UK correspondent MD, a Honda driver, comments:

Alfred P. Sloan wrote in his 1964 book "My Years with General Motors" that:

"The causes of success or failure are deep and complex, and chance plays a part. Experience has convinced me, however, that for those who are responsible for a business, two important factors are motivation and opportunity. The former is supplied in good part by incentive compensation, the latter by decentralization."
Pleasing though it is to see GM and Fiat bury the hatchet for €1.55bn rather than do a Kramer vs Kramer, it remains to be seen whether GM can recapture some of the glory days they knew under Sloan. Nonetheless, this appears to be a good deal for both parties and gets them out of a sticky situation - at least for the moment.

GM has a number of structural problems in the US that it has been slow to tackle including aging plant, poor product (particularly in the field of design), a perverse brand strategy, rising healthcare and pensions benefits (see footnote) and a unionised workforce (which means structural reform is slow). None of these are unique to GM: Ford and DaimlerChrysler too have similar if proportionately lesser issues. But at GM the concerns have been blindingly obvious for years yet never properly addressed. The feeling is that both Ford and, in particular, DaimlerChrysler will tackle matters sooner.

Coupled to this are problems elsewhere in the empire, particularly in Europe. The marques in Europe have been poorly managed for years. Recent faux pas have included stupendously ugly US-inspired design of the mid-sized Vectra which, whilst now a good car (spacious, comfortable, OK to drive and well screwed together) is hampered by its predecessor's dog-like reputation and naff looks. Thankfully for GM, the new Astra (a VW Golf competitor) is much better looking and a worthy motor.

Elsewhere in Europe, Saab has been allowed to wither on the vine - the recent(ish) 9-3 "sports saloon", whilst handsome enough and quite good, doesn't match the Audi A4 or BMW 3 series. The only other product is the old 9-5, now at least 6 years old and with no indication of a replacement in the wings. Again, it was blindingly obvious that for Saab to be a success patience, investment, more product (a third model would help) and consistent marketing was required. To date everything has been half-hearted, so much so that the whole viability of the brand is again in question.

Enter stage-left, Daewoo (now to be known as Chevrolet). One questions whether GM needs yet another marque, more plant and so on - particularly as the product is not particularly cheap or particularly good ("crap" some might say). Quite why they think Chevrolet will be a brand to conjure up sales in Europe is mysterious. Equally, and although Daewoo is supposed to help in emerging markets, does GM really also need to compete against their own brands (Vauxhall and Opel) head to head?

So where next for GM? The only sure way is to put a greater emphasis on product engineering and design, drop dog brands such as Saturn and close many of their myriad plants. Whether their finances will give them the time to do this is a moot point. Conversely, over at Fiat they are already taking the appropriate steps to engineer a product-led revival - helped considerably by GM's bung.

One wonders what Mr. Sloan would have made of all this.

Healthcare footnote: GM currently service 1.1 million health care packages in the US with an $8,000 per head, per annum average cost. This cost is rising at 15% per annum, faster than the firm's materials costs. Clearly, the brakes need to be applied soon, or Chapter 11 will look a more and more sensible option. And they say doing business in Europe is more expensive than in the US.

Bookmark and Share

0 comments

Related Posts with Thumbnails