If you have been following my recent editorials you may have noticed a trend
towards the negative. Most of this negative slant has been directed at the once
sacrosanct American corporate giant known as General Motors. GM has recently emerged from a structured bankruptcy. The Generals
pre-bankruptcy reserves amounted to about 12 billion dollars of cash on hand.
The pre-bankruptcy price of its common stock fell under two dollars per share.
This was the lowest the stock had been since 1946 and
was in the same category at OTC junk stock.
The Corvette assembly line at Bowling Green was temporarily shut down and 800 skilled
Corvette assembly workers were laid off. The C7 has been put on
hold and the future of the once beloved flagship of GM was in serious jeopardy.
This negative trend was really driven home at the 2008 SEMA show in Las Vegas.
The show which is touted as the largest display of after market and corporate vehicle
parts in the world was missing something. That something was our beloved Corvette.
GM had a large section of the Las Vegas convention center that was dedicated to its
performance image. Pontiac's, Saturn's, Caddy's and of course the new corporate
darling the 09 Camaro were on display.
Me and my staff of Vette detectives searched out every nook and cranny of
GM's niche at the 2008 show. The end results were the same, no Corvettes to be found.
Fearing the worst I summoned up the courage and approached several GM reps.
I asked the forbidden question, "Where is the Corvette?" After several blank
stares I was informed that this is the year of the Camaro. They acted as if the
Corvette had already been declared dead and buried.
Don't get me wrong, the Camaro is a very nice car.
The problem is that it is about five years too late.
I first started hearing about a Camaro
revival in 2000. The gears move very slowly in Detroit
and it is a wonder that they were able to get the Camaro from concept
to showroom at all. Congratulations to all the marketing wizards who made
this a reality. One side comment; you picked a hell of a time to release your new
baby. With an ever looming fuel crisis, Congress demanding econo buckets,
a worldwide economic recession and the buying public
clamoring for Asian innovation, the new Camaro may go over like a fart in church.
GM is not alone, Chrysler and Ford also picked a hell of a time to release
the Hemi Challenger and blown retro Mustangs. In short cu dos to all of you on
your keen sense of market timing.
The 2007 show was replete with Corvettes, and Corvette
concepts that were supposed to take the icon well into the foreseeable future.
We were told that the C7 was ready to come off the drawing boards and enter the
pre-tooling phase. What a difference a year makes! We had a pretty good
suspicion that bad things were a foot when the 09 Caddy got the power plant that
was originally slated for the base 2010 Vette. One of the GM reps summed it
up perfectly, "every party has to end".
As for the rest of the show, it was very good. There were tons of hot rods and dream
machines wearing the latest in the after markets new goodie's. The thing that
struck us was the overall sense of doom and gloom that everyone seemed to have.
The sour economy has really affected the overall motivation and optimism of the
industry.
It should be noted that the 2009 SEMA Show was a breath of fresh air. Everyone seemed to shake off the intense
negativity that has characterized the mood of the past two years. The glitz and show girls were back at the show.
New products and amazing future concept cars gave the 09 show a renewed "get on with business" feeling. And believe it or not the Corvette
was back as king of the hill at the GM pavilion. The new Grand Sport was the darling of the show.
GM is hoping that the GS will revitalize Vette sales until the C7 is finally released.
Inside sources are hinting that a split window, mid engine C7 will be hitting the tarmac within the next two years.
Back to reality.
GM has succeeded in strong arming congress for a multi billion dollar
bailout.
General Motors said it will probably need another 30 or so billion dollars to ensure that this new government owned entity
can continue to do business.
Total US government aid by 2011 could amount to well over 50 billion dollars, the general will also
cut 47,000 jobs around the globe in 2009.
"If the new, even lower downside volume sensitivity scenario occurs,
GM will require further federal funding ... which could bring total
government support up to 30 billion dollars, by 2011," GM said in its
restructuring plan.
The problem is congress and the American taxpayer will want to know what the
money will be used for.
The General may not be able to give them a good answer. It takes a ton of money to
support seventy one dollar an hour assembly line workers and unlimited
lifetime medical benefits. Is a bailout warranted if it is nothing more
than a corporate welfare plan? Is the American consumer still in the market
for an American car?
Anyone can open and run a business if the intended end result is a
loss in revenue.
A real business must show a profit to survive. GM has not been a real business
for years now. Unlike the rest of the U.S. economy the car manufacturers
seem to keep on going without ever showing a profit. The GM bean counters stated that the General lost over 30.1 billion dollars in
in its last 2008 quarter financial report.
Come on guy's give us a break.
In essence America was blackmailed into this bailout on the threat
that if we let GM go under it would have cost thousands of jobs.
So lets call it like it is, the
bailout was nothing more than a giant welfare plan to keep Detroit and its
suppliers afloat. Keep the masses working for no other reason than it benefits the state.
Sounds like socialism to me.
The bottom line is that no matter how much money you pour
into a business you still have to sell a product to someone. The question remains,
can you convince Joe the plumber to shell out $25K for a base Chevy Impala
grocery getter versus a slick new Toyota Camry that retails for about $20K?
Forget about the sticky accelerator problem, Toyota will take the hit and still come out smelling like a rose.
If you can't sell your products at a profit you are out of business, end of story.
At this point in time the big three are just trying to sell off inventory,
forget about making a profit. There are still new 2008 GM models rusting in
dealer lots throughout the land.
A government mandated bankruptcy was the only
out for GM.
The UAW wanted a forced structured bankruptcy like Custer wanted another
Indian. A bankruptcy will mean a restructuring of existing contracts and the
end to the sweet deals that have been negotiated over the last thirty years.
A bankruptcy may also hurt existing consumer confidence in GM and virtually bring potential vehicle
sales to a standstill. Who will buy a vehicle from a company that may not be able to offer
service or properly honor warranty claims. The Government said that it would back
all warranty claims in the event of a GM bankruptcy. Don't worry about that new ZO6, Obama will send
you a voucher that can be used at
the auto service bay at your local Walmart.
GM may have to
rethink and re-engineer its corporate mission.
If they can't sell cars maybe they should consider re-tooling and become
a prime source parts manufacturer for the Japanese.
If you can't beat them you might as well join them.
At this point you may be angered at what I have to say, hey don't shoot the messenger.
Direct your anger at the incompetent and arrogant management that created
this situation. The policy over the last thirty years of kicking out
millions of low quality over priced vehicles is finally being felt.
The American auto industry has tried to clean up its act over the
past several years but it may be too late. As any under grad marketing student
can tell you, once you loose customers you rarely get them back.
The Japanese saw this fatal error and exploited it.
The following is a listing from Consumer
Reports on Chevy vehicles to avoid due to excessive mechanical problems:
That's a very long list of sins for only one division of GM
GM will have to make some very hard decisions in the near future.
The Corvette has always been a very valuable marketing tool for GM.
The Corvette has also served as a test bed
for new automotive innovation and technology. If the bean counters eventually make
the decision to let the Corvette go there is nothing much we can do about it.
My advice is to enjoy your Vette and let the bean counters drive around in
company owned Saturn's. (The latest news from GM is that the Saturn division will be scrapped;
the bean counters can always opt for a good lease deal on a fleet of
American made Honda's : )
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