The GM-Peugeot Partnership

Not quite sure what the executives in Detroit are doing.

So GM plans to take a stake in Peugeot, and I'm not sure why. Well, we have an explanation:

LONDON—General Motors Co. is to take as much as a 7% stake in smaller French rival PSA Peugeot Citroën SA as part of a new auto-making alliance the two companies are negotiating to prop up their unprofitable European operations, people familiar with the talks said Tuesday.

But that explanation still makes no sense to me. I'm talking about the core concept of the matter:

In buying a stake in Peugeot, GM would make the French auto maker its primary partner in Europe to share engineering and development costs as well as provide funds to help the French company in its drive to reduce debt by selling assets, the person said.

This type of agreement has been done before. It did not work out well. GM hurt its public perception by trying to produce cars through parts sharing. A lot of their cars shared the same uninspired characteristics. This bean counting cut car quality and put GM in the hole that led to the 2008 bailout.

We've also seen brands within the GM conglomerate fail including Oldsmobile, Pontiac, and Saab. Making the same cars with different grills is not the way to success. It remains to be seen what this partnership with Peugeot holds in store, but I'm skeptical because of past failures in execution. On paper, it makes sense. However, history says otherwise.

The UAW Agreement

I remember when I was in high school, I wrote a paper about how the United Auo Workers Union was ruining the American Auto Industry by demanding too much. At the time, the Big Three were losing billions of dollars and jobs were fleeing the rust belt, where the UAW has a stronghold, as a result.

The time around, the UAW has less ground to stand on in that they cannot strike against Chrysler or General Motors. This was part of the agreement when the US bailed out those two companies in light of the financial crisis. Ford did not take the money, so they do have to worry about a potential strike. Additionally, Ford appears to be the healthiest of the three companies.

In these recent negotiations, there are signs that the UAW and the Big Three are on better terms:

Not many decades ago, contract expirations used to be firm deadlines for the UAW. Agreements, or strike notification, usually came around the midnight deadline when the negotiators were groggy from several nights of very little sleep.

This year it helped that the union had agreed not to strike General Motors and Chrysler over wages.

This shows a pleasant change between the two parties. It's funny how a few lean years can do to a relationship. I think it's always important that the interests of a union and the companies it is negotiating with are aligned. So often, the interests are not aligned and this is not good for either party.

The UAW seems happy:

“They’re all new jobs, and quite a few of those jobs were located in Mexico,” UAW Vice President Joe Ashton said. “What we said going into negotiations is one of our major objectives is jobs, and we think we met that objective.”

“I am really proud of our whole team,” King said at the press conference. “We really came into negotiations to create jobs in America.”

Perhaps the most important result of this good news is that it is good for Michigan, a state that has been hit hard by the automakers' struggles:

Although the details will not be confirmed until today, early word suggests that workers will get a nice array of one-time rewards, in the form of a signing bonus and increased profit-sharing. That keeps the company's day-to-day costs fixed going forward, a boon in this still all-too-uncertain economy, while recognizing that workers deserve recognition for the role they continue to play in keeping the company and its products strong.

As a fan of the American Auto Industry, it was important for an amicable deal to get done. Hopefully, this deal will signal a new era of better relationships between the UAW and the automakers. Hopefully, it will lead to a more successful Michigan.

GM Cashes In

GM has reported its first quarterly profit since 2007:

Ten months after emerging from a government-orchestrated bankruptcy, General Motors Co. on Monday reported its first quarterly profit in three years, driven by dramatic cost reductions and improved global sales.

GM made $863 million in the first three months of 2010, compared with a $6 billion loss a year earlier, a performance that surprised analysts who expected more modest results. Revenue grew 40% to $31.5 billion, and the company generated $1 billion in cash.

From Finance Chief Liddell:

"My mantra is to focus on the day job and the [initial public offering] will be successful," he said in an interview. That could happen anytime from a few months until next year, he said. "This is an industry where a lot of variables can change. There is no reward in my field for being overly optimistic."

This is not big news, it is HUGE news. We've seen a shift from GM from producing as many cars as possible to making quality cars that people want to buy. This has had a positive effect on revenues. There is still a lot of work to be done, but it's great to see GM move in a positive direction.

New GM Commercials

I feel like these new commercials from GM seem more honest than I've ever seen from a car company.