Beyond The Precipice – GM in 2009

On GM's “restructuring” plan:

The young political novelist Benjamin Disraeli, in his 1826 “Vivian Grey,” took aim at the drastic change in the writing by one of his characters: “it is the same tale, the same refacimento of lies, and treachery, and cowardice doled out with diplomatic politesse.” - William Safire, The New York Times

As you may or may not know, GM recently submitted their 177 page modified restructuring plan to the US government as a condition to receive more bailout loans from the US Govt.

Nowhere does GM commit to launching the Volt or any alternative fuel vehicles, only that they're investigating and loosely planning to launch them. Nor do they have any commitment milestones or launch dates for the Volt or any other alternative fuel vehicle. GM also asserts in their Industry Segment Mix projections that they don't expect small and compact car sales to exceed 17 percent of total sales even by 2014 and that truck sales will still account for 27% of their total vehicle sales. This means that at least 27% of GM vehicles sold in 2014 will still have less than 30mpg. Remember too, that GM sells half of their vehicles around the globe, so we're not just talking about domestic markets.

Additionally, they claim that as oil prices went down, truck sales as a proportion of their total sales started to climb back up. GM continues to assert that their trucks will be sub 30MPG vehicles for at least the next 3-4 years. So if they continued to grow truck sales as a percentage of total sales, on-road fuel efficiency of new vehicles as a total average of all vehicles sold could still decline.

GM applied for numerous DOE Section 136 loans totaling almost 8 billion dollars which are allocated under the following assumptions:

“Under section 136, the ATVM provides loans to automobile and automobile part manufacturers for the cost of re-equipping, expanding, or establishing manufacturing facilities in the United States to produce advanced technology vehicles or qualified components, and for associated engineering integration costs.”

However in the restructuring plan GM claims that the loans were applied for “advance propulsion and alternative fuels research”. This doesn't mean “renewable fuels” or “electric vehicles” and why does a company like GM need 8 billion dollars for this when they've been claiming they've been researching alternative fuel and advanced propulsion technology for the last 10 years (and I am sure have been claiming tax credits for same) and in fact even had a production electric vehicle in the 90s anyone remember the EV1? What few people realize about the EV1 lineup was that it had many iterations using different propulsion and fuel technologies. Here is a quick overview of the other EV1 prototypes courtesy of Wikipedia:

EV1 CNG

The compressed natural gas (CNG) variant was the only non-electric vehicle in the line-up, even though it employed the same up-stretched platform. It used a modified Suzuki 1.0-liter turbocharged 3-cylinder all-aluminum OHC engine installed under the hood. Due to the high octane rating of the CNG (allowing for a greater compression ratio), this small engine was able to deliver 72 hp at 5500 rpm.

The batteries were replaced with two CNG tanks capable of maximum operating pressure of 3000 psi. The tanks could be refueled from a single nozzle in only 4 minutes. In-tank solenoids shut off the fuel during refueling and engine idle, and a pressure relief device safeguarded against excessive temperature and pressure. With the help of a continuously variable transmission, the car accelerated 0 to 60 mph (96.6 km/h) in 11 seconds. The maximum range was 350 to 400 miles, and fuel economy was 60 mpg (in gasoline equivalent) .

EV1 series hybrid

The series hybrid prototype had a gas turbine engine APU placed in the trunk. A single-stage, single-shaft, recuperated gas turbine unit with a high-speed permanent-magnet AC generator was provided by Williams International; it weighed 220 lb (99.8 kg), measured 20 inches (50.8 cm) in diameter by 22 inches (55.9 cm) long and was running between 100,000 and 140,000 rpm. The turbine could run on a number of high-octane[citation needed] alternative fuels, from octane-boosted gasoline to compressed natural gas. The APU started automatically when the battery charge dropped below 40% and delivered 40 kW of electrical power, enough to achieve speeds up to 80 mph (128.8 km/h) and to return the car's 44 NiMH cells to a 50% charge level.

