Is GM finished?

[drkitten]

FAIL. Take a look at the ratio of retirees to working employees GM has and Honda has.

Fail yourself. Sunk costs are sunk costs. Retirees are, by definition, sunk costs.

And sunk costs, by definition do NOT influence the costs of new construction.

GM could very easily put up a building in central Ohio, and say "now, here are the working condititions -- including pension schemes -- for anyone who wants a job there." If the union complained,.... well, let 'em complain. That's what management is for, to manage. (ETA: In fact, that's one of the things that they tried, with the new Saturn division a while back. They couldn' pull it off because management wasn't willing to support Saturn with a different corporate culture, and of course the unions didn't like the union-unfriendly management style that the Saturn division was using. When they decided in the late 1990s that Saturn would move away from its "small-car" roots and start making SUVs like every other division, the death warrant was signed.)

There will, by definition, be no retirees from the new plant yet (since the plant is new). The pay structure would be entirely what the new management wanted to make the pay structure (and with 6.5% unemployment -- and higher in Ohio -- they would probably be able to find non-union people to actually do the work).

The problem is that you -- and, apparently, the GM management --- are unable to walk away from previous bad decisions and insist on throwing good money after bad.

 

[drkitten]

What was short sighted, I might add, is the faith people had in the Free Market. They believed that allowing forgeign auto makers access to our economy would strengthen it.

What? So you suggest that instead we should have put protectionist policies into place, so that GM would have been able to sell poorly-made cars for three times what it cost the Japanese instead of only twice?

As Francesca pointed out, GM is not doing that badly overseas --- but using an entirely different business model. And, of course, the Japanese car manufacturers are not doing that badly using their business model over here.

GM is simply doing the wrong thing. And you want to use protectionist policies to encourage them to do the wrong thing?

 

[Furcifer]

Germany does this. Autria does this. I understand Japan does this.

Its a Free Market, and only the big 3 were short sighted. Despite years of fore-warning.

I'm not sure what your point here is? I also understand the Japanese have 100 year mortages. We have different cultures and ways of life. If we all (NA) moved into the city and took public transit we woudln't need cars at all, so that's short sighted?

If the big 3 fail, there won't be any industry to make money to buy cars, period. They hoped to weather the storm by making cars people thought they wanted and bring to market a viable product. I still don't see this as being short sighted. What's unfortunate is the market changes faster than these companies can make a turnaround. There's a point to be made about companies ignoring this and not investing in tooling that could make this turnaround. I've been saying this for years. NA has the technology, the best in the World. They just don't have the means of implementing this fast enough. Perhaps if they didn't have the competition from other markets willing to work for less, in terrible conditions, without adequate benefits they could have implemented the tooling.

All I'm saying is there is much more to this problem than "They were short sighted" and ending it there. If you believe this your next question must be "Why?"

 

[drkitten]

They hoped to weather the storm by making cars people thought they wanted and bring to market a viable product. I still don't see this as being short sighted.

It's short-sighted to think that the product "people thought they wanted" would be and remain viable.

I might want to buy diamond panes for my windows. You might want to sell them to me. But it's short sighted to think that you can sell enough of them for long enough to make them a viable product line.

It's not like oil prices have been a closely held secret.

What's unfortunate is the market changes faster than these companies can make a turnaround.

Again, that's bad management. If the company expects that a turnaround will be necessary in the next ten years, then the time to start turning is now. When did Toyota start making the hybrids that are rapidly becoming their bread-and-butter?

From Wikipedia:

In late 2003, GM officially canceled the EV1 program. GM stated that it could not sell enough of the cars to make the EV1 profitable. However according to GM Chairman and CEO Rick Wagoner, the worst decision of his tenure at GM was "axing the EV1 electric-car program and not putting the right resources into hybrids. It didn’t affect profitability, but it did affect image." According to the March 13, 2007, issue of Newsweek, "GM R&D chief Larry Burns . . . now wishes GM hadn't killed the plug-in hybrid EV1 prototype his engineers had on the road a decade ago: 'If we could turn back the hands of time,' says Burns, 'we could have had the Chevy Volt 10 years earlier.'"

From the Atlantic Monthly:

In the 1990s, when minivans and SUVs took off, GM was caught unprepared. In the early part of this decade, it decided hybrids were too unprofitable to pursue, leaving a gap in the market that Toyota, with its Prius, brilliantly and mercilessly exploited. By the time GM recognized its blunder and launched its own hybrids, Toyota dominated the field.

All I'm saying is there is much more to this problem than "They were short sighted" and ending it there. If you believe this your next question must be "Why?"

