GM’s still an old dog
One of my younger colleagues came up to me this morning and said something like: I don’t get all the fuss about GM. No one I know would even consider buying a GM car. And if I was going to buy a car based on patriotism or pity, I’d certainly choose Ford over GM. Just let GM die. Let’s discuss this, shall we?
I imagine his viewpoint is shared by many people, especially younger people who don’t have the “loyalty” gene of previous generations. And I don’t mean that as a criticism. I’m a bit older than he is, and I don’t have the loyalty gene either.
I think there’s a strong sentiment out there that GM’s bankruptcy is nothing more than a way to cushion the blow of its inevitable demise – to spare the fragile economy an abrupt ending. That isn’t a very compelling reason to go out and buy a GM car. And by the way, if we’re going to pump all this money into the company, how about a shareholder discount?
GM can talk about reinvention (just watch the video on this website), but the same old people are running the company. If you look at that video, you’ll see the usual images GM trots out – American flags, horses charging and footballs flying through the air. I appreciate the honesty of the ad: “There was a time when 8 different brands made sense. Not anymore.” But does GM have any idea how to speak to a generation that doesn’t care about its storied legacy? Leaner and greener sounds great, but GM had better deliver. And soon, because the foreign carmakers and Ford will be circling.
Yes, what about Ford? Ford’s now being put in a position to essentially compete against the government. On one hand, there are advantages to your main rivals being in bankruptcy and to the government being so involved. Ford is increasing production this quarter and next to capitalize on that.
But as USA Today points out, in a way, Ford is being punished for being self-sufficient:
Ford would be “fools not to go back to the union and say, ‘Why don’t you give us the same deal as you gave (them)?’ ” says Rebecca Lindland, director of IHS Global Insight’s automotive practice…
Ford stayed out of Chapter 11 by seeking additional capital before the recession took hold. But it now owes $25.8 billion at a time GM and Chrysler are improving their balance sheets. As of March, Ford had $21.3 billion in cash.
“If I were in Ford’s shoes, I would be most worried about GM’s ability to get rid of debt,” says William Kohler, co-chair of the automotive practice of law firm Butzel Long.
But I wouldn’t be that worried about it.
Oh, and by the way, the New York Times reports that the buyer of GM’s Hummer brand is…
A heavy machinery company in western China.
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