GM CEO quits. Does that count as job creation?

Fritz Henderson, the man with the 2nd least desirable job in the US*, has quit or been pushed after failing to turn around the troubled automaker in less than 6 months.

What? I don’t really know. He or an underling managed to screw up the sale of Opal, Saab, Saturn and any other part of the company vaguely attractive enough for someone to spend money on. Plus, lets face it, Fritz is not a really marketable name.

Company officials described the decision for Henderson to resign at "mutual." I have to wonder if some of that mutuality had to do with Fritz screaming, “Free at last! Free at last! God almighty I’m free at last.” as he left the office today.

It is worth noting that the people who hired Henderson did so with very real doubts. Speaking last month Steven Rattner, head of the Obama auto task force, had this piece of high praise for Henderson “He’s shown that he can manage.” In what has to be one of the least surprising opinions ever offered on the auto industry, Rattner said GM and Chrysler “were some of the worst-run companies I’ve ever seen in my life.”

 

*1 = US President

GM bankruptcy ad is a symphony of weasel words

In the face of the greatest single corporate collapse in the history of the world, GM rolled out an ad that inadvertently explains the company’s failure.

It is a veritable symphony of weasel words.

Let’s be completely honest, no company wants to go through this.

By the end of that first sentence it is clear this ad has no intention whatsoever of living up to that initial clause. You can tell because the final pronoun is never made specific. That “this” covers billions of sins. It implies we all know what has happened without saying what that was. It is everything to everyone and thus means nothing. Is “this” an utter failure of leadership? Or is it an inability to have even the vaguest understanding of the needs of the marketplace? Sadly, I suspect “this” is “an economic calamity no one could have foreseen” – the preferred phrase of everyone from Alan Greenspan to, well, the Detroit-based car makers. There is no taking responsibility anywhere in this ad just as there has been no taking responsibility at GM for decades.

But we’re not witnessing the end of the American car,

We’re witnessing the rebirth of the American car.

The conflation of America and GM is offered as an explanation as to why the US citizen is now on the hook for $50+ billion dollars. GM = American car and of course we need to save American car. This neatly sidesteps two key facts: 1) Ford has somehow managed to avoid contributing to the financial debacle that is the US government; and 2) Honda, Toyota and all those other companies who build and sell cars in the US are just as “American” as GM. Actually by the very fact they haven’t required our tax dollars to pay for them to go out of business they are, in my eyes, far more patriotic than GM. They are providing jobs and generating funds for the nation and its citizens.

General Motors needs to start over in order to get stronger.

You can’t argue with the need to start over. It is a safe, bland phrase which appeals to the charitable side in everyone. After all, who hasn’t had problems and who doesn’t believe in a second chance? And we are offered no option but the opinion that GM will get stronger. This is an emotional appeal specifically aimed at diverting attention from the fact that this is a business, not your neighbor or nephew. Any discussion of capitalism and free markets is shunted aside. This isn’t about dollars or stock price or the rich getting richer, no this is about helping someone who is down on his luck.

And lest we forget how dazzling and brilliant that friend once was:

There was a time when eight different brands made sense, not anymore.

There was a time when our cost structure could compete world-wide, not anymore.

Note the use of the phrase “There was a time.” The rhetoric seeks to use past successes as another way of avoiding responsibility. This is nothing more than a badly bloated rewriting of “Mistakes were made.” This is followed up quickly by a blizzard of meaningless business jargon and words that imply much but mean nothing.

Reinvention is the only way we can fix this and fix it, we will.

So here’s what the new GM is going to be:

Fewer, stronger brands.

Fewer, stronger models.

Greater efficiencies.

Better fuel economy.

And new technologies.

Leaner, greener, faster, smarter.

Reinvention! Yes that’s the ticket!

Well, actually what GM needs is the corporate equivalent of putting senior management up against the wall. To actually re-invent the company everyone associated with the ancient regime would need to be replaced. The successor executives are about as likely to break from past failed policies as Ben Bernanke and Tim Geithner. Since I am paying for this fiasco can I make a suggestion: Jim Stengel’s stepping down from P&G, can we put him in charge? If not Stengel – and I would not wish this job on anyone – then how about someone else who has experience running a successful business?

