I’ve heard that the Chinese symbol for “crisis” is composed of elements that signify “danger” and “opportunity.” A professor of Chinese language and literature at the University of Pennsylvania says this is untrue, which is too bad because it is such a good story.
It is also exactly the situation that GM finds itself in. The bankruptcy creates an opportunity to create a new value chain. Specifically, it creates an opportunity to move to a configure-to-order value chain with a stronger service component. What if GM were to take one of its surviving brands, say Cadillac, and move to selling configured cars over the Internet the way Dell sells computers? Let’s say I wanted an STS with a red exterior and white interior, sun roof, and XM radio. I would enter those configuration choices online and out comes the price, no haggling with dealers necessary.
In order to test drive the car, I would go a local service center, they would have one car for each model but no other inventory. I would also be able to do the configuration at this service center location with a little help, if I was uncomfortable doing it myself at home. The service center could also serve as a middleman for financing, and as the location where my configured car would be delivered. They would be paid fees for these services, but they wouldn’t necessarily sell me the car.
From my perspective, if I could configure a car just the way I wanted it and get it delivered in two weeks, I would be ecstatic. If delivery was to take longer than a month, I’d probably look for a luxury car from another car company. This would create a supply chain with a lot less inventory and much stronger cash flows. The last leg of transportation would probably be more expensive because fully utilizing the car hauler rigs would be more difficult.
The bankruptcy is also an opportunity for GM to transform the role of dealerships in the value chain. There has been a lot of talk in the media about the large number of dealerships being put out of business, and how many of them contribute to their communities in different ways, like sponsoring Little League teams. But my perspective is that dealerships are one of the weakest links of the automotive value chain. Historically, state franchise laws have created barriers to enabling a more efficient supply chain, from prohibiting online sales earlier this decade to prohibiting car sales on Sundays, which is true in 14 states and various counties. And from my own personal experience, I believe dealerships with quota and commission structures in their service departments can lead to unethical behavior (in my case, being pressured to replace brakes when it wasn’t necessary).
In making decisions about which dealers remain, and which are no longer needed, GM and Chrysler have stated that service capabilities is one of the factors. If it was my decision, I would focus on dealerships that paid service personnel a straight salary, instead of using quotas and commissions, and placed a high value on customer satisfaction. If GM could use its bankruptcy and exigent circumstances to drive these kinds of changes in its service network, it could result in a competitive advantage over other car companies.
Would these changes save GM? They would help the company, but not save them. GM still needs to build interesting and reliable cars that people want to buy.
Actually GM did run a program along these lines for the Cadillac brand in 1998-99. It was called Custom Xpress Delivery (CXD). Under the program order to delivery lead times shrank from an average of 42 days to 8-9 days. It utilized pooled vehicle inventories across dealers (e.g., a shared inventory location in Orlando for all dealers in Florida) and an exceptionally quick manufacturing response (e.g., a customer specified order was placed at the head of the build queue).
At the time, dealer franchise laws prevented some of the retail steps you are proposing. Though Ford did run an experiment in Indianapolis where all the dealerships were Ford owned and did accept internet orders – if I remember right. Unfortunately both experiments ultimately were terminated.