Here's a point to ponder. In 2000, General Motors had a market
capitalization of $28.3 billion, while Apple Computer's market
capitalization was a modest $5.56 billion. On December 30, 2008, GM's
market capitalization had diminished radically to a paltry $2.99
billion, but Apple's had ballooned even more radically to $85.25
billion, and the company's cash holdings have grown at an annual rate
of 50% (year-to-year) or more every quarter for the past two years.
Of course, things have deteriorated for both companies since then,
with GM's market cap last Friday down to less than half of its 2008
year-end figure to a barely there (by major corporate standards) $1.37
billion. Apple is down somewhat on the year as well, but still worth a
robust and impressive $79.54 billion.
For bit more perspective, Ford Motor Company's market value at the
beginning of 2000 was $60 billion, but it was quoted at $4.78 billion
last Friday - a lot better than GM, but eating Apple's dust as
well.
If Steve Jobs Ran GM...
All of which makes fantasizing about drafting Steve Jobs to save GM
an intriguing proposition. I think it was the New York Times'
Thomas Friedman who launched this line of speculation last fall
(before the seriousness of Jobs' current health issues was public
knowledge) with his comment: "somebody ought to call Steve Jobs, who
doesn't need to be bribed to do innovation, and ask him if he'd like to
do national service and run a car company for a year. I'd bet it
wouldn't take him much longer than that to come up with the GM
iCar."
If you are a regular reader, you will perhaps recall my column of a few weeks
back about the iCar rumors (which were not associated with GM). Anyway,
the idea quickly caught the fancy of many other commentators both in
the financial press and the Mac Web blogosphere.
Cnet's Charles Cooper
noted that Jobs "embodies a textbook example of how creativity can
rescue a near-moribund operation. After Jobs returned to Apple in 1997,
he did not hesitate to pull the plug on dead-end projects like the
Newton, or ruffle feathers by
cutting off the Mac clone makers.
At the same time, he infused Apple with a design aesthetic that
manifested itself in the development of products such as the iMac, Mac OS X, the
iPod, and the iPhone. None of this was preordained; it was the result
of innovative thinking and fast execution."
Computerworld's Preston
Gralla observed that despite his dislike of Jobs, he thought
Friedman was on to something, commenting: "While I dislike Jobs for his
arrogance, his vindictiveness, and the way he uses attack-dog lawyers
to muzzle any criticism or dissent, he's probably one of the few people
who could turn around GM. He's a great innovator and designer, and
understands what consumers are looking for. He did a brilliant job of
turning around Apple. He might be able to do the same for GM."
Architosh's
Anthony Frausto-Robledo suggested that "Judging from the way Jobs
took hold of Apple in 1997 when he came back to save the company we
could certainly assume that Jobs would slash product lines very
dramatically . . . Steve Jobs stands for innovation, true
innovation. Jobs also stands for originality, independent thinking and
a complete passion for the energy he puts behind his company and its
products. From this perspective one could reasonably assume that Steve
Jobs would just say screw the Big Three, they all fail on the merits
for which he lives and breaths . . . However, if the
government said, 'Steve, we've made a decision that Detroit is a
critical piece of our country's future, we are going to save these
companies to some degree, but we want you to tell us what you would do,
if you were in complete control of the situation....'"
And just this past weekend, experimentalmu's
journal blogged (presumably English is not the author's first
language) that "What Steve Jobs do with Apple be he unbutton the
company spike to executive who were staunch to him and a polished of
obscurity he could truly handle. The Apple he take over and done with
was on eradication monitor, largely because it couldn't execute and it
was facing a market made up of cheaper products, both that beck the
then-aging Mac OS, and Windows that were cheaper and unanimously
in-between to the requirements of the market . . . If Steve
were to cart over GM, he would feasible purge a few the division that
overlap."
The Big Three's Death Spiral
It's hard to imagine a world without General Motors, but it
shouldn't be unthinkable, and I'm skeptical that multibillion dollar
government bailouts (euphemized as repayable loans) can save these
wounded titans of North American industry. I'll be surprised if more
than two of the Detroit Big Three emerge from this recession (when will
we face reality and call it a depression?) as more than a radically
downsized and fragmented vestige of their former selves.
Last week, GM reported a $9.6 billion fourth-quarter loss, and that
it hemorrhaged $6.2 billion in the last three months of 2008, including
a $4 billion government loan
After already receiving $9.4 billion in US government loans and
commitment for $4 billion more, plus $3 billion in loan guarantees from
the Canadian and Ontario governments, GM is back with its hand out for
reportedly another $16.6 billion from Washington and $7.5 billion from
Ottawa and Queens Park. Anyone who imagines it will stop there is the
sunniest of optimists. GM disclosed last week that it burned through
$19.2 billion in cash last year on its way to a $30.9 billion loss for
the year, and said its only hope of living another year is more aid
from the government, which IMHO should at least be taking an equity
stake in the companies in return for doling out any more cash. Some
analysts suggest that automaker bailout demands could reach $100
billion cumulatively.