Having invoked the empty but pretty idea of re-invention the ad descends into a staccato barrage of lovely sounding words and phrases signifying nothing: Fewer, stronger, greater, better, leaner, greener, faster, smarter!

The ad ends with triumphal horn blast

This is not about going out of business, this is about getting down to business.

Because the only chapter we’re focused on is Chapter 1.

The first sentence is straight from the handbook of Kennedy speechwriter Ted Sorensen who penned all those pretty reversible quotes like “Ask not what your country can do for you – ask what you can do for your country.” It is a call to action that requires no action. A promise without commitment. The final words are a smug wink and a nudge, an effort to let you know how clever they – or the ad writers – still are. Note the unspoken play on Chapter 11.

At a time when what the company and all three of its remaining customers need are a few simple declarative sentences we get more of the usual: Pretty smoke and brilliant mirrors. GM still wants us to believe its management knows what is best for the company. I didn’t mind that claim nearly as much when they weren’t using my money to make it.

I am clearly not the only person to feel this way. Here is the version of the GM ad I would have made if I had the video skills I clearly don’t.

US nationalizes Chrysler, GM auto warranties

From The Wall Street Journal:

To assure consumers reluctant to buy GM or Chrysler cars, the government plans to take the unusual step of guaranteeing all warrantees on new cars from either company. These guarantees would lapse back to the companies once they return to health.

  • For those of you on the conservative side of things: Can you imagine what it will take to get your warrantee covered by the Feds?
  • For the liberals: They’ll pay to repair the car but not the owner?

Coming next: “Free bailout with every purchase!”

Steve Hartley nails it: “GM = Government Motors. What could go wrong?”

New Hyundai warranty covers job loss*

*Mostly.

hyundaiIn a mark of how bad things are “Hyundai is providing a complimentary vehicle return program for the first year on every new Hyundai that is financed or leased for owners who experience an involuntary loss of income within 12 months of the purchase date.

What that actually means is Hyundai is offering to cover up to $7.5K of the debt on a new car in case of

  • Involuntary unemployment
  • Physical disability
  • Loss of driver’s license due to medical impairment
  • International employment transfer
  • Self-employed personal bankruptcy
  • Accidental death

Details: You have to have made at least two payments; you are still on the hook for everything over $7.5K and; they get the car back.  Which means if you bought the bottom line Accent with nothing added to it (MSRP $9.9K) and make just the two payments you are only on the cuff for about two grand. Not great but so far it’s better than anything else out there. (What dumbass wrote that? Truth is below)

You are on the hook for only the depreciation OVER $7500. Example: if the car had an msrp of around 25 grand and you were on the peverbial hook for the whole magilla and the depreciation over the first 10 months was 30% ( 7.5 large ) you would owe nada.

The deal looks even better when you consider that none of your tax dollars have gone into propping the company up.

So the new motto is, “Hyundai — the car to buy if you think you’re going to get canned.”

Buy 1, get 1 free is worldwide trend among car dealers

Can the US get the same deal with car makers?

I totally fail to understand the economics on this for the dealers beyond: UH OH.

When all else fails … hope for divine intervention:

With sport-utility vehicles at the altar and auto workers in the pews, one of Detroit’s largest churches on Sunday offered up prayers for Congress to bail out the struggling auto industry.

“We have never seen as midnight an hour as we face this week,” the Rev. Charles Ellis told several thousand congregants at a rousing service at Detroit’s Greater Grace Temple. “This week, lives are hanging above an abyss of uncertainty as both houses of Congress decide whether to extend a helping hand.”

Local car dealerships donated three hybrid SUVs to be displayed during the service, one from each of the Big Three. A Ford Escape, Chevy Tahoe from GM and a Chrysler Aspen were parked just in front of the choir and behind the pulpit.

Detroit car cos. as bad at PR as they are at business

autofailThe CEOs of GM and Ford have announced they will drive from Detroit to DC for the next round of begging from Congress. Clearly this was supposed to make us forget that the Detroit Three had flown in separate private jets the last time they tried to explain why their companies were running out of money.

Instead all it has done is reminded us of this. Apparently you can’t answer a cheap shot with a cheap stunt. I particularly like the fact that the two CEOs are coming in separate cars. No car pooling for these two.

