Comments

At this rate, before long, GM will no longer be too big to fail.

Posted by Jim Outland at June 4, 2009 11:22 AM

If they do end up failing -- given the message they are trying to convey in recent advertising -- I wonder if they will deem themselves a failed "restart?" I wish for the sake of long time, dedicated GM employees, there was some way to restart the company. I just don't see it happening. Yet nothing would pleasantly surprise me more than to actually see them do it.

I won't say it can't be done, nor claim to be the expert on the subject, but I know enough to say with conviction it would be a very hard and very painful process, with many people still being hard hit to do it.

Posted by Dan Gunter at June 4, 2009 11:34 AM

I'd be interested in an answer to this question:

If the tax dollars recently invested in GM represents the largest share of investors as some reports state, making US (the taxpayers) the majority stockholder, how do WE, the taxpayers, get to vote on GM's policy decisions? Will the IRS be in charge of mailing out proxy voting documents, or what?

I prefer not to invest in things I don't have a voice in. At least we do get to go to the polls and vote on the people we're paying to lead the government. Will the GM CEO's slot be on the 2012 ballot? Somehow, I doubt it.

:-(

Posted by Dan Gunter at June 4, 2009 12:01 PM

Tom, a serious question for you:

In your opinion, if GM could somehow (in really short order) be busted up into a bunch of smaller, really autonomous units (genuinely independent units -- not just on paper,) do you think it's possible that it could be turned around?

I know some will scream "But what if an independent unit focuses more on business with someone other than another GM unit? How would cars get built?" Each unit would have to be the very best at what IT does in order to be the provider of choice for other units (all free to look elsewhere), and each would have to be a viable CUSTOMER to the other units (all free to sell their wares elsewhere.) Allow (indeed ENCOURAGE) businesses outside GM to cut themselves into the game, which might actually bring some much needed tech and business innovations to the table.

Do you think it could be pulled off?

Posted by Dan Gunter at June 4, 2009 12:22 PM

Ironically, "On a Clear Day You Can See General Motors" was written 30 years ago this year. Surprising GM lasted this long without a bankruptcy, actually.

Posted by Bruce at June 4, 2009 1:54 PM

Wonder what the margin declines were for each automaker? Did GM give away the cars to maintain market share?

Posted by David Porter at June 4, 2009 3:53 PM

That's an interesting question David. With the increases in incentives, it can't look good. For real, if you get the numbers, paste 'em on here.

Posted by Dan Gunter at June 4, 2009 4:01 PM

Dan – You bring up some very interesting points. Calling taxpayers “owners” of GM stock is simply a PR term for using government money to run GM. I posted, back in early May, about the people who are actually running the company. Steve Rattner (yes, the guy who is being investigated for his alleged involvement in a New York retirement fund scandal) is the head of the Treasury Task Force in charge of GM, and Boston Consulting Group (BCG) is involved in the operational details of the company. BCG is getting paid $7 million for their first round. Of course, a cadre of Treasury staffers is also throwing their weight around at GM. No, neither you nor I will have a vote on anything that goes on at GM—except on Election Day, next time around.

Regarding the busting up of GM—In my opinion, it could be done, but there would likely be some elements that would not survive. I recently read about companies getting too big to “survive”—maybe GM cannot survive without busting up. (As a long-time turnaround guy, I would love to take a crack at a couple of units.) But, I too, would like to hear Tom’s opinion on this.

Posted by Bob Foster at June 4, 2009 4:45 PM

Bob, thanks tons. That's what I'm thinking -- divestiture. I'm also thinking that if the result is breaking-out and identifying a few "dud" units that can't make it, then so be it. Call it "quality control studies to the extreme." I'm with Tom on the idea that if you can find someone on the outside (a P.S.F., if you will) that can do it equally well or better for equal or less money, go for it. I actually posed the question on the "Can It Be This Simple #1?" post raising the challenge that we talk about ideas of what COULD be done to create a turnaround. In an economic climate where a lot of companies are looking for ways to improve the bottom line (if only to survive) what harm could it do to toss around some "turnaround" ideas?

