Automotive News - March 9, 2009 - (Page 12) 12 • FEBRUARY 9, 2009 opinion GM has left dealers hanging long enough The time for half-measures is over. General Motors must quickly define the long-term brand and channel strategies that will be part of its restructuring plan and then immediately implement them. It is reprehensible that GM has left its dealers and their customers hanging for this long. It has been widely known for several years — except perhaps The smell of death at GM — that drastic measures were needed because the auis palpable even tomaker has had too many brands and too many dealerthough the ships in some major metro marautomaker hasn’t kets. Those who conveyed that message to the inner sanctum, announced the as then-GM board member Jerry York did three years ago, were igultimate fate nored. But the time for denial is of noncore brands. over. To dealers and consumers, GM already has rung the death knell for Saturn, Hummer, Saab and Pontiac. The smell of death is palpable even though the automaker hasn’t announced the ultimate fate of those brands. Loudly declaring them noncore brands and then announcing that Hummer and Saab are for sale and that the long-term options for Saturn are under review sent clear messages across America. While GM has dithered, consumers have stayed away from many dealerships, leaving loyal, long-standing dealers in the lurch. Those dealers are independent businesspeople. Their fortunes and the livelihoods of their employees depend on what GM does. It is wrong to keep them guessing. GM should not treat them the way Isuzu treated its retailers after it decided to abandon the light-vehicle market in North America. It would be unconscionable for GM to starve dealers by withholding product in the hopes that they will wither, die and go away without a whimper, let alone compensation. To be sure, the way GM handled the death of Oldsmobile was costly. It is understandable that GM cannot afford to repeat that experience. But it doesn’t need to be that way. The current crisis and the government’s bailout largesse offer an opportunity to set GM right. GM’s hierarchy must stop deluding itself that sooner or later some buyer will show up for its damaged brands or that the company can lackadaisically operate Saturn for a couple of years. GM should acknowledge the cost of getting rid of these albatrosses and factor that into its loan requests. That’s the prudent and ethical thing to do. Chrysler’s days are numbered if it doesn’t get more money from the federal government. It is sliding slowly into an abyss and will need a lot of money simply to stay afloat. Meanwhile, Fiat shows up as another white knight. For no money down, Fiat wants 35 percent of Chrysler in exchange for technology, platforms and general all-around help. Later, Fiat would have an option to pick up an additional 20 percent of Chrysler, giving it control and about 55 percent of the company for a cash infusion of $25 million — that’s “million” with an “M.” That means the Italians will have equity, the Germans may still have equity and, of course, Cerberus, too. And they want the U.S. government to fund this marriage of equals or whatever. If Fiat and Cerberus think the U.S. government will continue to fund Chrysler, they don’t understand the mood of the DAILY AUTO NEWS >> You can get the news you need every day. Go to autonews.com/signup and sign up for our daily e-mail newsletter. It’s becoming a hornet’s nest government today. Chances are more likely that the U.S. government will ask Chrysler to repay the earlier loan. The risks to Chrysler’s dealers and suppliers and the company itself are huge, and the injection of Fiat into this mess is doing nothing but muddying the already muddy waters. It doesn’t matter what Fiat brings to the party. Sergio Marchionne is a smart CEO, and he has done a great job bringing Fiat back from the brink. Now he’s trying to pick up Chrysler for peanuts in an environment in which his tactics will be viewed with great skepticism. Chrysler is kidding itself and its dealers if it thinks the U.S. government will look kindly on this financial deal. Fiat is trying to get control of Chrysler for $25 million, a bargain beyond belief. If Fiat and Cerberus think the U.S. government will continue to fund Chrysler, they don’t understand the mood of the government today. Fiat claims it will give Chrysler technology and platforms worth billions. Perhaps so. But since no one else has offered Fiat a single euro for them, the value seems to be zero. Chrysler will need billions more to take advantage of Fiat’s offer, on top of the huge cost of staying alive until products based on Fiat platforms are introduced in the