Is GM finished?

[drkitten]

Isn't Vauxhall still GM? I used to deal with GMIMCo and they were a few years back . . .

May still be. If so, that would rather prove my point, since it would mean that GM could produce cars that were notably reliable, but it can't -- or won't -- do so for the US/North American market.

 

[drkitten]

Underfunded inactive DB pension funds are certainly incurred liabilities, but not sunk costs. GM could sell out of its pension liabilities to an insurance company. Several (quite pioneering) methods of doing this via an asset manager/insurer partnership have already been done.

However, doing that now after the crash of '08 would be another catastrophic after-the-horse-has-bolted piece of timing. Hence Uncle Sam will likely be oicking this up.

Again, this rather proves my point. This is the sort of thing that forward-thinking management has managed to solve BEFORE it became a crisis. Somehow, pension liability was never an issue for GM before Toyota started to outcompete it..... One of the marks of good management, at least in my humble opinion, is to figure out which horse is likely to bolt next and to take steps before it happens.

 

[bobrayner]

FAIL. Take a look at the ratio of retirees to working employees GM has and Honda has. It's not as simple as you're making it out to be. It's unfortunate that you represent a large part of the population that really isn't aware of what it costs to operate an empire like GM. Last I checked Chrysler had 3 retirees to every working employee. I'm going out on a lmb and saying GM has at least that many, if not more. That's considerable overhead.

Sunk costs are sunk costs, as drkitten pointed out.

If Chrysler opened a new production line tomorrow and hired 1000 extra employees to work there, would Chrysler suddenly have to support 3000 extra retirees too? Yes or no?

You fail to see he impact of moving your hard earned dollars out of the country by buying forgeign

Economic nationalism is a fallacy. For some reason it's very commonly applied to vehicle manufacturing - with some rather unpleasant effects.

 

[Roadtoad]

Again, this rather proves my point. This is the sort of thing that forward-thinking management has managed to solve BEFORE it became a crisis. Somehow, pension liability was never an issue for GM before Toyota started to outcompete it..... One of the marks of good management, at least in my humble opinion, is to figure out which horse is likely to bolt next and to take steps before it happens.

Just a thought from someone who will be starting a business. (Maybe not today, but as soon as is economically possible...)

As I'm preparing to purchase a truck, I've been talking with guys who are already doing what I want to do, and getting the best info I can. The ones who are continuing to work are the ones who planned ahead for an economic downturn. These are the guys who positioned themselves to haul basic commodities, such as food, and bought the equipment which would allow them to haul it. It's one of the reasons you see sales of dry vans holding steady, for the most part, (at least from what I can find), while specialized equipment sales have dropped off. Drop decks are fairly limited in their uses, and they don't work too good for canned foods. (Note to Bob Blaylock: I don't think your job's in much danger.) In other words, you look for equipment which can handle a broader variety of freight. You try to avoid specialization, unless you can justify the purchase of such equipment.

GM had a decent idea at first: One good platform, adaptable for a variety of vehicles. The "X" platform could be used for damned near everything, with the exception of large trucks. The Problem was that GM refused to prepare ahead of time for what everyone had said was coming: An economic downturn, which would leave automakers in trouble. They had a taste of this in the 1980's, and should have learned from it. They refused to.

Now, I'm sorry as hell that I'm so damned ignorant of the industry that I can't figure this one out, but when you look, for example, at how well Toyota and Honda -- both cited above -- have managed to prepare ahead of time, it leaves GM, Ford, and Chrysler without any excuse. (Chrysler is in even worse shape, and when an industrial juggernaut like Daimler can't fix what's wrong with you, you might as well shut the doors and turn out the lights.)

It's easy as hell to blame the Unions for being stubborn. It's easy as hell to blame the market. It's harder to look at the shortsightedness of management.

I'm reminded of something Dominick Dunne wrote about a wannabe "financier," who bought up a fashion designer's firm. While everyone else was going to shorter skirts, this outfit, at the insistence of the "owner," went with long skirts.

People tried to tell him, "The clothes are ugly."

Problem was, this "financier" had bought with ill-gotten gains a number of paintings. This supposedly made him an "expert." "How many Fragonards do you own?" he'd ask.

None? "I own several. I think the clothes are beautiful."

And the line went into the tank.

So, here we are, with Waggoner, Smith, Reuss, Stempel, all of them, asking, "So, who's the CEO of GM?"

Well, obviously not me. I still think the cars are ugly, they can't be maintained, (CRITICAL POINT, KIDS!!!), and their mileage sucks.

"Well, I'm the CEO, and I think the cars are great."

