-built, thoroughly competent machine. As good as it is, Chevrolet's mid-size sedan will only remain psychologically inescapable as long as GM sustains the car's $150m ad campaign. To suggest otherwise ignores the quality and strength of the ‘Bu's competition. It's yet another example of GM's mindless arrogance. In fact, Chevy's first hit in years is already in deep trouble, as I discovered down at the dealership.

Sitting in the salesman's cubicle, waiting for the Malibu demonstrator to return, I watched a customer vent his ire. "I am NOT satisfied," he yelled at a manager sheltering behind the reception desk. "It's a new car. I've been back here FIVE TIMES and I am NOT satisfied."

This confrontation could have happened at any dealership. J.D. Powers, Consumer Reports and TrueDelta have documented GM products' increased quality and reliability. But the way the dealer's staff glanced at each other during the customer's diatribe told me that the distraught buyer's remorse was neither unexpected nor unfamiliar. Worse, I observed a frisson of fear spread across my fellow customers, as they contemplated what could- maybe even has- occurred to them.

Even if we assume that the new ‘Bu represents a new dawn for the brand, Chevy's past is a recurring nightmare that will not fade away. Call it import bigotry or sensible self-protection, but GM's marketing campaign should have addressed this problem head-on. Instead, they sent a subliminal message that their latest next big thing is good enough to convince customers to ignore Chevy's ignoble legacy of customer alienations. It's an intellectual leap that GM's marketing maven are making on their own.

A minute later, I asked the middle-aged Mom emerging from her Malibu test drive what she thought about the car. She was all smiles. "We came down to look at an Impala," she said, pointing to a picture in a discarded ad resting on the salesman's desk. "But this is one sharp car."

Cannibalization is one of GM's less-discussed afflictions. For example, the domestic automaker basks in the success of its Lambda-platformed crossovers. Yet many if not most of these sales came straight out of the hide of their more profitable SUV business.

If the Impala intender above clicked over to TrueDelta to compare base vs. base, she'd find that the new 'Bu is $1568 cheaper than the Impala. With incentives, it could soon be a wash. She'd also discover that the new 'Bu is just $807 more than its sister-under-the-skin, the Saturn Aura, and $364 LESS than Pontiac's platform sib, the slow-selling G6. Clearly, the new, better-built, sharper-looking Malibu will steal sales from other corners of the GM empire. 

Model and brand overlap is a luxury the Malibu's maker can't afford. If GM is to prosper/recover from its dramatic downsizing, it must attract NEW players to the table. Reshuffling the deck for the same old diehards won't do it- especially if the old cards were better stacked in GM's favor (i.e. more profitable) than the new ones.

Let's face it: the buyers most able to ignore the new Malibu- contented Accord, Camry and Altima buyers- are the ones GM needs the most. To be fair, the new Malibu is a highly credible alternative in a highly competitive genre. But…

GM didn't make enough Malibus. The dealer I visited had one Malibu. They'd sold another. Only two more were due this month. Next month, they MIGHT get four. Hell, even their own ad agency seems to be having trouble getting them; all the spots I've seen use computer-generated cars. 

This is the Mother of All Screw-Ups. Imagine you're a transplant-type who suddenly decided to shop for a mid-size car. You stop by the Chevy dealer for the first time in a decade- or ever- to clock the new ‘Bu. No demo car. No cars on the lot. All (and by that I mean a handful) of the cars coming are pre-sold. What are the chances you'll wait?

The competition won't. Not only do Honda, Toyota and Nissan (not to mention Ford and Chrysler) already have plenty of stock at all trim levels and colors in this class (duh), but they aren't about to be caught flat-footed by GM's nifty newbie. Look for them to amp-up their marketing campaigns and/or offer discounts– as Chevy dealers charge full sticker (just because they can). And then, soon, the 'Bu's foes will counter-attack with even better cars.

You only get one chance to make a good first impression. Chevy's blown it. Given the aforementioned bad vibes dogging both GM and Chevy, this is an irrecoverable mistake. The Malibu hype will die down. The new Chevy will be a solid seller when supplies ease, but it will have lost the chance to capitalize on GM's $150m marketing mitzvah to build the momentum it needed to provide The General with a breakout success.

So, GM finally built a commercially viable car, yet failed to make a meaningful marketing campaign, sort out its model lineup or assure adequate supplies. The new ‘Bu reveals the fundamental problem plaguing GM, the deficiency we've highlighted since this series began: a bloated, unfocused and incompetent bureaucratic structure. Until and unless GM corrects this fault, they're doomed.  

After perusing the United Auto Workers’ (UAW) contract with GM, I reckon both sides got a good deal. The UAW secured job guarantees: assurances that GM won’t off-shore new and existing products for the North American market. For its part, The General gets to off-load the lion’s share of its fixed costs AND a chance to lower the pay scale for a third of its hourly workforce. If the contract is ratified, the UAW protects its existing members’ livelihoods and GM becomes a lower-cost producer. No question: it’s a new lease on life. 

By removing The Mother of All Fixed Costs (retiree health care), GM will have the chance to do something it couldn’t do for decades: stop making cars. That may sound like the very definition of a Pyrrhic victory, but GM’s always-on product spigot has been the bane of its existence. Sure, it generated cash to pay the hired help's health care, but it also created a tsunami of new product. The flood drove down new car prices, lowered used car residuals and dragged all eight GM brands (including Cadillac) into K-Mart country.

