GM: Are You Out There??

Posted by: David Kiley on November 12, 2008

I had a couple of conversations and e-mail exchanges with people inside General Motors and with those doing business with GM about the fact that the company is getting its hide ripped off.

You know what material info I got back? GM has cancelled its press briefing at the Los Angeles Auto Show next week and withdrawn the availability of vice chairman Bob Lutz.

I blogged earlier today about the inane column in The New York Times today written by Pulitzer Prize winning New York Times columnist Thomas Friedman. Friedman, who usually is the smartest guy in the room, has long had a burr in his pants about Detroit. He also has a blindspot for truth and reality.

It was a little distressing to see MSNBC today during two of its shows, Morning Joe and Hardball, to give Friedman an unchallenged microphone to amplify what was a pretty wrong-headed column.

Look…I am not carrying water for GM or Ford. I am carrying water for the truth. And while there was some truth in Friedman’s column, it was out-shouted by the innaccuracies and distortions about the true state of play in Detroit.

What I can’t figure out is why, except for TV spots on Fox Business News and Bloomberg TV by GM CEO Rick Wagoner last Friday, two very low-rated TV programs, why there isn’t a credible witness for the Defense on TV.

Michigan Governor Jennifer Granholm has been on TV sticking up for her industry. And GM dealers have, I am told, have made 10,000 legislator contacts in the last week. But what’s missing is the discussion beyond jobs to point out to nay-sayers that GM and Ford have narrowed the gap with the Japanese to an almost statistically insignificant gap on quality, and can go vehicle to vehicle with Toyota on fuel economy.

How about GM president Troy Clark or GM sales and marketing chief Mark LaNeve to give their side of things; provided they were well prepared with sharp arguments and not blithering talking points.

This is not a quiet period. Yes, Congress is deliberating an aid package. They are also deliberating what kinds of restrictions and handcuffs to put on the executives in exchange for the money. Yes, GM is runing out of money.

But exactly what are you waiting for before you start bringing a compelling case to the public on why you deserve to be saved.

The low point today for me was listening to Friedman turn up the volume on his rant on MSNBC, followed by Mississippi Governor Haley Barber (Mississippi is home to Nissan’s U.S. manufacturing)effusively agree with him. (Um…Governor…you may be interested to know that Nissan’s plant there isn’t a raging success since the company fell on its face with pickup truck and a big SUV.)

I’m trying to find the precedent that shows how a company on the ropes—financially and with most of the public—succeeded by going dark.

Reader Comments

Paul (Vw)

November 12, 2008 8:14 PM

>>> It was a little distressing to see MSNBC today during two of its shows, Morning Joe and Hardball, to give Friedman an unchallenged microphone to amplify what was a pretty wrong-headed column.

This is why a media bent in one direction on a topic is so dangerous. If it collectively leans to far in one direction, the general population is deprived of important facts. MSNBC and the NYTimes are pretty much in love with each other, that's why you won't see them grill each other. Want to see a real love fest? Watch some old videos of Russert with the Sunday show when he had the NYTime pundits on (Dowd/Friedman/etc).

Dearborn Observer

November 13, 2008 2:19 AM

David, the sad truth is that the PR/Public Affairs departments of the Detroit Three are a shadow of the former selves and tend now to be staffed with spineless execs and/or less motivated contract employees (a product of the last eight years of restructuring and cutbacks). There isn't one PR person out there in the Detroit Three with the chops of a Jason Vines, for example.
Assuming that the government bailout funds come through, the D3 would be well advised to use some of that money to bulk up their PR departments with some qualified, creative and aggressive people - perhaps wave a few $million at the PR team at Apple or ex-Obama campaign staff?

motofashion

November 13, 2008 4:29 AM

GM is heading for bankrupcy as they have declared they cannot raise cash by selling assets and it can be as early as 2009. See the cash burn ratio and it's like going on your SUV at cruise speed in the middle of the dessert with no gas station ahead. May be the Fed can come with the gas barrel and pump a little bit, or may be not.
http://motofashion.blogspot.com

