No easy, cheap fix for GM's problems
Losing a numbing $15.5 billion in one quarter, as General Motors Corp.
confirmed Friday, is a sure-fire way to restart the wailing.
Kill Buick and Pontiac.
Sue the directors.
Dump Rick Wagoner, GM chairman through some of the most transformative
(and bleak) times in the company's 100-year history.
Blame the United Auto Workers and the clueless Detroit culture that
didn't see $4-a-gallon gas coming (even if Japanese rivals Toyota and
Nissan, the airlines and lots of others didn't, either).
However tempting some of these options may be -- and a few actually
could happen -- the simple fact is that quick fixes for what ails GM
right now aren't easy. Nor are they cheap for a company bleeding cash
and trying to conserve every penny.
Soothe Wall Street? Its traders already have shown by their actions --
GM's market cap is a measly $5.79 billion compared with Toyota's $146.7
billion -- they believe the company to be essentially worthless despite
its massive assets in the United States and its profitable operations
Force a company into shuttering brands? Doing so would be the automotive
equivalent of the cure being worse than the disease by inviting a wave
of litigation and requiring GM to write checks totaling at least a
couple billion dollars to dealers protected by myriad state franchise laws.
Validate the critics who've assigned personal culpability to a complex
series of business challenges, many of which cannot be controlled from
atop the RenCen? Feed a press corps with the attention span of a
kindergarten, which will then turn its attention to Bob Nardelli's
meltdown at Chrysler LLC?
The point here is not to understate the gravity of GM's predicament
because it is very grave. A company that burns cash at roughly the rate
of $1 billion a month, reports a 30 percent drop in North American
revenue in a single quarter, books a loss in its hot Asian operations
and says its overriding objective is to maximize cash flow is a company
that is fighting for survival.
I've covered GM for 12 years from three continents, seen its successes
and failures, its smart moves (China and Korea), its less smart ones
(Fiat) and a legit renaissance in the quality and looks of its cars and
trucks. Through it all has been one constant: GM can't muster much of
any momentum in its home market, and when things go wrong, they go
The truth is that everyone in the business is getting whacked by record
oil prices and the consumer's turn away from pickups and SUVs to smaller
cars and crossovers. But no one is getting hit harder and destroying
more shareholder value than GM, whose stock closed Friday at $10.23,
down a staggering 76.3 percent from its 52-week high of $43.20 in October.
Is steering the General clear of federal bankruptcy court the only test
of accountability for Wagoner & Co. -- beyond cutting bonuses, that is?
GM's directors are scheduled to meet Monday evening and Tuesday, their
first since June, in what is likely to be the first in a series of
fairly dramatic board meetings over the next 60 to 90 days.
If GM's financials worsen, oil prices spike higher, credit conditions
worsen, the automaker's cash hoard slips appreciably south of $20
billion and the company draws heavily on its revolving credit lines,
pressure will intensify on the directors to act. It won't matter how
broadly they may support Wagoner, President Fritz Henderson and their
That's business. That's how corporate directors can behave -- arguably
must behave -- when sustainably crappy business results quickly merge
fiduciary responsibility with personal liability and directors start
showing up at board meetings with their lawyers in tow.
The more immediate question: What are you gonna' do about it, GM? It was
telling that Henderson opened Friday morning's 90-minute conference call
with a reprise of the automaker's two-week-old plan to raise $15 billion
through $10 billion in "self-help" cost cutting and $5 billion in asset
sales and financing.
"This is a game about rebuilding our revenue base," Henderson said. "It
is what it is."
Yes, it is. And it's ugly.