Round and Round GM Goes

Round and round GM goes and where she stops, nobody knows.  Even a cursory examination of the various news reports, on the net at MSNBC or through the spoon-feeding of NBC Nightly News that arrives via your nice, new, widescreen digital television set, reaches the conclusion that no one really knows what they’re talking about.

By the time you finish wading thru all the contradictory comments, jawboning and visits to Fantasy Island, your head has a very good chance of suffering mental whiplash, if not actual severe hernia of the mind. Let’s see if there’s any way to make sense of the mess.

June 1, 2009, General Motors finally drank the hemlock and filed for bankruptcy at the behest, encouragement, dictation or coercion (pick one; your choice) of President Obama and the U.S. Government.  GM’s bankruptcy filing is one of only two things that has been consistently reported or agreed upon.  The second?  Insistence that bankruptcy court will allow GM to emerge within a short period of time as “a leaner, meaner and smaller company that will be able to respond quickly to market forces, producing cars that Americans want and that are also environmentally responsible.”  What “environmentally responsible” means I don’t know, other than you will likely see a parade of petite cars you pull on like a pair of jeans.

From this point on, you pays your money and takes your chances.  Some things are obvious, such as President Obama saying there will be additional pain, more dealerships will close and some parts suppliers will go out of business.  That’s a masterpiece of understatement, particularly when you consider another statement appearing on MSNBC.  David Cole—who just happens to be the Chairman of the Center For Automotive Research in Ann Arbor, Michigan—essentially said that critical suppliers were on the edge of failure.  If they go down, they could trigger a cascading failure, causing the collapse of the entire automotive industry, then moving on to affect the rest of the economy.

Even the number of plants to be closed is a moving target.  According to the bankruptcy filing, nine plants will be closed and three idled.  Other reports have indicated sixteen, still others claiming either more or fewer.  You feel like you’re in the middle of a shell game, trying to figure out which shell has the correct number of plant closings under it.  Regardless, 21,000 will be fired, but 1200 “new jobs” will be “created.”

From the perspective of the loyal, dedicated worker who suddenly finds himself (or herself) out in the cold, it doesn’t matter if a plant is closed or idled.  They still don’t have a job all of a sudden, which means they have to go find one…assuming they even know how to go about the process.  Keep in mind that many of them have never worked anywhere except for GM and they don’t have a clue how to start a job search or create a resume.

When an idled plant is finally restarted, if it ever is, a new problem rears its head.  Where do you find the skilled workers to get the assembly lines rolling again?  The ones who knew how are no longer around.  Either they’ve found new jobs in the area, moved to another state or taken forced retirement.

In spite of his “cascading failure” comment, David Cole does a 180-degree pirouette with his statement that a more focused product offering from GM could generate a profit of around $10 Billion dollars.  Taking it a step farther, he claims that the auto industry is on the threshold of a dramatic increase in profitability.  Of course, that does assume a rebounding economy and the creation of one million new households per year, resulting in growing demand.

The demand may be growing, particularly as cars wear out and a family or individual either replaces them or does without, instead falling back on public transportation and shank’s mare, but there is the little problem of being able to qualify for a loan.  Granted, money is available for those with good credit, but the number of Americans with good credit is definitely going down.  Beyond that, how many of us want to be saddled with a five to seven year car loan when many don’t know if they’ll even have a job five to seven months from now?

Cascading failure or rebounding economy: does anyone know for sure which it will be?  Even those of us who are charter members of the Doom & Gloom Society don’t know for sure which direction it will finally go or how bad it will truly be if things do go south. Especially way south.  Still, there seems to be no dearth of analysts, positive thinkers or Pollyannas who insist that we’re just having a difficult period at the moment, but things will soon return to business as usual.

Another positive thinker, as reported on the June 1 MSNBC, is George Magliano.  Mr. Magliano is Director of automotive industry research for the Americas at the consulting firm IHS Global Insight.  He is projecting sales of 9.5 – 11 million vehicles annually for the next couple of years, gradually returning to 15 million per year after that.  He also said that we’re beginning to feel pretty good about the economy, but the recovery will be anemic.  If that ain’t an oxymoron, what is?  Correct me if I’m wrong, but an anemic recovery darn sure doesn’t qualify as a recovery from where I’m sitting.  Nor would it make me feel pretty good about the economy.  But this is what you get when you make a habit of wearing either rose-colored glasses or blinders.

Another comment that has been made…sorry, I can’t remember where.  The reports, comments, contradictions and information floating around is coming so fast and furious that it doesn’t take long to begin suffering from sensory or informational overload.

Some experts suggest that GM will become a publicly traded company again by the middle of next year, at which time the Government will begin to slowly sell its stake in the company.  Depending on your perspective, reaction to that statement will range all the way from stunned silence to hysterical laughter.  Few people believe it will happen and a local conservative talk show host stated that when the government gets into something, they never get out of it.  The chances of Government Motors ever becoming General Motors again are somewhere between slim and none…and slim just left town.

Let’s take a quick look at the kinds of cars you won’t have versus the ones they (meaning the government) think you want.  All I can say is read it and weep.

So-called muscle and emotional cars, meaning the Corvette, Camaro, anything with a large V-8, comfortable and sufficiently large enough to provide decent protection in a crash, are either going to vanish or become few and far between.  Makes you wonder what’s going to happen to large SUVs and full-size pick’emup trucks, doesn’t it?

What will take their place?  Trot on over to Chevrolet’s Future Vehicles page and take a look.

There are four vehicles listed and none of them are as large as the current Chevy Impala. The Cruze is the largest of the bunch, but you can’t get a sense of its size because it’s described as having comfortable seating for five, ample interior space and surprising cargo capacity.  Then there’s the Volt, a plug-in electric car with a 40-mile range without a drop of gas being used.  A perfect commute car, it says?  No way, I say.  Especially in Texas.  You can easily rack up more than 40 miles by the time you make a single combined run to the grocery store, office supply, Radio Shack and the mall before coming home.

But the real jewel is the Chevy Spark, which will be imported from…where else but… China.  It’s a true 4-4-4, meaning it has a 4-banger engine, 4 doors and 4 seats.  This thing is so small that it can be parked in the back of my ’93 Buick Roadmaster Station Wagon with room to spare!  Forty years ago, I saw a 1967 Ford Mustang Hardtop tooling down the road with a Great Dane in the back seat.  Poor dog had to stand on the seat with his head out one window and his tail out the other.

The Spark appears to be even smaller, which means that even if I could shoehorn myself behind the wheel …which I doubt since I have trouble squeezing into a Dodge Stratus, even though I’m only six-foot-one and weigh about 185 pounds… my dog, Magnum, would be emulating that Great Dane.  And Magnum is a Dudley Yellow Lab weighing a mere 65 pounds.

The bankruptcy of General Motors, its transformation into Government Motors and the myriad questions swirling around the entire episode, leaves one with the feeling that we are occupying a real live episode of Perils of Pauline, with no assurance that there will be a hero coming to her rescue.

Would I buy another General Motors car right now?  Maybe.  Would I buy a future minicar, electric car or any other car produced by Government Motors?  Not a chance.

If a substantial percentage of car buyers reach the same conclusion, the anemic economic recovery they’re obsessed with spending into existence may very well turn into a robust depression.

Regards,
Richard Marmo

June 10, 2009