The news out of Detroit is that the response to the myriad threats to the very existence of big car companies...is to morph into bigger companies.
GM has admitted that it has talked to both Ford and Chrysler about the possibilities of alliances, mergers, and other corporate machinations in the past month.
Now, forget for a moment the fact that something like almost every corporate merger fails to accomplish anything good. Many end up in early divorces, or pacts of mutual, cold tolerance.
People worry about their jobs, processes get interrupted, technology platforms conflict and, generally, consumers and customers suffer. Zillions gets spent on outward-bound brand marketing, usually declaring stuff that has no connection to reality whatsoever.
Then companies reassemble into new combinations, and more money is spent making more promises. Cingular is a giant brand, and then it isn't. Bank One is a branded financial powerhouse, and then it disappears. It was declared that the Daimler-Chrysler merger would usher in a new era of automotive greatness, only then not so much.
Hence mergers are the full-employment act for investment bankers, branding experts, and employee outsourcing firms. And repo companies.
What would lead GM to think that such behavior should even be considered?
The financial crisis, of course. Understood from a ledger, it's likely clear that car loans are tight, production costs are up, distribution and servicing is complicated, and...oh yes...consumers don't seem to want to buy much of the dreck that GM or its Detroit-originating counterparts want to sell.
A merger would enable lots of cost cuts, especially in people. The resulting new company wouldn't be as large as its constituent parts, but it would be a really large concern. There's a lot of money to be saved in that, right?
Sure. But it has nothing to do with making cars.
So the brand names would still stand for nothing, and the businesses would fail...only after enriching the investment bankers, branding experts, and employee outsourcing firms.
Fix the balance sheet, and destroy the whole shebang. It makes you wonder who is really running these companies. I'm reminded of the dinosaurs, and our best evolutionary theory...
Over the millennia, dinosaurs were the unchallenged rulers of the earth. So they grew into highly specialized versions to exploit every niche on the planet; some had excruciatingly long necks, or short arms. The biggest ones were full-time eating machines, well-suited to an environment that served up full-time meals.
When an asteroid and/or volcanic activity literally clouded the picture about 65 million years ago, all of these dinosaur types lost out on their vaunted position on the food chain to smaller, more nimble, creatively intelligent, and environmentally adaptable creatures.
This is why we talk today instead of hiss at one another.
So the question facing the Big Three companies is simple: do you want to be dinosaurs, or mammals?
Downsizing would be no less painful than a merger, certainly, and there are no guarantees of survival, let alone success. The efficiencies of global, outsourced manufacturing don't necessarily translate into smaller production runs. The distribution channels, like brand marketing, are built upon the premise of offering a "full line" of vehicles, and the assumption that consumers prefer this go-to-market strategy.
But what if getting smaller, and smarter/more focused, is the only way to go? A company that made, say, environmentally-leading cars, or family-focused vehicles, might find a way to thrive in the new business environment. That would be a dream branding job.
A bigger GM would be no more capable of addressing the environmental realities of the marketplace than the company they've got now.
At best, it'll just buy them a bit of time...to enrich all those folks I mentioned earlier. I failed to mention that the executive leadership will have more time to collect money, too.
Bigger dinosaurs might eat well, for a time. But they're unlikely to realize that they're enjoying their last meal.
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