For car guys/gals: GM Broken Up Instead of Bailed Out

Bob Lutz, former CEO of General Motors, went on record recently saying that when they asked the government for money, they were told they had too many brands. This is why Pontiac got the axe; Buick only survived because of their success in China (I forget why GMC was spared).

But let's suppose instead of telling them they could have the bailout money if they lost some weight, they were told the company was too big and had to be broken up like Ma Bell was? Which brands would exist under each company? How likely would each be to survive?

My take:

Chevrolet Motors: Consists of Chevrolet, Pontiac, and Cadillac. Chevrolet is the main brand with Pontiac being a youth oriented budget performance brand and Cadillac being the luxury brand it's always been (think Toyota/Scion/Lexus for an OTL equivalent). GMC dissolved, but the Denali sub-brand continues as a high end trim for Chevrolet trucks (i.e. Sierra Denali becomes Silverado Denali, Yukon Denali becomes Tahoe Denali, etc).

Chances of success: High - these have always been GM's best selling brands. The only possible hitch is the loss of GMC since the two generally attract a different customer base - and neither one wants anything to do with the other (even given the fact that the only major difference between the two is sheet metal and interior appointments).

Opel Group: GM's European subsidiary becomes its own company. Buick continues under their wing and becomes a badge job company for North America and China a la Vauxhall is in the UK ITTL.

Chances of success: Medium/high - Opel does fairly well in continental Europe, as does Vauxhall. Buick is so closely aligned with Opel nowdays that this part may as well have actually happened. The question would be if Opel's management could keep the company alive without Detroit's guidance/money.

Holden: GM's Australian subsidiary goes back to being an independent company like it was in 1932.

Chances of success: Medium/low - from what I understand, most of Holden's products have been badge jobs of Chevrolet, Opel, and Isuzu products with the exception of a few standouts like the Commodore and Torana. Also, ITTL Holden's small market share in the extremely fractured Australian automotive market (they have over 70 brands on sale there) has made it unsustainable to manufacture there, so after next year all of their products will be badge jobs. Now, they could leverage some extra volume in North America and the UK by continuing to sell the Commodore in those places under its own name instead of the Pontiac G8 (in NA) and Vauxhall VXR8 Bathurst, (in the UK). They could also bring back the GTO/Monaro, as well as revive the stillborn Holden Ute/Pontiac G8 ST project by just building the chicken tax into the price. Maybe they could even make a new Torana based off the 2004 concept (if that'd been built - and made it to these shores somehow - that would've been sweet)...

Anyone else want to weigh in on this?
 
GM will fight the Buick sell off tooth and nail because it is their best brand in their second-largest market, that being China. They won't want to give that up for love or money because it is in essence a safety to fall back on, something wise to have considering the fact that the European and North American markets are incredibly competitive. It would also be highly unlikely GMC would be broken up - more likely GMC becomes the truck division and Chevrolet's truck offerings aside from its car based crossovers go there instead.

The European subsidiaries would depend on whether they could find somebody with sufficient working capital for this. A private or venture capital firm isn't an option because with the state of those operations in 2008, the almost-certain result would be a fairly rapid closure of operations and a sell-off of the assets that remain, namely because Opel and Vauxhall don't exactly have excellent market positions and all of the lower-priced European carmakers save Volkswagen and to a lesser extent Renault are seriously struggling. General Motors considered selling their European divisions to Magna in 2011, but that deal fell through both due to GM's getting a sizable chunk of money from Berlin to stay operating and the fact that Russian banks were underwriting the deal and the banks had capital issues. Best bet on this would be for Magna to appeal to Canada's banks and government during this process and have them underwrite the deal - easily possible if fairly expensive, but the company would end up almost certainly having to carve a niche into North America as well as Europe and the third world.

Holden surviving on its own is a total non-starter - market is too small and the labor cost there is too high to allow the company to make much in the way of profit, and that is before the issues you mention. Holden being sold off as part of the Opel/Vauxhall deal probably makes more sense, and Holden's products would have been a useful base for the cars sold in North America that would assuredly come.
 
