By Peter M. DeLorenzo
Detroit. So, GM has finally given up on trying to make a profitable go of Opel and is selling it to the PSA Group (the Paris-based maker of Peugeot and Citroen vehicles) for $2.3 billion or thereabouts. This means that GM is handing over Opel (and its Vauxhall brand in the UK), as well as half of its financing arm over there. This will in turn lead to a non-cash charge of $4-$4.5 billion to GM’s balance sheet.
What does it all mean?
Since GM and PSA aren’t strangers (the two companies had already been cooperating on a limited basis) the deal came about thoughtfully and without rancor, which is unusual in today’s climate. But the reality is that GM is now opting out of trying to make Opel something that it was never going to be. Make no mistake: Opel was once a jewel in GM’s crown, responsible for a lot of the product development goodness that we saw in GM vehicles over here and around the world. But this is a different GM now – thank goodness – and throwing good money after bad, no matter how stellar that product goodness was coming out of Opel, is a luxury that GM can no longer afford.
Kudos have to go to Mary Barra and Dan I Am Ammann for acknowledging that trying to extract profitability out of Opel was a worthless pursuit. Even so, the company was still insisting that Opel would have been profitable if it weren’t for Brexit, so it appears that giving up on a company that had been part of GM since 1929 wasn’t easy. But it was time. In fact the move had been long overdue. And it wasn’t going to get any easier for GM because the investment required going forward, especially in the hostile, anti-car regulatory nightmare that Europe has become, would grow exponentially. In the end, any thoughts of sticking with Opel became a fleeting pipe dream.
That this isn’t the “same as it ever was” old-think GM is a hugely positive development. It signifies a fundamental realization that any thought of what once was within GM is thankfully obsolete. As it should be.
In case anyone has forgotten, GM, once this country’s shining beacon of industrial might, went bankrupt eight years ago, and in many ways it has never recovered. This wasn’t just another corporate bankruptcy either. Instead, it was a painfully humiliating and very public admission of defeat. After years of its own serial incompetence, a financial doomsday scenario that played out at exactly the wrong time was finally the death knell for GM. And it wasn’t pretty. In fact, for a lot of people associated with this industry and in this town, it was downright u-g-l-y.
It didn’t help that GM was set upon by carpetbagging interlopers in the aftermath of the bankruptcy either. First it was Ed Whitacre, the former CEO of AT&T, who brought no qualifying experience to the job and basically acted like an absentee landlord when he was present, which wasn’t often. Then, of course, there was Dan “Captain Queeg” Akerson, the failed Private Equity hack and renowned unctuous prick whose idea of “management” revolved around fear, intimidation and calculated misrepresentation. This accidental tourist of a CEO, who had left a trail of mediocrity in his wake at every prior stop before being given the reins of power down at the RenCen, almost single-handedly turned the company toward yet another bankruptcy because of his knee-jerk, instantaneous “knowledge” of the business - which amounted to exactly zero - and his reactionary pronouncements and decision making based on it. It was nothing short of a corporate Reign of Terror, and Akerson’s thankfully brief tenure remains the darkest era in GM corporate history.
And now, here we are. Mary Barra has proved to be an unwilling participant in the old ways of the company just because of the classic “we’ve always done it this way” mantra that has been rampant at the company for decades. And this is a very good thing. She has done an excellent job, for the most part. With emphasis on for the most part. (That she and Ammann are singularly unqualified to appreciate the art of marketing or even understand the fundamental requirements necessary to do it well remains a gaping hole in their management credibility.)
As for the reactions to the GM-PSA news, it has been overwhelmingly positive. Except, that is, for a doddering hack “journalist” who has been phoning it in for years (and who shall remain nameless) lamenting the fact that this Opel-Peugeot deal was kind of sad because of what had become of the once-powerful General Motors. And that is just ludicrous. This just in: General Motors hasn’t been “General Motors” in years. In fact, that company’s heyday was from 1957 to 1979. Yes, there were certainly highlights since then, mostly revolving around significant product entries – and particularly in the last decade – but lamenting the loss of the “old” GM is flat-out nonsense.
We will never see that once-dominant company ever again. The automobile business has become a global battlefield with ruthless competitors, meddling governments and profound environmental challenges.
GM isn’t the same as it ever was. It can’t be. And that is a very good thing.
It is a different time and a different era.
And that’s the High-Octane Truth for this week.