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E-mailGeneral Motors - American’s largest automaker - is desperate. It was just rescued from the brink of bankruptcy with a $13.4 billion bailout from the federal government and now says it needs another $16.6 billion to continue operations.
GM has been to leverage debt in the past few months to acquire capital, and now it is considering selling a 25%-50% stake in its European Opel brand. GM may even seek to sell-off Opel into an independent car makers.
[Opel Flextreme concept car]
The measure is of course intended to provide GM with capital for its American operations, but by selling Opel GM may be seeking short-term gain only to spite its face in the long-run.
Opel is one of GM’s oldest international brands, bought by the American company in 1929 when Opel was Germany’s largest and most efficient automaker. It is also well-placed to provide GM with lots of cars sales from emerging markets in Asia, Latin America, and Africa where Opel is well established. Further, Opel’s brand and manufacturing are closely-intertwined and GM cannot split up in a deal. Opel’s manufacturing includes highly-efficient engines that GM intends to use in its American models to provide the more fuel-efficient cars that consumers increasingly want. But without Opel, GM will not have access to such capabilities.
So, the previously giant automaker is caught in a conundrum. That is why GM is desperately hoping the Germany government will come to the rescue of Opel, but that remains far from a certainty. And there is no way the American government - already reluctant to hand GM more money - will come to the rescue of a foreign subsidiary. If left with GM Opel will certainly cease to exist, but without Opel GM may find giving its line of cars a new kick even harder then present circumstances.
RSS 
June 27, 2006 — 07:13 am
India’s Model T: Tata’s $2000 Car Rob Katz
June 27, 2006 — 07:13 am
India’s Model T: Tata’s $2000 Car Out by 2008
Update: Lee Schipper, Director of Research for WRI’s Center for Sustainable Transport, comments below on the implications of a low-cost car for India.
A mass-produced, affordable auto revolution is coming to India. Or, as BoingBoing suggests, “make way for the hundred dollar laptop of automobiles:”
Tata Group Chief Ratan Tata told shareholders that the launch of the car would create a new paradigm in low-cost personal transport, carve out a new market segment and reach a broader base of the pyramid.
”The styling and designing of the car have been completed and prototypes are being tested in the plant. It will be a rear engine, 4-5 seat, four-door car with about a 30 horsepower engine,” Tata said in the company’s annual report for 2005-06.
The car will be launched in early 2008 and we believe it will be extremely attractive to the Indian consumer, particularly younger families, at a price level of about Rs one lakh, Tata said.
I absolutely love it when a big shot CEO uses terminology like “Base of the Pyramid,” because it demonstrates how some firms at least know the concept. Whether they are doing it in a sustainable, profitable way...anyway, while I love this concept from a BOP and economic development perspective, what worries me is twofold. First, what about the environmental impact of hundreds of thousands of additional cars on India’s already-congested roads? Answer to myself: it will be up to Tata to make these vehicles as fuel-efficient as possible. Second, will this push Indian development toward the US model of roads and highways and provide a disincentive to well-planned cities and public transport?
Original links via IndianRaj and SouthAsiaBiz. Original article in the Hindustan Times.
Lee Iaccoca, who ultimately managed to preserve Chrysler, called the sale of Talbot one of the stupidest decisions ever made by the management he replaced.
Unlike Chrysler, however, which had no other foreign subsidiaries other than Talbot, GM also has Vauxhall (GM-UK), Daewoo (GM-South Korea), GM-South Africa, GM-Australia, Saab and Chevrolet subsidiaries in Argentina, Brazil, Chile, Columbia, Ecuador, Egypt and Uruguay to help them through the crisis.
What they need to do is sell off the subsidiaries with no development branches first; those plants that just assemble cars for local markets.
Selling off their controlling share of Opel would be a big mistake for GM.