Under the new contract, GM can throttle back factory output to more closely match supply with demand. With careful husbandry, residual values of used GM vehicles will rise. Even better, with all that slop drained from the system, GM can (at least in theory) make greater profits on lower volumes, or lower prices further to gain market share, or add content, or some combination thereof. What was once a desperate struggle to sell whatever came out the factory gates suddenly becomes a more considered battle to meet or beat the competition.

Actually, this has always been CEO Rick Wagoner’s turnaround plan: cut costs until they match production and then build the business back up from there. And a damn fine plan it was too, back in ’05; back when GM’s US market share stood at 26.2 percent. And it was still a pretty good idea the next year, when GM’s market share sank to 24.7 percent. And you gotta love it today, when GM’s market share has tumbled to 22.1 percent. The question is, how low can GM go?

The short answer: another three or four percentage points of US market share. If GM production drops below that level– 12 percent or 500k units in production terms– the business will rapidly become unsustainable.

Prior to '05, GM has been shedding four percent US market share roughly every six years. The company lost that much ground from 1991 (35 percent) to 1997 (31.3 percent); and from 2000 (28.2 percent) to 2006 (24.7 percent). But those were good years for the US car industry. Considering the four percent hit since '05 and today’s contracting new car market, it's easy to imagine that timeline could contract violently. And then it’s lights out.  

I repeat: all the cost savings won’t be enough if GM’s North American profits continue to fall faster than its savings– which is what’s happening now. Yes, GM’s sold its remaining "non core" assets and put together a nice little $32b nest egg. Even after deducting $5b to $6b to pay for the new health care VEBA (the remainder involves a transfer of existing VEBA control from GM to the UAW), that still leaves the automaker plenty of time to lose plenty of money. But postponing defeat is not the same as assuring victory.

The new UAW contract could be a genuine "get out of jail free" card, but GM still can’t cut their way to prosperity. That’s the mantra pundits chanted two years ago, when Rick Wagoner announced the first “historic health care giveback” (a.k.a. a $3b GM-funded health care VEBA). It’s just as true now, with a $29.9b union-controlled health care VEBA in the works. Until and unless GM recaptures lost ground in the sales charts, or at least holds steady, the company is on a downwards trajectory, spiraling into the abyss.

Course correction requires reversing a 17-year trend. With eight brands and 7100 dealers selling some 65 models, what are the chances GM has the focus it needs to reignite vehicle sales across the board? Has GM’s management team learned their lessons re: badge engineering, brand positioning, customer service, product quality and long-term marketing? Are they now ready to put in the long, hard slog needed to gradually and steadily improve their existing products, rather than swinging for the fences with Hail Mary newbies like, dare I say it, the Chevrolet Volt?

Dream on. If anything, this bold UAW contract will create a new sense of complacency, as both union and management congratulate and [generously] reward themselves for pulling back from the brink of disaster. Whatever brave plans GM has for its future, its stultifying bureaucracy will, as always, have the last word.  

Clearly, nothing about the United Auto Workers (UAW) proposed contract with GM is clear. Until we see the precise details, the agreement's ramifications are unknown and unknowable. Meanwhile, you'd expect the media to hang fire. Yeah right. "For GM, deal is a game changer" proclaims the Globe and Mail. "GM Labor Deal Ushers In New Era for Auto Industry" the Wall Street Journal advises. "Deal gives GM cash to build better cars" predicts The Detroit Free Press. Scanning these Pollyanna prognostications, the Freep provides the greatest insight. Not because I believe a word of Mark Phelan's thesis. Because I don't.

I reckon the UAW's new contract will not deliver one dime of short-term savings to GM. If anything, it will add to their overheads– especially the interest on the money that will pay for the multi-billion dollar union-controlled VEBA health care superfund). This has been the pattern since GM CEO Rick Wagoner started his campaign to trim his employer's overheads to match their falling income. Wagoner announces plant closures and union buyouts that transfer costs from now to later. Why would this new contract be any different? As Frank Williams pointed-out, the contract calls for a "targeted special attrition program" for "non-core workers."

But let's assume Phelan's giant leap of faith is correct and [for reasons I can't possibly fathom] this new contract reduces GM's labor costs by $2k per car produced (presuming GM's output hasn't declined further since he wrote the piece). Is the scribe right to suggest that GM would– sorry, "will" use the extra cash to build better cars? Could this really be a turning point, where GM rides to glory on the back of a product renaissance? In a word, no.

In any discussion about GM's future, you have to consider the unavoidable truism that you can't fix stupid. In other words, no matter how much more money GM spends on improving its products, it runs the [usual] risk of spending the "extra" money on the wrong cars, in the wrong way, with little of nothing to show for it. When it comes to creating competitive product, financial resources are key. But a coherent strategy is more important. And a healthy corporate culture is the most important element of all. In this case, one out of three sucks. To wit:

Building a down market Caddy is stupid. Selling two different versions of the same CUV in the same dealership (Buick Enclave, GMC Acadia) is absurd. Rebadging a Chevy Trailblazer as a SAAB 9-7x is dumb. Sticking a $65k Corvette next to a $13k Aveo in a Chevy showroom is idiotic. Building a Corvette-engined folding hardtop pickup truck (SSR) is seriously misguided. Letting the Pontiac Grand Prix rot on the vine for a decade is asinine. Selling better Buicks in China than the US is ridiculous. And so on.

