CAR Management Briefing Seminars-#4

CAR MANAGEMENT BRIEFING SEMINARS #4
Does GM Now Mean Government Motors?
By Steve Purdy
TheAutoChannel.com
Detroit Bureau

You’d have to live on a different planet, or perhaps in the wilderness somewhere, not to know about the unprecedented government involvement, ownership that is, of US automakers: GM (60.8%) and Chrysler (8%). And, you’d probably have to be just as isolated not to have heard the acronymic redefinition referenced in the subtitle.

Ron Bloom, senior advisor to President Obama, commonly called the car czar, stood before hundreds of attendees here at the Management Briefing Seminars and read a carefully prepared and precisely delivered speech laying out policies we mostly already knew. His head never lifted from reading his remarks.

Most of what he had to say was common knowledge. For example, he reviewed the 42-day process of bankruptcy for Chrysler and the more amazing 39-day process at GM. Those achievements remain amazing to me, and to most analysts. To think that the government can orchestrate something so complex in so short a time boggles the mind. Only time will tell if that was a good thing.

Mr. Bloom attempted to undermine criticism of these deals. Many of the critics have pointed out the inequity of treatment between different stakeholders in the deals – like, suppliers getting a bigger payout than bondholders, foreign investors getting more than employees or taxing authorities getting more than anyone. He explained the legal legitimacy of all that but I’m not sure everyone was buying it.

Most importantly, I thought, is the commitment Mr. Bloom conveyed that the government will get out of the auto business just as soon as practical – probably beginning next year for GM and perhaps in 2011 for Chrysler. In the meantime he reiterated the business version of the Golden Rule, that is, “he who has the gold makes the rules.” That means that the provider of capitol has the right and the obligation to make rules that protect the capitol provider, in this case the US taxpayer. But he also insisted that the government would not be running the company in any way – just overseeing.

Perhaps as important was Mr. Blooms reassurance that the government would not use ownership of GM for social control. Nor would the government be likely to put in any more money if the companies don’t turn it around. I wouldn’t bet on either of those.

Earlier in the day the new boss at Toyota, grandson of company founder, racecar driver and former NUMMI vice-president, Akion Toyoda, touted the company’s racing exploits and announced that they will build a new, affordable sports car in the next two years. He presented a video of him at the wheel going very fast at LeMans. He also announced the impending production of the Lexus LF-A super sports car and an affordable new sports car. We’ve seen the stunning LF-A at the major auto shows and it promises to be a thriller. These announcements were just side notes during his speech wherein he insisted that it is time to reinvent the automobile.

Mr. Toyoda left us hanging still on what might be the fate of the California NUMMI plant. NUMMI was a ground-breaking joint venture between GM and Toyota where a variety of products have been built, most recently the Toyota Matrix and Pontiac Vibe. While we had heard that it was a successful venture we now hear that the plant has never been profitable.

Steve Millstein of Telematics talked convincingly about the importance of building “connectivity” into future automobiles. He said that ½ of all auto buyers today have not known a world without cell phones. Lifestyles today are becoming more and more dependent on being connected to the outside world. Not only does it allow the driver to be connected to his/her world but it also allows the car to be connected to the infrastructure around it.

Millstein also talked about marketing messages that can no longer be effective in traditional forms. The promoters of any consumer goods, including cars of course, cannot control their message delivery because the customer through his/her electronic connection to the world now controls those messages. Commercial messages cannot just be scatter-shot at an audience and expected to hit a receptive ear anymore.

Other buzz here at the conference was about announcements made by VP Joe Biden in suburban Detroit earlier in the day that $2.4 billion worth of the stimulus money would be awarded to the Detroit Three and others to support the development of electric car components – batteries, controllers and other essentials. The Detroit Three (we don’t call them them all get cash and a variety of suppliers will share the largess. More than half that money will stay in Michigan – a reflection of the fact that 70 to 80% of automotive R&D is within Southeast Michigan.

One of my favorite CAR (Center for Automotive Research) guys is president and chief economist Sean McAlinden who professes the belief that the government will promulgate policies that favor the companies in which they have an ownership stake. McAlinden has a great sense of humor and a sharp sense of irony that come out in all his presentations. He’s a real treat to listen to.

Next up are speeches by more mover’s and shakers, Michigan governor Jennifer Granholm, GM’s new product boss Tom Stevens and a few others.

Watch this space for installment #5 tomorrow.