Look, I've got two rollaways in my garage full of tools, plus more in tool boxes stashed around my garage. My father-in-law is a retired mechanic, I have friends who are mechanics, I work day-in, day-out with mechanics. Of all the mechanics I know, only my father-in-law has a GM car, and that's because it's still under warranty. All others buy Japanese or European. They can either fix them themselves, or they can get them fixed. If you can't keep the damned things running, THEY ARE NOT WORTH BUYING. Hell, I can't even find a Chilton's manual that will adequately cover what I need to know to fix my Chevy truck. Add to this the expense of repairs, and ask yourself, is it worth it?

It's funny, because if GM would build a car that could at least be fixed by the average person, almost a "plug and play" type system, the might find that not only would the cars sell, they might find that their service departments at their dealers were doing a land office business, simply because some people don't want to do their own work.

As far as I'm concerned, GM's execs bear the lion's share of the blame for this. That they haven't been prosecuted for criminal wrongdoing owes a hell of a lot to political connections, rather than any morality that would be recognizable in common society. One of the few things where Michael Moore and I are in agreement is regarding Roger Smith. Frankly, after reading about his collection of boats and his pseudo-Andy Hardy personna, I find I'd like nothing more than to tie his sorry ass to the back bumper of my Chevy truck and drag him through the streets of Flint, Michigan.

Lucky for him, I can't get the damn thing to start.

 

[balrog666]

A friend of mine bought a Pontiac Fiero when they came out. After a couple of years he found out you had to pull the engine just to change the spark plugs and dumped it.

Great design, GM!

 

[Roadtoad]

A friend of mine bought a Pontiac Fiero when they came out. After a couple of years he found out you had to pull the engine just to change the spark plugs and dumped it.

Great design, GM!

Not to mention their unfortunate habit of catching fire with little or no provocation.

Frankly, if you wanted a car that was one hot ride, there were better choices available, ideally ones which wouldn't self-immolate.

 

[Hindmost]

That's the point really, they were complacent and ultimately incompotent by answering to the American publics non-sensical demands and share holders immediate need to see profits. This is the problem with the Free Market. Instead of dicatating it caters.

It very much is a question of getting a product to market before the market changes. You've no idea of how money is borrowed to finance the production of an automobile do you? The concept of stockpiling and how it effects profit margins? Projections based on current and aticipated demands in certain sectors? The efffects of supplier interuptions?

It's only the benefit of hindsight that allows you to now claim shortsightedness on the part of GM. People like yourself who have little or no working knowledge of what it takes to bring a product to market continue to bad mouth GM for making poor guesses based on the fickle American consumer. The question was posed is GM too big to fail, the reality is they became too big not too.

As someone who does know how to bring a product to market, I can tell you that hindsight really was not needed. GM, Ford and Chrysler sacrificed long term goals for short term profits. Suvs and trucks were cheaper to build and required less pollution controls coupled with less stringent mileage standards. Marketing was geared toward selling these profitable vehicles.

Anyone that does not understand the fickle nature of consumers, shouldn't be in charge of a company that relies on those consumers. It was very clear that gas prices were going to increase in the future and that gas guzzlers were going to be obsolete. (I used to tell my students about the energy issues on this planet and how the latest round of muscle cars are going to disappear). It is the mission of corporate executives to see into the future and prepare for it. The big 3 didn't and now they are behind again. I just wish I would have shorted GM.

glenn

 

[Bob Blaylock]

(Note to Bob Blaylock: I don't think your job's in much danger.)

I agree. I consider myself very fortunate to have landed with my current employer, before this latest round of economic trouble. In fact, I've cause to feel dowright smug about how my employer is doing in these times.

 

[Toke]

An economist named Fucoyama or something wrote a book on trust and its importance for economy.

One of his examples were the auto industry of japan, germany, and usa.
The problem in usa was a complete lack of trust between workers and management, it led to phonebook sized agreements and very rigid work environment.
The germans had a better ability to substitute one worker for another if the days work required it.

Most danish companies pay a small monthly amount to a employes pention fund*, I don´t see how it could be more expensive to pay the pention after the worker retires.
It sounds more like a lame excuse for bad management, don´t the company save up the money during the workers employment?

*The money is held by a seperate company and independant of your employers fortune.

 

[Bodhi Dharma Zen]

GM, Ford and Chrysler sacrificed long term goals for short term profits.

Wait, you just described what every business and politician in America has been about recently, "all I can get for me, to hell with anyone else and the future". And we can add to this overinflated compensation/bonuses/benefits for high ranking employees. The industry might be unrecoverable, but this guys will keep their wallets.

 

[Roadtoad]

Sounds like they've been taking advice from Al "Chainsaw" Dunlap.

 

[Damien Evans]

I'm not sure what you're asking. There was a Lexus sharing the platform of the Camry, but my recollection is that the '97 Camry design was created first, then extended to the Lexus model. The engines were a mix of 4- and 6-cylinder engines made in Kentucky.