Now you could posit that these mistakes are somehow cost-related. And you'd be wrong. An extra $2k lavished on any of these vehicles would not have corrected the underlying strategic blunders that led to their realization. As Phelan himself points out, the fact that GM could sell the new, improved Cadillac CTS for the same price as the previous model puts paid to the "we don't have enough money to build competitive models" argument.

We've spoken before about the all-conquering corrosiveness of GM's multi-divisional corporate culture. The automaker is a labyrinth of beancounters and middle managers whose interdepartmental skills make Kafka's nightmarish bureaucracy seem like a well-run America's Cup team. It's important to realize that this kind of diseased corporate culture spends resources with all the efficiency and effectiveness of a government agency.

When I moved to the UK, the Labor party had the same answer for every problem: more money. When they assumed power, they raised taxes and spent the money. And… nothing. Anyone who holds the belief that an extra billion or two or five pumped into GM's stultified product development process will be a "game changer" is sorely mistaken. The money would– sorry, "will" disappear down the same rat hole that currently swallows GM's development cash and produces substandard, bone-headed products.

Fortunately, not all journalists are lining-up at the GM water cooler to drink the company's Kool-Aid. Like many TTAC commentators, some news outlets are pointing out that GM CEO Rick Wagoner's post-strike comment– "This agreement helps us close the fundamental competitive gaps that exist in our business"– finally puts his ass on the line. By his own admission, Wagoner can no longer point to labor costs as the weights around GM's ankles preventing it from running with (ahead of?) the Toyotas, Hondas and Nissans of the world.

Yes, well, there's still Japanese currency manipulation, the mortgage crisis, a general economic downturn and all the other excuses the company has been trotting-out since GM found itself having to explain why its indeterminate turnaround plan has failed to gain traction. Look for more of the same.

Well exactly. GM's new union contract– if ratified– will not save the automaker from its fundamental weaknesses. Going forward, in 2008, GM will be in for a long, tough slog, warmed only by its own cash conflagration. During this time, GM's labor costs will not come down dramatically, its health costs will not be reined in and its Hail Mary products won't save its soul.

Day two of the UAW strike and media consensus has been reached: chill. Amongst The Detroit News’ (DTN) hopeful headlines: “Gettelfinger: Strike may prod bargainers to end stalemate.” Uh, isn’t that the point of a strike? Anyway, in a piece entitled “GM Can Handle A Short Strike,” the DTN rounds-up the usual suspects to allay fears that the automaker and its union are headed straight to Hell. In sum, “Analysts view GM's tough bargaining as a calculated gamble that is likely to pay off.” That’s a bit like saying Russian roulette offers its players terrific odds.

The party line: GM is finally getting tough with the UAW. According to auto insiders, that’s a good thing (unless the strike goes on too long and then it bloody well isn’t). But those analysts who view the UAW’s company-wide walkout through the prism of traditional labor relations– it’s high time GM “taught the union a lesson”– fail to understand that this isn’t about GM getting tough. It’s about GM not being able to afford its union.

This is the idée fixe that informed GM’s side of the negotiations. And it’s true. Unless GM pares down its labor costs, overseas profits or no, they’re headed straight for Chapter 11. But, the union counters, that’s only true because of YOUR incompetence. If you designed better cars you'd make enough money to pay us what we want. That’s the UAW’s idée fixe and it’s also true. GM’s erstwhile leadership has shown no ability to get its product-related shit together in the US market. 

So here we have the UAW and GM management blaming each other for the poisoned fruits of their shared arrogance, incompetence, intransigence and greed. The obvious answer: both sides should sit down and figure out the best possible way to work together to right the ship, setting aside all past agreements. That’s about as likely as Tom and Jerry getting married in Mississippi.

The single largest roadblock to union – management cooperation is GM management’s refusal to accept the fact that their entire North American business is going down in flames. GM’s brands are meaningless, its products uncompetitive and its dealer network bloated beyond any rational idea of sustainability. “Tweaking” the underlying business model– whether through a $51b union health care superfund or a reduction in union salaries– won’t rescue GM from the abyss.

What’s needed is radical surgery. Given the franchise law strait-jacket prohibiting the required dealericide, and the union’s satisfaction (indeed love of) the status quo, there’s only one way GM management could sort out both its labor problem and its business fundamentals: Chapter 11.

Most people consider Chapter 11 a way to jettison union contracts and hire scab labor. This is far from the case. GM would a very hard time indeed finding a federal judge willing to [risk life and limb and] toss the UAW aside. The situation over at bankrupt parts maker Delphi illustrates the point perfectly; UAW workers worked under their “old” contract from bankruptcy declaration (October ’05) to July ’07.

Even in Chapter 11, GM would have to work with the UAW to find a way to reinvent their relationship. Why wait? GM could use this strike as an opportunity/excuse to approach the UAW ahead of a bankruptcy petition and say “We’re all in this together guys. Let’s find a way to start with a clean slate. What would a commercially successful, American-based, fully unionized automaker look like?”

