Monday, March 30, 2009

The Wagoner Train Departs

One of the key failings of Wagoner at GM is starting to come out:

“ His critics say that under his watch, GM focused too much on trucks and sport-utility vehicles even as foreign rivals introduced smaller, more fuel-efficient vehicles. The company eventually pushed development of its plug-in Chevrolet Volt, but that was after gas prices skyrocketed, they say.” *

Essentially, he’s charged with the sin of making politically incorrect cars.

This, of course, is minor compared to the issue of never being able to get his legacy UAW costs for labor, healthcare, and pensions under control. That huge fixed cost base for current retirees provides one of the drivers pushing the truck and SUV strategy. GM needed the high revenue base from these vehicles to make any kind of money at all.

And it helps that these are the kinds of vehicles that Americans wanted – big, comfortable, zippy, and safe. Now that gas is going back down to the low $2 range, these vehicles will become popular again. Assuming, of course, that the economy turns around sometime soon.

Which is somewhat unlikely, given Washington’s general cluelessness.

GM is now Obama’s problem. His guys are now running the place. Granted, the Bush Administration should have allowed these companies to go bankrupt last year, but they didn’t.

Regardless of the administration’s tough talk on bankruptcy, deadlines are going to be extended, and more money is going into GM. The key is to get real concessions from the UAW, and those are only going to occur once it becomes obvious to all that bankruptcy is going to be filed.

* On thing that this means is that Hummer is doomed. Politicians hate cars generally – except their own – and Hummers especially. Again, except their own.