What should General Motors do?
Now that General Motors has some extra change in its pocket, what steps should the company take to make themselves profitable again? I understand that none of us here have any idea about huge and complex this undertaking must be for the company, but it would be a good chance to say, what if.
First thing, make a copy of the agreement that Honda, Toyota, BMW and Nissan have with its hourly employes in this country and give them the choice of agreeing to what would be their new contract, or the procedure for signing-up for unemployment. If you have ever wanted to know what a UAW contract looks like, then look HERE . All 22 pounds of it.
Second thing, contact each state governor and tell them that General Motors is going to relocate its headquarters and some of its manufacturing to the state that offers the best tax breaks and incentives. This would reinvigorate each state with a spirit of competition. The state of Michigan has shown the world what happens when you keep raising taxes on business, now it’s time for another state to show what can happen with a lower tax base.
GM is now in a perfect position to negotiate. After all, what do they have to lose.
After all, what do they have to lose.
Since the government is bailing out GM and changing laws to help them like they’ve done for decades, they have nothing to lose. Only we as americans have everything to lose since we’re continually robbed to support a failing company.
Now that General Motors has some extra change in its pocket, what steps should the company take to make themselves profitable again?
1) Make cars assuming that the price of fuel will be $6/gallon. That’s what it costs in Italy and the country is (somewhat) functioning.
2) Consolidate brands
3) Invest in new manufacturing technology and process to permanently cut the workforce by 50% and raise the salaries of those remaining by 20%. Easier said than done, but….
4) Reward executives for financial performance of the previous five years, not one year.
The elephant in the room is labor’s efforts to elect the incoming administration. How can political solutions overcome the labor cost issue? They cannot and they will not.
Labor is an issue. But the bigger challenge and the absolutely critical key to GM’s survival is PRODUCT. GM’s product is good, not great. In a market that has seen demand trimmed from 17mm to 11mm new units, everyone hurts. GM’s cost disadvantage in a crowded field of franchises will make it that much more difficult.
If GM were to produce “must-have” vehicles, the cost disadvantage can be overcome. Yes, UAW has to cough up concessions to wages and legacy costs. But at the end of the day, GM’s survival depends more on making vehicles people want. Very easy to say but difficult to execute.
I fear that GM will not make enough progress on either front (cost and product) to keep them out of Uncle Sam’s pocket (i.e. yours and mine) for some time to come.