GMAC Again?

JANUARY 12, 2011 BY GEORGE LOVATO JR
A Look forward – But First a Look Back
So here we all sit watching General Motors make another bold move. But first before we talk about the latest and greatest let’s look back. Years ago GM sold off the GMAC unit to a third party. The proverbial cash cow is tossed to the wind. Many in the industry said that was foolish due primarily to the fact that it was such an integral part of the overall business model. Nonetheless it was sold. General Motors continued to operate ineffectively after that transaction. They continued to receive criticism from the observation gallery about the transaction. The dealer body thought it was a stupid move as well.
Fast forward. GM purchase a second rate subprime finance company recently. All of a sudden someone at the helm begins to awaken. Next GM decides we need our venerable GMAC unit back. “Let’s get back in the business of finance!” What genius will get credit for this one? When I read about the purchase of the subprime unit I was not surprised but a little dumbfounded. They got kudos from Wall Street like this was a revelation. Now Wall Street is amping the volume up again about the latest revelation that they need to enhance the finance arm. To this I say hogwash! The business model should have never excluded them from the finance business to begin with.
Rewarding a Pencil Pushing Wunderkind
Now some pencil pushing wunderkind will be touted around the company as the next Bill Gates for coming up with this new and “fresh idea”. They will be given some notable bonus and the clock will continue to tick away. We as shareholders will continue to wonder who is at the helm and what map they are looking at. I say never reward stupidity. I know I have never been rewarded for it because if I ever was I would be a billionaire by now.
Because of my role in the development of AutoStar, I keep abreast of automotive industry matters. Next I have the good fortune of speaking with dealers all over the country. I speak frequently to the displaced General Motors dealers as well as the survivors. What I can tell you is Ally Bank is doing a poor job at servicing and managing the opportunity they have in providing financing to the dealer body as a whole.
Ally Bank?
GM needs a replacement service. Ally is just not what the industry needs. There are too many inexperienced poor quality field managers that do not understand, let alone execute, the much needed wholesale financing service the average dealer needs to remain competitive. I hear every day how they are fumbling the ball. I even have been in some negotiations with the “boys” from Ally and I am surprised in some cases that they were even picked to do the job on the first place. They continue to toss perfectly good clients under the bus. The credit qualification standards are archaic. Their overall approach is crude and very unprofessional. Simply they need to be jettisoned out of the picture. They have no vested interest in this industry. They do not care and thus they can destroy the industry from within at a critical time.
Cartographers Who Can’t Read Maps
But back to the cartographers at GM. I say you read the map wrong years ago. No you should not be rewarded for doing what you should have been doing all along and that is to provide a captive finance source. Read the map boys! If you have to, go back a couple of decades and read the annual reports. GMAC was part of your original mission! If you are going to put it back together put in a floor plan program with modern management mechanisms. Put in consumer lending products that meet the market demands. Provide what will work! Do not provide something for the sake of Wall Street. Pay attention to your dealers! They are your lifeblood. They are not a disposable asset which is how you have been treating them. They too have been around as long as you have. And oh by the way, don’t buy a percentage buy control or all of it! Get back in control of which way this ship is headed.

What Would Have Happened to GM….

NOVEMBER 12, 2010 BY GEORGE LOVATO JR L
…If the Government Had Not Stepped In?
I have my own theory. But applying the rules of commerce and survival of the fittest concepts lead me to believe GM would be a quite different animal today. So let’s travel down the path of speculation.
Piece By Piece It Should Have Been Liquidated
GM was in terrible shape. Heavy at the top and strained at the dealership level. Individual models were stagnant and stale. Compensation was out of line with performance and the consumer thought it would be common place for the company to lumber along in losses. So in the real world what should have happened? First of all management should have axed and removed from top to bottom. A new search should have been deployed to find new and innovative talent to steer the company. Each division/brand should have then undergone a thorough evaluation to ascertain if it would be viable as a standalone entity. Then the brand popularity should be measured. The least desirable brands should then should have been spun off and generate cash and eliminate debt. Piece by piece it should have been liquidated. Then in the end the remaining desirable divisions/brands should have made up the new GM. Funny though, I think all the brands would have survived but just in a different configuration. The consumer would have most likely had access to all they see today but just run and manufactured more efficiently.
A New Finance Division Was Needed
Instead of floating a dead stock issue the company should have then recapitalized a new and more vibrant finance division with new creative minds at the helm. Out with the old and in with the new and more capable. This new finance arm should be able to provide an array of products and services to not only the consumer but the dealer as well. This finance company should have been prepared to invest in every dealer remaining worth his/her salt. This new company just should not have been renamed but rebuilt from the ground up.
The Formation of a New Dynamic Company Was Required
The newly structured GM should have floated a separate stock issue to re-tool the dealership distribution network and put the money where the most return could have been realized. The remaining brands should have put money into new more cutting edge product development. Instead of floating stock to pay off the US government/taxpayer, money should have been deployed to form a new more dynamic company. Instead what we have is a top heavy company with old management, just less of them, in place doing what they have always done. Yes it is making money but they should have been doing that all along. Yes they should be making money because they have less debt. That sort of seems like a no brainer to me.
It Is The Same Old GM
A GM trying to make a sows ear look like a silk purse with this upcoming offering. I think my imagination would have served GM better and the public as well and it would have saved the government/taxpayer a ton of money. The rules of commerce and survival of the fittest were derailed. I thought those rules were what out capitalist system were all about? I guess I need to rethink all of this.