GM: The 'Change' That Is Needed

By: Zacks Investment Research Monday, March 30, 2009 2:00 PM

Article Author

Bio and Articles
Author's Website

Vote for next session

The next market session will close:

An Open Letter to Lawrence Summers and Timothy Geithner about GM

Over the weekend, the administration forced General Motors Corp. (GM) CEO Rick Wagoner to resign (the CEO was "anti-bankruptcy"), and gave GM 60 days to put a viable restructuring program in place. Bondholders must share more of the burden, and a "structured" bankruptcy could occur. The government will provide funds to GM in the interim period, and funds are being set aside to back up warranties.

GM's presented "plan" would not make the company viable even if the economy recovered. Lately, 7,500 more employees have accepted buyouts.

Let me discuss what "CHANGE" is needed. The new CEO should be nothing more than an interim CEO:

"CHANGE" 1 -- The new CEO must hate SUVs and have a passion for AFVs (Alternative Fuel Vehicles). This CEO should be willing to allow a $30,000/vehicle tax on SUV's to price them out of the market and use this to subsidize AFV's by at least $20,000 per vehicle. It's time to make SUVs extinct and turn the Chevy Volt and other AFVs into rolling iPhones.

The time to focus on 35+ MPG cars is now and not when gas goes to $5/gallon.

"CHANGE" 2 -- Allow consumers to deduct auto interest and the government guarantee auto loans for selected high MPG cars and AFVs. If consumers want gas guzzlers, or cars with non-American parts content over 25%, they cannot deduct their interest and must rely on crippled banks for financing. In other words, they are relegated to the used car market.

"CHANGE" 3 -- File bankruptcy now and take the UAW to the Supreme Court. Eliminate all pension and health care benefits just like the Japanese transplants do. This will lower car costs dramatically. Tear up all supplier contracts, particularly with flowback companies such as Delphi.

Settle liabilities and debts for pennies on the dollar. Think of the US Government as a DIP financer, not an owner of GM. Hopefully, this will keep GM from becoming the AIG of Main Street.

"CHANGE" 4 -- Get creative with marketing. Copy Hyundai's "return the car if you are unemployed" program. They are having great success and their sales are up in the US.

Separate the dealerships from the rest of the company and allow them to service their own markets creatively and independently. Guarantee all parts and service for existing and future GM car owners.

"CHANGE" 5 -- Get global. Get a CEO who has lived in a foreign country. The growth is in India and China, whose sales were up 20-25% in the past month. China is now the largest new car market in the world. Start forging alliances with producers in Europe and Asia that can help tap into these foreign markets and ultimately be buyers for the Big Three when markets improve.

"CHANGE" 6 -- Rick Wagoner is only the first management change. There should be at least 50-100 of the top people following as well. Replace them with people with non-automotive backgrounds who can think creatively. Auto innovation is occurring in Silicon Valley, not in Detroit.

"CHANGE" 7 -- Implement tariffs and quotas to protect these companies in the short run and force producers such as Toyota (TM) and Nissan (NSANY) to make all their vehicles in the US. They will hire displaced workers from the Big Three.

"CHANGE" 8 -- Focus on key brands and do them well. This includes the Chevy (Malibu, Cobalt, Trailblazer, Silverado, Impala, Tahoe, HHR), GMC Sierra, Pontiac G6, Saturn Vue. Get rid of all other brands and models. They lose money and are a drag on the company.

Overall, these 8 steps will be needed to make this "CHANGE WE CAN BELIEVE IN."

Bookmark:
Email
Print


3/30/2009 2:22:32 PM by KB If Zacks investment research think that their ideas for turning around GM are good. Then I think they should stick to investment research. Everyone out their thinks they no whats right for GM and that they could do better. Just go buy their cars some of the best in the world and let them do what they need to do to turn around the company. Reply Rating: (0) (0)
3/30/2009 2:31:22 PM by Michael Grand As a GM pension and benefits receiver this is very distasteful and appalling. This type of thinking will further destroy the economy if the flow of funding and benefits is eliminated to thousands of retirees. The bank will not collect on mortgages, and there will be no funds for medical services. This is a win-lose situation. GM will win, but the people will lose. Reply Rating: (0) (0)
3/30/2009 2:40:04 PM by Michael Grand The USA North American Operations Automobile Industry ispositioning to evolve into the next industrial revolution. The Worldneeds a new industry. The North American Automobile Industry (NAO: GM, Ford,Chrysler) is capable of pulling the USA out of this recession / depression.They will join together and retool for the next New World Industry of buildingHomes. A new Eco-technical design housing industry will evolve from the currenteconomic world crisis. A new and additional industry is the next and largestevolutionary step in industrialization. A regenerative and sustainabledevelopment industry could carry us into and through the next millennium. Each city would have a rock-solid concrete and steel space-framewith multiple mini-villages much like our current suburban malls. The industrywill provide the Modular Plug-in units for living and later recycled back intothe industry every 25 years. The main structure would last a minimum of 100years and would be hurricane resistant. It could be built as a floating City onthe water or on land. You would go into the mini-village mall to commune. Eachmini-city will have large atriums, multiple levels, schoolrooms, medicalservices, and playgrounds for the children of the village, business, religiousservice centers, entertainment, and sports facilities, a total livingenvironment. Then, you would go to the outside slopes of the village toprivate-home terraces with trees and bushes for isolation from one another.There would be monorail transportation between each mini-village, and fewercars and trucks to congest our cities. Other individual style homes can be produced as spheres, 1/2sphere, or 3/4 spheres such as the Epcot Sphere in Orlando, Florida. Theexterior panels would provide both visual appeal and function to absorbsunlight on its solar panels. The interior would consist of a space-framestructure. Inner walls would help insulate and provide protection. Optic fiberlight engines would provide lighting. All material will be recycled back intothe industry for future development. Reply Rating: (0) (0)

Post Comment

Name:

Alert for new comments:

Your email:

Your Website:

Title:

Comments:

The above story is the opinion of the author only and it does not reflect iStockAnalyst opinion. Further, the author is not personally advising you regarding the suitability of the story for your investment needs. In no event iStockAnalyst will be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from or arising out of, or in connection with the use of this information. Please consult your investment advisor before making any investment decision.

Related Stories