A frustrated General Motors Corp. (GM) executive fills up his company Suburban with pertol. Suddenly, an apparition emerges, and introduces himself as the Genie of the Tank.
He grants the executive his one wish—to run a profitable car company—and promises to conjure it into existence using whatever elements of GM the executive chooses.
The executive draws up a list. To keep it simple, he christens his new company Focused Motors to break with the blunderbuss approach that landed GM in its current hole.
Next, he chooses vehicles. He knows he must turn GM’s dependence on gas guzzlers on its head—trucks and SUVs constitute roughly 60% of US sales—and produce fewer models. He recalls that Toyota makes just eight models in the US. GM has 70-odd across its eight brands.
He reckons as many as 20 models may be a good starting point, and all under its two strongest brands, Cadillac and Chevrolet.
Next, he assembles a workforce. He estimates 36,000 in total. That is the same as Toyota employs in the US, and much less than the 54,000 or so union workers alone at GM. And no special deals on healthcare or pensions.
He also will need only a fraction of GM’s 7,000 dealers. Using Toyota as his yardstick, he plumps for around 1,500. Finally, he throws in a request for no debt, and $12 billion of GM’s cash for supplies, research and emergencies, hands his list to the genie and shazam! He is in charge of a successful manufacturer with a 6% operating profit margin selling as many as two million vehicles a year.
If only it were so easy for GM boss Rick Wagoner.
GM may need $15 billion of fresh cash just to make it to 2010. That is without culling brands, which can be expensive. But to be profitable, GM surely needs to shrink.
As it stands, without a touch of genie magic, filing for bankruptcy-law protection may be the only way it can achieve that goal.