GM Goes From Crisis to Chaos

By Brendan Moore

03.09.2009

When I was at the Detroit Auto Show in January, I was impressed with the organization and focus of the many General Motors executives that I talked to during the show. Despite the reeling auto market, their looming financial insolvency and the tenuous status of government aid, the people at GM seemed to have a plan and seemed intent on executing it; the situation was seen as temporary until the plan started working.

But, now, I just don’t know. Crisis planning seems to have given way to the chaos of little or no planning.

The wind-down of different businesses and the shedding of brands is happening, but in the instance of the brands, GM seems to have decided to just basically cut those brands loose without a lot of effort to make their landing a little easier. This is understandable with Hummer, but the sorry way GM has booted Saab and left them twisting in the wind is unbelievably careless, to say the least.

Pontiac is going to be….what? No one knows, no one seems to have any ideas (that they’re saying out loud, anyway) about what Pontiac might be, and what the future might hold. All that anyone at GM will say is that Pontiac will be a boutique brand, and what a boutique brand is to GM is anyone’s guess.

But apparently the worst of it has been saved up for Opel, a company and brand that GM has owned since 1929. 1929! A great brand with some great cars, cars that could be sold in the US and everywhere else. Opel is also GM Europe, more or less. Chevrolet is making inroads in Europe, but Opel is the king for GM in that region. Vauxhall has become the British version of Opel, for all intents and purposes, so if GM loses Opel, then they also lose a chunk of the UK market.

Yet, every day that goes by shows that GM’s actions concerning Opel and it’s future corporate independence become more and more slapdash. They issue contradictory statements about the shares of Opel they want to keep, what other investors they are pursuing, etc. All this while Opel’s burn rate accelerates and the company is projected to run out of money in the first part of the second quarter of 2009. Yes, that’s right – anywhere from three weeks from now to six weeks from now.

Opel is key to GM’s long-term survival, and GM needs to come up with a short-term plan and a strategy in order to make sure Opel is still an integral part of GM five years from now, provided, of course that GM is still a viable entity in 2014.

It looks like Saab is going to have to fend for itself, away from GM, and Pontiac may well end up as the red-headed step-child in the GM corporate family, but neither of those brands is going to make a material difference in GM’s future. Opel, on the other hand, will make a difference.

GM has got to get rid of the chaos currently around Opel, and move on to a plan that makes some strategic sense.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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7 Comments

  1. Well, I guess if GM had known how to make strategic sense in the first place, they wouldn’t be in the pickle they’re in. Their mismanagement is simply unbelievable. I totally agree with what you say about their mishandling of Opel. Are there any potential buyers for Opel? Or is GM just going to look the other way and pretend they don’t hear the baby crying? And what they’ve done to Saab is shameful. Pontiac a boutique brand? Like Porsche or Ferrari? What’s that saying about trying to “make a silk purse out of a sow’s ear”?

  2. The Opel bumbling is revealing of the state of GM, I agree. GM wants very badly to keep all of Opel, but they need the money from the German government bad enough that they’ll accept any conditions attached. They simply don’t have a plan B in which they turn down the money. The German government is smart to get assurances the money won’t be siphoned off to pay bills in Detroit, so I don’t blame them for the conditions. I get the feeling that any strategic plans regarding Opel will be trumped by a reasonable offer from a buyer, regardless of the ownership percentage involved.

  3. I guess Carlos Ghosn might be relieved then he’s not at GM currently after these talks with GM when “Captain Kirk” Kerkorian was at GM in 2006. However on the other hand, he wait peacefully (according to Autoblog and others articles on the net, he waits then the financial and credit market will be more stable http://www.autoblog.com/2009/03/02/carlos-ghosn-says-no-more-alliances-for-a-while/ ) then GM might sign chapter 11 or doing a bankrupcy without saying it’s a bankrupcy (receivership?) and trying to buy GM for a “bouchée de pain” (piece of breed) as I said in French.

    Since Ghosn couldn’t have Chrysler since Fiat had stepped on it or unless Ghosn had decided to wait and see before playing his next card.

  4. I agree about Saab. General Motors just tossed that hot potato into the Swedish government’s lap and walked away. What an awful way to treat your children.

    I lived in Australia for many years and Holden must be getting pretty nervous by now, considering what GM has doen with their other holdings.

  5. Deutsche Bank got about $6 billion of American tax payers money via AIG bailout, and it is the only one of example of foreign financial institue reaqued by US tax payer, and for what? And German goverment doesn’t gtive a damn about American company? What the hell. Why Amercians have to spend money to defend Europe, provide markets for European companies, save European companies but when it comes to pay back our Europans “allies” are unwilling to to give a helping hand.

  6. If the German and UK Government chose to ‘support’ Opel and Vauxhall then would that actually save GM?

    I suspect not. And I’ll wager that Germany and UK think the same.

    If Vauxhall failed then it would be just another major blow to the UK and if Opel failed….well the Germans still have Mercedes, BMW and the VW Group. None of whom seem to be in any danger of spiralling out like the US Big Three.

    The UK can’t rescue Opel/Vauxhall because they can’t afford it……and the Germans won’t rescue them simply because they don’t have to.

    Quite where this leaves Holden in Australia or Daewoo in South Korea though….hmmm, Holden is about to begin local assembly of a Korean small car platform (Cruze) and already sells Korean sourced product…so perhaps there’s a future there. But not much future product…

  7. So they might toss Opel into the fire and keep Holden? Which division represents more revenue for GM worldwide?

    I like the products of Holden and Opel and I can’t for the life of me understand why GM keeps them at arm’s length from the US. Maybe they need to sell them here as Opels and Holdens rather than as products from damaged nameplates (Saturn – starved of quality products) or as Pontiacs (which some people think means something from the 60s).

    Maybe we’ll luck out and GM will cut them both free and we’ll be able to buy Opel and Holden products without GM “adjusting” them for US markets (read rebadging them or decontenting them or retrimming them – see Catera).

    The reason those transplant vehicles don’t sell well is they don’t get promoted very well. I have yet to see a Saturn commercial that shows the Astra. I saw one where the whole product lineup was shown and the Astra rear wheel and bumper in profile were shown and that is it. The “new” GTO was awesome (if expensive) but the folks who remember the GTO think the Holden was from another planet.

    GM has a fickle customer base (what’s left of it) these days. They can give that dwindling customer base what they want (more SUVs, trucks) while dangling a few hot tacos out there (Volt and the Camaro) to keep up interest but at the end of the day GM needs to be able to sell ALOT of $mid-priced cars rather than halo cars.

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