Two Shifty-Eyed Guys We Now Have to Believe In

Us Automakers Obama Analysis

Look, no matter what your politics, you know that GM’s bankruptcy had to happen, and today happened to be the day. At his late-morning press conference (video below), President Obama stressed the positive, naturally: Government will get out quickly, warranties will be safe, today’s sacrifices will produce an America that “makes things” again.

It was a good statement of the facts, such as they are. Here is some of what he didn’t (and couldn’t) say to the nation. (Apologies to the parties depicted in the photo at right; it was too good to pass up.)

  1. The old GM will take at least a year, probably more, to accomplish its makeover to GM.2—which is predicated on the economy cooperating. But if the new company can’t pass the stress test of operating successfully in a 9-million-cars-a-year sales environment, what happens then? To be fair, no one can answer that.
  2. All the stakeholders (bondholders, UAW-CAW, the Treasury) want out ASAP, but transformation of the GM product line will take at least a year. Yet GM is in a better position than Chrysler, which has awful cars and will have to wait on Fiat to fill its pipeline. Ford may be the big gainer here.
  3. 20,000 people will be on the street, 12 plants (at least) will close, dealerships and some suppliers will go bye-bye, creating an enormous cascade of pain and economic cost.
  4. As Fritz Henderson acknowledged in his subsequent press conference, GM was carrying simply unsustainable debt and had no way out. You have to look at this as, he said, a “remarkable opportunity to address” balance sheet and product issues.

I then watched Jared Bernstein on Andrea Mitchell’s show (msnbc.com, not posted yet). He’s an economist and member of the auto task force, who was asked the big political question: “How would the government handle it if the company decided to keep promoting the sale of big gas-hogging trucks?”

His response: The government as shareholder has as its major concern the profitable running of the company. If it came to that, the government would want GM to sell trucks if it was the right management decision. The government’s environmental goals should be dealt with outside the boardroom.

That’s the first statement I’ve heard on what could be a very dicey issue. You’ve got to have hope.

Will the government be able to keep its political and social goals out of the boardroom?

—jgoods

1 Comment

  1. When everyone involved says that the most important thing right now it so boost the stock value of the new company, they are going back to the same management philosophy that killed GM in the first place– Lack of strategic planning and basing everything on short-term decisions that mainly address stock value. This is the hallmark of managers who are rewarded by boosting stock value at the expense of the business. This management philosopyh produced everything that killed GM, including poor product mix, pandering to the union with unsustainable benefits, and fighting government regulators every step of the way.

    There are two fundamental differences between GM and Toyota– Strategic vs. short term planning, and quality as the core corporate value versus quality as a requirement to stop losing market share. GM must start planning strategically and make quality the corporate obsession or they will not last long. They have a good model– Toyota– but they must adopt the whole model, and not just the part that fits their traditional short-term management style.

    They also need someone to lead the company who has a very strong product background without the Detroit baggage. Fritz is very much the wrong man, as was Rick Wagoner. GM desperately needs a good enema, starting at the top, to wash out the entrenched Big 3 thinking that is proven poison at this point.

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