Because they were complacent and incompetent. It's not a question of them being unable to move fast enough -- they've been late for every major development in the automotive field since about the 1970s, even when they invented the fundamental technology themselves.

As far as I'm concerned, there really is little more to say.

 

[DanishDynamite]

I'm not sure what your point here is? I also understand the Japanese have 100 year mortages. We have different cultures and ways of life. If we all (NA) moved into the city and took public transit we woudln't need cars at all, so that's short sighted?

If the big 3 fail, there won't be any industry to make money to buy cars, period. They hoped to weather the storm by making cars people thought they wanted and bring to market a viable product. I still don't see this as being short sighted. What's unfortunate is the market changes faster than these companies can make a turnaround. There's a point to be made about companies ignoring this and not investing in tooling that could make this turnaround. I've been saying this for years. NA has the technology, the best in the World. They just don't have the means of implementing this fast enough. Perhaps if they didn't have the competition from other markets willing to work for less, in terrible conditions, without adequate benefits they could have implemented the tooling.

All I'm saying is there is much more to this problem than "They were short sighted" and ending it there. If you believe this your next question must be "Why?"

My point is in answer to your quetion.

As to your inability to see that the big 3's insistance on gas-guzzlers as the way to go despite every objection it was not, well, have you been blind for very long?

 

[Fnord]

GM's business model is astonishingly consistent, in that they have never missed an opportunity to miss an opportunity.

 

[Roadtoad]

My point is in answer to your quetion.

As to your inability to see that the big 3's insistance on gas-guzzlers as the way to go despite every objection it was not, well, have you been blind for very long?

This has been an objection since 1974, when Buick, in response to the fuel crisis, unveiled the Apollo. The idea that Detroit actually "got it" is a joke. Hell, follow the history of the Ford Mustang, DD. That car started out as a very trim four seater, originally powered by a straight six, later offered with the superb 289 V8. If they'd stayed with the 302, and gone no higher, that car would have remained an excellent vehicle.

The problem, though, is that Henry the Deuce insisted on the Mustang becoming like every other car in Ford's line-up, over the heated objections of Lee Iacocca, (Hmmmm. That name rings a bell...) Had the Mustang stayed a small car, as it was originally intended to be, instead of becoming the bloated, underpowered porker that it wound up being by 1970, (with the rare exception of the Mach 1, ideally with the Boss 302), had Ford insisted on taking care of the customer first, instead of producing that gawdawful Pinto, and even worse, the Maverick, Ford would have earned Loyalty. They don't.

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]

 

[Roadtoad]

GM's business model is astonishingly consistent, in that they have never missed an opportunity to miss an opportunity.

Nominated!!!

 

[Furcifer]

Because they were complacent and incompetent. It's not a question of them being unable to move fast enough -- they've been late for every major development in the automotive field since about the 1970s, even when they invented the fundamental technology themselves.

As far as I'm concerned, there really is little more to say.

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.

 

[Dragoonster]

If the big 3 fail, there won't be any industry to make money to buy cars, period.

That's some pretty huge hyperbole.

They hoped to weather the storm by making cars people thought they wanted and bring to market a viable product. I still don't see this as being short sighted. What's unfortunate is the market changes faster than these companies can make a turnaround. There's a point to be made about companies ignoring this and not investing in tooling that could make this turnaround. I've been saying this for years. NA has the technology, the best in the World. They just don't have the means of implementing this fast enough. Perhaps if they didn't have the competition from other markets willing to work for less, in terrible conditions, without adequate benefits they could have implemented the tooling.

I don't see what competition has to do with cleaning your own house. If anything it should've spurred such a thing rather than prevented it. It's very possible that the United States auto work force (in particular its unions) simply isn't willing to make "only" $50/hr in wages/benefits. If this is so, the industry should be disbanded if it's unable to make profit, and these workers can try to find other jobs or start other types of businesses.

All I'm saying is there is much more to this problem than "They were short sighted" and ending it there. If you believe this your next question must be "Why?"

Because they were short-sighted. This isn't a tautology, not everyone needs a reason to be stupid.

*They lived on a fine edge of profit due to exhorbitant salaries/benefits
*They didn't diversify models and target groups enough to quickly switch when demand changed; and they aborted diversification attempts rather than sticking with them
*They made many poorly-manufactured models (plastic interiors, recalls, high maintenance, etc.)
*They lost billions for years and never corrected any of this

No matter the reasons, they've failed. Giving them money to continue failing is the wrong thing to do for the long-term. And I don't trust Congress (with it's recent bailout) to enact requirements that they radically alter their business model. Nope, if that example is anything they'll appoint one person to oversee the industry and alter anything that was intended, not fire any execs, let them pay huge bonuses and go on retreats (or the equivalent--pay UAW their usual demands), and continue to suck.