And then I woke up.

It’s a Catch 22. The sort of management team who could even consider this strategy is not the sort of management team that would have put the company in this position in the first place. The fact that GM’s top brass drew down millions in compensation as the company’s market share sank, profits dwindled and union negotiations loomed is all the proof– if proof be needed– that GM management doesn’t have the humility required to admit that everything they know is wrong.

So, will the UAW strike last more than a week? If so, GM is doomed. An analyst for Lehman Brothers told the Associated Press that the UAW strike would cost GM around $8b per month. Speaking to the DTN, BNP-Paribas analyst Brad Rubin pegs the cost of a month-long GM strike at $4b, and adds that the hit would likely tip the automaker into bankruptcy. And therein lies the tale…

Is it really possible that GM is now so weak that a “mere” $4b loss could send them into federal court clutching bankruptcy papers, hoping against hope that they have enough cash to recover? If so, it doesn’t really matter if the UAW and GM sign a new contract. The ongoing slide in GM’s US profits will top that number by year’s end. Chapter 11? Anyway you look at this, they lose.

After more than a week of overtime negotiations, the United Auto Workers (UAW) is on strike at General Motors. For those who think this action signals the beginning of the end for The General: yes and no. On the yes side, the strike will highlight the original sins that led both sides to this point. The executive greed and mismanagement. The union intransigence and denial. The strike will alert the dim-witted media that the Emperor hasn’t been wearing any clothes for decades, ding GM's rep, and make it even more difficult for the carmaker to sell cars. On the no side, GM will settle. A compromise will be reached. The same players will resume the game, poorer but no wiser.

The strike stems from one simple fact: the UAW is unwilling to take a hit for the team. As I’ve stated many times, trade unions are not in the business of surrendering wages, benefits or working conditions. It’s not in their nature. All the previous UAW “givebacks”– which supposedly signaled the union’s willingness to sacrifice for the good of the company– were nothing of the sort. They were payoffs. You want us to give up jobs? Create an attrition program. You want to increase our health care co-pays? Stick $2b in the bank. The UAW puts the “pro” in quid pro quo.

Can you really blame the UAW for holding fast to this "you'll get what you pay for" philosophy? Sure, analysts and media pundits have been bleating on about the need for GM to trim its labor costs to keep pace with their non-union competition. But how can a union member be expected to make a sacrifice when the company’s top players are paying themselves tens of millions of dollars in salary and bonuses? Do as I say, not as I do? I don’t think so.

GM went into these negotiations determined to create a $51b union-administered VEBA health care superfund. As always, the UAW was listening to WIIFM (What’s In It For Me?). You want to dump your health care liabilities on us? Show me the money. Not 65 cents on a dollar. Not 50 percent stock, 50 percent cash. A $51b health care VEBA will cost you… $51b. And while we’re at it, let’s have some job guarantees and a nice fat signing bonus.

The fact that GM didn’t give the union what it wanted has nothing to do with testicular fortitude. If GM had the money to cut the deal, they would have cut the deal. But they don’t, so they didn’t. Ten or twenty years ago, GM could have written a check or, at the least, rung-up a few bankers and arranged favorable financing. No more. Cash-wise, Forbes says they're sitting on $32b. Take off a $10b float, add up their ongoing liabilities, consider the cost of borrowing $51b and it's no wonder the VEBA was a stock-heavy deal. Or that the union walked. 

Which leaves us here: either GM will borrow the “extra” money at usurious rates to establish their beloved VEBA and settle the strike, or they’ll dump the VEBA and settle the strike with a new wage structure and working conditions. That's provided GM has the money to pay off the union for these “givebacks.” If GM can't pay the freight for ANY changes in the UAW's wages, benefits or working rules, they’ve either got to keep on paying the current rate plus a little bit ‘mo (‘cause there’s always a little bit ‘mo) or go nuclear: sit it out, file chapter 11 and hit reset.

Again, in all likelihood, GM will cave. Just as the UAW never surrenders, GM never stares them down. Meanwhile, the UAW strike is pouring gas on GM's cash conflagration. The UAW's 53-day, 9200 worker strike against GM in 1998 cost the automaker an estimated $2b or roughly $37m a day. This time 'round, 73k UAW members are on strike. This industrial action could cost GM as much as $300m per day. At that rate, GM's entire cash pile would be gone in 106 days. What's more, if GM is too cash-strapped to buy off the union now, what hope will there be in a month or more?

At the same time, the more GM publicly justifies its negotiating position– we can't keep up with the Toyotas of the world with our sky-high UAW labor costs– the more people will hear "GM can't compete." And that story renders GM's PR narrative– our house is now in order and we're on the cusp of a major product-led renaissance– meaningless. In fact, with each passing day of this strike, GM will look more and more like what it is: an old-fashioned, incompetent, easily-distracted automaker caught flat-footed by its modern, focused, streamlined, non-union competition. 

Imagine GM CEO Rick Wagoner in his RenCen bunker in the middle of August. Reports from the front indicate his North American division faces a third straight month of lowered sales. As the architect of a turnaround plan with no publicly defined goals (including a return to profitability), Wagoner’s given himself plenty of wiggle room. But a bad August– in the face of production cutbacks and a rapidly declining market– would finally trigger Wall Street’s alarm clock. So what does he do? He cheats. 