All GM

I have thought this since before Oldsmobile there would be 2 divisions. GM Trucks and GM Cars. That way they could keep some historic names. Like Olds Cutlass by GM. the Buick Regal by GM. Chevy Chevelle by GM. Ect. It would cut a lot of duplication.
 
I could see Penske successfully taking over Saturn in this scenario.
http://abcnews.go.com/Business/story?id=7766377

It would have taken far, far longer for Saturn to make any money if that deal had happened, if it would have survived at all, namely owing to the fact that Saturn would not have been able to design new cars that fast (nearly all of them were badge-engineered models built on GM platforms) and get a manufacturing system set up. Penske I don't think went further on that deal because I think he looked at that, saw the gargantuan logistical challenges involved, realized that his automobile dealerships would be among those who kept their franchises and bailed out.

I am not too sure. I am still bummed out that they don't exist anymore in OTL, but there had to be someone out there that was willing to take over that brand.

Considering the economic conditions of the time, I'm not surprised at all. One of GM's major problems was model duplication, which is the reason Ford buried Mercury and Chrysler buried Plymouth - when you control 80+% of the American car market as the Big Three did as late as the mid-1980s, you can have brand and model duplication. But between the SUV/crossover boom and the massive growth of the Japanese (and the entrance of the Koreans) in the 1980s and 1990s, that equation simply didn't work, and GM's enormous bureaucracy simply didn't get the memo very quickly because the bureaucrats and many of the management personnel wanted to keep their jobs. It took the reorganization to fix that problem both by forcing model consolidation, reducing GM's massive liabilities and cutting out many of the middle manager ranks.

If you are going to break up GM at the worst point of their crisis, you need to have somebody in line who would be willing and able to pick up the lost pieces, otherwise you are looking at probably a million lost (good-paying) jobs and almost-immediate political problems that result. That's why GM got a lot of government help to get through the crisis in the first place.

Best overall scenario that keeps the largest portion of the company intact would be the Magna scenario I talked about, kicked into overdrive. Get the Canadian banks (who did MUCH better than the global norm in the 2008 financial crisis) and Ottawa (good political case for this might be the Conservative prime minister wanting to score points in majority-Liberal Ontario, where the majority of the car industry is located) in on it, along with the investors that tried to save Saab. (Magna's Magna Steyr division is a major maker of parts for specialty makers, so this is indeed quite possible.) GM parts out Pontiac, Saturn and Hummer, along with the Opel, Vauxhall, Saab and Holden divisions. GM agrees to maintain production of the existing models under license to Magna for up to 5-7 years, while Magna takes over a number of North American facilities (particularly in Canada, for political support reasons) and a sizable chunk of the dealer franchises that got closed down as a result of GM's reorganization. I would be betting on Saturn being the everyday car brand (up to and including minivans and crossovers), while Hummer's focus stays on trucks and SUVs and Pontiac becomes a fun car company a la BMW and its Mini division, and Saab stays active in North America. Small and medium car development is assigned to Opel and Vauxhall, big cars to Holden, the crossovers to Canadian divisions, trucks to Hummer, along with hiring outside firms to develop engines and drivetrains (somebody like Cosworth for engines and ZF Freidrichshafen for drivetrains would be ideal) and allowing Magna to sort out the logistics and production details.

First priorities have to be getting good crossovers in North America and good smaller cars in Europe, particularly a really-good Supermini to score points on the European competition, along with a modern Commodore for Australia and a good minivan for the Canadian market. The engine builders would be focusing their efforts on a series of smaller turbocharged engines. GM shed 2400 dealerships in the United States, and if Magna can get a quarter of these in the better markets they will be able to have a ready-made network of highly-motivated dealers. Assuming this works, the Commodore's big chassis gets used in North America and Asia and the company's markets begin spreading worldwide. Saab would be the luxury brand of these, and the co-ownership with Koenigsegg would probably see them help Magna with these tasks. Since the Canadians were the drivers of this, it means Magna gets based out of its HQ in Aurora, Ontario (in a dream scenario, a prospering Magna might commission a new HQ in Toronto, an hour down the road :) ) and the company would almost certainly be seen as 'Canada's Car Company', which is a very helpful thing for the company as it gets off the floor.
 