If we could be guaranteed that a bailout would be accompanied by massive and intelligent change, I'd be all for it. A green, efficient, well-priced auto industry would be very good for the country. I don't trust this Congress, or the industry itself to change though, no matter how much money or insufficient "oversight" we throw at it.

Since the UAW is entrenched and the liberals probably won't let the big 3 fail, my desires are moot. I just hope my, and your $250+ increase to the deficit leads to a strong and secure auto industry. I think though that we'll just be bailing them out again in 10 years.

 

[Furcifer]

As to your inability to see that the big 3's insistance on gas-guzzlers as the way to go despite every objection it was not, well, have you been blind for very long?

Ahh, you have it figured out. Very clever, you personally bested hundreds, if not thousands of people trying desperately to make these companies profitable. It is in fact your blindness that allows you to make this statement. It was the American publics stupidity buying these things to begin with that led to this. There's little additional costs to the manufacturer producing these gas-guzzlers, a little extra steel and some trim. And yet they carried ridiculous price tags an eager American public was willing to pay. Any objections voiced by the American public are ultimately converted into buying power. Somewhere along the way it became ingrained in the American psyche they would continue to buy big American cars if they could, and smaller more "reliable" Japanese if they couldn't. The fallacy that Japanese cars are more reliable, and bigger American SUV's are safer still lingers to this day. I can't begin to tell you how many people honestly believe the size of the car is in direct proportion to the safety. For me it's an ignorant public and not a short sighted GM that led to this failure. It's just easier to point a finger and say "They screwed up" instead of just maybe "They screwed up because of me"

 

[Dragoonster]

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.

1. Diversification & anticipation
2. Having high manufacturing standards
3. Not paying employees outrageous wages/benefits, thus allowing for balance sheet leeway during transition periods

Foreign manufacturers' US markets were under exactly the same conditions, managed to follow these simple concepts, and haven't failed. Blaming the big 3's failure primarily on US consumers is ridiculous.

 

[drkitten]

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.

That's right. If the shareholders need profits now that will ultimately reduce the profitability of the company, you need to tell them "NO." If consumers want products that you can't afford to deliver to them, you need to tell them "NO." While I admit that it can be hard to do that, that's part of the fundamental job of management.

It's only the benefit of hindsight that allows you to now claim shortsightedness on the part of GM.

And I'd accept that if there weren't a number of examples of companies -- Toyota and Honda leap to mind -- that did manage to take the long-sighted decision.

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.

Yep. And people like me who have been in the business of bringing products to market for longer than you've been alive also continue to bad moutn GM for making poor guesses.

For that matter, GM execs badmouth GM for making poor guesses (I cited some examples upthread).

 

[balrog666]

Ahh, you have it figured out. Very clever, you personally bested hundreds, if not thousands of people trying desperately to make these companies profitable. It is in fact your blindness that allows you to make this statement. It was the American publics stupidity buying these things to begin with that led to this. There's little additional costs to the manufacturer producing these gas-guzzlers, a little extra steel and some trim. And yet they carried ridiculous price tags an eager American public was willing to pay. Any objections voiced by the American public are ultimately converted into buying power. Somewhere along the way it became ingrained in the American psyche they would continue to buy big American cars if they could, and smaller more "reliable" Japanese if they couldn't. The fallacy that Japanese cars are more reliable, and bigger American SUV's are safer still lingers to this day. I can't begin to tell you how many people honestly believe the size of the car is in direct proportion to the safety. For me it's an ignorant public and not a short sighted GM that led to this failure. It's just easier to point a finger and say "They screwed up" instead of just maybe "They screwed up because of me"

Blaming customers for buying what they want is rather silly. Blaming GM for selling it to them is even worse.

And it's funny how GM management has missed the last 50 years of automobile testing and reliability tracking that has documented their substandard engineering and poor manufacturing processes.

And, after all this posting, I have yet to see you lay any blame at the feet of the reviled UAW. Why is that?

.

 

[Almo]

I thought the SUV thing had a lot to do with the import duty on certain types of trucks. The SUV was effectively protected against foreign competition.

 

[drkitten]

Ahh, you have it figured out. Very clever, you personally bested hundreds, if not thousands of people trying desperately to make these companies profitable.

Not hard, I'm afraid. A hundred, a thousand, or a million dumb people remain dumb people

It was the American publics stupidity buying these things to begin with that led to this.

