What's a GM to Do?
Mike Neiss offers this commentary on the state of GM.
May 6th started with the normal routine ... coffee, turn on the music, fire up the web, and head to my favorite newspapers online. As REM sang in the background, "It's the end of the world as we know it ...", the headline from the Detroit Free Press seemed to confirm REM's sentiment. "GM, Ford credit rated junk". The Lansing, Michigan, assembly plant rolled their last car off the line after 85 years. Legacy costs are at an astronomical high with 2.5 retirees for every active worker. And GM's response? We have to lower costs again. If ever there was a case for re-imagining, it is at GM.
Now I've mulled it over for a week, and here's my take: Cutting costs further will not work. Already, quality and the "wow" factor have been hurt by cheaper and cheaper materials. And layoffs won't work. GM has to sell every car they have capacity to make to cover their legacy costs. They can't close a factory. The issue is clear. They have to stop the deep dive on market share loss. That means better, more exciting design. That means taking the risks they currently avoid to be the leader in hydrogen cell vehicles (oops ... too late, Honda and Toyota are battling it out to have hydrogen powered vehicles in the showroom by model year 2010). That means the UAW has to start reading the writing on the wall and give back their fair share. That means the end of promotion by entitlement, and the beginning of promotion based on real results. That means understanding that their cash cow is GMAC, but you have to have something to feed the finance pipeline.
It's hard to criticize GM. They are my former employer, and many of my friends are in senior management positions. Once they tried to turn around the late Oldsmobile brand by insisting "this is not your Father's Oldsmobile!" Don't they have to realize that they are still operating as their Father's General Motors? What do you think? What can be done?