Holden surviving on its own is a total non-starter - market is too small and the labor cost there is too high to allow the company to make much in the way of profit, and that is before the issues you mention. Holden being sold off as part of the Opel/Vauxhall deal probably makes more sense, and Holden's products would have been a useful base for the cars sold in North America that would assuredly come.

Holden's major problem is arguably the cars they are trying to sell rather than local costs. Blaming the wage rates etc, well don't they say that about the USA, insisting they can't make small cars economically there? Somehow Toyota etc do, 70 percent of all 'Japanese' cars sold in the USA are made in the USA by American workers, they make a profit on small cars but GM etc insist they can't. So it looks like a GM management problem, The Wall Street Journal did an article blaming management culture for it about the time of the bale out this timeline is concerned with. Half of all the 'American cars' sold in the USA are made in other countries by foreign nationals and imported. Breaking up the industry would not make a difference if the management culture stays the same. Here endeth the Sermon.

As to the actual cars Holden was/is making issue, the Commodore was a great car thirty something years ago, and sold fairly well thirty years ago. The market has moved and while the versions now are updated, they are no longer the type of car many people buy.

They used to be the normal family car, now only taxi companies and other 'fleet buyers' use them.
 
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Holden's major problem is arguably the cars they are trying to sell rather than local costs. Blaming the wage rates etc, well don't they say that about the USA, insisting they can't make small cars economically there? Somehow Toyota etc do, 70 percent of all 'Japanese' cars sold in the USA are made in the USA by American workers, they make a profit on small cars but GM etc insist they can't. So it looks like a GM management problem, The Wall Street Journal did an article blaming management culture for it about the time of the bale out this timeline is concerned with. Half of all the 'American cars' sold in the USA are made in other countries by foreign nationals and imported. Breaking up the industry would not make a difference if the management culture stays the same. Here endeth the Sermon.

The biggest single problem for an independent Australian car company is the small market - Australia is 24 million people, which for a car market is peanuts, and the conditions are more than a little specific. The wage scale difference primarily is based on the fact that Australian cars are now mostly manufactured in Thailand or Malaysia, both of which have considerably lower labor costs. Building a car company on a market of 24 million is the greater problem, though, as the cost of developing a car is quite large now, and making that up just on the Australian market is effectively impossible.

Holden was born with GM help because the Australian government didn't think they could do it on their own, and that was immediately after WWII.

As to the actual cars Holden was/is making issue, the Commodore was a great car thirty something years ago, and sold fairly well thirty years ago. The market has moved and while the versions now are updated, they are no longer the type of car many people buy.

They used to be the normal family car, now only taxi companies and other 'fleet buyers' use them.

I agree fully, and that problem has busted both Ford and Holden something awful, though Ford has fewer excuses in that they make world-class smaller cars and didn't need to focus on the Falcon. What truly amazes me is that both Ford and General Motors didn't get to selling the Australian big cars in North America twenty before now - in both cases, the platforms they were working with were long past their sell-by date, and the Australian cars would have been ridiculously-easy fixes to that problem not to mention something which would keep the Aussie industry running well.
 
You're big problem is all the common platforms and drive trains throughout the group, buying up one or two brands would require licensing of GM tech, GM being paid to keep making current designs or the brand effectively bring shuttered till vehicles developed by the new owner would come on stream.

GM killing off brands seems much easier than splitting it up.
 

Ian_W

Banned
Breaking up GM would have only worked if you'd fixed the basic problem of GM, which is that companies paying pensions and medical costs for their retired workforce out of current profits just doesnt work.

GM being a mediocre car maker making mediocre cars doesnt help, either - they are a middle of the road producer, that on a world scale is neither cheap nor good.

That said, I think you could have raised the funds in Australia to buy Holden off GM, including the cross-licencing agreements (and maybe the Camaro brand for selling Australian-built muscle cars through the GM dealer network).

The 'baby GMs' might work, if the government agreed to take over GM's promises to pay retirement and healthcare to their old workforce, and if the holders of GMs shares were wiped out and the shares in the baby GMs given to GM bondholders in lieu of debt.
 
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