Opel: Deal or No Deal

　

It was never the first choice for GM to sell off its European hand Opel to Fiat or Magna or to anyone for that matter. Last few months GM has witnessed its one of the worst crisis ever which has not only almost claimed its existence but also in this period it made GM sold its iconic brand Hummer and Saab to almost unknown companies for the price of peanuts. When the economic hurricane has subsidized a bit, till then GM has lost its crown which was intact for more than three quarter of the century and became certainly a leaner if not a meaner organization.

GM sold its one European brand Saab to a tiny company Koenigsegg, a Luxury sports car manufacturer who has the presence in the Top 10 list of world’s fastest cars.
Well, another European unit Opel accounts for significant GM Share in EU market. If GM would have sold its share in Opel, definitely it would have been almost whipped from EU, not so pleasant situation for the automaker.


No doubt it was not the move which has been received warmly by everyone but with this decision GM has faced lots of criticism not from the industry but also from the government of Germany and Russia. But again, its business, where ethics always throws towel whenever it faces profit and greed heads on. This whole deal took a long time while seeing many ups and downs. Now even after GM declared not to sell Opel, condition of Opel has not become any clearer, in fact became a bit uncertain. Where Magna plan was not in the favor of laying off workers more than 2600 and without shutting down any of its plant, GM doesn’t make any such kind of promise. No doubt Magna was also German’s choice for this reason. So very obviously after turning its back from the deal GM management has been told to return the bridge loan of 1.5 billion Euro till the end of this month. Hopefully GM may manage to return it since it is now become Government Motors and it has the support of the US treasury, if they justify their move. Meanwhile Russian Prime Minister Mr Putin didn’t say much about the situation but his disappointment was pretty evident from his statement that he has learned his lesson from this deal. One can only hope that the economical relation between Cold war rivals is going to be unaffected with this U-turn. GM CEO Henderson already made an apologizing statement but sure it’s not going to sooth their temper any sooner.

　
Well, these all were the situations considering the bidder side in the Opel deal, Magna and Sperbank. Now lets see GM’s stand. Only future will say this step was good or bad but one thing for sure in this economic turmoil situation GM was not in the drivers seat while making the deal. GM has already sold its muscular Hummer to a Chinese heavy machinery company for some $200m odd value, which was even less than half of expected value. Surely GM has to improve its fuel economic image and while Hummer was not a profiting hand, it has to go. Another was Saab which was hardly ever profitable since it has been acquired by GM. So its deal also didn’t hurt much to GM. But Opel story is completely different. Opel captures a significant percentage of European market share and has some very good model in its kitty. Also, build on the Volt platform Ampera is supposed to launch in coming year as an Electric vehicle. Here was one of the major concerns for GM with this deal, loosing its grip over its intellectual property which not only accounts for numerous patents and technologies but also they overlap significantly with GM’s core technology these days. No wonder GM management was not able to digest this and also they were not finding any suitable way out of this issue.

After the elimination of Fiat from the bidding, it was taking way too long for Magna to close the deal and meanwhile economy and Auto sector has started to see the light in the tunnel. Cash for clunkers, stimulus packages, and massive cost cuttings have shown some positive signs and almost all Auto manufacturers and major Auto markets data saw north after long time. Ford has already posted its long awaited billion dollar quarterly profit followed by Toyota, performing way better than wall street prediction of losses. GM was also not left behind in riding the wave of change as it has reported after long the growth in the sell percentage of its car in North America whereas it continues breaking all self made previous records in China, world’s latest largest Auto market.

Seeing these positive signs GM has changed its mind to sell Opel. Off course it has shattered the dream of Magna to enter the auto sector as OEM. But well again, win for some is the loss for some.

