The automobile industry is in crisis. There's no more time or money for frittering away resources on sideshows.
We're in a recession, and the other guys are driving into Detroit's Red Zone. Here's some advice:
Forget globalism. This isn't one world. We've got the proof in lower New York. The nationalists, not the globalists, are successful. Honda Motor Co. Ltd. and Toyota Motor Corp. build Japanese cars and sell them around the world. They don't go around buying foreign companies. Porsche AG sells German Porsches around the world. That's not global. BMW AG nearly died with acquisitions, but now it's pure BMW again and roaring.
The fight for survival for Detroit is through California, not China or Korea. Mexico, Canada, Europe, Brazil. These are Detroit's markets. Yet General Motors Corp. kills Oldsmobile and murders Camaro and buys bankrupt Daewoo Motor Co. Ltd. GM will lose more money in one year of Daewoo than 30 years of Camaro. Ford Motor Co. dies in Brazil and has no new volume cars for its U.S. factories but is spending $6.5 billion for little Volvo Car. I estimate GM and Ford have put $30 billion (and I may be low) into global adventures; go find the return.
You know, if your spouse hasn't cooked a good meal in 30 years, wise up; you're not likely to ever get one.
GM has owned part of Japanese Isuzu Motors Ltd. for better than three decades. Billions down the drain and more to come. Here's what to do. Walk up the streets over there and give every pretty Japanese woman a 1,000-Isuzu-share certificate, free, until the stock is all gone.
Cut the losses. GM likes Isuzu diesel engines? Fine. Buy them. I hate to tell this to all those Harvard MBAs at GM, but you don't have to own a cow — or even part of it — to drink milk.
Swedish Saab Automobile was building 120,000 cars a year before GM bought it, and a decade later after billions of dollars in investment and losses, it's still 120,000 a year. GM always talks of doubling Saab sales. Sure, like they'll double Chevrolet car sales. Stop the bleeding. Walk up those streets in Sweden and give every pretty Swede a 1,000-share Saab stock certificate until they are all gone.
Suzuki Motor Corp. GM has been losing money with Suzuki since the day it became involved with a joint venture factory in Canada. Give it away to pretty Canadians.
Fiat Auto SpA. GM and Fiat say their association is saving zillions in costs. Sure. But the more they “save” the bigger the losses and the smaller the profits at GM in Europe and Fiat. Right! A 1,000-share Fiat certificate to every pretty girl in Italy. I know Fiat got 5% of GM's stock. Let them keep it. GM will still be ahead of the game giving away its Fiat share.
GM China? Stop investing. Go back in 20 years if the market develops. But the billions being spent in China and Korea are going for sideshows while the home market is being lost. Protect the home turf first.
Ford has been in Mazda Motor Corp. more than two decades, losing money all the way. Mazda is always having a new beginning. Enough already. Pass out those 1,000-share certificates.
Ford owns all of Jaguar and has a chance of success. Keep it and British Land Rover, too.
Volvo never will fit, and Ford will never earn back the $6.5 billion it is spending to buy it (plus more on product development). Get rid of it.
You're wondering: Won't these automakers run out of pretty girls before they run out of stock certificates? It's a risk, but it's worth the effort.
I want to save DaimlerChrysler AG of Germany, too, because Mercedes makes a good car. Alas, the DC board just extended Juergen Schrempp's contract as chief executive until 2005. That's all right. Contracts get broken. Daimler is in danger. Huge losses at Chrysler and Mitsubishi Motors Co. could sink Mercedes.
Get rid of them or the two will drag Mercedes down, just as buying British Rover nearly dragged down BMW. In the end, BMW paid Brits $1 billion to take Rover.
And Chrysler has a much better chance of survival if it can be freed from German rule.
Desperate times are coming, and desperate measures are called for.
Lighten the load.
Jerry Flint is a columnist for, and former senior editor of, Forbes magazine.
What Fools These Mortals Be
Detroit announces base prices that have little relation to real transaction prices. They think they fool people. I routinely add 25% to most GM price announcements to get an idea of what a vehicle costs. The worst is the new Jeep Liberty. Chrysler talks about the $17,035 base price, and the press uses that figure. That's for a 4-cyl. model with manual transmission.
There is no such model. There never has been. (Although DaimlerChrysler says they'll have one out by the end of the year). So people hear $17,000 and go to the showroom and find $25,000 stickers. Is that a way to do business?
What Fools These Mortals Be!