In August, GM’s year-on-year sales rose by 6.1 percent. In the same period, Toyota’s sales declined by 2.8 percent. On the face of it, it’s a stunning result. The media and Wall Street’s reaction was both swift and positive. “Investors given hope after GM bucks downtrend” MSNBC proclaimed. On Tuesday, GM shares rose by $1.18 (3.8 percent). Clearly, Wagoner's wily ways worked: he dodged the bullet.

Despite the obvious anomaly, industry experts weren’t all that interested in examining the figures for a suitable explanation. IRN Inc. auto analyst Erich Merkle spoke for many when he told Bloomberg “It was a quirky month.” Quirky or not, all GM's upward movement came from light truck sales, which rose by 16.5 percent. (Passenger cars sales tanked by a Toyota-beating 7.8 percent.) So the press credited the jump to a sudden increase in consumer demand for GM's pickups and called it good. Very good.

And yet, the clues to the real state of affairs were there for all to see, right in GM’s press release. “When combining retail sales with our growing commercial business, our sales were up when compared with last August,” Marketing Maven Mark LaNeve crowed. "With the double-digit decline in daily rental sales so far this year, and an overall market that remains challenging and competitive, we continue to stabilize our retail share and pricing in the market.”

Growing commercial business? Is this the same GM that said it loud and said it proud: we hereby swear-off fleet sales to protect retail residuals and get GM out of the “pile ‘em high and sell ‘em cheap” mentality? The numbers tell the tale. In August, GM’s total fleet sales rose by 21 percent. And as for LaNeve’s professed “double digit decline in daily rental sales,” note the “so far this year” qualifier. GM’s sales to rental companies increased by 24 percent during August.

In other words, Wagoner’s mob reneged on their promise to their retail customers. They sacrificed their retail customer's vehicular equity to goose the company's August numbers. They cheated. Sometime in mid-August, someone placed a call to fleet buyers and said OK, we’re done starving you of cheap cars. How many would you like ‘cause we got LOTS.

It’s hard to be specific. In a radical and deeply suspicious break with previous policy, GM didn’t separate out fleet and retail sales numbers for August. But the fact that sales of all the usual rental car suspects (Pontiac G6, Chevrolet Impala, Chevrolet Malibu, etc.) matched or exceeded last year’s totals in a declining market is pretty damn damning. If you think about it, that 7.8 percent drop in GM's car sales would have been catastrophic without bulk sales.

As for the trucks, again, we have no idea how many went to fleets. But you can bet it was a bunch. Whenever there’s a statistical anomaly–such as the reversal of GM’s sales losses and Toyota’s sales gains– common sense says something’s changed. On the retail truck side, there’s only one factor that could explain a Silverado or Sierra surge: increased incentives. From July 31 onwards, GM offered from $2k to $4k incentives or zero percent financing on their pickups– even as Toyota quietly dropped national incentives on their Tundra.

Sacrificing profits for sales might increase sales, but it does nothing for profits. So even if GM's 30 percent increase in pickup truck sales isn’t fleet related, the surge isn’t all that it’s cracked-up to be. Truth be told, The General’s recent pickup truck production cutbacks sent a clear signal to alert observers that the automaker's August sales increase must be a temporary bump on a rocky road to oblivion. Short term, GM’s headed straight for lower pickup truck sales AND reduced profit.

Since the numbers received so much attention, let’s finish with the numbers.

Frank Williams says GM’s August increase is based on percentage change per sales day. If you just compare the total numbers from Aug ‘07 to Aug ’06, there's only a 4.9 percent sales increase. Since both months had the same number of selling days (27), there’s only one reason to change the formula: to inflate the percentages. But no matter how they slice it, GM’s still down 7.5 percent overall year to date. While a few models may be showing some increases, the overall trend is decidedly downwards.

Mr. Wagoner can hide from the truth, but there’s nowhere left to run.

Last week, I spoke with former Florida Oldsmobile dealer Robert Horvath. Horvath insisted that General Motors cut a secret deal with Toyota to deep-six Olds. Reacting to this tin foil hat analysis of Oldsmobile’s demise, TTAC commentator canfood extended his deepest sympathies. “When something so unexpected and seemingly nonsensical happens it causes people to attribute it to some kind of outside force or even some kind of supernatural event.” Less charitably, if you refuse to accept reality long enough, you lose the ability to do so. The men helming GM are on that arc.

Bob Lutz is the poster child for GM's delusional denial. For some reason, GM’s Vice Chairman of Product Development can't get his head around the fact that only a handful of his employer's products are demonstrably better than the competitions', while most are patently worse. The idea that the new Chevrolet Malibu is no Accord killer simply doesn't appear on the former Marine aviator's radar screen. And if the new Honda Accord [continues to] kick the Malibu’s ass in the sales chart? Why there must be other, more sinister forces at work. 

In fact, it’s only a matter of time before Maximum Bob will be shuffling around a swank hotel in a terry cloth bathrobe muttering Horvathian diatribes about The Black Dragon Society’s secret pact with The Oval Office. Rick Wagoner will eventually succumb to the same paranoid psychosis– only he’ll bore bystanders with endless, detailed expositions on currency manipulation, health care policy, union relations and the unequal burden of federal regulations on American automakers. 

