Copyright 2006 Richard Stoyeck
Don’t you just love it? General Motors can’t make a quality car to save its life, which is what it’s trying to do, and it wants Nissan to give it billions of dollars to show respect for a failed company. Over the last couple of years, you have heard of failed nation states, many of them in Africa. Countries that can’t feed themselves, and have just about as much wealth as is necessary to put an embassy in NY, so their diplomats can dine at the United Nations, and park overnight with diplomatic plates.
Now we have failed corporate states like General Motors who can’t get out of their own way, and probably have no justification for remaining in business other than the fact that they’ve been around for something approaching a century. If you really think about it, other than the employees who would anyone miss General Motors if they went out of business tomorrow, maybe even today. The remaining players would immediately pick up their market share, and we wouldn’t have to watch the slow market attrition that is taking that share down anyway.
There will come a time if they remain in business, that only aliens coming to visit our planet will buy General Motors vehicles. The news recently is ludicrous. Carlos Ghosn runs Nissan-Renault. This man has done a world-class turnaround over the last several years, making billions of dollars for a company that very few thought could be turned around.
Rick Wagoner is the typical corporate bureaucrat that spent decades at GM while its market share slid down the tubes. The two of them have been talking about some sort of consortium at the behest of GM’s major shareholder Kirk Kerkorian, who wants GM turned around tonight, today, yesterday. Wagoner has now decided that Nissan should pay GM billions of dollars for GM’s perceived greater value.
What value? Hey dude, you just lost $10 billion last year. You’ve bought out thirty five thousand employees that you can’t find work for. You’re a textbook case study in how to lose money by selling inferior products, and you believe you bring greater value to a partnership with Nissan, than Nissan brings to you. HELLO, ANYBODY HOME?
One of the first lessons anybody learns if they are active in the stock market is, you have to deal with reality, not your perceived reality, but what’s really taking place. GM has yet to do a full, truthful self-assessment and figure out where they are. What are you doing wrong? You can’t be doing things right, and lose $10 billion in a year. You’ve got sales all right, but your customers are so disenchanted with your product that they are not allowing you to price your product at a number that allows you to take a profit out of the sale. That’s how you lose money, and you can’t make it up on volume. You also have the issue of your competition’s pricing. The other guys are giving their customers perceived value and real value. The value is so great, that it is disallowing you a profit in the vehicles that you are putting on the market. It’s that simple.
But wait, there’s more!!
Toyota, your main rival for world supremacy just came out with a new Lexus LS 460 with built in features that GM isn’t even thinking about. It’s not even on the drawing boards at GM. THE LEXUS CAR PARKS ITSELF. It’s got sonar distance finding devices that link up to its navigation system. This thing can pull into a parallel parking position with the driver basically watching the car park itself.
Mercedes will envy the paint job at twice the price, and a first ever 8-speed transmission. How does a car with 380 horsepower get 19 miles to the gallon anyway? With a crash sensing system that prepares the brakes and airbags for the coming impact, this Lexus may give new meaning to the word safety. What’s going on here? For $70,000, Lexus will give you a car that BMW, and Mercedes can’t even dream about making for the price.
I have talked with representatives of the Japanese automobile companies. They think GM is on the ropes, and who can argue. The old giant is pumping out iron that just doesn’t do it anymore. The only employees happy at the company are hebephrenics on the assembly line who are taking too many pain killers. There’s also Chairman Rick Wagoner who appears to be constipated in every interview he gives, and wants a financial tribute from Nissan to boot.
The Future of GM
General Motors will continue to exist. If the consumer bought only on the basis of quality, and bang for the buck, GM would have filed for bankruptcy years ago. The consumer buys for other reasons though, aside from quality. Some have never driven a Japanese car, and wouldn’t consider it. Once you drive Japanese, buying American cars becomes unthinkable. Some buyers live in sections of the country where there is peer group pressure to buy American, such as the Midwest.
People on the East coast, and West coast however have basically shunned GM’s vehicles. The Big 3 automaker will never recapture anything in those two markets again. I can’t imagine how they turn around corporate morale. With seventeen layers of management compared to Toyota’s five, I don’t know how anyone is proud to say, “I work for GM”.
Would I love to see GM come back? You bet I would, how does it happen with an arrogant management team, trained by the guys that lost the ship to begin with. Wagoner’s team are the type of guys that would have screwed up the Iraq war worse than what it is, and I can’t imagine how it could be much worse. You need an outsider, with no loyalties to insiders, who can come in and SHAKE THINGS UP. Is it going to happen? Probably not, but that’s still what it takes. GM may have already gone through critical thresholds, and will just continue to peter out. Toyota on the other hand has just announced they are hiring 8,000 new engineers. Any takers?