Paul (Vw)

November 13, 2008 8:22 AM

What I don't understand is why the Detroit executives (and union heads) have not been hauled in front of a congressional committee (or two) and grilled on how they got to this point, what/why they say they need/want (sounds like money), and what are the reasons for/against going bankrupt. Strange how we saw oil company and tobacco company executives grilled but not Detroit (unless I missed something on C-SPAN)

The mad rush by every sector to Washington for a feeding bonanza on taxpayer money is starting to get a bit disconerting.

Paul (Vw)

November 13, 2008 10:14 AM

>>> What I can’t figure out is why, except for TV spots on Fox Business News and Bloomberg TV by GM CEO Rick Wagoner last Friday, two very low-rated TV programs, why there isn’t a credible witness for the Defense on TV.

Conspiracy-like question...

Does corporate Detroit really want a bailout? Or do they maybe (secretly) want to file bankruptcy so they can restructure? Right now I only see the democrats pushing the issue. Could it be the unions (strong democrat party supporters) want the bailout but the suits want to file chapter 11?

Oh, and for the record, I believe Oswald acted alone.

Roy Bagdasarian

November 13, 2008 9:18 PM

The answer to "Is GM Out There?" is "probably not." If GM can't afford to put a couple of concept cars in a truck and send them to the largest market (L. A.) in the country, then GM can't be interested in selling cars any more. It breaks my heart.

PacificGatePost

November 13, 2008 11:39 PM

NO LOANS – BUT DON’T KILL THE HEARTLAND

It depends on HOW a bailout is structured, but one should be attempted.

BAILOUTS ARE COMPLEX BEASTS, but Try something outside the box like this to save the U.S. Auto Industry - - -

http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html

Toyota and Honda also depend on the same suppliers who feed GM and FORD. No need to let “Detroit” disappear.

There is also much creative talent hidden inside the U.S. Big 3 that has been smothered by mismanagement and the UAW.

James Raider

November 13, 2008 11:45 PM

Mr. Kiley,

Yes, they should be saved. Absolutely. I've been in high tech and the venture capital side of the game, but it strikes me that as far as the Auto Industry is concerned, some common sense should be injected into this mess. Now is a good time to do it.

BAILOUTS ARE COMPLEX BEASTS, but Try something outside the box like this to save the U.S. Auto Industry - - -

http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html

Toyota and Honda also depend on the same suppliers who feed GM and FORD. No need to let “Detroit” disappear.

There is also much creative talent hidden inside the U.S. Big 3 that has been smothered by mismanagement and the UAW.

Srini

November 15, 2008 10:57 AM

David
You got it all wrong, not Friedman. Your thoughts are misguided and you're missing the point.
It's not about the quality of cars or if GM or Ford are closing in on the quality bar; it's about gross mismanagement and a company's right to perish as a result. Why should the Govt or the taxpayer bail out a sick company in a capitalistic free market?
GM deserves to close down, their union deserves to lose jobs for all the misgivings of the past. Rest in Peace GM!