Now as GM has retained Opel, this is the easy part. Now hard part comes which is to restructure the company and making it profitable unit. After breaking the trust of the government and the employee, it’s not going to be an easy task for the management. No doubt GM has put its veteran Bob Lutz to come up with a plan. Also, the most successful GM employee in current time Nick Reilly, president of GMIO is going to handle GM European operation replacing Carl Forster from the Opel top position who is supposedly moving to manage Jaguar Land Rover owned by Nano famed Tata Motors. Well this addition and subtraction at top slot in not a Herculean task for the company but the company will have acid test when it will come to manage at lower level considering workers layoff and huge cost cutting is inevitable with chances of some plant closure. In addition to this workers and government are already unhappy. But considering the success story of Nick Reilly its going to be interesting to see how they make their plan viable.

Well the outcome of the whole drama may get clear after some time but lets just hope for a while it will come positive for the former world Auto champion. The whole Opel case may turn around as sweet for some or sour for some but for sure its going to be a hell of a case study in Auto Sector.

God bless GM...

The era of procrastination, of half measures, of soothing and baffling expedients, of delays is coming to its close. In its place we are entering a period of consequences.
…Winston Churchill

It may not be said in Automotive industry context, but it completely suits today’s scenario of Auto market.

So it is now pretty evident that now GM will follow the footsteps of its younger brother Chrysler. June 1st seems to be the date when the king of Automobile will come in the court to file chapter 11 bankruptcy and will try to protect its remaining reputation in the global market.
Last quarter result seemed to be the final nail in its coffin, when GM had reported net loss of $6 billion (Loss of $9.66 per share), though it was less than expected as per Reuters, who has estimated loss of $11.05 per share. I could only manage to stop my laugh after reading those line “less than expected” even after posting $6 b loss. May be they wanted more from the former world no1. But this time honor goes to new world champion Toyota after posting quarter loss of $6.9 billion with annual loss of $8.9 billion. Now the lean company Toyota president Mr Watanabe must be feeling the heat after reporting consecutive bad report cards. OK, I am not going to comment over Toyota.

Showing consistency in negative growth GM has reported significant drop in its market share. Only hope came from GM Asia Pacific reason where in spite of overall market sell was down GM was able to post some single digit growth rate. Thanks to China and India where GM is reporting positive growth rate. Buick is trying to makeup of GM loss, which has reported around 60% growth in China. India also is trying to give it share in GM growth by giving positive result in the highly competitive and crowded small car segment with Chevy Spark. Captiva is also proving to be right choice but it deals in a highly low volume market segment in India. So, after this quarter result now GM CEO Mr Fritz Henderson is now accepting that bankruptcy is now the most feasible option. Well, I don’t see whether they have any other option.

This week only I was attending All Employee Meeting with Ron Yuile, Executive Director and CEO GMPT-AP, Where he was addressing curious GM India employee and was trying to answer the question. Not surprisingly the talk of bankruptcy was in the core of talk. Well, he has said that now GM bankruptcy is almost inevitable and we might be filling for chapter 11 on 1st June, deadline given by Obama government. What I could not understand him saying that in August GM will be out of bankruptcy and New lean mean GM will take off from there. I wish the same. But will it be possible? If you have such a futuristic vision, how could you let this situation come? I know filling for bankruptcy is your choice but at the same time coming out of it is not yours and its not so easy. You have to make tougher and quick decision then and after seeing the past report of GM decision taking capacity, it doesn’t give a bright hope. But yes, Current CEO Mr Henderson seems a bit quick and clear while taking decision. Here GM has started relying on the positive starting of Chrysler bankruptcy and hoping that Chrysler will come out of it within two months. Hence to go for a quick bankruptcy should be a good and feasible way for GM too. Sounds good. But is it for real?

