Good Night, Saturn

Saturn: GM's Stab at Long-Term Relevance Goes Straight Through Its Heart
(Image Credits: Treehugger.com)

As this Washington Post article details, Penske Automotive has backed down from a deal to acquire the Saturn brand from GM. Penske had hoped to acquire the Saturn dealers, leaving a partner manufacturing firm to build the cars to be sold. It was a sensible plan; Penske has long been a force in retailing and the dealership world, yet he has very little experience (if any) on building cars (Indy, excepted). The obvious hitch was that there were no automakers out there who are so flush with cash that they could acquire a brand like Saturn.
I did find one of the descriptions of Saturn in the article a bit overblown. For example, does Saturn really have a " '...passionate customer base'?" I can't remember too many people salivating over the Vue, but then again, I know people who like cars. I won't make light of what is clearly a tragic consequence of GM's mismanagement. Saturn could have worked, in fact, I'll even go so far to say that it should have worked. A company dedicated to customer service, safe, cheap and efficient small cars. Gosh, that sounds like a recipe for a turnaround, doesn't it? Unfortunately, it was--like so many other GM decisions of the past two decades--a reaction to what Toyota, Honda, and other Japanese automakers had already done. If the automobile market is to return to a sustainable level, some of the saturation needs to be wrung out. It won't be pretty, it won't be popular, but it is necessary. The first one down the drain just happens to be "a different kind of car company."

Transparency Hops in the Back Seat

General Motors tries to Keep the EPA from Stealing Its Lunch
(Image Credits: A&M Flims)

It seems that GM's CEO, Fritz Henderson, had better grow some eyes in the back of his head; he's going to be spending a lot of time backpedaling. After issuing a statement several days ago on the Chevrolet Volt being potentially commercially unviable (after previously making it the centerpiece of GM's comeback from the brink), Mr. Henderson has now had to do a bit more reversing. After claiming (by a mystical, magical, opaque (re: not transparent) formula) that the Volt would be rated at 230 MPG (get it?), the General has had its magic carpet pulled out from under it by the EPA: the EPA has not tested a Volt. This is like that scene in The Breakfast Club (RIP J. Hughes, enjoy the High School in the Sky) where Judd Nelson and Anthony Michael Hall are talking with Molly Ringwald and AMH accidentally, but not accidentally, hints that he and MR are secretly having nocturnal discourses. Did GM seriously think that they could make outlandish fuel economy claims and have everyone just take it? Does their hubris still run so deep that they can actually believe they are one of the most trusted institutions in America? Making bold claims can show boldness. However, making unsubstantiated and bold claims is plainly foolish.

Progress Means Moving Forward

Richard Nixon's Resignation Speech Was Merely His Attempt at Being 'Transparent' About His 'Progress' Since the Watergate Scandal
(Image Credits: www.visitingdc.com)

In a recent update of Autocar Online, GM states that the Chevrolet Volt may not be commercially viable. To any casual follower of the auto industry this should come as little of a surprise. GM has not broken new ground since it came out with badge-engineering in the 1980's; and really that just made it easier for the executives since they could refer to their product as 'car' rather than 'cars.'
I really do feel for Fritz Henderson, however. The guy will have to respond apologetically to every polemical comment levied against GM thanks to Rick Wagoner's arrogant and shameful last stand. I do think that he should have better press people, though. While I admire GM's obvious desire to spin this as a positive by being 'transparent' and trying 'to keep the public informed of our progress,' this is not the sort of thing that one wants to be transparent about. And, frankly, how can this be interpreted as progress? If Mr. Henderson means that GM has made 'progress' in that it is no longer denying that it makes inferior product and that its competitors vastly outstrip its innovative capacity, well then kudos for GM making it past step 1. However, that seems far too existential a realization for GM at this stage.
GM is hoping that something bold, brash, and brilliant like the Volt will bring it back from the brink (apologies for the alliteration). The trouble with that line of thinking is that it is too much like banking on a home run to win the game; chances are, you're going to strike out. Any student of history knows that success in war requires steady, consistent, and unwavering progress, especially in the face of adversity. Let's all hope that GM is 'transparent' about some real 'progress' in the future.

Generally Motors

Ironically, the One Thing that GM Got Wrong with Futurama was That There Will Be No GM In the Future (Image Credits: Wired Magazine)

The rise and fall of kingdoms, empires, and cultures provides the hills and valleys that make human history so rich and topographically interesting. When I am bored, I often contemplate what the world would be like without Rome and her successors. For an engineer such as myself, this is clearly a flight of fancy. Any classicist or historian will tell you that it is a logical impossibility. I cannot even fashion a sentence without somehow giving heritage to the Roman Empire and her language. The fact is, though, that Rome reached her apogee a couple of thousand years ago. There is little doubt in my mind that the average Roman citizen, poor though they may have been, believed that they were living in the greatest, most invincible society in the world. It wasn't until several centuries later, when Rome was a shadow of her former glory, that her people could look back and realize how good they had it and how much they had lost in the interim.