My point is that Toyota didn't just luck out and have their Japanese models become successes in NA. They built Camrys, Carollas, Avalons, etc. in Kentucky, Ontario, California, etc, and, starting with the '97 Camry, actually started doing design work in the US, as well. And when fuel efficiency became more of an issue, they proved that a hybrid could be profitiable in the US. Ford saw the writing on the wall and licensed the "Hybrid Synergy Drive" technology from Toyota, but GM had to be dragged along kicking and screaming.

Toyota did almost the exact same thing here. They're a smart bunch.

 

[Hindmost]

Wait, you just described what every business and politician in America has been about recently, "all I can get for me, to hell with anyone else and the future". And we can add to this overinflated compensation/bonuses/benefits for high ranking employees. The industry might be unrecoverable, but this guys will keep their wallets.

It actually amazes me that "Hot Wheels" has a larger market cap than GM.

When I came back to the US after living in Korea for a bit, I saw so many SUVs and trucks. I knew it was a portent for future problems...and I am no oracle. They obviously had zero contingency. It is probably time to let them go...but it would devastate families. It does seem to be a no win situation.

glenn

 

[balrog666]

An economist named Fucoyama or something wrote a book on trust and its importance for economy.

One of his examples were the auto industry of japan, germany, and usa.
The problem in usa was a complete lack of trust between workers and management, it led to phonebook sized agreements and very rigid work environment.
The germans had a better ability to substitute one worker for another if the days work required it.

Most danish companies pay a small monthly amount to a employes pention fund*, I don´t see how it could be more expensive to pay the pention after the worker retires.
It sounds more like a lame excuse for bad management, don´t the company save up the money during the workers employment?

*The money is held by a seperate company and independant of your employers fortune.

That is the essence of the 401K retirement plan - the company has known and limited costs during the current fiscal year with no outyear extended liability and the account is owned by and goes with the employee.

Most large companies have been moving to such plans for the last 40 years because it simplifies financial planning and usually increases retirement benefits to the employee without added cost.

So, once again, GM et al are 40 years behind the times.

.

 

[Francesca R]

An economist named Fucoyama or something wrote a book on trust and its importance for economy.

It's Francis Fukuyama (more of a "political scientist") and it's this book.

One of his examples were the auto industry of japan, germany, and usa. The problem in usa was a complete lack of trust between workers and management, it led to phonebook sized agreements and very rigid work environment. The germans had a better ability to substitute one worker for another if the days work required it. Most danish companies pay a small monthly amount to a employes pention fund*, I don´t see how it could be more expensive to pay the pention after the worker retires.
It sounds more like a lame excuse for bad management, don´t the company save up the money during the workers employment?

*The money is held by a seperate company and independant of your employers fortune.

However, I don't think it has much to do with defined benefit versus defined contribution pension schemes. At least, not in the way you frame this.

Most large companies have been moving to such plans for the last 40 years because it simplifies financial planning and usually increases retirement benefits to the employee without added cost.

So, once again, GM et al are 40 years behind the times.

Nah. Companies shift from DB to DC because investment risk, inflation risk and longevity risk are all transferred from the company to the employee. It is not an altruistic act. And seen that way, it is more a move from collectivism to individualism than the other way around (just without the choice on the part of the individual).

Apart from closing DB schemes, employers (outside juristictions like Argentina ) do not have the ability to renege on former promised benefits. They can merely stop indemnifying pension benefits which are yet to be earned. I don't know how early on GM did this, or if it has done it. Once unions get wind of this, they tend to overwhelmingly push for preservation of DB over DC, and it's pretty obvious why. I have a DB pension from a previous job. Pretty small, but I have spurned repeated offers from the company I used to work for to trade it in for a transfer value that will (from here on) be all at my risk. I have plenty enough market risk; my previous employer is welcome to continue to wear it

 

[WildCat]

GM responded to American demands for gas guzzling automobiles, plain and simple. No one forced anyone to buy them, there were plenty of economy vehicles to be bought! Americans chose to buy them, the free market dictated that they continue to sell vehicles to ignorant American to remain competitive. Had GM sat down and said "Hey, let's stop building vehicles that get less than 30 mpg and only sell what the American populous really needs" they would have cut themselves out of the game. Don't you think there were intelligent people saying this years ago? Do you really think no one foresaw the $4 gallon and said lets build a smaller car? Can't you wrap your head around the fact that gluttonous Americans demanded big cars they couldn't afford and that's what caused this? It's so typical of Americans to blame someone else for their own short comings. It's a free market, it's the markets fault, not the suppliers.

And yet, those same American consumers bought lots of Toyotas and Hondas.

It's not GM's fault for making SUVs, or even fuel economy. It's the fact that they built crap that didn't last as long as other cars. New CAFE standards won't help them there.