ll2018

November 16, 2008 2:39 AM

Outside of trying to prevent the collapse of the financial infrastructure, the bailout has become a ridiculous scheme for companies trying to take advantage of the American Tax payer. The American tax payer is not and should not be responisble for failed management and leadership strategies set by executive leaders of numerous companies (GM,Chysler, American Express, etc…). The management teams at these companies have failed for years by not focusing on the right trends or performing for future shareholder value. They should be accountable for their policies which have led to the current situation irregardless of the economy dynamics. Because of their size, these companies are using their employees and suppliers as “Human Shields”; the same way terrorist use people in urban areas to prevent direct attack on their position. For example, GM says if it fails, the country will lose 2 million jobs; therefore, Mr. Government (tax payer), you cannot allow me to reap the rewards of an incompetent management team. You must help me or else these employees and suppliers will go belly up and the impact would be catastrophic. Well, as usual, our leaders in the government are as stupid and unaccountable for our resources (money) as usual and want to throw good money at bad. If GM has been in a decline for the past year or two, what will an additional infusion of cash do? It will not change their strategy (the same idiots are still leading the company), it will not enhance innovation, so why give them the money so that they can ask for more later? Here’s what our impotent leaders in congress and the executive branch should consider: (1) Tell GM and other companies that they will not get any money from the government (2) For every worker displaced (laid off) by GM, the government should compensate through extended unemployment benefits (3) Spend tax payer money on retraining or additional education for these people to be competitive at obtaining work doing something else that has value in the current market (4) extended unemployment benefits are contingent on laid off workers and suppliers enrolling in the retraining or educational program. (5) The extended benefits + retraining + additional educational opportunity will be cheaper than any bailout to GM or any other company and more importantly it provides people with the means for competiting in the job market; in addition, it would make America more competitive since it would raise the skill level of our workforce. Bottom line - we (tax payers) prevent the GMs of the world from using their employees and suppliers in the market as “Human Shields” and it will force companies like this be run better because this example will stand as a precedent to the business world that there is no free lunch at the expense of the taxpayer. Can you imagine how corporate leadership and governance would change under a scenario like this? Don’t be a scapegoat led to the slaughter while people who should be accountable are not!

Joseph Hare

November 16, 2008 11:50 AM

'The 15% Solution"


One possible approach to dealing with the auto crisis -- The federal government should give any one who buys a fuel efficient car from the Big 3 a 15% rebate back on the selling price. This program could have an 18 month time limit.


The total of the rebate dollars might then constitute a loan the auto makers would have to pay back.

If effective, this solution would immediately jump start US auto makers by giving them a huge advantage over the competition while they work on the remaining legacy issues. Auto makers would stay employed and no money would go directly to the car makers.


The feds might also think about underwriting an extended warranty program for this period. Again, the total dollars to do so, could constitute a loan to the auto makers


If the Idea proves out somehat flawed, the conceptual approach might we worth exploring.

Joseph Hare
Hingham, MA.

Paul Andersen

November 16, 2008 2:12 PM

The catching up in quality is a complete myth. At most in initial quality, Ford has reduced the gap. Chrysler cars are atrocious and GM cars are pretty bad. The low resale value is the market vote on that.
Losing money on cars designed for fueld efficiency mandates and hoping to make it up with gas guzzlers is not a sound business plan.
Talking about competing with Toyota/Honda/Nissan for three decades and failing is not a confidence inspiring move.

Westernfan

November 18, 2008 4:30 PM

A couple of points:
1. The resale value argument is skewed- the calculation uses sticker price vs. the value of the used vehicle, and Detroit inflates their sticker prices to facilitate discounts and incentives. The foreign builders price their vehicles closer to the transaction price. Recalculate the residual values using the actual selling price of the new vehicle vs. used vehicle value, and you get a more accurate view of the depreciation.
2. The Detroit Three are pretty competitive in terms of quality on their newer vehicles, but are still suffering from the reputation they brought upon themselves
3. Not long ago, GM, Ford, and Chrysler were grossing over $10k for every Truck and SUV they could build- why would they stop building them?
4. Historically, GM, Ford, and Chrysler have all struggled to make a profit at all on small cars. Toyota, Honda, etc., have decades of experience designing and building cars for an international market-where the costs for gasoline have always been higher than in the U.S. Is it any wonder they have a head start on fuel effeciency?
5. Every vehicle coming out of Detroit in the past 3 years has components made by suppliers in bankruptcy
6. The only way the Detroit Three can get their costs in line is through bankruptcy and the re-negciation of thousands of obligations they have- a painful process everyone knows is nescessary, but no one wants to support.
7. The Republicans would love to hang the demise of the Auto industry on Mr. Obama, which explains their current lack of cooperation.

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