Chrysler major operation stays in North America and Fiat alone was capable of taking control of the troubled automaker not to mention at a fire sell price. Even after all these now it seems tough for Chrysler to come out of chapter11 in 2 months, as per Reuters analysts it may take up to 2 years. Now here is GM, Operating almost all over world. I am not going to discuss about GM-AP and GM-LAAM operation as their financial results are not as bad if not good. But North America and Europe operations really needs a complete face lift. Where GM NA is facing the burden of seven big brands (Chevrolet, Cadillac, Buick, Pontiac, Buick, Saturn, Hummer), Europe also is in a deep mesh. Now its pretty clear that GM will be almost done with Europe market and drastically reduced in its home market too after either selling or phasing out its legendry brands. I really feel sorry about Pontiac, one of my favorite car with more than eighty years of glorious history and models (GTO, Bonneville, Sunfire,G6, Grand Prix, Grand Am, Solstice, etc)behind him.

After Saab, now its other strong unit Opel is under the hammer. Fiat, Magna and many others are waiting to grasp this golden opportunity to take control over this brand. Recently launched Opel Insignia is doing pretty well but now its late for GM to keep maker of Roadster. They have to say now bye (buy) Opel.Since last June GM is trying to sell its Hummer brand which is just proving as keeping and feeding an elephant in recent years. But even after one year GM is unable to close a good deal for its iconic brand. Now it’s clear that it may not get the desired price for this Off-road 4X4 monster. Same way Saturn is also not in the good book of GM. So here is the situation, Once after acquiring several brands to create a global common name GM, which has kept all the brands under one umbrella for almost a century now they are removing them one by one.

With four brands Chevy, Cadillac, GMC and Buick, GM will be a relatively small company but will it become a lean and profitable organization…lets see. With reduced brands and reduced market share GM will not reclaim the top spot in the Auto industry in near future. But I wish at least it mark its presence in the future, as it was my dream to work in GM after visiting Renaissance Center.

In case (most likely) GM files for bankruptcy, end of Detroit reign will almost come to an end. As only ford out of Big3 will remain out of court but again even Ford is now much smaller than its glorious days and now struggling to get rid of its quarterly report in red ink.Coming Back to GM now it’s a critical time or can say last chance to survive. Whatever mistakes you have done in your golden time will always hunt you back in your turmoil period. Its like there is no escape from mistakes. But yes, learn from it, don’t repeat it and grow over it are our only obligations. Prosperity and poverty may show two extreme faces. Its prosperity which defines your strength, guts and wisdom but its poverty which tests them.

Even after shutting down many plants and laying off thousands of employee if GM survives and emerge stronger then it would be a real life time accomplishment of Mr Fritz Henderson. I wish him luck...God bless GM.

Auto Run 2008

It is a transition phase for the globe not only in the field of economy or finance but at the same time in many other sectors as well. Domination of West has been challenged and replaced by the East. Collapse of North American structure has shaken the foundation of European Union as well. Even Asia Pacific and other parts of globe are not immune with this one of the worst financial situation of the century but the effect has been modulated and we didn’t see any big setbacks apart from market slow down here.

OK…I wont go in much details of these huge and complicated area of economics. Even I am not an eligible candidate to comment on it right now. Here I will focus on the Automotive Sector in this turmoil period primarily.
As mentioned this transition phase has also been seen in the world of wheels. In fact it was most obvious in this sector. 2008 didn’t come as a big surprise package for auto experts. Because whatever came from the quarter results and number, only thing was unexpected that it was worse than the expected.

Toyota has outsold GM in number game of vehicle sold in 2008. 77 years of North American domination has been ended by one of the smallest but hardest working country. As per the company released reports, GM has sold around 8.3 million vehicle in the year 2008 approx 0.6million less than Toyota. GM has seen the decline of around 11% of sales compare to last year after crude oil has risen to record high. Again it was not a surprise as observing previous few years numbers it was clear that its only a matter of time that when Toyota out thrown GM from No.1. GM still has something to breathe as it retained the crown at its home turf, which is the biggest market of automobiles in the world. But considering the performance and decline of the auto major it wont come as a surprise if it looses at its home market as well eventually.
But certainly there are some surprises stored for auto pundits. First time in history, after 70 years Toyota has registered a loss. This was not welcomed by Japanese but the Big 3 should take a lesson from this. Toyota has responded after the loss one year, whereas Big 3 are so lazy to take any aggressive step even after registering losses year after years.

