“See the USA in Your Chevrolet”

Anyone planning to tour the USA, or Panama, for that matter, in a Chevrolet, better hurry. GM has just ditched its Pontiac division models (G5, G6, G8, Solstice, Torrent, and Vibe) after sounding the death kneel for Hummer, Opel, Saab, and Saturn (Astra, Aura, Outlook, Sky, and Vue). Even GMC, the automaker’s upscale Chevrolet truck division is on GM’s endangered species list because it sells trucks that are practically identical to what Chevrolet sells. GM’s market valuation is now about a third of Bed, Bath, and Beyond; Its two billion dollar capitalization is about two percent of Toyota’s; and GM stock is barely two bucks a share, while Ford’s sell for over $5.

General Motors, like the other two geezers of the Old Detroit Three, is a vast retirement home, with a small loss-making auto subsidiary. The UAW is the AARP in an Edsel: It has three times as many retirees and widows as “workers”. GM has 96,000 employees (pre-new cuts) but provides health benefits to a million people.

These legacy costs are compounded by so many chronic inefficiencies and in-bred mal-administration that a huge increase in sales will only make the Detroit-based automakers lose money faster. For example, Honda and Nissan make a pre-tax operating profit per vehicle of around $1,600; Ford, Chrysler and GM sustain a loss of between $500 and $1,500—losing money on every vehicle sold.

GM’S ‘PEDAL TO THE METAL’ PROPOSALS. GM’s restructuring plans made earlier this week are encouraging signs that the company will make bold moves to survive by embracing transformative changes that will propel the automobile industry into the 21st century, by giving government and unions a majority equity in the company. These concessions would never have seen the light of day under GM’s previous leadership (ex-CEO Wagoner, et al).

Give GM credit for trying to turn its adrift oil tanker around. GM says its 96,000 U. S. employees will be pared down to 38,000 workers and its 12,000 Canadian employees will lose 7,000 jobs by 2014; the dealer network will be cut by half; and, the company’s eight divisions will be reduced to four (Buick, Cadillac, Chevrolet, and GMC). By cutting workers and models, GM hopes to make money in a North American auto market that will retail annually only 10 million vehicles, instead of 17 million. And, the company expects that rationalizing its production using more co-ventures with Toyota NUMMI in California, will quickly bring in new GM models at little financial risk.

QUO VADIS CHRYSLER? GM’s extensive restructuring goals make Chrysler’s ‘roll of the dice’ with a Fiat partnership, with or outside bankruptcy protection, look risky and short-sighted. If Chrysler hitches its wagon (and minivan) to Fiat, it will be like two drunks propping up each other. The U. K. Consumers Association calls Motoring Which magazine calls Fiat’s small cars both frugal and feeble. With fuel prices as low as they are in Panama and North America it’s not likely that buyers will risk their money on a Chrysler/ Fiat combo imported from Europe or built in Mexico.

Dealerships in Panama will continue to support more stable, reliable Japanese and South Korean makes while they patiently wait for the Chrysler dust to settle before investing their own money. In the meantime, smart investors believe Chrysler is no longer a viable entity no matter to whom it is partnered (remember, not even Mercedes could afford to support Chrysler’s cash-burn and recently dumped its 19 percent stake in the company). Expect the Chrysler/Fiat marriage to be annulled after a “quickie” honeymoon.

Incidentally, a recent CNN polls shows that 63 percent of North American car buyers would not buy a vehicle sold by a manufacturer that had gone bankrupt. Again, Leonard Cohen succinctly sums up the public’s distrust as he sings: “Everybody Knows”.

NEXT WEEK: Does Ford have a future?