GM has their rally caps on

General Motors has started to run television ads, asking Americans to ‘put on their rally caps.’ What is most disturbing about this message is that management of GM might really believe that wearing an inside-out baseball cap will turn the company around. Make no mistake, there has been no attempt by management to actually repair any of the crippling problems sinking the company over the last handful of years. I suspect they have used up all the lucky rabbit’s feet that they purchased with our tax money and are now turning to other forms of superstition to save their jobs. GM’s strange behavior is not limited to the last few weeks. It is instead a pattern of behavior suggesting their lack of judgment. Permit me to highlight some specific examples of GM’s insanity.

GM has not turned a profit since 2004, that’s four straight years of losses. GM, no longer able to pay their bills, decided to “restructure.” But wait, that’s not entirely true. It was only as a contingency of government support that GM produced a plan to revamp the company into something that will survive in the future. Apparently, GM management thought four years of poor results were not enough to warrant a rethinking of their strategy. After the GM plan was reviewed, President Obama fired the CEO of GM. We can infer from this action, that GM consulted neither reality, nor accountability, when they formulated their plan. I guess things were not bad enough yet.

Let us not forget GM’s focus on the relevant issues and technologies of the time. Our world is faced with global warming, depleting petroleum reserves and the worst economic downturn since the great depression. Seeing these issues GM management turned their attention to crafting something that would solve all of those problems-the Corvette ZR1!

The Corvette ZR1 is GM’s brand new top of the line, high performance super car. The ZR1 is based on the already high performance Corvette coupe and has been engineered to compete with the likes of Ferrari, Lamborghini and Maserati. The 630 horsepower ZR1 can keep up with many of the neighborhood super cars that the 430 horsepower standard Corvette couldn’t quite catch. And the ZR1 is only double the price of the standard Corvette, and way cheaper than any comparable Ferrari or Lamborghini, for those who are budget conscious. For the environmentally conscious the ZR1 gets 14 miles per gallon (MPG) city and 20 MPG highway. That’s like planting a tree every time you floor the throttle. The sheer irresponsibility of focusing resources on a pet project, during a time of crisis, is indicative of GM management’s lack of judgment.

There is a compelling reason for GM not to focus on small to midsize economical cars for ordinary people. They are good at making big cars. Remember the Pontiac GTO of the 1960s, big engine, lots of power. It started the muscle car era. It was probably one of GM’s greatest successes. GM was good at making big powerful cars.

On the contrary, GM is not good at making small cars. The 1970s saw conditions similar to today, high gas prices, new environmental rules and poor economic conditions. This era saw some of GM’s humblest moments attempting to make small economical cars. Does anyone remember the Chevy Vega or the sporty Chevy Monza. Those cars were so bad their tales can be used to scare auto executives the way the boogyman is used to scare small children. GM does not want to repeat their bad experience with compact cars, and who could blame them. Its not like Toyota, Honda, Nissan, Volkswagen, Renault, Fiat, Hyundai, Kia, Mitsubishi, Mazda, Ford, and Chrysler have decent compact cars right?

How about GM’s lackluster attempt to make a fuel efficient car? GM does market several “hybrids,” which are nothing more than gasoline powered cars with modest electric boost. The hybrid Chevrolet Malibu gets 26 MPG city/34 MPG highway, the hybrid Toyota Prius gets 48 MPG city/45 MPG highway, while the hybrid Honda Civic gets 40 MPG city/45 MPG highway. I guess GM missed the day hybrids were taught in auto engineering school.

GM has indicated that the technology is not yet available to make an effective electric car. But wait, GM did engineer a famous electric car, way back during the 1960s. GM engineers designed the lunar rover, the electric car that transported astronauts across the surface of the moon. Let us step back and put this into perspective. GM engineers designed an electric car that survived launch in a giant rocket and a trip to the moon. The car was then driven across the dusty lunar surface in the vacuum of space, quite a feat of engineering. Hasn’t GM learned anything new about electric cars since then? Consider that the entire history of the personal computer took less time than has elapsed since the lunar rover. I guess GM got upset when the astronauts left the rover on the surface of the moon, instead of bringing it back for a trade-in.

These examples highlight what appear to be poor judgment, ineptitude, and most of all poor management by those running GM. If the government intends to save the company, there will have to be many more management changes. It remains to be seen how deep the surgeon’s scalpel will have to go, before the patient can be saved, I suspect it will be deep. Hopefully, someone with accountability can be found to make the cut.

Why so many brands GM?

Okay, so here's a question for a certain U.S. Automaker: Why do you have to have so many different brands or makes of car--just for the U.S. Market? Chrysler has Jeep, Dodge, and Chrysler (they got rid of Plymouth). Ford has Lincoln, Mercury, and Ford (not bad-but why keep mercury). But General Motors has Buick, Cadillac, Chevrolet, GMC, Pontiac, Saturn, and Hummer. Buick and Cadillac are both luxury brands.