A fuel tank capacity of 6.5 gallons (24.6 l) and fuel economy of 60 to 100 mpg (3.9 to 2.4 L/100 km) in hybrid mode, depending on the driving conditions, allowed for a highway range of more than 390 miles (627.6 km). The car accelerated to 0-60 mph (96.6 km/h) in 9 seconds.

There was also a research programhat powered the series hybrid Gen2 version from Stirling engine based generator. The program demonstrated the technical feasibility of such drivetrain, but concluded that commercial viability was out of reach at that time.

EV1 parallel hybrid

The parallel hybrid variant featured a de-stroked 1.3 L turbocharged DTI diesel engine (Isuzu Circle L), delivering 75 hp, installed in the trunk along with an additional 6.5 hp DC motor/generator; the two motors drove the rear wheels through an electronically controlled transaxle. When combined with the AC induction motor which powered the front wheels, all three power units delivered a total output of 219 hp, accelerating the car to 0-60 mph (96.6 km/h) in 7 seconds. A single tank of diesel fuel could keep the car running for 550 miles with a fuel economy of 80 mpg.

EV1 fuel cell

This variant extended all-electric propulsion capabilities with a methanol-powered fuel cell system (developed by Daimler-Benz/Ballard for the Mercedes-Benz NECAR), again installed in the trunk. The system consisted of a fuel processor, an expander/compressor and the fuel cell stack. The highway range was about 300 miles, with a fuel economy of 80 mpg (in a gasoline equivalent). The car accelerated to 0-60 mph (96.6 km/h) in 9 seconds.

Now why does GM need 8 billion dollars to research more technology solutions when they've already designed feasible electric cars, advanced propulsion technology and alternative fuel prototypes? To boot, their restructuring plan assumes they'll get the almost 8 billion in loans from Section 136.

Additionally, according to the restructuring plan: “In December 2008, the Federal Reserve approved GMAC‘s application to become a Bank Holding Company and the U.S. Department of the Treasury made a $5 billion TARP investment in GMAC.”

Further follies

GM mentions that they'll reduce their manufacturing workforce by 47,000 employees, but they also mention they're shrinking dealerships and brands, meaning there will be potentially hundreds of thousands of indirect jobs lost as a result of this restructuring.

The Canadian Press reports that Canadian automotive workers will escape the restructuring plan relatively unscathed because they believe the Camaro launch in 2010 and the new Equinox will save them. But how does a 400 Horsepower, 23MPG (GM estimated) vehicle fit in the “greener” economy of 2010? And if we're still in a global recession, who's going to be buying Camaros?

http://www.google.com/hostednews/canadianpress/article/ALeqM5gPr-0RZ6crN...

Additionally, GM indicates that their net present value (for their Enterprise Value) calculations are contingent upon successful restructuring in Canada and Germany and nowhere do they mention that they're not planning on laying off more Canadians. In fact, if the Camaro or Equinox sales were depressed or legislated downward (due to increased fuel efficiency requirements) there's no reason to think there couldn't be more layoffs.

Is there anything in this restructuring plan other than cutting brands/badges and jobs? Is there any indication that GM is buckling down and performing real market research to find out what kind of cars people really want to buy? No. The dark comedy that is unraveling here is that this plan is happening in the complete absence of input from the people that matter, the consumers.

An insoluble problem.

No one can say they have the solution, the problem is too big, with too many variables. For every argument there is a counter argument, for every solution there is an alternative. And at the end of the day, the motives and ethos of a profit driven corporation need to be questioned seriously and taken into account. Corporations motivated by profitability are not rewarded for good or ethical behavior. Survival of the fittest doesn't favor the weak, but society says we must protect those that can't protect themselves.  

I suspect any further loans to the automakers will make them dependent upon government and taxpayer money. They will snuggle up to the teat of the taxpayer and it will be impossible to wean them. When we try, they will cry and wail like wounded babies. It's a slippery slope and one that doesn't take into account the very severe pressures that GM will face as China enters the automotive manufacturing sector and starts producing cars at a price point far below the current average North American retail price. Already they have eyes on the North American market with vehicles priced far lower than their domestic or Japanese produced counterparts.