“General Motors, according to various reports, is negotiating a merger with Chrysler LLC’s majority owner, Cerberus Capital Management LP. Why? Because the bosses at GM and Chrysler are deal makers who just can’t help themselves.” [Jeremy Cato writing yesterday in the Globe and Mail] Will a GM-Chrysler merger really accomplish anything beyond creating a bigger bankruptcy a few months down the road? Yes, it will. I know, because I was there.
I’ll be the first to admit that my work at GM was a little too much like beating my head against the wall. My advice about streamlining the company, slowing down production, and putting less pressure on the dealer network seemed to fall on deaf ears. I don’t mean to point fingers, though. When a company goes from being worth 11 figures to being worth 11 figures with a negative sign — well, you’re just in uncharted territory, and it’s no surprise that no one quite seemed to know what to do.
For my part, I was sick of it all. I just wanted to get out of there — I didn’t care if I ever saw another Allanté, Bravada, or Corvair for the rest of my life. And so, just like that, I was out of GM and back at Chrysler again. I walked in the door the same day they were taking the “Under New Management” sign out to the dumpster. And, perhaps not by coincidence, the new managers seemed eager to go out the door themselves.
Chrysler, as it turned out, was facing all the same problems as GM, but had almost the opposite attitude about them. At GM, if you tried to address the company’s problems, it would get you banned from the company picnic. Chrysler canceled its company picnic, then went on to fire everyone who thought the company was doing fine. Profits had not been good, to say the least, and with all the red ink they had on their fingers, it was hard to persuade my bosses at Chrysler that there was any reason for hope.
“Cut costs, and figure out the new motor technology, and you’ve got a future,” I told them.
But they wanted more than just to keep the company going for another ten years with the hope of turning it around. “We just want to be the biggest automaker in the world,” they told me. “When we started here, our plan was to get that done in two or three years, and then have a big pizza party and retire. But what can we do when our own sales are falling almost as fast as the sales at GM?”
“You could buy GM,” I suggested. “At this point, I don’t think its market cap is more than a couple million.”
“We don’t want to sink any more money into this business,” they said. “If we can’t make money in cars, maybe we’ll try video rental next.”
“But you just need someone else to pay for it,” I said. ”Maybe your friends at Wachovia will put up the money.”
“I hear what you’re saying, but I don’t think it will work,” they said. “The last time we talked to Wachovia, it seemed like they didn’t have anything left. It was so bad they were burning the furniture to keep warm.”
“But still,” I insisted, “there must be a way. Aren’t you the company that got that loan guarantee from Washington way back?”
“Well, yes, but that was Lee Iacocca. That was ages ago. And as soon as he paid it all back, he retired from the auto business and started that cola business of his.”
“But still,” I said. “Just mention the words, ‘loan guarantee,’ and I think Jimmy will be willing to talk about the future of GM. Do you have any idea how bad things are over there?
“I’ll see if I can get him on the phone right now,” I continued. “I think you might get your pizza party after all. Oh, and I won’t mention Iacocca’s name.”
I dialed the phone, and to my surprise, Jimmy answered on the first ring. I knew just what I wanted to say. “Hello, Jimmy? Remember that one and a half billion dollar lifeline you were looking for? Well, it turns out that Chrysler went to talk to the people in Washington and they got all the money. . . . Jimmy, calm down. I happen to have them in my office right now, and I think you might want to talk to them.”
They ushered me out of the office less than a minute later, of course, but if what I’m reading in the paper is true, they may already be making plans for their pizza party. I might not be invited to the event that I was so instrumental in setting up, but I’m not bitter. As a consultant, if I can find a solution to your problems and get paid for it, that’s all I really ask.