On Monday, General Motors declared bankruptcy and the Rome of our time fell. I have written at length in this blog about the cataclysmically stupid and utterly appalling management at Detroit's major automakers. In the wake of Monday, 'I told you so' hardly seems justified from someone of so humble a station as myself. We, as American and global citizens, cannot begin to fathom how the collapse of General Motors will ultimately affect the American and world economies. However, there are several lessons to be learned by burgeoning, multi-national empires out there (Exxon, Apple, Google, I'm looking at you) and for the automotive industry as a whole:

1) Greed kills companies

Companies exist to provide a service. At one point in time, for GM, that meant selling cars. From the post-war years to well into the 1980s, though, GM began to expand into finance. Car companies realized that, rather than simply selling you the car, they could loan you the money and then you would still be paying them years on. It was a brilliant scheme, but it also opened the door to a world that GM had no business entering. Rather than focusing on building cars that people wanted to buy, GM began expending its energy on financial services.
Yes, companies exist to make money. Car companies are, and must, be different. GM's failure is categorical proof that having a management structure that knows little to nothing about the detailed ins and outs of developing a car for market does not work. Selling 'widgets' may be fine at business school; it isn't fine in 'grown-up land.'
It's easy to point fingers at the GM's brass and blame them for the failure, however, there's was not the only sin. A rigid and completely unreasonable union structure also hamstrung GM from restructuring its expenses. To accuse unions of being greedy seems almost like super-fascist right wing claptrap. The fact is, it isn't. The UAW and the AFL-CIO are massively powerful, massively wealthy and influential organizations. They are as much a big business (or big-time interest) as any of the car companies whose workers they represent. Workers out of work are workers that can't pay union dues. It doesn't get any simpler than that.

2) Unwillingness to Change Kills Companies

Neither GM nor its opposites in the unions were willing to wake up and realize that it's 2009 and not 1909. GM believed that because it had once been the world's biggest automaker that it could continue to be the world's biggest automaker (even after Toyota surpassed GM in sales). Meanwhile, the unions stuck to the Gilded Age line that whatever is good for business must be bad for the workers. If GM needs to cut redundant divisions, well that must be bad for the workers. The unwillingness to compromise on perception on either side is what brought GM to the dead end that it has reached. Trouble is, once the company goes into the can, who is going to pay the workers? Where do the workers work when the company sinks?
It is a microcosm of the state of affairs in the United States, and the world as a whole, that people don't want to sacrifice short-term convenience for long-term security or even gain. For example, climate change mitigation strategies require sacrifices now to secure the future. Similarly, the UAW saw GM still as the monolithic, invincible strongman that once defeated the Nazis with sheer manufacturing power, rather than wheezing, arthritic spectre of its former glory that it had become. Neither side blinked; now we have to file the accident report. I won't follow this digression any further.
The ultimate takeaway is that both GM and the unions were living in 'fantasty-land.' If this saga were a teen movie, GM would be clinging to its past glory like the former high-school quarterback star who still shows up on Friday nights to try and recapture some of the magic, the unions were the kids who got bullied and never forgave Joe Quarterback. GM used to be able to tell American consumers what they wanted to drive. Somewhere along the line, Americans realized they had a choice. Rather than responding to demand, GM kept making demands with blinders on to the rest of the market. The best way to miss what's in front of you is to be looking in the rear-view mirror; ironically, GM forgot that.

3) Bankruptcy is not a means to an end, it is an end

The above quote comes from Douglas Fruehling at The Washington Business Journal. It doesn't take an MBA to see the truth of the statement. GM's public image was already heavily tarnished by substandard product. If you've driven a late '80s-early '90s Chevy, GM, Pontiac, or Buick and have felt that ghastly vinyl then you know what I'm talking about. It's no surprise why American stopped buying GM. Now, the company is heading into receivership (however accelerated). However slim, however trim, however sleek GM emerges from this extreme makeover, only diehard 'bow-tie' (e.g. Chevy) men will go back to her. GM is going to have to do things the hard way; she's going to have to come out with a dynamite car that revolutionizes the marketplace. Government is not known for innovation nor radical new solutions. Stodge will beget only stodge.

Postscript:

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