Car Guys vs. Bean Counters - Bob Lutz [103]
I’ll tell you one company I would have bought but we didn’t, and that’s Chrysler. In 2006, when Daimler wanted to divest itself of Chrysler (after having thoroughly messed up the product program), I urged Wagoner and Henderson to take a look at it in the hopes that we could take it all off Daimler’s hands for next to nothing and merge Chrysler into GM.
Why would this have made sense? Because, operating in the same geography, same union environment, in the same legal and regulatory climate, the consolidation savings would have been huge. We could have, in all cases, collapsed two finance departments, two design groups, two engineering organizations, two human resources departments, two legal, two tax . . . into one of each, perhaps 10 percent larger than GM’s former entities. As in the case of Chrysler’s acquisition of American Motors Corporation, maker of Jeep, in 1987, a careful sifting would have taken place, keeping the best and brightest of both companies and retiring the “bottom halves.” We would have acquired Jeep, Dodge Trucks, the minivan architecture, and a good rear-wheel-drive sedan architecture. Longer term, huge capital and engineering savings were in the offing, through consolidation of truck chassis, drive-lines, and passenger car platforms. Fritz Henderson was enthused: a simple analysis showed a savings potential of $7 billion in the first year. Roughly 1.5 million more units, but with only a bit of added fixed cost, would have diluted GM’s fixed cost per unit to the point where we would have been hugely profitable. Daimler’s Dieter Zetsche liked the idea (they would have gotten an equity stake), but they also talked to other suitors and in the end, Cerberus offered more, and that’s where the ill-fated Chrysler Corporation and Chrysler Credit went.
In the middle of 2008, it became clear that Cerberus was desperate to unload Chrysler. Henderson and I looked at the idea again and were convinced that time was running out for both companies. Something dramatic needed to be done, if only to show Washington that the automotive CEOs were “doing something.” The consolidation savings were still there.The new and by far world’s largest car company would have enjoyed unprecedented leverage with the UAW and suppliers. Fritz and I were excited. Rick Wagoner took it to the board several times. Alas, that’s where it stopped. Several influential board members were almost paranoid about the UAW (“Why would we want to compound that problem?”). Arguments about urgently needed consolidation savings fell on deaf ears. Rick heeded the board’s advice. I would have fought on. At that point, the CEO’s job was in peril anyway. May as well go down swinging!
And then there’s the issue of GM’s brands: While we successfully absorbed Daewoo, a brand we really didn’t need, into Chevrolet, globally we still had too many. Oldsmobile had been terminated prior to my arrival. My problem was that, basically, I loved them all, especially the traditional five in the U.S. market: Chevrolet, Pontiac, Buick, and Cadillac, and in light trucks the increasingly respected and highly profitable GMC. I was a bit less “emotionally committed” to Saturn, feeling as with Saab that it was an experiment GM should never have undertaken, but now that we had the brand and a loyal (bordering on the fanatical) customer base, I was a strong advocate of providing the brand with world-class products. Sadly, while the new product generation of Aura,Vue, Outlook, Sky roadster, and Europe-sourced