Monday, July 07, 2008
I don't know if it's me getting older or the country getting dumber, but I couldn't believe my eyes when the Associated Press unleashed this article on its unsuspecting public:
"GM said to consider more cuts as market shrinks," read the headline, followed by this bit of journalistic genius:
DETROIT - General Motors Corp. may get rid of some brands, speed the introduction of small cars from other markets and make further white-collar job cuts as it tries to deal with a shrinking U.S. auto market.
Let's just take a moment to reread that headline very slowly. GM is considering more cuts because the market shrinks? I don't think so. The market for cars isn't shrinking at all. The market for outdated, denial-based automobiles sure has, which is why GM stock is at a 50+ year low -- even when you adjust it for inflation.
A more accurate headline would have been "GM finally gets its ass kicked after generations of denial." Not because GM makes a terrible car. They don't. In fact, my whole family drives GM cars and every one of us loves them. The problem with GM is the same problem we have in boardrooms across this country:
Too many decisions are being made by people who don't feel the effects of their decisions.
That's no slap at anyone in particular, it's just the way life is. Carl Icahn is famous for pointing out the folly of rewarding highly paid CEO's like Angelo Mozilo of Countrywide or Bob Nardelli of Home Depot for failing at their jobs. This is pretty much the same thing. After all, if Nardelli or Mozilo actually felt the consequences of their decisions, their enterprises might still be thriving today. But they don't. Mozilo never lost his home due to a deceptive loan practice and Nardelli never got laid off from the Gardening Department. We're talking about decision makers who take down tens of millions in annual pay even before they get fired. A five or ten dollar hike in gasoline prices has no effect on them. It equates to something like a tenth of a cent hike for people like you and me.
Those of us with more than a few strands of gray running through their forelocks can recall the first arab oil embargo of the 1970's. People waited in long lines for hours for the chance to fill their tanks at what were then record high prices. Supply was so short, that for the first time since the Second World War, gas rationing became the standard. You could only fill up on certain days of the week depending on whether the number on your license plated was odd or even.
Since that time, all the talk has been about the oil supplies running lower and global climates running hotter. Do the math and that works out to something like forty years of oil scarcity being at the top of the public's mind. Forty years is a long time to simply ignore reality. Hell, even the army retires you after twenty.
With all its resources, General Motors should have seen the writing on the wall and gotten its act together way sooner. The truth is that they did see the writing on the wall, they just conveniently decided to forget how to read. They could have kept their gas guzzlers in production for the steadily dwindling proportion of buyers. But at the same time, they could have been leading the way in the design and production of smaller, alternative cars.
They didn't. And now GM is said to be considering selling off some or all of its brands. Brands like Hummer "should be going for a cool billion dollars," according to GM. When they open their eyes, however, they're going to find the brand selling for less than that. A whole lot less.
GM is getting what it deserves for ignoring the basics of smart business. They bluffed their way for years and now the market has called their bluff. The only cards GM has left, as the saying goes, are jokers -- and nobody is laughing.