Since I'm already posting here, I'll throw out this one: the auto industry as a whole is sluggish. So, we have all these Hyundai and Kia suppliers in the Southeast that are feeling it. I'm sure that at least some of them would be willing to discuss subcontracting component manufacturing to G.M. If they have their manufacturing costs and quality well enough under control to provide high quality parts at prices that let Hyundai and Kia control costs, why can't G.M. drop a few of the "divisions" and work with some of these manufacturers? At least the jobs would still be here at home in the U.S.

We could still wave our little "Made in America" flags and perhaps add a newer, updated one to hang on our GM cars: "Saved in America."

Posted by Dan Gunter at June 4, 2009 5:13 PM

Dan: Best I can do is Q109 10Q for GM. $22.2B automotive sales, $24.6B Cost of sales. Q109 $41.9B sales and $38.2B COS. Cost of sales rate as of automotive sales = 110.7 this year and 91% last year. Hope the 31-year old in charge of the restructuring has lots of Big Chief tablets and number 2 pencils. It's going to be a long year for Government Motors' turnaround team.

Posted by David Porter at June 4, 2009 5:39 PM

David, thanks for digging these up. Numbers that could only be deemed impressive to a corporate raider with a turnaround plan already devised, along with a team that's really prepared to pull it off. Even then I'd probably doubt the deal investment worthy. It will be a long year indeed. Think I'll buy stock in Maalox, Pepto-Bismol, and NyQuil. Sales of those are gonna soar.

Posted by Dan Gunter at June 4, 2009 6:06 PM

The sales % is irrelevant - GM's massive losses & $100B of taxpayer money is the answer to their bankruptcy de-evolution. Picture 55 year old "big 3" retirees with a wine & Viagra cocktail cruising in an Escalade.

Toyota adds to the Treasury coffers - GM robs us like a Trevor cult madman - welcome to the new world of socialism - similar to what took down the USSR.

http://www.youtube.com/watch?v=GhRu9yzlTRI

Back in the USSR - you don't know how lucky you are. :>)

Posted by C Love at June 4, 2009 6:10 PM

The collapse of the Detroit cartel will turn out to be a boom for the American car industry in the long run. GM said that Penske will buy Saturn and that Saturn had 16 potential buyers. Not bad for being one of GM's "failed" brands. The government will not own GM for more than four years. What's left of it. Pres Obama didn't want GM broken up. So now GM is just broken in half. I believe there is going to be a Reagan like movement which will force GM to sink or swim.

Posted by Michigan and Me at June 5, 2009 7:25 AM

Roger Penske is a great man! Excellent service at his dealerships! He's an excellent servant-leader with a great love for Detroit.

Posted by Judith Ellis at June 5, 2009 7:34 AM

What's a Regan-like movement here, Michigan and Me?

Posted by Judith Ellis at June 5, 2009 7:35 AM

Michigan and Me, interesting comments. In a way, the Saturn sale underscores my question of "Would it be better if GM DID break up?" It's hard to shed or replace a failing part of your company if it's still a tightly interwoven part of your company. On the other hand, if you create an element of separation and autonomy, it's easier to achieve objectivity. You open the door to improvement, or finding better sources of the same (or better) materials and services, or just eliminating it, if those goods and services are no longer needed.

There's a time for chanting "We're all in this together." But there's also a time when it pays to see the individual identity and evaluate the performance and contribution of every person, every unit, every service, every department. If one or more is dragging you down, find out why. Improve it if you can. Eliminate or replace it if necessary.

Posted by Dan Gunter at June 5, 2009 7:54 AM

What I forgot to say above...

"Breaking up" does not necessarily entail "dumping" or "selling-off."

And I wonder if selling Saturn is the exact opposite of what should be done? Saturn might turn out to be one of the few islands of Excellence in GM. Separate it, so to speak, let it breathe on its own, but learn from it. No doubt even Saturn (like any company or division) can be improved. Just don't let the heavy GM blanket snuff out any embers of Excellence in Saturn.

Posted by Dan Gunter at June 5, 2009 8:06 AM

The 80-20 rule. I believe the government believes that they have an 80% chance that they can save GM through massive investment and oversight. The likelihood is, they have a 20% chance of making it happen.

