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Resistance Is Futile

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Okay, I’ll ‘fess up.  

I’m a Star Trek fan. 

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I don’t go to conventions or dress up as a Klingon, although the thought has crossed my mind.

I’m not one of those purists who claim that only the original Gene Roddenberry version with Spock, Kirk and the irascible Bones is the only one worth watching.  

In truth, I’m kind of partial to the Next Generation, even though the android Data is a pale substitute for Leonard Nimoy’s conflicted half-Vulcan character.

In particular, I am drawn to the clash with the Borg; half man, half machine drones on with a mission to assimilate all other life forms into their technologically superior single-minded collective. The Borg zip around the universe in silvery cubes that look strikingly like Chevy trucks after they’ve been super-compacted for recycling, telling every being they encounter that “resistance is futile.”

It sort of reminds me of G.M.

The Ever-Shrinking Kingdom

There was a time when General Motors ruled the auto universe. It made every kind of car imaginable. 

If you wanted luxury, G.M. gave you the Caddy.  If you craved sporty muscle, it was Corvette, Camaro or Firebird.  If you needed a truck to haul the contents of your mother-in-law’s garage or an SUV to drag your fishing buddies and the bass boat to the lake, G.M. had the car for you.

They were sort of like the Borg – they tried to assimilate everyone and everything.

As the June 1 government deadline approaches, it appears that it now will be G.M. that’s about to be assimilated. With “Mini Me” (read Chrysler) in the thick of bankruptcy, G.M. appears to have accepted the inevitability of its fate.

G.M. furiously has attempted to shave operating expenses. It has been in non-stop negotiations with bondholders and the United Auto Workers to shrink debt and union obligations by $44 billion. President Obama’s automotive task force set the timetable to complete those tasks or have the company end up in court.

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In a statement released this morning, General Motors’ new Chief Executive Officer Fritz Henderson said bankruptcy now is probable. Despite its best efforts, and even with billions in taxpayer bailout, G.M. will not be able to cut costs or renegotiate its debts without the aid of a bankruptcy judge.

One of the first casualties of G.M.’s quest to survive will be its extensive dealership network.   

Horrible News Hours Away

At the end of last year, G.M. had nearly 6,200 outlets for its cars and trucks. Most analysts believe that G.M. wants to reduce its franchise obligations by slashing approximately 3,600 local dealerships from it rolls. As a first step, G.M. will notify 1,000 to 1,200 dealers tomorrow that their franchises will not be renewed.

Shoring up its sales operations by cutting dealers is fiscally sound. But it will cause an additional spike in the unemployment associated with reorganization of the U.S. auto industry. Chrysler already has informed the bankruptcy trustee that it will terminate about 800 dealership franchises.

For too many G.M. dealers, their stiffest competition is not Toyota or Honda but the other G.M. dealer down the street. By comparison, Toyota sells more cars in the U.S. than G.M. with less than half the number of dealerships.

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G.M. already has euthanized Oldsmobile and Pontiac.  Going forward, G.M. has announced that it will scuttle its Saturn brand and send the Hummer to the steroid scrap heap.  

Rumors abound that G.M. will move its corporate headquarters out of Detroit to an overseas locale.  G.M. CEO Henderson says that his company has no such plans, but wouldn’t rule out this option in the future.

The automaker’s challenge is to get through the bankruptcy process at light speed.  Unless it successfully accomplishes this mission, it runs the genuine risk of becoming a permanent lesser life form in the car universe.  

Live long and prosper.  

John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com