Tuesday, December 2, 2008

Big Three starting to get a clue

Wonders never cease - the Big Three are starting to get a clue about how drastically they need to change. They're going back to Washington, still begging - at least GM and Chrysler are, Ford claims to be in better shape - but this time they're demonstrating a tad more humility. The three top guys - Alan Mulally of Ford, Rick Wagoner of GM and Robert Nardelli of Chrysler - are driving to Washington. Yes, each driving their own company's cars. They apparently got the signal loud and clear that flying corporate jets to plead poverty sends the wrong message. They're not even flying coach! Maybe they're staying at Motel 6 somewhere on the Ohio Turnpike. Welcome to reality, gentlemen.

GM claims that it is the most desperate, and it needs $4 billion by the end of the year, or it will go bankrupt. That's a really, really hard thing for any person to admit. I would tend to believe them, because the consequences of not being straight in this situation are so ridiculously dire.

GM is also, however, also taking the most dramatic steps:
G.M. said it planned to focus on four core brands — Chevrolet, Cadillac, Buick and GMC — and sell, eliminate or consolidate the Saturn, Saab, Hummer and Pontiac brands.
Now we're getting somewhere. From what I understand, and I have good reason to believe this, GM has never made any money off of Saturn. It was started in the 1980's by the then-chairman, Roger Smith (made famous by Michael Moore in "Roger and Me"). The last thing that GM needed then, and the last thing it needs now, is more brands and more models. I've driven Saturns and liked them, but I won't be sad to see it go. I'm willing to bet that GM can get a decent price for Saab, because it's still a great brand, and I'm sure the Saab people in Sweden will be thrilled to no longer be working for GM. As for Hummer: I once had a temp job working on the technical manual for the Hummer. This was back when it was still being built by AM General. That was the company that made the Humvee, and developed the Hummer after the first Gulf War, at the insistence of Arnold Schwarzenegger. There was a picture of Arnold in the lobby.

The original Hummer was actually quite a piece of machinery. Having worked with the engineers who designed it, I can tell you that it really was made for going seriously off-road. If you're a firefighter fighting forest fires, this was what you wanted. Got yourself a few thousand acres in Montana? This was the vehicle for you. Driving to the mall? Not so much.

I worked there before the Hummer became an object of mass consumption. At one point, I heard a speech by one of the company head honchos, talking about how to raise brand awareness of the Hummer. They did that almost too well. I still have some nostalgia for the original article, but that's long gone. So I won't be sorry to see the Hummer go. I doubt GM will get much for it, if anything. Unlike Saturn, however, I am guessing they made money on Hummers.

I won't miss Pontiac too much, either. I'm not sure, at this point, what the difference is between Chevy and Pontiac. A great brand name with a lot of history, but I won't miss it much.

I'm not sure why they are keeping GMC, but considering what else they are getting rid of, at this point I can't fault GM's board for not taking things seriously. They are making some real sacrifices here.

GM is also cutting its white collar staff - again - and the number of dealerships it has. Painful, but good moves there.

On the subject of labor costs, one line in this NY Times article struck me as a little discordant:
G.M. will also seek to cut its labor costs by reopening its contract with the U.A.W. Possible cost cuts in the contract include eliminating job security provisions, including the so-called jobs bank that pays idled workers when their plants close.
The jobs bank is still operating?!?!? Seriously? It boggles the mind that this is still part of the Big Three cost structure. The jobs bank is a simple idea - when a plant slows down, instead of laying off workers, the companies keep them on the payroll, even when they're not working. They have to show up to the factory, so they do, but a lot of times, they will spend literally months just playing cards. Then, when the factory gets busy again, they start working again. But they can spend months drawing paychecks for doing literally nothing. Talk about inefficiency. Fortunately, Ron Gettelfinger, UAW president, has apparently indicated a willingness to bargain. Damn right, Ron. This bailout ain't getting past Congress with the jobs bank still operating. I know your guys are hurting, but "job security" is a thing of the past. I've never had it, and I never expect to.

Dan Neil, who I have mentioned before, has a great Op-Ed piece today in the LA Times, suggesting that we nationalize GM. I think I was more inclined to agree with him this morning, when I read the piece, than I am this evening. This morning, I wasn't sure if or when GM was going to do some serious cutting, up to and including some brands. Now that I know that they are, I think we can cut them a bit more slack. But, as usual with Mr. Neil, his argument makes a certain amount of sense. And this is one of the few Dan Neil articles with a metaphor I don't get (I pride myself on almost always understanding his allusions). What exactly is a "Morton's Fork?" I'm going to have to look it up. Much as I may disagree with how they got themselves into this mess, the gang running GM are still a bunch of smart and dedicated - and terrified, and therefore motivated - people. For the first time in a long time, I actually agree with most of GM's strategic decisions. A long time? This may be the first time I've agreed this much with GM management since I was knee high to a Corvette.

Welcome to reality, ladies and gentlemen. Thanks for coming. We're so glad you understand that the world is different now. It will get better, eventually. But you know all that stuff you've learned about how real men admit it when they're wrong? Nice to see your testosterone is working better than it is for that guy still in the White House.

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