Obama is rationalizing this decision all the way to my bank account.

On a separate note, Ford beat out Toyota now 2-months running. Toyota is also in big trouble. So to say that Toyota has the magic formula for how to sell cars is wrong.

Where are the smart guys that know how to lead - instead of just follow?

Posted by Rodney Johnson at June 5, 2009 9:04 AM

Rodney, since you brought it up (Pareto), albeit in a way I haven't looked at it, I'll bang my own drum again. Back to the "Saturn" notion. It may well be that GM needs to either fix or dump 80% of the crap it's buried in and figure out how to grow the 20% that stands a chance (Saturn perhaps being one of them.) It doesn't take a financial genius to figure out that if you're losing your (ass)ets trying to make something, you might want to consider not making it. On the flip side, if you have a product that's poised to actually make a dent in the market, let the people doing it just "do it" while you sit back and say "thank you!" at the end of the day.

Pareto is alive and well. We probably WOULD stand a better chance of getting a return on our GM investment if they figured out the RIGHT 80% of their operations that need to go (i.e., "cut your losses" sooner, rather than later) and focus on doing what they do well (or at least stand a chance to.) 150 mg viagra

Building big, bulky, gas-guzzling cars ain't it. Having a bunch of overpaid, under-results-providing management ain't doing it. The old ways of running a business at GM ain't doing it.

I hold a Ph.D. from Nowhere University, and I've got sense enough to figure that out.

Posted by Dan Gunter at June 5, 2009 9:24 AM

Pondering GM "divisions"...

Not long ago, I heard that the buzz was that GM was going to drop the Pontiac line (and possibly Buick.) I know a lot of older folks that see Buick as THE car to own, choosing them over Cadillacs and Lincolns. Meanwhile, for weeks I have been commenting to friends that the best looking new (sporty) automobile I've seen in a while happens to be the new Pontiacs sitting in front of the local dealership. If I was in the market for a new car, I'd give it serious consideration. But I'd look at the quality, the price, the E.P.A. rating, a lot of things.

Bottom line is that if GM has it priced competitively (and is making a reasonable profit) and can truly show me that the car is worth owning, they stand a chance. Just as my older-generation friends feel about their Buicks.

Back to my "get the hell out of the way and size them up" theory. Pull an IBM/Lexmark move if you have to: sell the majority of ownership in the division to the people building them (minus OUR taxpayer's stock in it now) and see what happens. If they want to start getting the parts to build them from somewhere else in order to build them affordably (meaning from a non-GM supplier) then that's the way the cookie crumbles. If they get it right, you get a cut. If they get it wrong, you're forced to play the role of prudent investor and get out -- sell it off to somebody else or sell the remainder of ownership to the division employees, giving them the ultimate incentive to get better at the game.

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Posted by Dan Gunter at June 5, 2009 9:36 AM

Thanks for that, Rodney. I appreciate your point on leadership. Also, I had been seeing some Ford and GM models being driven around here well before they came out and thought, now, that's a beautiful car--whether SUV or compact.

Posted by Judith Ellis at June 5, 2009 11:04 AM

Dan – A recent article in BusinessWeek said that the Treasury Task Force (for the auto industry) visited GM in numbers, and pushed hard to “eliminate” all GM models except Chevy and Cadillac. The argument was that Toyota only had the Toyota brand and Lexus, and that GM should follow their program. GM pushed back with Buick, because it is a big seller in China (it was a hit in the recent Shanghai auto show), and GMC because it was the only division making money. So, now GM has a line-up of Chevy, Cadillac, Buick and GMC…at least for the moment. Of course, these were the same Treasury folks who wanted to know when the Chevy Malibu would be available—even though it had been in showrooms for 18 months.

Rodney - I was delighted to see that Ford has been beating out Toyota the last couple of months. Toyota makes fine cars, but they do not have any magic formula—American car-makers can make fine cars also. Unfortunately, I’m not sure our government can make fine cars though.

Posted by Bob Foster at June 5, 2009 7:39 PM