What GM’s Friday announcements might be
The Detroit News is reporting that General Motors will announce “important changes” to its operation on Friday. Citing an internal company email, the News says GM CEO Rick Wagoner and Fritz Henderson, the company’s President and Chief Operating Officer, will outline plans to address challenges “brought on by the volatile global economic situation.”
Earlier, we’d been told to expect big announcements on November 4, and, after that, on November 5. So either we (the media in general) are getting a lot of misinformation, or the date keeps moving, for whatever reason.
It’s possible that a proposed GM-Chrysler merger/takeover failed to materialize. That would explain a lot of rumors. I wouldn’t blame GM for backing out — or the board for rejecting that “solution.” Most mergers fail, and there’s no reason to think this would magically work. GM may have been built via acquisitions, but it also nearly went under — twice — because the founder spent more time acquiring than managing.
Here are some possible announcements that could be made.
Buick to be sold
This was rumored a while ago, and I have to say there’s some logic to it. Selling GM’s profitable Chinese operations to SAIC, their joint venture partner, would provide needed capital — I’d assume they could get at least $3 billion for it, but I think it’s worth far more in a good market. Buick has a golden reputation in China, and that’s worth quite a bit given that competition is fierce and getting fiercer. GM can always come back in with a different brand. What’s more, SAIC would then be responsible engineering costs for product for American Buick dealers, or for shutting them down, or, most likely, doing both, in that order.
Massive cost cut and factory closings
It would be about time, too. Ford and Chrysler have downsized dramatically. What would really be nice is the executives giving up some of their perks and huge salaries. During World War II, Chrysler execs barely got paid at all… and we all know about Lee taking $1 per year. Mainly, though, I expect the lower level employees to bear the brunt of it, as usual. Why cut $1 million off one person’s salary when you can cut 25 people making $40,000 a year?
More reorganizations
Reorganizations are like Shuffling the deck chairs on the Titanic, someone once said; but in GM’s case, they could do a lot to cut their marketing costs. That would include eliminating all GMC consumer grade trucks (in other words, the trucks also sold be Chevy); eliminating separate engineering and marketing organizations for different brands, where those still exist; and dropping most of their duplicate models, so that, at most, a single vehicle would have two brand names. That would help the surviving models to climb up the charts a little, and would allow for more jobs to be eliminated. I wonder how long the Australian operations will continue?
Dealing with GMAC
Lining up a different bank to do car loans would be prudent, given that GM can be all too easily hurt by Cerberus’ machinations. I’d never have gotten myself into that position in the first place…
Commercial truck unit to be sold
This idea came from someone else, who suggested it might go to Isuzu. I don’t know if Isuzu has the cash, but it would help to beef up their commercial truck line.
Partnering up
GM already has numerous joint projects with Ford. They used to develop jointly with Chrysler, too. Even without a merger or acquisition, there are a lot of opportunities for Chrysler and GM to share product development. GM has a nice small car, the Aveo - if you haven’t driven a 2009, you are probably wondering where I got this crazy notion - and is about to come up with a new compact, the Cruze. The Malibu is highly regarded, as is the G8 - and I suspect the G8 is a lot cheaper to make than the Charger. Meanwhile Chrysler has these great new engines and this terrific transmission technology; and both are working on electric cars. As partners, they’re a great match. If nothing else, the two MIGHT be able to use each others’ free flex factory space to optimize production levels and shut down or idle a few plants.
Oh — and there might be some sort of weird merger thing. Who knows?
We’ll see what happens. You read it hear… probably not first… but you did read it.
For the record: TV ads depict Buick, GMC and Pontiac ‘together’———as if it is now one de facto division.
Oh. For second there, I thought you said “de functo”.
Amen Dave.
There are going to be more layoffs, sped up plant closings (Janesville by the end of the year instead of 2010, for instance) and product integration.
GM should have probably three divisions, Chevrolet, Cadillac and either Buick or Saturn. Chevrolet maybe could be broken up as they have such a huge line of vehicles.
They may want to keep a Buick or two, strictly as a between Chevrolet and Cadillac line, or they may opt to lop off Chevy’s lower end and keep Saturn. Truck wise, there could still be a GMC for the commercial class 5 and up models as they have a better name there than Chevrolet. That is if they even keep the heavy duty segment which I believe is currently a money loser for them. Did I forget Pontiac? No not any more than the rest of the world. They will join Olds. RIP.
The Friday announcement will concern the survival of GM as envisioned by the GN top management and it’s BOD. Ergo, there will be no talk of the Cerberus engineered merger designed solely for the survival of Cerberus
I do have a concern about the now (hopefully) on-going talks with Pelosi. There is no representation there from Chrysler. Nardelli is Snow’s and Quayle’s puppet. He is in fact not representing Chrysler as propagandized, but is representing Cerberus, which is trying to bury Chrysler (at a profit, of course) and could care less about them, or GM or the auto industry as a whole.
