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Forbes’ article, General Motors Crash Warning, pointed out that the auditors, Deloitte & Touche, had “substantial doubt” that the automaker can stay in business.

First a disclosure: I own a GM SUV but do not own any GM shares. I know that my GM dealer/servicer, Burt GMC, does an excellent job; and I used to work for GMAC.

The real problem with the GM management is that GM has been losing market share for the last 50 years and has not done anything to stop this loss.

This is a very poor reflection of the management culture at GM. I have seen this type of behavior at other manufacturing companies, that many times when bright, highly skilled managers come together as a team at the senior level they do strange irrational things.

My first assessment is that GM will continue asking for more bailout funds and the government will have to Give More.

I would recommend that GM be split into several companies and that would give breathing room for new management cultures to take root.

Yes, I can hear the ‘experts’ saying that GM requires scale economies to compete. This is false.

First, Toyota started out as a tiny company that has now surpassed GM. The other Japanese automakers, Honda, Nissan & Subaru all came out of tiny or previously non-existent companies while GM was ‘king’.

Second, inspite of GM’s existing scale economies it has continued to lose market share for the last fifty years.

My second assessment is that GM’s management culture put a premium on profits at the expense of cashflow. An onerous profit focus leads to gaming the system, profits today at the expense of future losses. 

If GM was cashflow-focused first, and only then profit-focused, this would have lead to management objectives that included market share growth, and real business strategies.

Disclosure: I’m a capitalist too, and my musings & opinions on this blog are for informational/educational purposes and part of my efforts to learn from the mistakes of other people. Hope you do, too. These musings are not to be taken as financial advise, and are based on data that is assumed to be correct. Therefore, my opinions are subject to change without notice. This blog is not intended to either negate or advocate any persons, entity, product, services or political position.

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