I know I’m getting ahead of myself. I'm preparing for GM’s August sales stats. Even as the bad news hits the wires, The General’s spinmeisters will claim the faltering housing market caused a general downturn in U.S. automobile sales which, they will insist, led to their precarious predicament. In other words, the corporate big wigs will trot-out the Curly defense: “I’m a victim of coicumstance!”

Of course, Toyota’s growth in this declining market is proof positive that GM is a “victim” of nothing more (or less) than its own incompetence. Not to put too fine a point on it, the artist formerly known as the world’s largest automaker is circling the bowl because it can’t get out of its own way.

I mean that literally. GM’s stifling bureaucratic structure lies at the heart of the American automaker's multi-decade fall from grace. And if you thought GM’s management had reacted to the company's evaporating U.S. market share by keelhauling its corporate culture, ending octo-divisional internecine warfare and unleashing the world-class creativity lingering within, think again.

From tail lamp designs to drivetrains, GM product decisions are [still] made, remade, unmade, abandoned and resurrected with scant regard to deadlines, aesthetics or electro-mechanical harmony. What’s worse, GM’s new emphasis on “global development” has made the design process worse. Which brand gets what bit when and where in what form for how much is now a subject of international debate.

Overlapping fiefdoms continue to force GM designers and engineers to implement the simplest solution, rather than the best. A new Cadillac based on the old Saab platform? A new Saab on a Chevy platform? We can do that! Three new crossovers on the same Lambda platform? Why not four? Saturn Aura and Chevy Malibu twins based on an Opel? OK! Import another rear-wheel-drive Aussie V8 for Pontiac after the first one flopped? Go for it! It all makes perfect sense to someone. (I'm looking at you Mr. Car Czar). But not the consumer.

It’s the bureaucracy, stupid. And what has GM’s CEO done to dismantle the enemy within? Nothing. Why would he? Dismantling GM’s bureaucracy would destroy Rick Wagoner's power base and annihilate the only world he's ever known. And yet the devolution of power was GM's only possible savior. 

Ask yourself this: would an independent Pontiac have created the lackluster lineup currently littering their dealers’ lots? Would those dealers also be selling Buick sedans and crossovers and GMC pickup trucks and SUVs? Would a full functional Cadillac offer cars that compete on price rather than style or quality? If Saturn had controlled its own destiny, would they have built Americanized Opels for their rabidly loyal customers? And what about Oldsmobile? As Mr. Horvath pointed out (repeatedly), the Oldsmobile Cutlass was America’s best selling car from 1970 to 1985.

In truth, GM’s bureaucracy killed Oldsmobile the same way it’s poisoning Pontiac, Cadillac, Saturn and the five other brands GM flogs stateside. By failing to nurture, protect and value each brand’s [once] unique promise to its customers; by chasing the next big thing rather than doing every little thing to fulfill that promise, GM's sucked the soul right out their product.

At some point in the not too distant future, the cancer will kill the host. GM’s bureaucracy will drive the company into bankruptcy. Toyota and the transplants may have been the instrument of this ignominy, but they were never its cause.

I’d like to meet the idiot who thought that the Cadillac BLS was a good idea. Actually, I’d like to meet the group of idiots who said sure, let’s create a small, badge-engineered Saab, fit it with a diesel engine, call it a Caddy and sell it to Europeans, South Africans and Mexicans. No, wait; just sit me down in front of the idiot who gave the other idiots the power to green light the idiot who had the idiotic idea in the first place. And I’ll ask him straight out: what part of branding don’t you understand? You know, other than all of it.

Don’t get me wrong: I’m not saying that everyone inside the artist formerly known as the world’s largest automaker is completely clueless as to what kind of cars the company should be building. Just the ones making the decisions.

Of course, that’s a prima facie argument when you’re facing a born loser like the Cadillac BLS, a car that’s as far from “the standard of the world” as Target is from a “premium shopping experience.” But GM's brand confusion is equally obvious if you look elsewhere, at the other automobiles in The General's over-stuffed portfolio. I mean, what would you think about GM’s branding expertise if I told you that the above description of Target comes from the man behind the new Chevrolet Malibu?

It’s true. Clay Dean, GM's former design director of small and mid-sized cars, told Automotive News that the new Malibu will provide a “premium experience with a low price tag,” and then compared the model to Target. I don’t know about you, but the last time I went to Target I didn’t think, wow, this is just like one of those upmarket boutique type stores, only cheaper.

Target a cut-price Neiman Marcus? Hardly. I could try and complete that analogy– Malibu a cut-price Saab?– but readers’ sniggers would draw unwanted attention from their cubicle providers. Anyway, if Dean and GM had just left it at that– Malibu as Target– you could almost say, well, OK, Target makes money. Thing is, the company isn't even that focused; Clay's comment is just one small part of the Malibu’s aimless wander though the branding wilderness.

According to Automotive News, Ed Peper, Chevrolet's general manager, and Cheryl Catton, general director of Chevrolet's car marketing, went to see some honest-to-God customers who (gasp) bought something other than a Malibu (no names mentioned). The suits’ mission: figure out how to market the General’s next, next big thing/Hail Mary/new ’Bu.