There is a sort of fun side to all this.
If Chrysler were not currently owned by Cerberus, they would be more likely to buy GM than tother way around.
I agree with John about Janesville. Also, have you noticed that Shreveport (H3, Canyon, Colorado) and Wilmington (Solstice and Sky) are operating way below capacity? Shreveport makes slow sellers anyway so a closure there would make sense. Although the G6 is a good seller it requires incentives in good times and bad, and high fleeting. Cancelling the G6 and, thus, Orion might make sense. Fairfax, which makes the Malibu, is not running at capacity so Orion Malibu production could move there. The Aura could be cancelled to make room at Fairfax for extra Malibu production. The new LaCrosse is scheduled for Fairfax production, which could eventually change if Buick were to go to SAIC. If the G6 is cancelled that’s the end of Pontiac. That could explain the rumors of GM-Toyota talks: GM’s half of NUMMI gets sold to Toyota and the Vibe goes away. If the Aura and Sky go away (and they stop importing the money-losing Astra) could Saturn survive with just the strong-selling Vue? If GMC goes straight commercial, then the Acadia and Outlook would probably be cancelled and the Enclave could move to Spring Hill (the Enclave and Traverse are very similar in design). That would mean a closure at Lansing Delta Township. Another pickup plant could probably be closed (Flint?).
Still, based on how slowly GM moves, I would be shocked if any brands were sold or cancelled. Any announcement of a Chrysler merger seems far-fetched too.
Well, if GM is to survive, it won’t be moving slow. Expect fast moves, whatever they are. There’s been talk of ‘too many dealers/divisions/duplicate product’ for DECADES now, and eventually that all comes home to roost.
We’re at that point now. I expect a heavy ax to swing quite a few times.
I still don’t see how aquiring Chrysler makes any sense for GM, given all the above.
Dave, I just want to express to you and to everyone who reads this site, that Im proud to be a member here at ALLPAR, that I congratulate you and all the people who made this takeover analyses posible. Maybe its not the exact please to post it, but there is no other site who can compare to ALLPAR, the info. we have everyday is very valuable.
The takeover Analyse has been a great help and very informative, and of course with a high professionalism.
Dave you deserve a big applause and my congratulations to you.
It’s a tough road ahead and I hope they make it. Realistically they could cover the market with Chevrolet, Buick, Cadillac, and GMC.
Saturn and Pontiac has nothing that couldn’t be handled by Chevrolet. Saturn has absorbed investment in new product way out of proportion to the sales they have achieved. GMC is worth keeping in order to move another 100,000 or so trucks a year. Buick is worth keeping as a competitor to Lexus–it’s sales aren’t too bad and they’ve invested alot in the new product.
I’m just not sure if GM can cut brands like Pontiac or Saturn. Problem is the dealers, who would be justifiably mad if GM does another “Oldsmobile” on them.
It’s a vicious cycle–the more money they lose, the more they delay new product (that could really be a boon to Chevrolet and Cadillac), and the weaker the brands become.
Chevrolet has great marketing for the trucks–they have got to get the same message out for their cars. Cadillac has alot to offer–they just have to get more products. Buick has a great record for quality–they have got to market better against Lexus. Managing Chrysler’s destruction will not help them do any of those things.
For partenership or an “alliance” in the Renault-Nissan style, it might be a good idea but the trouble is how it’ll be executed.
Then there was a French article on the French newspaper “Le Figaro” who was deleted since who mentionned then GM is under the eyes of Carlos Ghosn O_o I don’t have a Spider-sense tingling but lately Carlos Ghosn seems to be very quiet on his latest moves….
I’m gonna throw out my wacky prediction.
dateline Detroit: GM sells GMAC AND Hummer to Chrysler owner Cereberus, “merger” talks a cover up.
Hows that?
Oh and I have heard that Saab was for sale too. Hmmmm. What could Chrysler do with Saab AND Hummer? Kinda makes you wonder.
Their announcment will probally be the sale of Hummer and/or GMAC to Cereberus and that they fired a bunch of their managment and are closing 5 factorys….
Just my guess.
looks like the world will keep turning after all. Thank God !!!! No GM-Chrysler merger !!!! I would still be willing to donate a few dollars to Chrysler to stabilize things if we could find a way to bring the donations together. How about it fellow Chrysler fans ? Sound like a good idea ???
GM will be waving the white flag, ford will be bobing around in the life preserver, and………..
suddenly……..
Mopar will pull one out of the hat
minivan squared for global energy
NEVER under estimate how strong the cornered badger is
all to lose all to gain
with the best engineering in the world
dr
Stand alone stamping facilities should be at the top of the list for closings. Shipping premiums are off the charts. Mansfield Stamping for example. They make a quality part, but most are SUV/Truck outer surface panels. Not a good thing at this point in the venture…
Two Issues. First GM has been unloading its commercial trucks for some time. It sold the big rigs to Volvo Trucks way back in time. It sold of the commercial chassis and motorhome business to Workhorse awhile ago. They where in the process of selling the rest of to Navistar but the deal was halted when the rising price of diesel killed truck sales in 2007.
