"GM reaches deal to sell Saturn to Penske" is the latest GM headline. Although the management at GM could not figure out how to run a profitable Saturn, it has very quickly sold the business. And within a week of selling Hummer to a Chinese company. Sounds like a combination of low pricing, and better skills at hiring investment bankers than running a business.
The biggest lesson we can learn from this is that GM was so Locked-in to its old Success Formula that it was frozen in place, unable to take actions that would allow GM's revenue and profit to grow. After years of doing nothing more than layoffs, GM was able to find buyers for 2 of its 3 semi-autonomous divisions almost immediately. In other words, if GM management had to change to fix GM the team would rather fail — wiping out the shareholders, most of the bondholder value, and eliminating thousands of jobs – and sell assets (at a significant loss) than change. Rather than Disrupt and use White Space to create a new GM, management preferred to declare bankruptcy, beg for billions in aid (like some impoverished third world starving nation such as Bangladesh), and give away assets in an effort to preserve the Success Formula they believe in – but which failed in the market. These leaders have shown they don't care about anyone or anything more than they care about trying to Defend & Extend the GM legacy – Cadillac, Chevrolet, Buick and GMC. This management doesn't want GM to succeed, they want to wind back the clock, and they'll try anything possible to see if they can make it happen.
They can't. The clock won't rewind. And GM's management is demonstrating why they should not be allowed to run any company – much less a major auto company. Nor should you trust them to watch your dog – much less trust them with $60billion in financing. Trying to preserve the past will only prolong dismal results. They will not repay this money.
So what about Saturn? Some think this acquisition, coupled potentially with the new ownership of Hummer, marks another shift in the auto industry. In "Putting GM's Saturn on a different orbit" the Marketwatch commentator indicates that we may be seeing a shift away from an industrial model of manufacturers pushing cars onto dealers. Since Penske owns many dealerships, he thinks these new independent labels may let the dealerships take the lead. Manufacturing will have to respond, through a network of manufacturers something like Nike uses, to the retailers – who will be much more in touch with the market.
From the pixels displaying these articles to God's ear, paraphrasing an old maxim. It would be wonderful if both Saturn and Hummer, and the soon to be independent Saab, were driven by market requirements rather than internally entrenched management trying to Defend & Extend old practices. If they are, the odds are good that they'll push the losses at the remaining GM much higher, much faster than the management team (and probably the government overseers handing them money) expect.
But it does beg the question, if it's so easy to sell these divisions why doesn't the government simply dismantle GM and sell everything? These are supposedly the smallest, least viable parts of GM. And they are selling incredibly fast. Instead of these "one-off" sales, happening at distressed prices to buyers with little competition, why not create an open market to sell everything? Obviously the only way to get rid of the terrible GM leaders is to sell the business out from under them, leaving them with nothing to do. So, instead of handing these incompetent GM leaders another $40B, why doesn't the government turn over assets to the investment bankers and tell them to maximize the value of a sale? Create a bunch of bidders for the various assets (less toxic than nothing-down mortgage securities), ala the intent of bankruptcy law, so that people with new ideas (like Penske) can acquire these assets and use those ideas and innovations to convert the brands, product lines, supply chains and manufacturing plants into something more valuable?
In a sale, a new buyer could purchase plants to redeploy for windmill production, for example. A GMC buyer could attempt to converting the brand into a competitor of Caterpillar Tractor or Komatsu. Chevrolet might have better life as a U.S. motorcycle company. Someone might want to turn Cadillac into an airplane company. As crazy as these ideas sound, don't forget that Honda has entered airplane production and shows every sign of succeeding. We know that running any part of GM like it used to be run will not work. So why not give the innovators a shot at these tangible and intangible assets on the open market? Wouldn't you rather see someone new, like the team at Penske Enterprises, try to do something with the rest of GM – rather than leave it in the hands of the people who say they need another $40billion to keep it alive. Ever heard of the term "cut your losses"?
Those who listen to markets survive – even thrive. That's what creates optimism about the future of Hummer, Saturn and Saab. The concept that new owners will utilize new market-based scenarios with clear understanding of competitors to Disrupt these companies, then attack old Lock-ins in order to implement new behaviors, excites people. We can imagine these new leaders using White Space to convert the design, production and distribution processes into methods that give customers what they want when they want it – achieving profits as a result. After 3 decades of ongoing failure, we can't imagine the people running GM doing it.
We believed in Lee Iacocca primarily because he had been fired at Ford. He knew Chrysler was not well enough connected to customers – and that he was. This was a guy who would cut off the top of a production car with a skill saw in order to drive it around the block as a way to test relaunching convertibles. He wasn't afraid to develop cars people had never seen, like mini-vans, because he saw changes in customer needs. He wasn't afraid to Disrupt the status quo and he wasn't afraid of testing new technologies, new production processes and new markets. That's why he turned around Chrysler. And that's what it will take to turn around Cadillac, Chevrolet, Buick and GMC.
It's too early to really know if new owners will do the right things to make these fire-sale divisions into successful businesses. We have to look for the scenarios, Disruptions and White Space. But we know we won't see such behavior out of GM. If the government folks who are considering giving more money to GM really want to save jobs, grow the economy and keep the profit motive alive they need to pull back fast from funding this GM management team. Instead, use this immediate market input (from the dividion sales) to force the courts to bust up the rest of GM and sell it to someone who just might have a truly better idea.