U.S. market. If Fiat wants to get into the U.S. market, it will have to invest plenty, perhaps even its own stock. Otherwise, it’s simply a shell game, one that Chrysler and U.S. taxpayers can’t win. THE WEEKLY NEWSPAPER OF THE INDUSTRY Established in 1925, published every Monday by Crain Communications Inc. Chrysler-Fiat deal doesn’t measure up To the Editor: Automotive News has been my must-read weekly for more than 40 years. But now I’m not so sure. How can you, in good faith, support the Chrysler-Fiat alliance as you call it (“Chrysler-Fiat alliance deserves a thumbs-up,” Opinion, Jan. 26)? To me it’s the American taxpayer bailing out Fiat. If the deal goes through, Fiat will get 35 percent of Chrysler now with the possibility of getting 55 percent later, putting the company in foreign hands all without Fiat investing one thin dime. Of course, Daimler AG and the threeheaded dog may have something to say. No, it does not behoove the White House and Congress to support this alliance. It is the American taxpayer’s money, and it should support GM, Ford and Chrysler. Should the deal go through, Fiat must pay back the billions already lent to Chrysler. RONALD T. STUMPP Middletown, N.Y. The writer is retired. He was a partner in a new-car dealership and worked for General Motors, Volvo and Isuzu. Keith E. Crain, Publisher and Editor-in-Chief Peter Brown, Associate Publisher and Editorial Director David Sedgwick, Editor Edward Lapham, Executive Editor HOW TO REACH US Web site: autonews.com Editorial staff autonews@crain.com Phone: 313-446-0361 Fax: 313-446-0383 Circulation Advertising subs@crain.com rgreer@crain.com Phone: 888-446-1422 Phone: 313-446-6050 Fax: 313-446-6777 Fax: 313-446-8030 Editorial data/research To locate information that has been published in Automotive News, call 313-446-1662. Customer service To start or renew a subscription or to report an address change or a delivery problem, e-mail subs@crain.com or call 888-446-1422 (in the U.S. or Canada) or 313-446-1662 (in all other locations). AUTOMOTIVE NEWS (ISSN 0005-1551) is published weekly at 1155 Gratiot Ave., Detroit, MI 48207-2997. Periodicals postage is paid at Detroit, MI and at additional mailing offices. Postmaster: Send address changes to AUTOMOTIVE NEWS, Circulation Department, 1155 Gratiot Ave., Detroit, MI 48207-2912. Canadian Post International Publications Mail Product (Canadian Distribution) Sales Agreement #40012850, GST#136760444. Canadian return address: 2-7496 Bath Road, Mississauga, ON L4T 1L2 Printed in the U.S.A. apply to the automotive industry. Yet, as TARP funds are received, automotive companies will be covered by the same limitations on executive compensation. I do not take issue with the limitations on golden parachutes. It is the insistence on $1 salaries or the elimination of incentive compensation that concerns me. At General Motors, for example, the top 25 executives fall under those limitations. While the industry pays well when times are good, those executives are badly underpaid if base salary is total compensation. With the job market soft, the risk of talented executives leaving the auto industry is tempered. But any executive eventually considers his or her compensation in terms of family well-being, and most see compensation as some measure of their market value and contribution. As we begin to emerge from this recession, how many future leaders of the automotive industry do we risk losing by imposing a compensation structure that undervalues their experience and leadership? I understand that there is an important dimension of public perception that enters this topic, particularly when that door is opened by taxpayer-funded support. However, if we allow the pendulum to swing too far away from market realities, we may be opening the drain plug on the very industry that we all desperately want to see survive. BRAD MARION Senior Client Partner and Leader Global Automotive Sector Korn/Ferry International Chicago Korn/Ferry is an executive recruitment company. Don’t lose leaders to rigid pay scale To the Editor: As the possible presence of funding from the Troubled Asset Relief Program begins to spread from the Detroit 3 to the supplier community, it becomes important to consider the implications of some of the strings attached — specifically, limitations on executive compensation. While there are enough examples of executive-compensation excesses in the financial services sector, I can think of few parallels that would legitimately We invite letters from our readers. Please limit your letter to 250 words and tell us whether we may print it. We reserve the right to edit it. 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