The article's lead misleads readers into thinking the dynamic duo made random house calls (which would have shown some genuine stones). In fact, Peper and Catton visited pre-selected import lovers and asked them to define quality, reliability and dependability.

Hang on; shouldn’t they have been asking these questions BEFORE building the Malibu? I mean, if these target (pun intended) consumers said “I define quality as a door that shuts like a bank vault” and the Malibu’s portals close with all the precision of a Chinese-made Fairly Odd Parents’ lunchbox, what then? 

Anyway, let’s assume that Peper and Catton simply wanted to know what wonderful things they should emphasize about their wonderful new Malibu. Then they’re still wrong. Creating a product that does one thing better than anyone else is the essence of branding. Even if you extend that philosophy to two or three attributes, the die was cast when the dies were cast. If you don’t know your car’s killer app by the time you build the damn thing, it's too late to re-boot.

Anyway, what did Peper and Catton say they learned from their ding-dong GM calling experience? “Consumers rank three core qualities as important when deciding on a mid-sized car: exterior styling, value and reliability.”

So, the heavy hitters went looking for definitions of core values and came back with the usual market research.

Excuse me: who ARE these people? Why are they in charge of a multi-billion dollar automaking enterprise? They’re minions of GM's President of North America, Troy Clarke, who “challenged” Peper and Catton to keep it party real. And who put Clarke at the helm? GM CEO Rick Wagoner.

The Italians say the fish stinks from the head down. Well, there you go. GM lifer and former CFO Rick Wagoner is the man who (at a minimum) destroyed any remaining brand equity within Cadillac, Buick, Saab, Pontiac, Oldsmobile and Chevrolet. Even if GM’s North American operations were making money, Wagoner should be held accountable for allowing his employees to engage in the mindless obliteration of GM’s most precious assets.

When GM introduced the BLS, they claimed they would sell 20k units per year. Last year, they sold 218. So far this year, they’ve shifted less than a dozen. Ladies and gentlemen, I rest my case.  

By their own admission, General Motors' North American operations are currently doing business with negative working capital (NWC). At About.com, an unnamed investment adviser has some advice on that subject. "Negative working capital is a sign of managerial efficiency in a business with low inventory and accounts receivable. In any other situation, it is a sign a company may be facing bankruptcy or serious financial trouble." Any guess which one of those descriptions applies to GM?

GM has been staving-off the whole "NWC leads to bankruptcy" paradigm by hocking the family jewels. The $5.4b recently added to GM's accounts by the sale of their highly profitable Allison Transmissions unit is only GM's last (and I do mean last) significant sell-off. In the preceding two years [alone], GM CEO Rick Wagoner jettisoned some $21.4b worth of corporate assets. During those same two years, the company signing his paycheck lost $12.4b.

While the charges for losses in these years were mostly non-cash items (worker buyouts, plant closings, etc.), the piper must be paid. The charges will eventually morph into cash demands. Without positive earnings (i.e. profitable vehicles), the situation is destined to deteriorate. 

Selling assets to cover the shortfall wasn't an inherently bad idea– if GM had used the proceeds to reinvigorate their brands and products. No such luck. GM was forced to use the money to pay for the aforementioned worker buyouts, plant closures and other downsizing costs. The automaker did so in the hopes that production would eventually equal demand, while cost reductions would lead to more profitable products.

As the last two month's of lowered sales and diminished market share have shown, as GM's accounts reveal, that strategy is dead in the water. 

In terms of the downturn's effects on GM's life-sustaining margins, much has been made of GM's increased incentives. Fair enough; every discount dollar bestowed upon GM's customers is one dollar less profit. But it should also be noted that the company's been heavily discounting its products beneath the media radar for quite some time. 

According to GMAC's recent 10K filing, at least 90 percent of the lender's 2006 GM vehicle financing involved rate buy-downs and lease subventions. That's up some 22 percent since 2005. Figure the same amount for '07, estimate the cash value at around $2k per vehicle, consider the fact that 48 percent of ALL GM's U.S. retail sales are financed by GMAC, and you can see that the automaker has been burning big bucks to maintain market share.

Scanning the large number of pickup truck and SUV sales involved, it's impossible not feel a frisson of fear. Pickups (many sold to construction companies and contractors) and large SUVs (sold to God-knows-whom) still generate the lion's share of General Motors' operating capital. The current sub-prime meltdown is hurting housing starts and refurbs AND causing a general economic slowdown. GM's cash cow is being slaughtered.

No wonder CFO Fritz Henderson declared that The General will defend its pickup truck market share "at all costs." Which is exactly the kind of statement you don't want to hear from a company with NWC.

There's another, hidden danger. The NWC situation has reached the stage where GM increasingly depends on suppliers' payment terms to keep the wheels turning. Should GM's suppliers decide not to extend the corporate mothership credit, the gig is up. GM would be forced to file. But even with their suppliers' support, GM is now sailing into hurricane force headwinds.

The way out of this mess hasn't changed since Rick Wagoner first outlined his turnaround strategy and began jettisoning assets to pay for it: trim production until it matches demand. Only GM can no longer afford large production cuts. Lost in NWC world, they need all the capital (i.e. money) they can get. If GM stops making so many vehicles, the gap between income and outgo earthquakes open and they'll fall into Chapter 11.

