Trouble with the Big 3

Everyone who writes about business affairs or cars has been weighing in on the crisis with the Big 3 (Ford, GM, and Chrysler) and their attempt to get bailout money from the federal government. I don’t know if I’m going to add anything to the discussion, but I will say that I read a really great article the other day in the New York Times. It compared the current American automakers’ financial crisis to what happened to the British car industry in the 1970s and 80s.

The article can be found at: http://www.nytimes.com/2008/11/18/business/economy/18car.html?scp=1&sq=british%20leyland&st=cse

I’m no expert on the business aspect of auto manufacturing, but I’d day that the piece is dead-on. I have no idea what will actually happen if Detroit is allowed to go bankrupt, but it’s clear to me that the bankruptcy reorganization aspect might allow them to do what they have NEVER been able to do themselves – slim down. GM, especially, is a bloated and frustrating organization. Some of their brands compete against each other (Buick and Cadillac). They make hundreds of models. They have few segment leaders (except their trucks). If this were any other business, you’d expect them to slim down, cut off the excess fat or underperforming branches, and focus their energy becoming the best at SOMETHING.

Another meme that auto journalists and industry pundits love is to list which brands GM should leave alone, and which should disappear. I can’t help myself – so here I go with my dream GM line-up:

Chevy for basic family and economy cars, and maybe a compact pickup

GMC for all the trucks and SUVs

Pontiac as the sport and niche brand

Cadillac as the luxury brand

(Which means that GM would need to kill Saab, Saturn, Hummer, and Buick. Except in China, because Buick does really well there. Those Buicks could be rebadged Cadillacs.)

Of course, that leaves a few unanswered questions. If Pontiac becomes the only sport division, who gets the Corvette? The Corvette is, and probably will remain, the GM flagship. If you left the Corvette with Chevy as would be the most likely scenario, then you really couldn’t have any Pontiac be faster or better than the Corvette. And people with Chevy pickups are really brand-loyal, and I think they’d be upset about losing their Chevy-branded trucks. Would they get over it and buy a GMC? I don’t know. But hey, I didn’t make this whole brand mess, GM did. So they need to sort it out. And leaving things as they are is a really stupid idea.

In any event, Congress and the President-elect need to really heed the past lessons and current public outcry, and avoid giving in to the powerful Michigan lawmakers. I think a wake-up call, as hard as it might be to swallow, is going to be good for the U.S. in the long run.