News today: GM (NYSE: GM) is about to show off a new vehicle it has produced in cooperation with Segway Inc., maker of the upright, self-balancing scooters. It is a new type of two-wheeled vehicle designed to move easily through congested urban streets. Very cool. Innovative. It's called called "PUMA," for Personal Urban Mobility and Accessibility. You can see what it looks like here: http://tinyurl.com/demz6w
But I wonder, did GM have to get permission from the White House to attempt this strategy? Did they review their promotional plans for how they are going to show off this new product in New York today?
We know two things that are relevant here. First, if the White House doesn't approve of Management decisions, they will cite the fact that GM has so much taxpayer money that the government has the right to show the Management to the door. We also know that the US government believes that the nation's energy policy in the future depends on GM and other auto manufacturers pursuing alternative fuel cars. Is the PUMA "alternative" enough? My guess is yes. But if you were the CEO of GM, and you wanted to keep your job and not be fired by White House officials, how would you know? Does GM have to ask the government whether the Segway venture is strategy that the government approves of before they enter into the venture? What if the government doesn't agree with that strategy for whatever reason? Maybe someone in the government fears that this new device could become so popular that it mitigates sales of new cars? Maybe that isn't the strategy the White House wants. Maybe it is. Who knows?
In normal circumstances, GM management would bring the idea of its new venture to its Board, which oversees management and strategy. OK. It's already been decided that whoever it is in the White House who makes decisions about GM strategy doesn't think too much of the GM board. So, what does GM management do?
Well, this one is kind of easy. The PUMA looks like it is a direct fit with the Obama administration's auto philosophy. But let's say that GM's consumer research department brings a report to the CEO. "Hey boss. You might not believe this. But we are seeing a real trend among adult women that they want big gas guzzlers. We have all the rationale right here in our research. Take a look. It's a little hard to believe but the demand is absolutely there." Now, if you were the CEO and the Board of GM, you have a fiduciary resposnibility to your investors to make those decisions that will translate into greater value for their investment. And here's a real opportunity to sell some high priced cars in pretty good volume and drive some earnings to the bottom line. But you also know that if you launch a gas guzzler you are going to irk the White House people who are overseeing you. They don't like gas guzzlers. If you approve a new gas guzzler model you will serve your investors but risk being fired. What do you do?