Friday, February 20, 2009

GM: don't slit your own throat!

GM is shedding its peripheral brands in hopes of focusing its resources on saving its core brands: Chevy, Buick, Cadillac and GMC.

It has cut Saab loose, and the Swedish car maker filed for bankruptcy this morning.

However, far more troubling is GM’s decision to spin off Saturn — in response to pressure from its Saturn dealers around the country. Reuters reports this afternoon:

GM said on Thursday it was working to spin off Saturn as a distribution company to source cars from other automakers and sell them through the brand's 420 U.S. showrooms.
This passage in Thursday's WSJ set off my alarm bells:
Some Saturn dealers now hope that instead of closing the brand, GM will spin it off as a separate company. A team of Saturn dealers is spending 60 days working with GM to evaluate the possibility. These dealers would sell vehicles under the Saturn brand made by other manufacturers, possibly from overseas.

"This is going to be somebody's low-cost entry to the world's largest car market," said David Fischer Sr., chairman and chief executive officer of Suburban Collection, which operates eight Saturn dealerships in Florida and Michigan.
The articles don’t say, but my guess is that the interested buyers would be low-cost producers from China or India.

If I could offer one word of advice to GM:


This is exactly like RCA in the 1950s. To gain a small amount of incremental income, it licensed its color TV patents to some small, obscure electronics companies in the Far East. The direct result (as recounted by the late Al Chandler) was that the Sony, Panasonic, Toshiba, JVC and other color TVs effectively put RCA out of business.

GM doesn’t have technology, but it does have distribution. It would be foolhardy to sell some of that distribution to enable additional entry (in the already crowded US market) by a low-cost maker of fuel efficient vehicles.

If GM goes ahead and sells the dealer network, that’s confirmation that it’s less interested in long-term business viability and more interested in scoring short-term political points with its new owners in Washington, DC.

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