Better move would have been to simply taken a commercial flight. Or walked. I hope the press will tail both men all the way during their drive. Otherwise we might get a Rosie Ruiz situation. (Ms. Ruiz was named winner of the 1980 Boston Marathon, until it was discovered she had only run .2 of the 26.2 mile course.)

Will Chrysler CEO Robert Nardelli also indulge in a little stunt driving? Unknown. What is known is that he “will not travel by corporate jet. A spokeswoman says his travel plans will remain secret for security reasons.” I have no doubt this is utter and total bullshit, but it certainly plays better than what the other two are doing.

GM argument against bankruptcy is a car wreck

The astoundingly badly run car maker says it won’t declare chapter 11 because “people won’t buy cars from a bankrupt company.” Given that GM’s sales have dropped 45 percent over the last year, how would this be any different from the current situation?

Not surprisingly the “it’s not our fault” argument is echoed by UAW President Ron Gettelfinger: “We’re here not because of what the auto industry has done. We’re here because of what has happened to the economy.”

This would be more believable if GM had been doing well before the credit markets went to hell. Let’s remember that we’re talking about GM here and what it’s track record is like. This is a company that even when it gets a good idea goes out of its way to kill it.

Quoth this great article from the WSJ:

This situation doesn’t stem from the recent meltdown in banking and the markets. GM, Ford and Chrysler have been losing billions since 2005, when the U.S. economy was still healthy. The financial crisis does, however, greatly exacerbate Detroit’s woes. As car sales plunge — both in the U.S. and in Detroit’s once-booming overseas markets — it’s becoming nearly impossible for the companies to cut costs fast enough to keep pace with the evaporation of their revenue.

In all this lies a tale of hubris, missed opportunities, disastrous decisions and flawed leadership of almost biblical proportions. In fact, for the last 30 years Detroit has gone astray, repented, gone astray and repented again in a cycle not unlike the Israelites in the Book of Exodus.

Remember Saturn? GM started an authentically different company that attained a beloved cult-like status and then all but killed it by not letting it put out new models. Don’t even get me started about the electric car and where the company would be today if they’d kept developing that program they killed after putting $1 billion into it. And then there’s the decades of lobbying against improving mileage standards that — had they been in effect — would have also saved their asses.

GM is also arguing that it’s basically under new management and that the guys who made all those stupid decisions have been replaced. Even if this is true, then let’s hold them accountable for the stupidity just since Rick Waggoner became CEO. For the last seven years their strategy has been, “we’re going to bet it all on the short-term profits to be made from SUVs.” Thus they launched Hummer et al. I’m supposed to trust a bunch of guys who couldn’t figure out that the price of gas fluctuates? Who couldn’t figure out that there was a difference between short-term profits and long-term viability?

Let’s make one thing clear — the term “US automakers” is a misnomer. When someone says they want to “bailout the US automakers” they really mean GM. Ford has said repeatedly that they have enough credit to get through and Chrysler is no more or less a US company than Honda or Toyota. The Big Three is in fact the Incompetent One.

Wait, I will bow to the Journal on this one: they’re going with “The Detroit Three” and that works for me.

Chrysler gambling with sales incentive that helps pay for gas

Not sure if this is brilliant or depressing. Or both.

Chrysler announced Monday an offer that caps the price of gasoline at $2.99 a gallon for three years for people who buy or lease new vehicles from Wednesday through June 2. The offer is based on 12,000 miles of driving per year at the vehicle’s rated fuel economy. Customers will get a card for buying gas that is linked to their own charge account, Chrysler said. The customer will be billed $2.99 a gallon, and Chrysler will pay the rest.

I’m sure the honchos in Auburn Hills did their math on this (and when was the last time a US car company didn’t correctly anticipate fuel costs?) but to me it looks like this could get pretty expensive.

The story goes on to point out that at the current $3.61 a gallon average gas price, someone who buys a new PT Cruiser (est. 21 MPG) would only cost the company $1075 per car. That seems a bit much but not ridiculous for a car with an MSRP of $15,285.

However let us take the radical notion that gas prices have not yet peaked. If the price of gas hits $5 a gallon (and I wish that were unthinkable) the total cost to the company hits $3300*. Even if the price “only” hits $4.50 per, the company is on the hook for $2580 per car. Suddenly that PT Cruiser is costing Chrysler a lot.

