Size Doesn't Matter
Friday, October 6, 2006
GM's size is a false defense
Q. Heading into the 1980s, are you as CEO of IBM concerned about the rise of so-called personal computers?
A. Hold it, young man. Who is the biggest computer company in the world?
If General Motors CEO Rick Wagoner and his board think that an alliance with Nissan Motor Co. and Renault SA is not in GM's interest, that's his call.
I'm not going to fault Wagoner for deciding that finding ways to cut costs and improve operations by working with partners would be a distraction from GM's turnaround efforts to, uh, cut costs and improve operations.
I'm not going to fault him for asking Carlos Ghosn for a "pay to play" check before committing GM staff to finding those savings and improvements.
Ghosn felt that the money undermined GM's commitment. But GM already is looking for cash first and deciding what makes sense second.
Recent moves by GM suggest a pattern.
The General is selling its seed corn. It sold stakes in both General Motors Acceptance Corp. and Suzuki Motor Corp., the fastest-growing Japanese carmaker in Europe and the pre-eminent player in India.
Far be it from me to suggest that Wagoner acted petulantly by saying, in effect, that GM wants to save every penny possible, unless doing so allows someone else to save a nickel.
But I have one response when Wagoner dismisses the chance of finding savings through an alliance by saying "GM sells more than 9 million vehicles a year globally. It's not logical or responsible to say we must have a partner to recover."
We've heard this before. A reporter once started to ask then-CEO Roger Smith about GM's slide in market share. GM at the time owned more than 40 percent of the U.S. market. "Hold it, young man," Smith interrupted the impertinent reporter. "Who is the largest carmaker in the world?"
For years, GM has hidden behind its size. Being the biggest meant all was right with the world. It was proof that GM must be doing something right, that the General was still in charge.
When it invokes its size as proof of its prowess, though, GM is like France saying it's not worried about Germany's rise because of the Maginot line.
Q. As CEO of Pan Am, do you worry about the rise of discount airlines?
A. Hold it, young man. What airline flies to more destinations than any other carrier?
First of all, GM is not the world's largest carmaker because it is doing something right. It is the largest -- for now -- because even slowing momentum is still momentum and because its large body of dealers in North America do an excellent job of selling what are all too often second-rate products.
Second, how much longer will GM hold the title of world's largest? Fourteen months? Two?
Anyone outside GM's executive suites can look at global sales charts and know that it's only a matter of time before Toyota Motor Corp. goes flying past GM.
Toyota is in the passing lane. GM is on the shoulder -- the breakdown lane.
Is GM really so far into denial that it can't realize that its days at the top are numbered? Is Wagoner? It seems hard to believe, but it may still be possible. After all, this is a company that practically broke its arm patting itself on the back because it raised its market share for two years in a row. Two in a row!
Hey, guys, calm down. The so-called gain each time was less than one percentage point. That's not raising your share. It's temporarily halting your decline.
Q. Caesar, are you worried by the recent encroachments by the Huns?
A. Hold it, young man. What is the largest empire the world has ever known?
Toyota's passing GM will be the best thing that has happened to the General in decades. Finally, perhaps, GM's top brass will admit that the world has changed. When Toyota punctures their arrogance, maybe they'll even decide that GM should get serious about competing in the auto business.
Because there isn't much evidence today that GM is doing what it takes to compete.
You may e-mail James B. Treece at firstname.lastname@example.org