To eliminate the NWC crisis, GM needs significant earnings from profitable vehicles and/or massive new borrowings. But the recent withdrawal of the Allison junk bond sale and Cerberus' escalated borrowing costs betray the new reality: the price of money has skyrocketed. So GM must sink or swim on the back of their products.

Clearly, the company's paddling like crazy. Truth is, Toyota could drown GM in debt simply by lowering their prices. GM couldn't afford to follow suit. At the same time, they couldn't afford NOT to follow suit.

Mind you, that's Toyota's nightmare scenario. Toyota's American profits depend on GM and Ford remaining high cost producers, setting a floor for U.S. market pricing. If GM files Chapter 11, eviscerates its bloated dealer network, consolidates its brands, builds some shit hot products and undercuts Toyota's prices, ToMoCo would have a real fight on its hands.

Sounds like a plan to me. 

In the second financial quarter, General Motors made $891m. The General's camp followers have been delighted with the slim not to say two percent profit. Meanwhile, GM North America (GMNA) lost $39m. The General has been almost universally commended for their U.S. division's performance, as it compares with a $3.95b loss in ’06. Supposedly, the move “close to profitability” indicates the rot has stopped, as a prelude to recovery. But lessening losses is not the same as making money, especially when you need money.

Make no mistake: GMNA needs LOTS of money. It needs tens of billions of dollars to eliminate the mountain of debt and obligations incurred in the downsizing process. Union buyouts, plant closures, ongoing payments to former parts maker Delphi, the upcoming Wall Street-requisite United Auto Workers pay-off– by the CFO's own admission, GM's cash conflagration is set to continue.

GMNA ain’t making it. Literally and figuratively. At best, GM CEO Rick Wagoner’s $9b in operational cuts have brought the automaker's U.S. expenditures in line with its reduced income. That’s fine, if you assume that income will increase from here on out and expenditure won’t. Both of which are false assumptions.

Next financial quarter, GMNA will shell-out $4b in capital expenditures. Annual plant closures and scheduled production cutbacks will also take their toll on their bottom line. More critically, if the two-month sales drop (July down 19%) is any indication, The General will continue to shed market share in a contracting market. Do the math. GMNA is about to make less money selling fewer vehicles.

After this false dawn, what then? Rabid Rick has two choices. He can slice more capacity from the system, continuing GM's death spiral. Or he can cut prices to move the moribund metal, further eroding his employer’s profit margins. Which are already crumbling under direct assault from Toyota and the transplants.

On Saturday, GM announced zero percent financing for up to 60 months on crew cab and extended cab Silverado pickup trucks. The move wipes some $2500 – $3000 off GM's pickup truck margins, halving their per truck profits. This after reigning-in Silverado production by 10 percent. Will there be another 'round of profit purloining discounts? Seems so. 

Once again, still, GMNA’s future depends on selling a lot of something that makes a lot of money; something other than what they’re already trying to sell. Now that GM’s new pickup trucks have failed to generate the anticipated turnaround bucks, GMNA must pin its hopes on the new Pontiac G8, Cadillac CTS, Saturn Astra and Chevrolet Malibu.

The General is only planning on importing, at best, 30k to 50k Aussie-built G8s for beleaguered Pontiac/GMC/Buick dealers. Cadillac sold 24k lame duck CTS sedans this year (vs. 73k refreshed 3-Series). Even if Caddy's new, spizzarkle-prowed model doubles its current sales total, it won't be enough to keep GMNA afloat. The Saturn Astra arrives from Europe at a loss. Which leaves the hopes of a company resting squarely on the shoulders of the new Chevrolet Malibu.

So far this year, GM sold 60k Malibus (many discounted to fleets). In the same period, Toyota sold 212k Camrys and Honda flogged 180k Accords (hardly any of which sailed with the fleets). If GM thinks it’s going to slay the competition with the new Malibu– whose form and function are not a million miles away from the slow-selling Saturn Aura– it’s sorely mistaken. Even if the Malibu is significantly better than the Camry and Accord (also set for a refresh), conquest sales will be like pulling teeth. The demand for an Camcord alternative doesn’t exist.

All of which leaves GM where it is now: depending on sales abroad to generate enough cash for the corporate mothership to stay afloat. That said, while 58 percent of GM’s Q2 unit volume originated oversea, these sales only accounted for 38 percent of the company's total revenues. GMNA's recovery remains mission critical. Besides, what happens if GM’s foreign operations go sour? Amid all the jubilation over GM’s overseas success, there are signs of struggle and danger.

According to GM’s numbers, their Asia Pacific market share is decreasing in an expanding market. GM Brazil has hit a production capacity wall. Shanghai Automotive’s hook-up with countryman Nanjing Motors reaffirms suggestions that The People’s Republic of China wants the lion’s share of their domestic market for themselves. The currency situation is volatile. And last but not least, Toyota's lean, mean, lean production machine is beginning to turn its attention to these ripe pickings– which could turn moldy in an international economic downturn.

In short, GM’s overseas profits are not guaranteed; whereas ongoing and increasing U.S. losses are a sure bet. On balance, the automaker isn’t. Even if GM worldwide continues to deliver enough cash to subsidize GMNA, we’re heading towards the point where GM’s Board of Bystanders must contemplate declaring GMNA bankrupt to save the corporate mothership.