Now or Never…

For last couple of months I was closely following the bailout news for the Big 3 in USA. GM and other two of the Big3 group was desperate for this support…I know they were anxious far more than me but like many other employee of GM, I was curious too. It was a must needed fuel for the cash starving US Auto Industry.
After the initial jolt from the Senate this loan of $17.4 billion came as a relief, at least for now. Out of this $9.4 billion will be provided to GM instantly and remaining amount on later stage. Chrysler too will get $4 billion right now. As a GM employee I welcome this step of the President Mr. Bush. But considering the way the big boys of these companies have performed in recent years, its totally unforgiving. Even as per the statement from White House, filling for bankruptcy would be the most eligible option for these automakers but considering already crumbling economy, loosing another sector entirely would be a knock out blow for the country.


Currently around 2,39,000 employees are working for the biggest manufacturer of Automobile. Combining all the suppliers, vendors, dealers and other related industries almost 2.5 million workforce is related directly or indirectly to GM. Considering the overall strength of the total workforce in automotive industry which is close to 3.5 million, this is a major portion. White House major concern was loosing these millions of job resulting from the collapse of Big3. How can you take this job loss of millions of people in the case of this economy slowdown? Even after paying billions of dollars of these guys to other financial companies in bailout and in a result you are laying off these poor taxpayers.

Its not a story of single night. For last several years all these American companies are loosing their money and market share quarter by quarter. How can these guys be so immature not to take a notice of this? Out of three Chrysler is the worst performer by loosing market share by 28%. GM and Ford are not far behind either.


Lets talk a bit about GM...
Since 2004, GM has lost more than $75 billion. Is it ringing some bell?
Still sounds not very appealing data, lets talk about another one… In a year company has lost more than 90% of the company share value. For decades, GM has provided several examples of their products, methods, and management processes, reviewed as case study in Ivy League colleges, which has kept this company at no.1 position for most of the part of the century. Now here goes another example from GM to be reviewed as a case study… how they lost their market share and everything so rapidly?
...Interesting?
You bet.


On September 30 GM had the reserve of $16 billion, not enough to continue operation past December. With this government loan, now GM can at least think to continue its operations for next few coming months. But at the same time again this loan is not assured one on which GM can blindly rely. If by March 31st GM doesn’t come up with a viable plan for restructuring the company, this loan will be called back and this will guarantee the bankruptcy of the organization. Pretty surprising, till this date GM and other companies could not come up with a plan which could satisfy White House. Just hope they have any such viable plan.


Talking about another one, Ford is currently in a better shape. Irrespective of their other bailout mate, Ford may need the cash after couple of quarter. Thanks to Mr. Mullaly who showed at least some vision and started restructuring his organization from 2006 itself. Selling out its loss making units, optimizing the production lines and reducing their workforces have put Ford today in a far better health than GM and Chrysler. They acted and acted aggressively. Other two should have at least taken some lessons from this company.
But at the same time Ford is not immune of the market and if GM and Chrysler collapse, it will shake the foundation of Ford too.

Next in the row is Chrysler, worst performer among three. Now seems even Cerberus is not willing to feed this elephant. According to their board of directors, Cerberus has already put more than allowed cash in this cash starving company. Looks like now they are just looking for a buyer who can buy this company. While buying Chrysler they looked very happy as thought they got a very cheap deal and after some time they will either sell this company for higher margin or they can turn around this company in a profitable one. Now it’s a well known fact that Cerberus has burnt their hands in this deal.

Cerberus is no longer in a mood to retain Chrysler and currently GM is not in a good health, so that it can go with this merger deal. It may be critical decision for both of them. It may not be good for Chrysler employee, as it will result in heavy lay off in that organization. Also, GM will have to invest billions in this cash strapped situation. If GM could not get it right, it will sink the ships of both the company together. But GM can get enough liquidity from Chrysler with this deal. Also, they can work together on the overlapping technology between two companies as well as they can have common dealers. Looks like this deal would be lucrative for GM, but again to go for it, GM should look for all the aspect as this could be their last mistakes…in case.

GMAC is among another loosing sector of the organization, which was once a major source of GM marketing and selling of its cars. But currently its share in the GM sell has reduced drastically. Currently GM has 49% stake in GMAC and Cerberus owns 51%. One deal GM can check to exchange the GMAC stake to Cerberus for the stake of Chrysler.

GM current situation is the reward of the inefficient management of the inefficient management for a long time. Even GM is making big promises and swearing for a revival, how much these top guys can be trusted, is a concern.
Gone are the time when you had the luxury of sitting and thinking. Its time to act, react and perform. Much needed restructuring of the organization is the most vital decision right now, which management has to do it with priority.
The most ambitious plan of GM is getting delayed. Looks like they were waiting for the bailout. Its beyond understanding why the most hyped and ambitious project is taking the back sit.

What should be the decision on Hummer? It’s an ancient question in GM. Surprisingly, in this critical situation, such critical questions are not getting answered for more than a year. How can a company be so lethargic in such adverse scenario?
Its not about what you lost, but its about what you could save from the house in fire. While in storm, to make your ship light you have to through the heavy stuffs out of the ship, no matter how much dear they are. Hummer is currently one of the heaviest loads on the company, which is supposed to be removed in spite it is the image of GM in off road vehicle segment.

Even after getting loans and big promises by Big three to make their company more competitive, leaner and efficient, questions remain unanswered. Considering their lethargic approach in reacting to this tragedy of lifetime, they are not looking very aggressive. If not now…when? Didn’t they have enough lessons from their past?
Its never too late…is this statement holds true for these companies right now? Do they still have chance of revival? Even their own country and President has lost their faith in these companies. While giving loan Mr. President has told, to go bankrupt would be the best option for these companies but considering already collapsed market, this is not a good option to loose another millions of job, considering this month only more than half a million got laid off. It clearly shows getting loan was not the very choice of White House. They got loan considering the adverse effect that it may cause with collapse. But clearly those guys were not pretty happy with the management and the way they are working.

This is another, may be the last opportunity provided to these companies. Its their last chance to prove. Its nothing less than do or die situation.
Also, to counter Japanese all three have to act together and with force. Together they may consider a joint venture to share technology and facility at least for coming few years. It may reduce the unwanted models from the market and will be beneficial for all 3 at the same time. It may cause initial job loss, but it will help to regain the reputation of US in the automotive industry. It will be a win-win situation for all 3 and also for employees eventually.