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GM – Then. Now. A Few More Weeks… : Is The General’s Last Stand Finally Here?

Monday July 3, 2006

Yes, the end of the world is nigh! So it seems for anyone who has any interest in GM, the American auto industry or even the automotive industry as a whole. The first sign of the apocalypse should’ve been quite evident when infamous investor Kirk “Kevorkian” Kerkorian stepped in many of us felt that this could bring no good to the old General and, much to our chagrin, as of last Friday it appears we were quite right.

What is so wrong about the whole idea? Where do I find such great evil in this potential predicament? Am I going to play ye olde“don’t let GM get taken over by foreigners” card? Well, to put it simply, no… My concerns with this go much deeper than that and, as a matter of fact, I am afraid that I will only be able to scratch the surface of what I wish to talk about, unless I were to write you a multi-volumed book.

The worst part of this and my biggest source of concern for their fate is the motive behind the proposal. What good could possibly come of this? How can this possibly fix any of GM’s problems? General Motors is a major corporation in the middle of massive restructuring and plagued with problems that it is slowly ridding itself of. It has excess plant capacity, massive legacy cost burdens, an excessive workforce and overlapping product. Renault-Nissan, which according to Kerkorian and York would be somewhat of a saviour for GM, is another major corporation with their own set of problems and also in the middle of some massive restructuring. They can not possibly aid GM in its situation when they find themselves facing their very own similar dilemma.

Some have argued that it may be one great devious ploy to obtain the skills and know-how of Renault-Nissan’s CEO, Carlos Ghosn, who has apparently refused offers which were already made to give him the CEO position over at General Motors. Either case, I fail to see how this could be very beneficial to GM to have Ghosn at the helm, either entirely or with partial control. Again, one of GM’s problems has been cost (legacy costs, payroll, benefits and health-care, etc.) and due to this, they have been forced to make many cuts to practically all things they can, they already have adopted their own lean manufacturingmethods and are working to make their plants more flexible. The Renault-Nissan Alliance, and Ghosn to be exact, are also known for having had to take the same kind of drastic measures and that is what Ghosn is best known for. However, much like the product problems that plague GM (mostly complaints about materials), Nissan has also faced such criticism as a result of Ghosn penny-pinching ways. GM does not need another bean counter at the head of their operations.

When you look at both sides and examine what they have to offer each other, it’s not hard to see that there really isn’t much to gain, except maybe to get the stocks to rise. But, I’m sure Mr. Kerkorian wasn’t thinking about that what he made his proposal…

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