May, 2005

There has to be a plan, because without one GM is a dead-man standing and has no chance whatsoever of surviving in the marketplace.

Generations of executive hubris are to blame. Don’t let anyone tell you it’s the foreign competition. Hubris, saving their corporate asses and not rocking a boat that badly needed new directions are the reasons they’re in such suddenly shallow water and in danger of going aground.

All that’s past history. Now to the plan.

• General Motors, over a period of five years, gets totally out of the automobile manufacturing business. Close down, sell off, consolidate assembly lines and leave Detroit for a hugely slimmed-down corporate headquarters in New York.
• Keep the brands (Chevrolet, Pontiac, Buick, Cadillac and GMC) and by all means keep the dealership network in place.
• Offshore the manufacturing.
• Then watch as the stock recovers and GM nameplates repopulate the American roads.

In order to re-achieve brand differentiation and bring back the buyers who want a Cadillac to be more than a glitzed Chevvy, GM should subcontract Caddy’s design and production to Honda. Essentially, the resulting car will be a Lexus with its own signature body design and interior, plus a few proprietary goodies thrown in. A hell of a fine car. They can easily market and sell the new Cadillac through the existing dealership network. It’ll make ‘em all smile to finally have a great car to sell that’s worthy of the emblem.

Fleshing out the plan, Chevrolet goes to Kia (along with Opel) and GMC to Kia’s parent, Hyundai. Toyota gets Buick and Pontiac. Saturn gets sold to the highest bidder. Saturn and its manufacturing facilities are probably still worth something.

Actually, when I say ‘off-shore the manufacturing,’ it’s more symbolism than fact, as a good many Japanese and Korean brands are now manufactured in the United States at tax-deferred facilities nearly everywhere but Detroit. How long has it been since GM had any kind of a break on a new plant, much less a tax break. So, this kind of off-shoring could (and would) bring manufacturing jobs back to the US in a whole string of new, efficient, cutting edge facilities that would bring a welcome halt to the relentless loss of paychecks overseas.

Getting out of manufacturing may require a bankruptcy on GM’s part to break union, health care and pension strangleholds, but there are worse choices in the alternatives. Better to manage a bankruptcy now than be hauled in, kicking and screaming, a few years down the road. At the moment, General Motors is cash-rich but that window won’t be open long as market share dwindles and pension and health plans spread chaos across the balance sheets.

A bold move now could forestall the death of a thousand cuts. On the other hand, GM has never been known for boldness and there’s a lot of corporate history that augurs against making the right move in a timely fashion. The failure to imagine is the greatest possible failure to stockholders and employees.

But if Bob Lutz wants to chat over coffee, I’m available.

Get out of the Archives and read what Jim's writing today