 

[WildCat]

But I also think the government has some blame to take as well. For years and years the auto lobbyists have blocked any sort of progress in CAFÉ standards, the auto industry fought tooth and nail against seat belts, crash test ratings, CO2 emission standards, hybrid cars, the list goes on and on. Government caved in to these lobbyists, they (the Government that is meant to protect us from ourselves) should take some of that heat as well. The auto lobbyists, in bed with the oil lobbyists are a major part of our problems today.

Are you seriously going to claim that people didn't buy GM, Ford, or Chrysler cars because the government didn't force them to boost crash test and CAFE ratings? Because everyone I know who stopped buying cars from the Big 3 did so because the quality and reliability sucked compared to foreign makes.

And those foreign makes play by the same rules the Big 3 did here.

To turn a phrase around, "It's the quality, stupid!".

 

[WildCat]

FAIL. Take a look at the ratio of retirees to working employees GM has and Honda has. It's not as simple as you're making it out to be. It's unfortunate that you represent a large part of the population that really isn't aware of what it costs to operate an empire like GM. Last I checked Chrysler had 3 retirees to every working employee. I'm going out on a lmb and saying GM has at least that many, if not more. That's considerable overhead.

And as I understand it they have so many retirees because the only way the UAW would agree to workforce cuts was for them to get early retirement.

Short-sighted and stupid. Screw 'em.

 

[WildCat]

Ditto Chevy's Chevette, a car so flawed, you might as well have parked it in a junkyard the moment you rolled off the lot. My sister had one, in black, which wound up with broken seat mounts, overheating problems, timing problems, (yeah, just TRY and tune up that piece of crap), and paint which faded faster than McCain's chances in Florida. A friend of mine had a yellow one, and that car finally blew its engine after less than 50,000 miles. Can you say "Trade in"? He got a Toyota.

Consider Oldsmobile's Quad 4 engine, which is now installed in several GM models. You can't change out the plugs on that damned engine. I tried. You have to remove the exhaust manifold, (good luck with that!), and MAYBE you can get to the plugs... Oh, wait. It doesn't USE standard plugs! You have to go to the dealer and pay those inflated prices, or worse, have THEM do the tune up! Got a couple of days to spare while they screw around with your car? Got an extra couple of grand lying around, because one flaw with that engine is that the head gasket has a tendency to let go.

I have a '91 GM pickup, and I need it. The only reason I have it is because I need a pickup. Paint fading, electrical problems out the ass, and I can't get the damned thing to pass California's smog check. Not good. I ain't happy.

If there's someone who works for GM reading this, I have one question: Why the hell should I buy any product you people build? Seriously. If you wanted to stay in business, why the hell didn't you build cars that could at least be maintained.

Fine, you people want to flip us off? You want to turn out crap, and tell us we have a duty to "Buy American"? Screw yourselves. My next car, when I can afford it, will be a Mercedes. It's safe, it can be maintained, it holds its value, and at least when I buy one, I have the satisfaction of knowing it was built by people who have some respect for mutts like me. As for the UAW, [RULE 10]

I hear ya Roadtoad. Back in '88 my mother, a lifelong Chevy customer, bought a new Chevy Beretta. By 1990 the paint was peeling off most of it. She took it to the dealer, not our problem they said. Wrote to Chevy, nope, not our fault they said. Meanwhile, the roads were full of Chevy cars from that era that had the paint peeling off of them. Apparently they were designed that way since Chevy didn't seem to think it was a manufacturing defect (that's sarcasm for those of you with broken detectors).

It made my mother sick to be driving around such an ugly car, she paid to have it repainted and vowed never to buy a Chevy again. Eventually it stopped running, and she bought a new '95 Toyota Camry. As I had no car at the time, she gave it to me. I spent $750 or so to fix it (clogged fuel injectors) and drove it a while before it quit again, The problem? Clogged fuel injectors again. Another $750 to fix it. It seemed every few months I had to make repairs on the damned thing, and wondered if it would be best just to get rid of it. And then a miracle happened - a truck turning into my alley had snagged it making the turn, mashing up the driver's side real good. The insurance company gave me a check for $1900! w00t! I couldn't have sold the thing for more than a few hundred.

The Camry my mother bought in '95 still looks nearly new, the paint is flawless. It still runs great with over 190,000 miles on it and is their 2nd car now. She bought another one a few years ago, only because the A/C had conked out in the old one. She wishes the new ones came in a 2-door model though.

Bottom line, it wasn't fuel economy or crash tests or CAFE standards or seat belt regs that turned her from a GM customer to a Toyota customer. It was a crappy car coupled with even worse customer service.

I don't see how a bailout or CAFE standards or alternative fuel requirements will help.

 

[Don At Work]

At least one GM division makes good cars: Holden.

And I say that as a Ford man, so I have no love for Holden.

my Holden :

Yea, its a Pontiac GTO, but it is really a Holden