Marry Barra and a new era at General Motors

1 2015 Cadillac Escalade

What a difference a couple of years makes. GM was left for dead by many after the 2008 economic meltdown. In our polarized political climate, it seemed that watching GM collapse was essential to validate their view of the world. The notion that the government would extend a lifeline and not let GM and Chrysler liquidate was heresy in many circles. Never mind that it would have decimated countless auto suppliers as well and destroyed hundreds of thousands of jobs.

The auto bailout, however, was much more than a government handout. It was an event that made it possible to make stryctural changes to GM that were necessary for the company’s survival and long term health. But even after the bailout, many were skeptical that GM could survive, let alone thrive. This is where the new management team found itself, and they deserve credit for moving the company forward. BusinessWeek noted the progress as GM made the hsitoric announcement that Mary Barra would take over as the new CEO:

As Barra takes charge, GM is looking stronger than it has in decades. It’s in its third straight profitable year and feasting on the fruits of bankruptcy, which in its case include lower labor costs, less debt, and the elimination of weak brands and redundant dealers. Brian Johnson, an analyst with Barclays (BCS), expects it to earn about $6 billion in 2013. As the automaker sees the benefits of all the products it’s launching and additional cost reductions, its profit could reach $10 billion in 2017, according to Johnson. In 2010, GM had the second-biggest initial public offering in U.S. history; shares are trading at a high; the company returned to the Standard & Poor’s 500-stock index; and it won back an investment-grade credit rating for the first time in eight years from Moody’s (MCO). Warren Buffett has been buying the stock. China, where Buick is a status symbol—it was the ride of China’s last emperor—is now the company’s biggest market.

And GM is no longer “Government Motors.” On Dec. 9, the day before Akerson announced his retirement, the Department of the Treasury, which had been selling about 1 million GM shares a day as the year was ending, declared it had sold the last. The federal government will recoup about $39 billion of its $50 billion investment. Supporters of the Obama administration’s decision to take over GM, who now include Akerson, contend that the jobs saved at both the company and its huge network of suppliers more than repaid U.S. taxpayers. According to the Center for Automotive Research in Ann Arbor, Mich., the takeover preserved 2.6 million jobs in 2009 at automakers and companies that depend on the industry. The center calculates that a collapse would have eliminated $284 billion in personal income in 2009 and 2010 and cost the federal government $105 billion in unemployment benefits and reduced Social Security contributions. GM says it has invested $8.8 billion in U.S. facilities since 2009 and created 25,500 jobs for new and existing workers.

Barra’s promotion is historic given her gender, but it also marks a new era in the history of GM. The bailout years are now behind the company, and Barra has an opportunity to continue the progress made over the past 5 years. Read the entire article, as she seems particularly qualified to lead this effort.

Auto bailout is front and center in presidential campaign

President Obama’s campaign is running this ad in Michigan and Ohio in response to discredited Mitt Romney arguments about Chrysler and Jeep moving jobs to China.

Pontiac will be a “focused niche brand”

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The GM restructuring plan will kill off Saturn and demote Pontiac.

And on Tuesday, when General Motors asked the federal government for more bailout money, it also announced a reorganization plan that included demoting Pontiac to a “focused niche brand,” signaling that its lineup of vehicles would shrink and that it would no longer be a separate division.

To industry analysts and Pontiac’s longtime fans, the downgrade provides a case study of the product missteps that helped put G.M. in its precarious state, and a reminder of the dangers in straying from a successful formula.

“When you deviate too far from it, that’s when you run into trouble as a brand and a company,” said Jack R. Nerad, executive editorial director at Kelley Blue Book, whose 1968 Firebird made him feel “as cool as I could be.”

More than any other G.M. brand, Pontiac stood for performance, speed and sex appeal. Its crosstown rivals followed with similar muscle cars, giving Detroit bragging rights over the cars that Japanese automakers were selling based on quality and reliability.

Though still G.M.’s third-best-selling division, behind Chevrolet and GMC, Pontiac’s sales peaked in 1984, when it sold almost 850,000 vehicles, roughly four times as many as it sold last year.

G.M.’s chief executive, Rick Wagoner, said the company’s decision to concentrate primarily on Cadillac, Chevrolet, Buick and GMC left the company with a “comprehensive portfolio.”

By many accounts, Pontiac started to falter when G.M. pursued a cost-saving strategy of providing the same cars to different divisions.

No kidding. It’s stunning that GM needs an economic catastrophe to admit to obvious truths.

This is the best thing for GM, and for Pontiac. Now, they can focus on cool cars, and maybe even recapture some of the muscle car glory of the brand’s past.

Saturn may bite the dust

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The GM restructuring plan is now expected to be rather bold, and many are predicting that the Saturn brand will not survive.

“I haven’t heard about what is in General Motors’ plan in detail, but it looks like it will be more maximum than minimum. In other words, it will be quite aggressive, and I don’t know whether this will include plant closings or elimination of brands,” said David Cole, head of the Institute for Automotive Research in Ann Arbor, Mich.

Meanwhile, Bob Lutz, who is slated to retire as GM’s vice president of product development, told the Automotive News that Saturn likely would not survive the restructuring plan.

“My personal favorite would be to see Saturn survive and prosper. But frankly, the reality is that that is probably not going to be the outcome,” Mr. Lutz said. Neither he, nor other GM officials could be reached for comment on Saturn’s future.

“We spent a huge bundle of money in giving Saturn an absolutely no-excuses product lineup, top to bottom. They had a better and fresher lineup than any GM division, and the sales just never materialized. So we have to act on that. It’s our duty,” Mr. Lutz told Automotive News.

Working against the idea of axing Saturn is the enormous amount of money that would have to be spent to settle with dealers and the potential lawsuits from them that would probably follow. That happened with Oldsmobile.

Rob Cochran of No. 1 Cochran in Monroeville and Robinson said he held out hope that Saturn would continue as a brand.

“I know that Saturn is … exploring a lot of options. The dealers met last month in New Orleans and there were three or four options on the table,” Mr. Cochran said. “We are waiting to see what those alternatives are.”

He added, “Mr. Lutz is famous — or depending on your viewpoint, infamous — for just winging it. He’s a great product person, but a challenge from a PR standpoint.”

Saab is expected to survive, as the Swedish government will likely invest billions to make sure Saab and Volvo remain viable, though details are not yet clear.

GM will threaten bankruptcy if it doesn’t get more aid

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The auto bailout helped to keep GM and Chrysler on life support, but GM will make it clear in it’s plan to be filed this week with the government that more money will be needed in order to avert bankruptcy.

General Motors Corp. will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents a restructuring plan next week, according to a report published Saturday.

The online edition of The Wall Street Journal, citing unnamed sources, said the competing choices present a dilemma for the Obama administration, which may fear seeing the industrial icon carmaker fall into bankruptcy and cut more jobs if it’s refused more aid.

The government has already committed $13.4 billion to GM as part of a federally-funded bailout. The automaker is expected to include its call for more funds in a restructuring plan it’s required to submit to the Treasury Department by Tuesday, though the company isn’t expected to include a dollar amount, according to the Wall Street Journal report.

However, Treasury Department officials believe GM needs at least $5 billion more in loans to keep operating beyond the first quarter, according to the report.

The key will be the plan laid out by GM. Will it have real concessions from bondholders and the union?

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