GM: Solutions For Effective Change
I, like so many people who have been following General Motors'
fortunes for some time, am wondering what the company's long
term plan of action is in the face of historic losses, plant
closings, and unrelenting and widening competition. No, I am not
talking about GM's gloabal operations, rather I am talking about
the North American fortunes of the world's largest automaker.
Quite frankly, the North American market is currently
unprofitable for the company while GM holds its own, even
thrives, in many markets beyond our borders. The following are
some suggestions to help "The General" not only get back on its
feet again, but to halt the bleeding in North America.
File For Bankruptcy -- It is time to play hardball with
recalcitrant unions and government authorities who don't
understand that GM is playing on an uneven field. Toyota, Honda,
Nissan, and Hyundai all build cars in the U.S. None of them are
saddled by huge legacy costs, i.e. health and pension benefits,
local tax burdens, etc. Yes, GM negotiated their contracts in
good faith, however the market has changed tremendously over the
past several decades and is wholly unfavorable to the way GM has
been doing business since then. In addition, GM often operates
at a disadvantage in foreign markets as local laws limit their
ability to effectively sell their vehicles.
Quit Building Small Cars -- All small cars built by GM
should no longer be built in the U.S. This includes the Saturn
ION and Chevrolet Cobalt. Instead, GM should rely on imports. By
tapping its relationship with Daewoo of South Korea, GM can
bring in enough cheaply made models to remain competitive and to
give consumers affordable transportation under the Saturn,
Chevrolet, and Pontiac nameplates. Use factories in Canada and
the U.S. to build larger cars and trucks only. GM has been
successfully selling the Chevy Aveo, a Daewoo model, and can
easily sell other models at competitive prices. This practice
would be especially wise as cheaply priced Chinese cars begin to
hit the North American market in 2007.
Shore Up The Divisions Unlike some who think that GM has
too many divisions, I disagree. Better to clarify your existing
divisions than to go through the costly and negative closing of
existing divisions. The Oldsmobile termination was a huge
financial drain on the company and ended up fueling hostility
against the company. Therefore, this is what I propose for GM:
1. Cadillac - GM's luxury division is riding high and no changes
need to be made. Keep producing distinguishable high quality
luxury cars and Cadillac will continue to compete against the
likes of Lexus, Mercedes, BMW, and Infiniti. Cadillac outsells
Lincoln by more than 2 to 1 and the division performs well in
all consumer quality and satisfaction surveys.
2. Buick - As the "near luxury" division for GM, Buick must
create a viable alternative to Cadillac without sacrificing
quality or confusing consumers. Bring back in a "halo" model
like the Regal to show Buick's youthful side.
3. Pontiac - Unless the Firebird returns, Pontiac's performance
image is gone for good. Pontiac needs this car and it must be
different from the proposed Chevy Camaro. Besides Saab, Pontiac
is the one division that needs the most work when it comes to
reinventing itself.
4. Chevrolet - Keep up what you have, but rely on imports to
fill the lower end of the market. Redo the Impala to help it
compete successfully against the Chrysler 300, Toyota Camry, and
Honda Accord. Yes, bring back the Camaro!
5. Saturn - Moving in the right direction, Saturn should chiefly
sell cars that are Opel inspired. Give the car a more European
flair and the division will succeed. The Sky is a knock out and
the Opel inspired Aura is a vast improvement over the old "L"
Series model. Keep the strong dealer network in place and Saturn
will compete successfully against Hyundai, Honda, Toyota,
Nissan, and others.
6. Saab - GM's Swedish division is floundering and may be cut.
Better yet, let the division sell upscale versions of Opel
models and please do not throw out the Swedish touch: safety and
durability. Unfortunately, GM hasn't been as kind to its Swedish
company as Ford has been to its Volvo subsidiary.
7. GMC - Between Chevy and GMC, no manufacturer sells more
passengers trucks then this division. Likely, nothing will
change, but coming out with a more capable small pick up truck
would go along way in helping GMC and Chevy. Also, redo the
Equinox to be a real battler against the Ford Escape and Toyota
RAV4.
8. Hummer - GM's niche division is the Hummer and little needs
to be changed other than to add an H4, a compact Hummer. With
the H4, give the division something to go with that can battle
the Jeep Wrangler. Hummer will always be perceived as the
company's gas guzzling company, but it is also profitable for
the corporation.
Personally, I do not want the bankruptcy route to be exercised
as I know that so many suppliers would be left out in the cold,
jobs lost, and goodwill would take a hit for at least the short
term. Still, aggressive action - even beyond plant closings and
layoffs - must be considered otherwise GM will be relegated to
operating as a second rate player in North America while
pursuing its fortunes abroad. In my opinion, neglecting the
profitable North American market would be a shame and very
costly.