All of this, btw, assumes something we all know to be false: That there is a relationship between the advertised MPG and what you actually get. If the car actually gets 18 MPG then Chrysler has to pick up the actual difference. At today’s prices that means a mere $150 increase over three years. However at $4.50 it’s about $500 more — which means Chrysler is in essence selling the PT Cruiser for about $12K. For the consumer it’s a great anti-inflation move, for the shareholders though? Well, for gas company share holders it’s great.

The other thing that will contribute to Chrysler’s costs is the fact that consumers will probably buy more expensive grades of gas. Why not always get super premium if it only costs me $2.99?

Here is my own personal indicator of the impact of the price of gas: I am now driving at or below the speed limit. This news so shocked Mrs. CollateralDamage that she briefly put down the latest guide to Disney.

*(In case you’re wondering here’s the formula I used 12000[miles] / 21 [MPG] = total gallons consumed [which I’ll call G]. G * price = total cost / (G * price – 2.99) = annual cost to Chrysler * 3 = total cost to Chrysler. Given my legendary inability to do anything beyond basic math I put this out there so that someone can and will correct me.)

Somebody must have flipped off the Pope-mobile: Vatican issues 10 commandments for drivers

“Forgive me Father, for I have exceeded the speed limit.”

Apparently the Vatican has determined that cars are here to stay. Today the World’s Smallest Nation issued a

36-page document called “Guidelines for the Pastoral Care of the Road” contains 10 Commandments covering everything from road rage, respecting pedestrians, keeping a car in good shape and avoiding rude gestures while behind the wheel.

OK, so I thought this was all covered under “Love thy neighbor as thyself,” and “Have no gods but God,” but what do I know? Unfortunately, this will now serve as a benchmark for Boston drivers (myself included). People will be saying, “I went 7 for 10 today!”

The Vatican’s recognition of the existence of cars a mere century+ after they were invented is a bit of a land-speed record for the Catholic Church. After all, this is the same institution that took four centuries to forgive Gallileo for being right about the Earth moving around the sun. Perhaps one of the reasons that the Vatican acted so quickly was its because of over-crowding. With 1000 cars, the city has a nearly 1:1 ratio of cars per person.

Group says Exxon paid $16M to mislead public; GM doing it for free

The Union of Concerned Scientists claims the oil co. paid groups to spread bad science about global warming.

Color me bitter and cynical but … there’s people who didn’t know that? Everyone remembers the tobacco industry’s efforts at “science,” right? You think they were the only ones who did this?

Meanwhile over at GM (motto: “Remember when we mattered?”), Honcho Bob Lutz says government plans to raise  fuel economy standards will “hand over” the truck and SUV markets to the Japanese.

Under CAFE rules, automakers earn credits for surpassing the fuel-economy standards in a model year. Those credits can then be used to cover a shortfall in the following three years. Many foreign automakers, such as Toyota and Honda, routinely surpass the standards, while GM, Ford and DaimlerChrysler have used credits in recent years. The Japanese automakers “have earned years of accumulated credits from their fleets of formerly very small cars,” Lutz said. “They can afford to go bigger, which they’re doing now by the way, and they’d be able to move up and fill the segments we’d be forced to vacate.”

So the argument is that the competition somehow cheated by making cars with better gas mileage when GM wasn’t?

Nor is this the only interesting moment of logic from Mr. L:

Lutz compared the attempt to force automakers to sell smaller vehicles to “fighting the nation’s obesity problem by forcing clothing manufacturers to sell garments only in small sizes. For one thing, it puts us, the domestic manufacturers, at odds with the desires of most of our customers,” he said.

Would those be the same customers who bought 13% fewer GM and Ford cars and light trucks last month than they had a year earlier? Or would those be the customers who pushed Toyota’s December sales up 12% from the previous year?

“It’s such a fine line between stupid, and clever.”*

"A TINY ecological car that can nip through peak-hour gridlock was launched in Britain today after three years of research financed by the EU. The three-wheeled, 1m-wide vehicle runs on natural gas and consumes 2.5 litres of fuel per 100km."

Gotta have a cool name for a cool product like this, right? So how about CLEVER — which stands for "Compact Low Emission Vehicle for Urban Transport." I don't know about you but I get CLEVUT or at best CLEVURT.

Go here to see a picture of the CLEVUT thing.

*go here.