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GM Will Rue the Day It Converted Roger Penske From Partner To Competitor

Enduring another endless spasm of "Pursue scale! Eliminate overhead!! Damn the torpedoes!!!" a PPE (that's Prior Place of Employment to you newer readers) closed a nearby primary care practice in favor of a larger practice two towns over.

To the extent there was ANY rationality behind the decision, several theories appeared to apply: (1) solo practice is an expensive, uncompetitive model of organizing a medical practice, and (2) consumers would happily do what they're told even if it meant driving 30 minutes through grinding suburban traffic to see another PPE-branded doctor.

Both theories were quickly proved wrong. What was proven right (again) is the notion that markets are local - one service provider, one customer, a loyal dyad.

Some physicians prefer practicing solo, are good at it and don't mind the drawbacks, which can be substantial. So it was with this doc. He left us, established another solo practice nearby, joined our competitor's medical staff and prospered. Oops. The PPE hadn't seen that coming.

And only a few patients transferred to the new, larger practice. The PPE watched and fretted as their market share in several key zip codes dropped off a cliff. Yikes. Didn't expect that either.

I'm not resurrecting an old debate here just to say "Nyah Nyah I was right!" (Even though I was...) No, I wonder how many of the same mistakes are being repeated by GM and Chrysler right now, as dealers and brands are sacrificed on the alter of overhead reduction.

Today, GM announced the sale of the Saturn brand to the Penske dealership chain. Roger Penske hasn't done much in life - from racing cars to running large companies - that hasn't worked out. He knows cars, he's well-respected, smart and tough - everything GM ought to fear in a competitor.

According to today's New York Times:
"'Saturn was kind of an unpolished gem at GM,'' said Brad Coulter, director at the Bloomfield Hills, Mich., turnaround firm O'Keefe and Associates. ''They had never really fully exploited what they developed. Saturn is known for having some of the best-run dealerships. The brand is highly rated. It's a top-notch sales organization.'''
So Penske's buying "...best run" dealerships, a "highly rated" brand and a "top-notch" sales organization. Sounds like those are the assets GM should be keeping, not selling.

I'll make a prediction: after three years under Penske's leadership, Saturn will be outperforming GM on most measures of corporate success. And the investment bankers on President Obama's auto task force will say "Gee, we never saw THAT coming!"

The Takeaway: Any idiot can slash overhead, and every day another idiot proves my point. Seeing beyond Wall Street's spreadsheet models and MBA mantras requires a rare degree of strategic subtlety, a finely-attuned ear for consumer feedback, a restless mind - a mind open to other scenarios and possibilities and, finally, an awareness of the post-slashing end game.

More of my ramblings about remaking the auto industry, here.


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