ON THE TABLE #454

July 16, 2008

GM. Lost in the mad media frenzy over GM's "contraction" news yesterday was the fact that the company is still trying to justify the existence of all of its divisions (except Hummer) in a market reality that could care less. What has changed? More great new products in the pipeline is fine - and wow, 2010 better be a hell of a year for GM, the way they're talking - but don't be surprised when there's another press conference six months from now with GM finally announcing that they can't keep all of its divisional balls in the air and they're finally being forced to address the issue once and for all. Not Good.

GM, Rick Wagoner. Publisher's Note: From the "Managing the Downward Spiral" File comes word that CEO Rick Wagoner seems to finally understand that GM's position is precarious and even more ominous than he first realized six weeks ago when he announced a round of measures to save GM cash at the company's annual meeting. In a media conference yesterday Wagoner announced more truck capacity reductions, a 20 percent reduction in GM's salaried work force, marketing, advertising and promotional budget cuts and a cessation of GM's dividend - measures totaling around $15 billion - all due to the fact that $5.00 per gallon gasoline has decimated the company's position in the U.S. market. With these cuts, GM now has enough cash to survive through the end of 2009, according to Wagoner, when the market should improve. While touting the upside of GM's future products (which are indeed outstanding), Wagoner's decisive actions were decisively late when compared to the moves that the Ford Motor Company has been making for going on nearly two years now, when the arrival of CEO Alan Mulally signaled a new beginning for the company. Will GM survive? Yes. Will GM survive in its current structural make-up? No. Will Rick Wagoner survive? No. Look for Wagoner to be replaced by Fritz Henderson by the first quarter of 2009. - PMD

Rick Wagoner, the GM Board. Publisher's Note: Asked by one scribe to describe the moves GM was making in reaction to the market in yesterday's news conference, The Rick insisted that GM was taking very proactive measures in reaction to market conditions, and not only that, these measures weren't taken to survive, but to win. Hmmm, that's the first time we've ever heard of the term proactive reactive measures. The fact of the matter is that GM has been up against the ropes taking body blows for months now. Yesterday's news conference only underscored the reality of GM management's futility when it came to anticipating the direction of the market. Being caught flat-footed by $5.00 per gallon pump prices is one thing, that could be forgiven. But GM knew there was trouble brewing with a capital "T" months before they announced their first round of 2008 cuts and adjustments at their annual meeting. It's that old lack of vision thing again with Rick Wagoner. When you're constantly managing the downward spiral, it's tough to pick your head up and make strategic moves that are out in front of the curve. And when you have a board of directors who should be summarily rounded up and dumped in the Detroit River for their relentless ineptitude, it's no wonder GM is on the precipice of disaster. - PMD

Bob Lutz. Publisher's Note: GM's product guru stressed throughout GM's news conference yesterday that the sanctity of GM's future product programs would remain untouched going forward, and that there was never any question of that even being on the table in this latest round of painful contractions. GM upper management finally gets it and understands that The Product has to remain the focus of the company, Lutz insisted, which is a very good thing and frankly unprecedented in the company's history. But then Bob went off on a tangent explaining how GM will not be putting any more products out that step on each other in the market, or something to that effect. Oh, are you talking about the current GM crossover dilemma, where they have four - count 'em - four large crossovers (Buick Enclave, GMC Acadia, Saturn Outlook and Chevrolet Traverse) when they need only two, at best? Should we point out the other rampant stupidity going on throughout a GM product lineup that's still configured for a 35 percent+ share of the U.S. market when the new reality for GM is 19 percent? I would be glad to do that yet again, since I've done it about 400 times in the nine years of doing Autoextremist.com. If you do one thing before you hang it up, Bob, cure GM's penchant for building multiples of the same vehicle just to perpetuate a dealer body that was obsolete 30 years ago. - PMD

Chrysler. People tell us often that we're far too hard on Chrysler, but on Monday, the Detroit Free Press reported that Chrysler could have electric vehicles developed in three to five years. Repeat the statement to yourself a couple of times. Is it any wonder that Chrysler's prospects are beyond grim at this point?

Roy Bostock. The mediocre ad veteran who made a lucrative career out of being in the right place at the right time while bringing nothing of substance to the table and getting paid exorbitantly for it - is remarkably enough now the chairman of Yahoo - a crowning achievement which places him securely in the Empty Suit Hall of Fame. Bostock told AdAge that, "InBev was a classic, perfectly managed takeover. They clearly had a commitment to get the deal done. That commitment was not there on the part of Microsoft." We'll see about that, Roy, and although you get our AE Quote of the Week, something tells us it would be a good idea if you kept your mouth shut until further notice.

Chattanooga, Tennessee. As expected, VW's new plant will be located in a southern city - specifically Chattanooga, TN - where the company will produce a mid-sized sedan, "tailor-made for the American consumer" when production begins in late 2010, according to Volkswagen Group of America CEO Stefan Jacoby. The new car will be positioned above the Passat and be available in 2011.

Which sports car are you? Go here http://www.tomorrowland.us/sportscar/ and take the quiz to find out which kind of sports car type you are.

Meadow Brook Concours d'Elegance. Celebrating its 30th anniversary, the 2008 Meadow Brook Concours d'Elegance weekend promises to be bigger and more extravagant than ever, thanks to the efforts of Chairman Larry Smith and the superb group of committed enthusiasts he has assembled to make sure the event lives up to its world class status. In addition to the Historic Races at Waterford Hills, annual art auction and motoring tour, the Destination d'Elegance debuts on Saturday, August 2, and features gourmet food, shops, cooking demonstrations and wine tastings. The Concours itself takes place Sunday, August 3, and will showcase significant Ferraris, 8-litre Bentleys, 16-cylinder cars, GM's 100th Anniversary celebration featuring the magnificent Bill Mitchell era concept cars, the Model T's 100th Anniversary, flying cars, vintage motorcycles with sidecars, the Class of 1933 and the North American debut of the B.A.T. 11. Visit www.mbconcours.org for more info.