Ask for more surprise?
Here comes the biggie. China was never or I will say very few times came as a surprise in a technical field especially in innovation and never heard in automotive sector.
This year NAIAS is an exception. BYD(Build Your Dreams), 2nd largest manufacturer of Li ion battery in the world came up with production version of their electric vehicle fleet which has not only surprised auto pundits but also send a clear warning message to all Auto makers including invincible Japanese and Germans.
Whatever they claim about their Electric Vehicle e6 is really like a dream wish. Lets just see what these Chinese people has done and come up with.

Specification of the Vehicle (e6)

Range: 250mile(400km)
Charging time: 1Hr
50%charge: 10min
80%charge: 15min
Seating capacity: 5 persons
Battery type: Fe
Top Speed: 160km/hr
0-100km: <8Sec
Emission: Zero.(For more or detail specification and the vehicle check www.byd.com)

Can you ask for more?
Even if it is half true, it will give volt, the most ambitious plan of GM a run for money.

Compare to Volt’s range of 40miles it has 250miles. Charging time of Volt will take 5-6 times more than what BYD claims. Also, seeing their pace and claim that vehicle will be launch within an year compare to estimated launch of Volt in 2011-2012, I don’t understand where GM stand a chance against this new innovation.

GM has always boasted its continuous investments in RnD. But for last so many years it is still waiting for such breakthrough innovations and ideas to come. Whereas, approx 20 year old companies are coming with such ideas, which will not only change the way we drive but it claims to become No.1 in coming 10-15years.
BYD is not only a threat for GM but also for Toyota and others at the same time. It may lead another transition in auto industry. From NA to Japan and now from Japan to China. ICE was lead by NA, so Hybrid was lead by Japan and now here comes China, started to claim the EV segment.

After the President Mr Obama has taken charge of White House, it would be his Herculean task to revive Auto industry of NA and reclaim the supremacy of this sector again. Already cash starved and cramp auto industry in NA will how long survive such blows, nobody knows.

After GM stepped back to acquire Chrysler, Fiat has now bought approx 30% of the stakes of this dying company. Even Fiat is not in a good health but its long awaited wish to come in NA has come true. It has got a nice platform to penetrate in NA market. Only concern remains, like Cerberus, Fiat don’t burn its hand in this deal. By mid of 2009 Fiat is expected to acquire more than 50% of Chrysler stake to take the ownership of the company. After Japanese, here comes Italian Stallion in NA. anything else GM management wish for. In flood you are getting rain. God bless GM.

As per COO of GM, it will run out of cash by 31 March after paying its due bills. Hopefully they have another slot of bridge loan pending which was promised my ex Bush administration. But this is not at all a permanent solution to revive a company. Its like feeding an starving elephant from house grocery. Whatever you do, you cant full its appetite. Just by giving the money of taxpayer to some incapable management is not a wise idea.

2008 has shown the reality of so many things. It has removed mask and shown the real picture and face of the otherwise glamorous market and industry. But it made us to think that it’s a high time to go for a reality check.

But again it’s a new year and it will be a new start. Only thing which should remain with us is hope. It’s a world of survival of the fittest. But being the fittest, needs lots of effort and practice. Lost at one front doesn’t mean end of the battle. There will be lots of challenges coming and continue to come till you say quit. But that is the best part of the market. So many came, so many will come. Ideas, companies, products, changes, setbacks, technologies, people, management…will keep coming one after another but…the show must go on.

Renaissance Center: Waiting for Renaissance

Once upon a time there was a company called GM…and story goes on.

Above line may seems like a line from a Science Fiction book where a character is chatting with another about the automotive industries of past. The question is… how far is that future?

