Change Is A Constant

Last Friday at 4:30 pm,cst. I sat in front of my computer and I felt very sad. Change is a constant I keep telling myself, but as someone who likes traditional things, this event was a bit hard to swallow. May 29th was the last full trading day for General Motors stock. It had fallen to $.75 a share, with a market value of $500 million dollars. Clearly, there was no more General Motors as we know it.

There will be books, documentaries, columns, etc.. for months and years to come about what caused this once barometer of our economy to collapse. It all comes down to management, but what decisions will be a lightning rod for critics is well beyond me. When Alan Mullaly took over the helm at Ford, he told senior management the company had been having a going out of business sale for the last 30 years. Apparently no one told GM that in time.

Rick Wagoner did not bring down General Motors, but he did not do much to save it. GM's terminal illness was too many brands and in China copied GM American's broken model. In China you can buy a Buick, Chevrolet, Vauxhall, Opel, Cadillac and Daihatsu and they are all made by GM. In contrast Toyota will let the Chinese buy a Lexus or a Toyota. Sound familiar?

Will GM be successful post bankruptcy? Any one's guess, but I have my doubts. First, management is not being replaced and that is unusual. In bankruptcy, the first thing to go is present upper management, the people who put you there. Second, the government will be the primary owner of the company. Historically we have not done this in the United States, but Britain tried this back in the 1970's with the disaster that was called British Leyland. They no longer make cars and Britain no longer has any domestically owned manufacturers. We consolidated the railroad under a government organization called Amtrak, and we still are subsidizing that decision.

There are those who are cheering the downfall of GM. And I can't blame them. Former customers who bought poorly designed vehicles and paid for repairs that they should never have had to. GM knew they would still sell cars, so why make customers happy. Despite the enormous engineering talent at GM, they have some legendary engineering failures on their hands. You knew the Pontiac Aztek was a looser when you looked at in the showroom. When your transmission went out or your diesel engine blew up after a few years that was a complete surprise.

Should you buy a GM product? I keep getting that question. In comparison to Chrysler, GM builds a better quality product. So the repair issue is less of a consideration. But since Chrysler went into bankruptcy, their products have been harder to finance as compared to Toyota, Ford, etc.. Several large lenders are now requiring larger down payments and higher interest rates. If you are a cash buyer or can secure good financing, you may be able to get a great deal if you have your heart set on a new vehicle.

But this is America. We live on a free market system. GM went into bankruptcy for a reason. Whey would you buy a product from a company that was so poorly managed? What cost cutting did they do the the product over the last year to save money? There are SO many vehicle options out there, why would you buy from a company that went bankrupt and possibly will not be there in the long term? What overwhelmingly compelling reason do you have to buy a GM product?

If you have to buy an American branded product, Ford makes a wonderful line of vehicles with the highest quality ranking for an American name plate. Some are higher then the imports. Ford outranks Nissan in quality as a company, but you don't hear that much. So go buy a Ford if you need a American branded product.

I do predict we will be without Buick (domestically) and GMC Truck eventually. Ford will outsell GM in 2009 and possibly 2010. If GM does fail in the next few year or so, it will be a HUGE black eye on the Obama administration and damage his presidency. You need revenue to exit bankruptcy, and if consumers shun GM products liquidation will be the next step as the revenue dries up.

You may gamble on a GM product if you like. President Obama has gambled on the entire company. Let's hope we're all winners.