Both have upscale cars, with lots of amenities and lots of price. Is Cadillac a little more upscale than Buick? Historically, that had been the case. Historically, meaning the 1950s! In this economy, who needs two separate luxury brands? How many of these luxury vehicles does GM think they can sell? It borders on lunacy. To make matters worse Cadillac and Buick are trying to compete with each other for the same market. Maybe that is an indicator of why they need so many government loans to stay afloat- they compete with themselves, and both sides are losers...Pick one (Cadillac) and support it exclusively. Buick can disappear into the sunset, or to China (where it's popular.) But I digress; we are discussing the vast U.S. market. Think of all the money GM can save by not having Buick around?

Now just when you thought the problem was solved, GM has yet another luxury brand, Hummer, which sells upscale pseudo-off road vehicles. Hummers compete directly with Cadillac SUVs. Good idea for business? Probably not. As we mentioned previously, competing with ones self isn't a good business strategy, it’s called cannibalization, and it means higher costs and lower sales. Sell Hummer, which luckily is what GM claim they are trying to do. Fingers crossed everybody!

Okay, lets step into the middle market-the car for us “Average Joes.” GM offers four different brands for us to chose from. Chevrolet, Pontiac, Saturn and GMC. Someone please explain to me, the difference between Chevrolet and Pontiac. They target the same market from economy cars to middle of the road cars. Again they compete against each other. And they cost more money to keep around.

Why can't we just call the best cars from each: Chevrolet? Sounds simple to me? Pontiac only sells a few models and no SUVs. Chevrolet offers a full line of cars, trucks, SUVs and minivans. Sounds like enough choices to me. Pontiac should just disappear off into the sunset...bye bye.

Now the easiest one, GMC. GMC makes the EXACT same trucks that Chevrolet does, just with a few minor cosmetic changes. They are like identical twins wearing different clothes. GM does not need two of them. GM certainly doesn't need any more cannibalization.

If consumers want to buy a GMC truck, they will want to buy a Chevrolet truck, because they are, essentially, the same truck! Duh! Let me repeat for emphasis, Duh!

We now turn to the hard choice, Saturn. Saturn does compete with Chevrolet and Pontiac for the small to middle market, so there is some cannibalization. But Saturn could be shaped into a low cost, youthful brand for GM, like Toyota's Scion brand. Keeping Saturn around is only worthwhile, if the development of a youthful brand is desirable, otherwise it’s a waste of resources, just like Pontiac, or Buick, or GMC. Instead of buying a Saturn, just buy a comparable Chevrolet. Oh did I mention the cars might be even cheaper without all that extra corporate overhead.

So what is the downside to all of this? Well, most likely its job losses, which is unfortunate and should not be taken lightly. Those employed by Buick, GMC, Pontiac, and Saturn would possibly lose their jobs, although many employees would still be needed to help the remaining brands handle the increased sales shifting over from the closed brands.

It is also abundantly clear that due to slower sales in this tough economy, some job cuts at GM, are inevitable, whether we shut down brands or not. If we use the brand shut down to target the job cuts, we end up with a more efficient company with employees in the right places to grow the company.

Random company-wide job cuts will only hurt morale across the company, and do nothing for efficiency or production costs but save some short term money. No underlying company problems would be addressed with random cuts. Strategic targeted cuts are most likely to result in a healthier, and more competitive GM; a GM that will need to hire more workers once growth returns to the marketplace. This would ultimately yield the more jobs in the company than the alternative.

The other question is that of dealerships. Eliminating 4 brands would certainly cause great dislocation in the distribution channel. But if the overall number of cars that GM sells remains the same, some of the Pontiac, Buick, GMC, and Saturn dealers will still be needed to sell and service Cadillac and Chevrolet. If given the choice to continue dwindling sales, or to change brands with an investment in the dealership, the smart and profitable dealers will chose to invest. The weaker dealerships will close, or shift to another carmaker. Even losing a few dealerships is acceptable in view of the ultimate lean mean GM turnaround.

If you disagree or think I am wrong, just look at other successful car companies in the U.S. For example: Toyota, Scion, and Lexus; Honda and Acura; Nissan and Infinity; Volkswagen and Audi; BMW and Mini. Chrysler, Dodge and Jeep; Ford, Mercury and Lincoln; Mercedes; Porsche; Hyundai; Mitsubishi; and Mazda. Looks like that might just be everyone else, I wonder if that means something...hmm. Come on GM, clean up your act for real this time! where the Buick brand is quite popular. market, they all have one or two brands or at most three brands.

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