Not surprisingly GM has created the most reputed name in the Automotive world ever which belongs to several brands and their world class models. Ruled the planet for more than three quarter of the century, it is the Blue Whale of Automotive Ocean. And if someone is saying less than a couple of year before that GM is going to die in a year…everyone who has having even the slightest idea of this industry on wheels would have think that person is the most crazy and foolish person in this world. But observing the current situation of the market, if someone is saying GM will survive beyond six months (here I am becoming optimistic) without government support, again he/she must be considered now in the same category as above.

After loosing its share value more than 95% in almost a year, once one of the biggest company in the world is on its knees in front of the government asking for a bailout. After the report of third quarter loss of $2.5 billion company market value dropped to a record low of $2.67 billion (per share value $3.36, Nov11, 2008). Cash reserve of the company came to an alarming value of $16.6 billion after the end of third quarter. As per company it needs between $11 to $14 billion to remain operative. Seeing this data and looking at the current market trend end of GM seems inevitable. Even after the assurance by President elect Obama, survival of GM is not guaranteed. As per Deutsche bank analyst, GM has not enough cash to continue operation beyond December and without government assistance collapse of GM is certain. Every other day GM share is touching new low which is not only giving blow to already injured company but also shaking the trust of people in the company’s future.

Such bad shape of the company didn’t happen in a single day, month or quarter. But GM along with Ford and Chrysler were loosing money for several past years. Even after seeing the down trend, these companies were too stubborn to acknowledge the loss and its future impact. Result, in 1960’s when GM has half the market share came to the first decade of 21^st century when it has merely around 20% of market share. They are loosing on their home ground by the outsider. Seems outsider has a better idea of their home customers. Fall of GM will not only risk the millions of job losses but it will be the epicenter for the radical crises which will include tier1-tier2 suppliers, dealers, financial market. Even US government understands that GM is too big to loose but at the same time GM is so huge that it may not be easy to protect it as a whole. Initially request was of $25billion for bailout for the Big three was modified to $50billion in just a month. But even the medicine of this much amount doesn’t guarantee the cure of this illness.

If management truly wants to come out of this trauma they need to reform the whole organization and redefine the way it operates. Rules set in the last century may need not be correct in the current scenario. If you are loosing at your home pitch where you have ruled for a century then certainly it’s a high time to recall your basics. Not just rely on the help which may or may not come in the way but act accordingly with all your guts.

When whole world is moving towards fuel efficiency, is it smart to bank on your previous successful fuel thirsty models. Change with the time and adapt fast with the new technology. The technology which has been developed by GM is being used by other company to capture its home market. This is surly the lack of vision. Otherwise, electric vehicle which was the concept of GM motors would not come from other company’s stable. Also, GM is a cluster of several brands like Cadillac, Chevrolet, Pontiac, GMC, Saab, Saturn, Buick, Hummer which acts like hindrance in many cases for upcoming brilliant design. To reform the company whole company need to be restructured. Even USA government is not going to provide a big blank check unless GM assures that it is going to restructure the company for the future.

GM is not just a company which will end if it fall, but it will be the end of the dreams, efforts and believes of millions of people who had and who are working together to help the civilization to move fast for more than a century. Even in this crisis of the lifetime GM is keeping its head up for the future. Brilliant designs and breakthrough futuristic cars are in the pipeline which are committed to change the way we used to travel. Volt, Eflex are just few names who are going to redefine the future of automotive industry but their own existence is dependent on the future of the company. To redesign the future it is needed to redesign the whole structure of the whole organization. Its good to have big ambition and dream of bright future but don’t forget the shaking present which is the foundation for the coming next 100 years of GM and Automotives. Lets hope the story of GM doesn’t shape as the story of dinosaurs but it turned to be the story of the evolution. We may not have the leadership of legendry Lee Iaccoca this time but we do have the learning of the episode of Chrysler revival. Seriously in this high time we are missing his kind of leadership.

Nevertheless its not time for expecting a hero to come and save but to execute as a team. Lets hope and work together for a bigger, brighter and stronger future and bring a brand new Renaissance at Renaissance Center.