Alfred P. Sloan, the legendary CEO of General Motors Corp. (NYSE: GM) from 1934 to 1956, envisioned GM as a company that would offer a car for every income level, thus keeping customers in the GM fold as they climbed the ladder of American success from their entry level jobs to their peak earnings years. Starting out, a customer would buy a Chevrolet and then keep buying bigger intermediate cars -- e.g., Pontiacs, Oldsmobiles and Buicks -- before reaching the summit -- Cadillac.
The new GM won't sell you those intermediate cars -- it will get you at the bottom (Chevrolet) and the top (Cadillac) and offer you nothing in between. Through something called a Section 363 bankruptcy, GM will sell its most valuable assets -- Chevy and Cadillac -- to a new government-funded company. The rest of GM -- Buick, Pontiac, Hummer, etc. -- will be left in the old GM. The proceeds from selling the good assets will help pay claims like GM's $27 billion in unsecured debt and its $20 billion in union pension liabilities.
Last November, I suggested a six point restructuring plan for the industry. On Sunday, the U.S. took the first and most important step, which was to replace GM's CEO. If this Section 363 plan goes into effect, the U.S. will move onto another key step: getting rid of unprofitable product lines and keeping the good ones, which I thought included Chevy, Cadillac and Buick. Some of the hard things that remain to be done are giving workers a pay cut, closing excess dealerships, and cramming down painful losses on bondholders.
GM's board should have done all this years ago -- and the failure of corporate governance here suggests that we need to rethink the way we run American companies. I believe these six changes would help.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in GM securities.
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Reader Comments (Page 1 of 1)
4-01-2009 @ 10:39AM
Chris said...
I always enjoy reading your articles because the never ending anti-GM sentememt show how negative you truly are. Why not show some positive signs for a change? There are some out there. If you keep telling someone how bad they are someday they will believe it and never be able to change. Attitude is everything and yours is all bad!
4-01-2009 @ 10:47AM
gorjing said...
Would somebody explain to me why when our own car companies are struggling do we continue to import cars from foreign countries.
There more foreign brands in the U.S. than there domestic brands.
4-02-2009 @ 11:52AM
Frank said...
lots of talk of how bad GMs management is. fact is unions have to give back or GM wont survive. wake up unions obamapropmpter isnt going to save you. grassfire.org
4-01-2009 @ 11:50AM
sitruc said...
Closing dealerships and sorting through several successful vehicles to decide to just chuck them all is easy and cost effective.... Cohan obviously doesn't understand the industry he is writing about.
4-01-2009 @ 12:29PM
Hugh said...
It might look like the right way to save GM. However, I would never buy a GM car again; I wouldn't trust GM even though I have only bought GM cars for the past 6o years!
4-01-2009 @ 8:10PM
babyraymond8 said...
thats ok dude cause I wouldnt drive a foriegn brand if it was given to me. Be American!! Buy American!! Drive american!! or go live in Japan, Korea ,China or Germany!!
4-02-2009 @ 11:05AM
Gene Ammirata said...
We are very stupid people in this country. We will be owned by Japan (Toyota), China (Walmart), Arabs (oil). We sold our souls for a few bucks. This is a very sad time. Say goodbye to decent paying jobs. We are FOOLS!!
4-04-2009 @ 11:26AM
Duke said...
Yup, the unions do have to give concessions that aren't token. They will have to get their pay cut immediately for the UAW workers. They will at least have a job, which is better than no job. They can sell their toys. They really don't need those Harleys, hot rods, boats, motorhomes, ATVs, hunting cabins, gun collections, cottages, jets skis, and 4,000 sq. ft. homes. I am hoping Obama will stab the unions in the back like Clinton did in signing NAFTA. Obama forced Wagoner to resign and now its the unions turn to hear that the taxpayers are tired of giving bailouts and that their compnay is broke and taking taxpayer dollars to keep the status quo, even though GM is flat broke.
4-05-2009 @ 5:24PM
flytynfool said...
keep buying products not made in america and soon we will be worse off than the 3rd world nations we are helping raise their quality of life standards.
4-06-2009 @ 5:56PM
Duke said...
Mr. Cohan is right on. GM is still in a lurch. They do not have a real plan and no models on the drawing board to compete head to head with the imports. GM does not set the bar anymore. The imports do. GM had better get use to it and find out why the American consumer prefers imports and then build on that instead of building GM cars and trucks the consumer dislikes.