ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist&reg;.com: Duke's Damage Control</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style1 { font-size: x-large; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td width="116" height="118" rowspan="2" valign="top" align="left" xpos="0"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="24" height="118" rowspan="2"></td> <td width="465" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="18" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="283" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr height="26"> <td width="624" height="26" colspan="6" valign="top" align="left" xpos="0"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#149; <a href="articlesindex.html">ARTICLES</a> &#149; <a href="books.html">BOOKS</a> &#149; <a href="teflon.html">THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#149; <a href="mailto:letters@onlinecolumnist.com">REACTIONS</a> &#149; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="1"> <td width="116" height="2574" rowspan="2" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="489" height="1" colspan="3"></td> <td width="18" height="2574" rowspan="2"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> </tr> <tr height="2573"> <td width="489" height="2573" colspan="3" align="left" xpos="116" content valign="top" csheight="2573"> <font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="5"><b> <br /> Ax Falls at GM</b></font><p><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b>by John M. Curtis<br> (310) 204-8700</b><br> </font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright March 29, 2009<br> All Rights Reserved.</i></font></p> <p><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</span><span class="style1">O</span>n the eve of President Barack Obama s new auto industry plan, General Motors Chairman and CEO 56-year-old Rick Wagoner got his pink slip from the White House.<span style="mso-spacerun: yes">&nbsp; </span> After getting $17.4 billion from the bailout, GM burned through its cash, requesting another $21.6 billion.<span style="mso-spacerun: yes">&nbsp; </span> Wagoner s latest request was the straw that broke the camel s back, causing the White House to seek his head.<span style="mso-spacerun: yes">&nbsp; </span> Wagoner s 31-year-old career was unceremoniously terminated, as much for symbolic reasons, after the public s disgust with Wall Street s CEOs getting bonuses for failure.<span style="mso-spacerun: yes">&nbsp; </span>Whether logical or not, it became impossible to retain Wagoner after GM lost $83 billion over the last four years, attributable to making bad decisions.<span style="mso-spacerun: yes">&nbsp; </span>While Wagoner would like to blame GM s problems on the recession, the company faces mounting problems for making undeniably poor choices.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>With the possible exception of GM s Saturn Division, the rest of lineup overestimated the appeal of gas-guzzling SUVs, now rusting at dealerships around the country.<span style="mso-spacerun: yes">&nbsp; </span>While high gas prices didn t help, Wagoner helped build successful divisions in China, Russia and Brazil.<span style="mso-spacerun: yes">&nbsp; </span>He couldn t see the wisdom of expanding production of his popular fuel-efficient Opel Division, currently among the best-selling cars in Europe, sold under the Vauxall name in the U.K.<span style="mso-spacerun: yes">&nbsp; </span>While Americans craved fuel-efficient cars and GM Opels sold like hotcakes in Europe, Wagoner continued to misread consumers needs.<span style="mso-spacerun: yes">&nbsp; </span> I m not necessarily sure it s the best idea for Wagoner to leave now, said Aaron Bragman, an industry analyst with HIS Global Insight.<span style="mso-spacerun: yes">&nbsp; </span> Your changing captains in the middle of the rapids here, said Bragman, not getting the benefit of making someone at GM stand accountable.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Whoever leads GM, they need to see the urgency of joining forces with a well-capitalized auto company.<span style="mso-spacerun: yes">&nbsp; </span>When Nissan took a stake in France s Renault in 1999, skeptics dismissed the partnership as sacrificing a well-know French brand.<span style="mso-spacerun: yes">&nbsp; </span>Ten years after the merger, Renault has some of the best-selling fuel-efficient cars in Europe.<span style="mso-spacerun: yes">&nbsp; </span>With GM s Opel Division already successful in Europe, bringing the line to the U.S. would have been a no-brainer while they move ahead with Wagoner s pet-project of GM s soon-to-be released plug-in Volt.<span style="mso-spacerun: yes">&nbsp; </span>Electric cars, while important, will still need other conventional vehicles before the technology evolves.<span style="mso-spacerun: yes">&nbsp; </span>Speaking on CBS  Face the Nation with Bob Schieffer, Obama reflected on GM.<span style="mso-spacerun: yes">&nbsp; </span> They re just not there yet, referring to GM s unpopular product lines.<span style="mso-spacerun: yes">&nbsp; </span>Asking for Wagoner s head, Obama signaled he means business in Detroit.