911: Auto Sector

I just opened the list of Forbes 2000 companies of 2009 (www.forbes.com).

Actually after reading that GE is the rank1 company for the year 2009 (market value $89.87b), suddenly I got curious that what is the ranking of GM, once upon the undisputed No.1 for almost half a century. When I became tired of searching the name of GM in the list which was ranking wise I decided to search by the name wise(Actually I was hopeful that I will find the ranking in top20, Toyota is No.3). It took some effort to find the rank finally. In this economic turmoil period there are very few news which have enough potential to surprise you. But here it was. GM rank: 844
(www.forbes.com/lists/2009/18/global-09_The-Global-2000_Rank.html).

All other company you know, name it and they are far far ahead then GM. Even Eaton was under 500. I checked it again for verification, but it didn’t change. With the net market valuation of $1.37, it is just a billion dollar company now. It has already lost almost all the money in the market and showing the consistency in reporting losses quarter after quarter, year after year. Once the share value of GM which was touching $100, has seen as low as $1.27 in recent days. Who knows it is not the bottom yet.

After shaking the CEO Mr Rick Wagoner, things have hardly turned in a way which we can say better. I am surprised too by the Obama government stand on Auto sector. Putting hundreds of billions of dollars to City, AIG and like companies make sense to these guys, but providing few billions to these wounded Auto giants are taking numerous meetings and planning. After witnessing a significant part of the bailout money, which is nothing but the taxpayer share, is going in the bonus and maintaining the luxuries of so called executive, Mr Obama only showed his disappointment. House was unhappy with the Big3 top rankers by using their corporate jets and eventually they came via ground transport next time. But it was Citygroup who is buying corporate jets from the bailout money, why such discriminations? Why is such hesitation to provide the loan amount of around $30b to these guys, who was one year before the No1 Company in the world for continuous 77 years. Here is AIG getting bailout and supports even after making loss of $60b in a quarter and here is Auto guys who are still in search of supporting hands even after going through numerous meetings and deadlines for a more viable plan. It won’t be surprising if we see in coming months that just to approve the viable plan these so called intellectuals have taken so much time that company itself has vanished. Its like one is calling 911 in fire and at the place of getting immediate understanding and support, that one is being asked for the description and urgency of the situations, so that they will sit and decide whether to help and support that guy or not. If you know what is not a good viable plan then you must be knowing what it is. If so why don’t you provide the viable plan to these companies to act upon and ask their agreement on it and save some critical time.

I am not playing a critique here and won’t comment on Mr. Wagoner capability and working. But one thing for sure, whatever he had faced was the mistakes of previous management team mostly. And considering his stepping out seems more political than rational. May be Mr Obama wants to show his people that he is not only giving easy tax money to these guys but also acting tough and punishing them for their mistakes. Its not that guys at the bottom line are being axed but also guys at the top are facing the heat. If that is the case, then why not with big guys of City, why not of AIG?
Seems these wall street executives have enough influence on the government decision making capacity and process. Also, government need their support in many cases, so lets not burn hand. This only shows here that Mr. Wagoner has just been proven sacrificial lamb.

Lets not criticize this event as well, coz its critical to concentrate on critical issues. Mr Henderson, the current CEO of GM is just continuing the restructure plan which was started by the ex-CEO. He is also a bit more vocal about the possible Chapter11 bankruptcy for the company. Considering the sell of the vehicle is directly related to the sentiments of customers, filling for Chapter11 is not the most eligible candidate in this situation.
Another lifeline has been provided by government, within 60 days come up with a more viable plan to get the aid. Also, Mr. Nardelli, CEO Chrysler has been asked to finalize the deal with Fiat by the end of April to get the support from the government. Remaining brother of these two, Ford seems to be in a bit more healthy and secure condition right now and also recovering at the same time. Thanks to Mr. Mulally, who has shown some vision and acted aggressively to restructure the company. Result, now it has better ranking than GM and share price is leading too. Public is also more optimistic about Ford right now, which is showing in the vehicle sell data of recent months.

Now facing loss after more than 70years, Toyota is again towards another loss. This time estimated loss is approx $5-6b. Toyota, who got the No1 slot last year and current world’s 3rd biggest company could get this position only because GM has lost ground continuously for several years (more than $80b has been lost since 2004 by GM). Now tough time for this new No1 has come too.

In this tough and transition phase of auto sector any prediction or speculations are pretty uncertain. But what is expected and hoped from the government that Auto sector should not be treated as a step son, coz this sector itself has a potential to reform this recession phase. After all millions of people had worked day and night to create this sector and are still attached directly or indirectly to this sector and working positively in this negative atmosphere.
Let’s give them a positive hope.

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.

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.