The GM Plan

The GM plan makes the same assumption that many of us do: people want to buy green cars. Thus, if the company can produce green cars, they can sell tons of them. That may or may not be true but talking about their wonderful cars is a small part of the plan, yet business success is a function of costs and sales. GM can cut costs until the cows come home, but it's all in vain if they can't sell their cars and selling cars has been a declining skill of GM for decades.

I was pleasantly surprised that the plan calls for the creation of an Oversight Board run by the government, but the definition of benchmarks will, I suspect, not be an easy task. If earnings is one benchmark, GM has two mealy-mouthed definitions - EBIT (earnings before interest and taxes) and EBITDA (earnings before interest, taxes, depreciation and amortization).

To read the plan is to see that GM has drunk the Kool-Aid and is convinced that they have been working on making their cars more fuel-efficient for decades. This is the same company that has been one of the leaders in the fight against increasing CAFE standards. They have also been transforming their business for the years their market share has decreased from 50% to 20%.

The plan bases its argument against bankruptcy on a survey of potential buyers wherein 30% of those looking at GM cars said they would not buy because of a possible bankruptcy. Why wouldn't the other 70% buy might be a good question to ask.

Not only is GM looking for $18 billion from us today. They also intend to make GMAC a bank holding company so that that arm of the company can suckle at the Federal Reserve trough.

And Wagoner and company will make sacrifices if we give them the money. Wagoner will work for $1 for one year. What happens after that? He made $1,600,000 million last year. How much has he made overseeing the decline of what once was America's company?

The Big Three simply assume that they are the auto industry. Well, the non-Big Three sell 54% of the cars we buy and will still be here after GM and friends are gone. Again the question - what is wrong with the Big Three declaring bankruptcy? It will be messy, but who said life is always neat.