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>GM must swallow its pride and consider joining forces with Toyota, Nissan or possibly Volkswagen.<span style="mso-spacerun: yes">&nbsp; </span>If Nissan helped Renault, GM could benefit by guidance from a successful foreign competitor.<span style="mso-spacerun: yes">&nbsp; </span>Toyota, Nissan and Volkswagen all manufacture popular cars for U.S. consumption.<span style="mso-spacerun: yes">&nbsp; </span>Under their direction, GM would begin to build state-of-art vehicles as they currently do in Europe, China, Brazil and South Africa.<span style="mso-spacerun: yes">&nbsp; </span>When Wagoner took over GM s North American operation in 1994, GM held 33% of the U.S. market.<span style="mso-spacerun: yes">&nbsp; </span>GM fell to 22% in 2008.<span style="mso-spacerun: yes">&nbsp; </span>Under Wagoner s direction, the company hasn t made money since 2004, losing $38.7 billion in 2007.<span style="mso-spacerun: yes">&nbsp; </span>Wagoner developed the Pontiac Azteck in 2000, an ugly-looking SUV that went over like a lead balloon.<span style="mso-spacerun: yes">&nbsp; </span>Retaining Wagoner in the new GM would send the wrong message to a company looking for new life, a fresh start and a bright future.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Obama administration officials announced March 30 that GM and Chrysler would not receive new bailout money without dramatic restructuring, prompting new worries about bankruptcy.<span style="mso-spacerun: yes">&nbsp; </span> The fact there s still a chance of GM going bankrupt is shocking, said Takashi Ushio, head of the investment strategy division at Marusan Securities in Japan.<span style="mso-spacerun: yes">&nbsp; </span>While GM shareholders have already been practically wiped out, a bankruptcy would decimate what s left of bondholders and creditors.<span style="mso-spacerun: yes">&nbsp; </span> We believe our approach to GM is starting with a clean sheet of paper, said an unnamed Treasury Dept. official, hinting that Chapter 11 may be next.<span style="mso-spacerun: yes">&nbsp; </span>Saddled with debt and union contracts, bankruptcy would allow GM and Chrysler the best chance of long-term recovery.<span style="mso-spacerun: yes">&nbsp; </span>U.S. officials have urged Chrysler to allow Italy s Fiat to take a 30% stake, providing cash and essential restructuring.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Booting out GM s Wagoner was the first step in what will no doubt be a painful restructuring of the once crown jewel of American industry.<span style="mso-spacerun: yes">&nbsp; </span>GM officials under obsolete management and crushing weight of existing contracts cannot recover without the pain of bankruptcy.<span style="mso-spacerun: yes">&nbsp; </span>Obama officials realize you can t keep throwing good money after bad, pressing a step closer to the inevitable.<span style="mso-spacerun: yes">&nbsp; </span>Like Chrysler, GM, too, will have to find a new, more well-capitalized partner like Toyota, Nissan or Volkswagen.<span style="mso-spacerun: yes">&nbsp; </span>Giving GM another $16 billion would throw more money down a rat hole.<span style="mso-spacerun: yes">&nbsp; </span>Losing $82 billion since 2005 proves that GM is already unofficially bankrupt.<span style="mso-spacerun: yes">&nbsp; </span>Bankruptcy brings new management, government help and hope for GM s eventual rise from the ashes.<span style="mso-spacerun: yes">&nbsp; </span>Postponing the inevitable only delays GM s chances of becoming an innovator and industry leader. </p> <p><u><b>About the Author</b></u></p> <p><b>John M. Curtis</b> writes politically neutral commentary analyzing spin in national and global news. He's editor OnlineColumnist.com and author of <a href="books.html">Dodging The Bullet</a> and <a href="books.html">Operation Charisma</a>.<br> </p> <p></p> </td> <td width="1" height="2573"><spacer type="block" width="1" height="2573"></td> </tr> <tr height="1" cntrlrow> <td width="116" height="1"><spacer type="block" width="116" height="1"></td> <td width="24" height="1"><spacer type="block" width="24" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="283" height="1"><spacer type="block" width="283" height="1"></td> <td width="18" height="1"><spacer type="block" width="18" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong>Home</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> || <a href="articlesindex.html">Articles</a> || <a href="books.html">Books</a> || <a href="teflon.html">The Teflon Report</a> || <a href="mailto:letters@onlinecolumnist.com">Reactions</a> || <a href="aboutdiscobolos.html">About Discobolos</a></strong></font> <div align="left"> <p><font size="1" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">This site designed, developed and hosted by the experts at</font><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"> <a href="http://www.cmeonline.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">&copy;1999-2002 <a href="aboutdiscobolos.html">Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>