General Motors: robots in demise

You may not believe it, but GM is a good guy — at least on the silver screen. At the end of the month the carmaker’s vehicles will star in what is expected to be the blockbuster movie of the year: in a continuation of one of the biggest product placements ever, the heroes of the film ‘Transformers 2’ are all GM autos that convert into evil-bashing robots.

And what’s more, GM didn’t have to pay producers Paramount a cent. In a rare smart move by the automaker, back in 2005 it arranged to contribute $1m worth of vehicles to the shoot for the first Transformers outing, and pay for a series of ads showcasing the movie and its vehicles. The same arrangement suited both parties just fine when the sequel was greenlit in 2007.

Upon closer inspection, the two are a pretty good match. After all, they’re both global brands, they were both huge in the 80s, and they’re both costing their respective owners a small fortune in 2009.

Paramount is rumoured to have spent a massive $300m on the Transformers sequel due this summer, making it the one of the most expensive pictures in history. The movie, however, is expected to easily recoup its investment.

Would that the same could be said for GM, where US taxpayers face a bill closer to $50bn, and anger is building in the wake of the third-largest bankruptcy in American history. The US government is now lumbered with a 60 percent stake in the automaker; public money alone is keeping the corporate colossus alive.

Barely a year after GM celebrated its centenary, a once-dominant force in the US economy has been brought to the brink of ruin by years of mismanagement and a series of strategic errors. The taxpayer is entitled to know what went wrong.

The unsold Pontiacs, Chevrolets, Hummers and Cadillacs cluttering forecourts around the world are testament to a once-great manufacturing behemoth that has been haemorrhaging money in the face of competition from the Far East.

The boom years, when GM sold as many SUVs, light trucks and muscle cars as it could rattle off its productions lines in Detroit and elsewhere, are a distant memory for the broken entity that last week reported $82.29bn in assets and $172.81bn in debt.

How did former CEO Rick Wagoner last so long in the driving seat, despite reporting company losses of $82bn during the last four years of his tenure? In his time at the top, the share price fell steadily from around $70 to just 75 cents last week. He was ejected by order of the White House in March, but that was after months of timewasting as Wagoner worked on incremental change rather than the drastic cost-cutting initiatives that were needed to keep GM alive.

And beyond that, how was an automaker that in 1954 boasted a 54 percent share of the US market, allowed to crawl along with 19 percent by the end of April 2009? Back then it was not just the world’s biggest carmaker, but the world’s biggest company. What happened to the innovation and competitiveness that enabled GM to rule the world for more than half a century?

Today, with public money fuelling its spluttering engine, GM is not in a position to splash cash on advertising the new Transformers movie — a cinema experience GM shareholders would be forgiven for skipping. Paramount will most likely pick up the marketing costs, which although hefty, pale into insignificance when placed against the debt owed to the American taxpayer. While GM plays the hero on screen, it’s a villain off it.

Andrew White is the editor of Arabian Business English.

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