Second issue. Jeep becomes much more valuable if its owners can regain full control of its design rights. The courts ruled whoever owns Hummer has use of Jeep designs and trademarks including the 7 slot grill. This goes back to the lawsuit ( before Campi ! ) of Daimler against GM for putting the trademark Jeep grill on a Chevy Suburban in a Halloween outfit. It was called Hummer H2. It is in the best interests of Jeep to get its design rights back. If Ceberus wants to sell Chrysler in pieces they will get a whole lot more for Jeep if combined with Hummer. In my opinion, whatever they would pay for Hummer will more than pay for itself in Jeep value. Russian and Indian companies rumored by others to be wanting Hummer don’t want it for the 7 slot grill. Cerberus might want Hummer just to full bartering leverage.
My guess is that Mahindra would ALSO have rights to the seven slot grille, since they’ve been using them for decades as well; and Mahindra already has a reputation in the US among small truck buyers… a pretty good reputation, in fact.
I can see Mahindra wanting Jeep to have a full product range — right now all they have covered is the mini-sized vehicles. I don’t know about the Russian companies, at least with regard to U.S. sales. Licensing has worked for them…
The seven slot grill is only on Mahindra’s products for certain markets. The grill is changed for their “exports”. The fact is they are Jeep in some parts of the world. I wonder if Daimler stepped on any toes with their China deals.
Well, GM’s big announcement has come and gone. There really wasn’t anything of substance in it. No unexpected plant closings, no product line discontinuations, nothing other than the latest P&L figures and the normal job cut rhetoric so common from Detroit (among others) of late. That the Chrysler acquisition (note the lack of the term “Merger”, that was Cerberus cover up of their intended sell-out of Chrysler) is now dead was also expected by many. They did sugar-coat the narrative to avoid irritating those that they may end up needing assistance from in the future but the point was made clear; this was not something in the best interests of GM.
I must say I am disappointed in GM’s apparent unwillingness to recognize just how much of a hole they are in. I am willing to spend my portion of the government’s bailout (whatever that may amount to) but only if the big chiefs at GM either start doing something to help themselves or resign! Else-wise I will be forced to petition my legis;ators to let GM go up that creek withoout MY paddle.
I’d donate if yeah, we could find some way to give it to them.
I guess GM has decided to go the “we’re too big to fail all by ourselves” route. With Pres-elect Obama, they will likely get some cash if they can hang on long enough. Nardelli calls GM’s impending bankruptcy as having “unimagineable consequences”. Like what? Nissan or Toyota or Honda buys them, and closes the unprofitable models and factories, but keeps 75-80% of the workforce? GM could do that themselves, but they’ve decided to gamble on everyone’s employment to save their own necks, knowing that they’ll all be fired in a takeover.
Why doesn’t GM does ask for loan guarantees like Chrysler did back in 1979? Instead, they are asking for you and me to loan the money outright to them, with no punishment for failure to payback. I already did when I bought a Grand Am (my father-in-law is GM-retired, and my daddy is Chrysler-retired. We had to buy 1 GM car).
Mr. DaveAdmin, regarding these guys taking pay cuts, you know as well as I that doing so would be largely symbolic. That would save several dozens of millions of dollars, which is about one tenth of one percent of what is needed - to survive only for year. In other words, if they took massive pay and bonus cuts, the company would last about two days longer. Unfortunately for the employees, all of that cash need is tied up in pensions and current employees paychecks. They really have only one choice and that’s to shink by 30% or so. Have we forgotten that Chrysler had to do this very thing nearly 30 years ago? And they ended up hiring - or trying to hire - every single empoyee they laid off.
Finally, Mr. Iacocca did reduce his salary to $1 per year for a while, but kept his bonus plan. So he still retained the largest chunk of his salary.
Oops, I wrote Nardelli, it meant to write Wagoner.
Pay cuts are partly symbolic, partly functional. You scoff at saving dozens of millions of dollars, without thinking of how many UAW jobs that means. It also sends a message that the execs are serious — not just a bunch of greedy slobs with no apparent value or loyalty to the company.
I figure 20 jobs paying $50,000 a year for each $1,000,000. You can also think about that money going into renovating dealers, or “spiffs,” or Google advertising to try to extoll Chevy virtues to potential Honda buyers. $12 million is real money. Over 200 factory jobs, for example. And we’re not just talking $12 million, are we? It’s likely multiples of that.
John Hagen, I agree - I was rather shocked by how little they announced. Though maybe Cerberus has cleverly been distracting their chiefs with merger/takeover talk so they’d be in disarray…