Spending on Nothing
General Motors has devised a brilliant cost reduction strategy – spending on nothing.
America’s third largest company announced that it will enter the hot acquisitions market by paying $2 billion not to buy Fiat, the ailing Italian auto maker.
While P&G will get a line of Gillette razors for its $57 billion and Verizon will pick up a bunch of MCI phone lines for $6.7 billion, GM will not even get a spare tire for its billions.
The company, which has seen its market share decline, claims that funding the non acquisition is a good move. The GM Chairman said it was, “… a good return on investment for our shareholders.” He claimed the company will see more in cost savings than it’s spending on the deal.
Boards of other companies will take notice. To reduce costs we might soon see United Airlines hand over a few billion not to buy say, Airbus. While the folks at Hewlett-Packard must be kicking themselves: they should have paid Carly Fiorina not to come to work. It would have saved them a few bucks on that Compaq deal.
Oh well, it’s only money.