Walking on the Economic Moonscape

GM is emerging out of bankruptcy, but it's hard to believe that such a short visit to "the box" will have changed much about the organization. A real learning organization is able to look at its past mistakes and figure out how things went off track. Creating the Saturn division was a bold move, but starving it for investment at a key juncture in its life was a critical mistake. Then, with the division starved for product and the dealers crying "Foul!" it rebadged a number of its new models with the Opel platform. For me, the interesting thing is how good these cars like the Vue and the Aura look. They are also good value in the US market, probably on a par with Hyundai.
But, giving a brand a last-ditch makeover with no sustained marketing or dealer support is not a real solution. It's like putting lipstick on a critical patient and saying, "There, get better!"
As the sale of Adam Opel GmbH nears closing, GM plans to retain a 35% stake, which is a good thing, as Opel was the source of the rebadged Saturns and clearly can make, design and produce good cars. Meanwhile, talking about brands, I walked by a Chevy and a GMC truck parked side-by-side in a parking lot and couldn't tell the difference. What does GMC stand for? Time to keep walking the moonscape.

The market is searching for direction, as Goldman Sachs reports gonzo earnings when the the financial sector, witness CIT, is still taking hits. So, the whole bailout candy store operation has achieved what? MFN's like Goldman, now under the bank holding company umbrella, are purring like a Cheshire cat that swallowed the canary. Bank of America will now owe fees for an agreement it apparently didn't sign, and for which it shouldn't be held responsible. Bank earnings up because margins will be up, fee income stays steady or rises, but troubled assets are still in the root cellar and lending remains sluggish.

I've been trained to look for inflationary shoots in the levels of unprecedented monetary expansion and fiscal stimulus that we've seen. However, if labor is the biggest expense for most corporations, it seems as if the unprecedented levels of job loss may mean an on-going slack in the labor market, even if the recovery gains traction in 2010 or later. Maybe the inflation concern is something to be rethought. It seems more and more likely that few corporations will regain the kind of pricing power that they enjoyed during the last two expansions. Something to think about on Bastille Day.