However, if GM a can't be made viable through restructuring,
downsizing, and, most importantly, substantial, sustained labour
contract concessions, those billions of taxpayer dollars that have been
ponied up - and whatever billions more to go down the GM chute - will
be irretrievably down the tubes with no more to show for it than brief
postponement of the inevitable.
I would like to think GM and Chrysler can be saved, but I'm
pessimistic (I have doubts about Ford as well). The burden of
uncompetitive labour costs plus grandfathered pension, benefit, and
health care obligations weighs just too heavily in this snake-bit
economy, which I expect will beleaguer us well into the next decade.
The automakers' troubles were 40 years in the making - not something
that dropped out of the blue when the economy went over a cliff last
fall. Detroit has been bleeding market share since the 1960s, largely
because offshore (and increasingly onshore) competition proved able to
deliver better content, quality, reliability, and value for the
consumer dollar.
What Would Steve Design?
So what sort of car would Steve Jobs pitch as the automotive analog
of the iMac, that proved the salvation and launch vehicle for Apple's
renaissance?
Well, the bitter
irony is that Detroit is already making some of the best product in its
history just as it hits the wall. For instance, Consumer Reports
recently singled out the Chevy Malibu, Cadillac CTS, Ford Flex, and
Ford F-150 as ranking near the top of their classes in its overall
rankings, while the Automobile Journalists Association of Canada named
the Flex (which is built in Oakville, Ontario) as their 2009 Best
Canadian Utility Vehicle of the Year. I think the truly innovative and
edgy Flex actually is the sort of car that Steve Jobs might come up
with, while also being retro - in a good way.
Back in the 1960s, when American cars ruled the roads, none were
more emblematic of mainstream middle-class North American aspirations
than station wagons. Like most kids of the era, I fondly remember
traveling on the cargo decks of these big boats, or in the "wayback"
third-row or facing seats when most cars didn't have seat belts and
using them was optional.
The stereotypical wagon of my "wonder years" was Ford's Country
Squire, a faux wood-paneled tribute to mid-20th Century middlebrow
taste. Admen dubbed Ford "The Wagon Master", and it seemed every family
with more than two kids (and plenty with fewer) drove Country Squires.
My friends down the block (three kids), wealthy enough to own any car
they liked, drove a Squire. So did my American summer neighbors (five
kids), and countless TV sitcom families. My family even had a
Ford-built fake "woody", although being two kids and one parent we
managed to get along with a compact (so to speak) Mercury Comet
Villager of 1963 vintage.
The Ford Flex
evokes something of the same ineffable vibe those Country Squires did
40 to 50 years ago. The new, Oakville, Ontario-built Ford Flex doesn't
look at all like the big Ford wagons of yore, other than perhaps in
having a generally squared-off styling theme. There's no fake wood
paneling (mercifully), but a Flex styling highlight is four
indentations or "strakes" on its flanks serving function by adding
rigidity to what are pretty slab-sided door panels. Other homages to
Ford wagons of yore are two-tone color schemes, a massive chrome
grille, and a wide, bright metal trim panel across the rear
liftgate.
I expect the Flex matches or betters the 60s Squires' interior
volume, and with three rows of seats (all forward facing and with seat
belts) exceeds them in practical passenger capacity and comfort for six
or seven. It's also safer, with the highest five-star frontal and side
impact NHTSA crash test ratings and a class-leading four-star rollover
rating. It's also way-cooler - cool being something the old Country
Squires were emphatically not.
It's vastly more efficient than those old boats with their
gas-slurping V8 engines of up to seven litres displacement; the Flex
has a 3.5 liter, 24-valve, single overhead cam V6 delivering a very
respectable (for this size vehicle) EPA fuel economy rating for the
front-wheel-drive Flex of 17 mpg city/24 mpg highway, and its 262
horsepower supports a towing capacity of 4,500 pounds. The Flex is
basically a modern front-wheel-drive car, based on the Volvo
S-80/Taurus X chassis - but optionally available with all-wheel-drive,
something that couldn't be had with any Country Squire.
Not an
iCar perhaps, but definitely Jobsian in the sense that Ford could have
played it safe in designing a new crossover utility vehicle, but
instead opted to swing for the fences with the Flex. An iCar in this
market would probably have to be a hybrid, but Ford has that base
covered as well with the 2010 Fusion hybrid that is getting rave
reviews from the automotive press, and which will start at a
competitive $19,270.
Jobsian enough? We'll see, but among the beleaguered Big Three, Ford
seems to be making the smartest moves, which probably accounts for
their so far declining any bailout funding.
