Bye Bye Miss American Pie

Bye Bye Miss American Pie

One of my favorite aspects of the automobile industry – just for personal interest has been the compelling ads that they churn out.
And so as I start writing today, on June 1 2009 as General Motors files for a chapter 11 – I can’t help but remember a Pontiac print ad from years ago – that showed a sparkling Pontiac silver car – with a tiger on its bonnet and a caption below saying “There’s one under the hood” ..and as the sun sets on this historic day … I am saddened that it’s roar has now become a whisper.

Its not a happy day this side of the world.
I’ve been reading a lot of analysts and articles on the GM filing and some of the statements I’ve come across have definitely contributed to the somber mood.

“The auto industry is fine. It is just not in Detroit anymore”
“This is not about getting out of business. This is about getting down to business”

But as we dissect aplenty the many many mistakes that decision makers in GM made, I can’t help but give a shout out to this legendary company that is 101 years old.

When General Motors was formed in 1908, much of what we now refer to as history had not even happened. The world wars had yet to be fought, man had not walked on the moon and many parts of the world were still under the shadow of the East India company.
That’s how old and iconic this mammoth of a company is.
One could say that while I was in B school – every single marketing strategy discussed could have a strong GM case to prove its success or failure.
From its strategy of straddling 5 different brands to cater to “a car for every price and purpose” (much like Kellog cereal these days)– to forming the GMAC to finance its cars thereby building an eco-system – to the many brands spreading its marketing costs too thin – to cannibalizing inter brand sales.

This is a company that had 54 percent of the car market share in the US at one time. And let it be noted that at that time – there was a huge hue and cry that this company should be government regulated lest it create a monopoly.

This is one of the car companies – that even created a market for cars. When that market did not exist. They built it – from the vendors to the dealers to the roads even …Through lobbying and hand holding and arm twisting at times I am sure.

This is the one car company, which retooled its lines during the world wars to supply tanks and armed vehicles. World wars that – started in Europe, shook the whole world and – took American soldiers and American blood to end.

Its easy to say that they should have changed over the years.
But when you think about it – so hard to accomplish.
While contracts with UAW depleted margins and made GM less competitive than its Japanese counterparts, their failure to invest in new technology on account of lack of funds or vision exacerbated their growing problems. Late entry into emerging markets certainly did not provide as much respite as it could have – while overdependence on SUV’S as cash cows basically established a strong correlation between gas prices and their profitability. Their fate was sealed so to say.

Oh, there were plenty of things that the company could have done differently. Hindsight is always 20-20 and reading glasses does not need. But if we examine the fine print – there are other players in this reinforcing cycle too. Numerous governing bodies that succumbed to automotive lobbying and did not raise emission standards, consumers who constantly fought against rising oil prices – and refused to cut back on their over dependence on cars and ended up shaping the SUV car market until gas prices soared– we could go on for a while.

But today, as we mourn the demise of one of the legacy companies in the world, many say that this has been the economic crisis that even Lehman, Citibank and others have not survived. But personally, I am especially saddened for GM.

Because the truth is that at the end of the day, making a car is not like making software or trading derivatives.
It is a costly, complex and highly specialized business. And let us not for a second forget how hard it is to build and move metal on wheels. It is technically as well as financially exhaustive – and has a fragile eco system with human intervention and innovation at every level from manufacturing to the union workers to the dealers to the financiers.

In my mind, today – regardless of which company you work for, and regardless of what industry you consider your core competence – we are all really in only one business – The OIL business.
Every industry is tied to the oil business directly or via a set of proxy chains. And let us not forget who controls the oil business. We should be measurably afraid. Especially so today.

I’ve never owned an American car.
But then again – I’ve never dreamt of driving a Toyota Corolla with the wind in my hair either.
That fantastic vision – of driving on an open road, fields of yellow flowers on both sides, turquoise sky above, scarf around my head slipping away and hair flying madly – held in place by huge precarious sunglasses will always be in a Chevy convertible from the 60’s.
It will be a while before I conjure up that much romance inside or outside of a hybrid – American or Japanese.
So as GM files today, and bows down at the altar of change, I am mellow and I am humbled like never before and I cannot help but hope that their restructuring and change is only as efficient as the markets that brought us here today.