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If you want to understand General Motors Corp. today, consider two data points:

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Tuesday, September 16, 2008

Daniel Howes

Commentary: Questions override future

If you want to understand General Motors Corp. today, as it marks its 100th anniversary, consider two data points:

The automaker will open three plants this year -- in China, India and Russia -- a testament to a nearly 20-year global expansion that has made GM a formidable and generally profitable player in virtually any market of consequence outside the United States and Canada.

And, second, GM is spearheading an industry push to secure at least $25 billion in taxpayer-backed loans from Congress, the culmination of a harrowing three-year race to radically remake an iconic business that -- like it or not -- joins the United Auto Workers in being poster children for American industrial decline.

It wasn't supposed to be this way. By now, more than 15 years after a boardroom coup swept retired Chairman John F. Smith Jr. into the top executive spot and he authored an ambitious strategic realignment, GM was supposed to be a global powerhouse at home and abroad.

Its captive finance arm, GMAC, would be pumping billions in profits to the parent company, not controlled by a private equity shop. GM's labor costs would be competitive. Its parts unit, now Delphi Corp., would be a successful, independent supplier, not mired in bankruptcy and asking GM for yet more cash.

On the factory floor, its production system, borrowed from Toyota Motor Corp., would be among the industry's most efficient. (It is.) In showrooms, GM's new cars and trucks would be more competitive and of higher quality. (They are.) And all of this, driven by smart technology and astute investments in next-generation alternative powertrains, would reverse a decades-long market share slide and make GM profitable again.

But it hasn't, at least not here at home -- the largest and richest automotive market in the world.

Rough patch? Or too late?

Questions about GM's future loom larger on the passing of its 100-year anniversary than perhaps any time in a storied history: the birth of the UAW, the Arsenal of Democracy during World War II, the golden age of the 1960s, the oil shocks of the '70s, the recession of the early '80s, the first Gulf War and the "Keep America Rolling" campaign in the somber days following the Sept. 11 terrorist attacks seven years ago.

That was then. Now? Will GM be able to muster the financial wherewithal to weather dramatic structural change in the U.S. auto business, powered mostly by energy concerns? Did it get started soon enough, back in 2005, on the latest iteration of its extreme makeover? Can its much-improved products and the push into alternative technologies, exemplified by the Volt hybrid to be unveiled on its 100th birthday, repair decades of damage to GM brands?

Does it have vigilant board oversight and the right management with enough credibility on Wall Street to complete the turn? The question is essentially answered by GM's billion-dollar monthly cash burn, awful credit ratings and a dismal market cap of $7.7 billion -- that for a company with $181 billion in annual revenue.

Good ol' days set the tone

GM today is more than a tale of two companies separated by oceans and markedly divergent financial results.

The automaker has struggled to meld a single culture as attuned to the outside world as it is to its Midwestern roots. Why? Partly because GM's core DNA is interwoven with an American exceptionalism, born of the pre-Japanese years when Detroit booked profits at will, that simply does not exist in the cutthroat global auto industry.

"GM was making so much money that it was hard for management to tear up the game plan, and it was hard for the union to resist asking for more," says John Casesa, a longtime industry analyst and now managing partner of the Casesa Shapiro Group in New York.

"In the 1960s, GM was making 20 cents on the dollar. GM was really a U.S. company. We made all our money here and we didn't think globally until we had to."

Unlike, it should be said, such rivals as Toyota and Honda in Japan and Volkswagen, BMW and Mercedes-Benz in Germany. All of them, despite (or perhaps because of) their countries' mid-20th century detours into warmongering, developed into export-driven companies that needed to understand foreign markets and their consumers if they hoped to grow sales.

GM did, but not at home. Nor did its Detroit rivals, which helps explain why the first years of GM's second century promise to be some of the most sobering yet.

Link: http://www.detnews.com/apps/pbcs.dll/artic...160318/0/AUTO01

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Well, that raises many new questions, answers few.

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...."credibility on WallStreet..."


Now that's ripe!

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