Just because the American public wants to buy something does not mean you need to supply it to them. And just because the American public wants to buy something doesn't mean that you shouldn't look ahead to the possibility that tastes will change, or events will change them. There's a print shop just down the road that made a fortune selling and printing anti-Bush T-shirts. Funny how the demand has dropped off in the past few weeks. It's almost like the American public is no longer interested.

A sudden drop in demand like that could put a company out of business. Except the guy who ran THIS shop wasn't a fool, and expected that he'd not be able to sell political T-shirts after the election, and already had a new product line in place. Unlike GM, he's willing to plan for the future instead of the present.

It's just easier to point a finger and say "They screwed up" instead of just maybe "They screwed up because of me"

It's definitely easier. But it's also more accurate. If you really think that the American public are the reason GM is on the ropes, I have to ask you

* Why isn't Honda? They sell to the same American public that GM do?
* Why isn't Toyota? They sell to the same American public that GM do?
* Why is GM the company that bought the Hummer brand? Why wasn't Honda or Toyota? (Jeep didn't care who it sold the brand to....) What spooked Honda? And why didn't it spook GM?

 

[Prometheus]

....The fallacy that Japanese cars are more reliable,

Walk through any large parking lot and count how many 10-or-more year-old Toyota/Hondas you see, and how many equally old GM cars.

 

[drkitten]

Walk through any large parking lot and count how many 10-or-more year-old Toyota/Hondas you see, and how many equally old GM cars.

Similarly, Consumer Reports has published reliability studies for every major car manufacturer on a yearly basis for something like forty years. I don't have one to hand, but it would be relatively easy for anyone to pick one up and look at the average rating for Honda, for Toyota, and for GM.

No GM car made Consumer Reports' 2008 most reliable list. Lots of Hondas, Toyotas, and Scions, though.

Warranty Direct publishes the following:

The Warranty Direct Top 100 Most Reliable Used Cars Of The Past Decade

1 Honda Accord 2 Subaru Forester 3 Mazda MX-5 4 Mitsubishi Carisma 5 Toyota Yaris 6 Honda Civic 7 Nissan Almera 8 Honda CR-V 9 Toyota RAV4 10 Nissan Micra 11 Lexus IS 200 12 Mazda 626 13 Jaguar X-Type 14 Toyota Landcruiser 15 Volvo S/V40 16 MINI (BMW) 17 Suzuki Vitara 18 Mazda 323 19 Toyota Carina E 20 Saab 9-5 21 Lexus LS400 22 Ford Ka 23 Rover 45 24 Hyundai Lantra 25 Mercedes SLK 26 Citroen Xsara 27 Ford Cougar 28 Subaru Impreza 29 Skoda Octavia 30 Audi A4 31 Nissan Primera 32 Toyota Avensis 33 Volvo 850 34 Vauxhall Corsa 35 Seat Toledo 36 Volkswagen Golf 37 Daewoo Lanos 38 Fiat Brava 39 Hyundai Coupe 40 Mitsubishi Shogun 41 Rover 25 42 Mercedes CLK 43 Fiat Marea 44 Ford Focus 45 Peugeot 106 46 MG MG TF 47 BMW Z3 48 Hyundai Accent 49 Volkswagen Polo 50 Fiat Punto 51 Vauxhall Zafira 52 Mercedes C-class 53 Volvo S60 54 Toyota MR2 55 Mazda Xedos 6 56 Ford Puma 57 Vauxhall Astra 58 Vauxhall Omega 59 Chrysler Neon 60 Audi A2 61 Ford Fiesta 62 Ford Mondeo 63 Vauxhall Corsa 64 Citroen Saxo 65 BMW 3 Series 66 Vauxhall Vectra 67 Isuzu Trooper 68 Mercedes M-Class 69 Subaru Legacy 70 Rover 400 71 Fiat Ulysse 72 Mercedes E-Class 73 Renault Clio 74 Toyota Celica 75 Peugeot 306 76 Peugeot 406 77 Volvo S70 78 Rover 75 79 Daewoo Matiz 80 Peugeot 206 81 Mazda MX-3 82 Vauxhall Tigra 83 Seat Ibiza 84 Peugeot 106 85 Renault Megane 86 Peugeot 406 87 Saab 9-3 88 Audi A3 89 BMW X5 90 Mercedes S-class 91 Toyota Corolla 92 Seat Alhambra 93 BMW 5-series 94 Daewoo Nubira 95 Alfa Romeo 145 96 Saab 900 97 Mazda MX-6 98 Jaguar S-Type 99 Daewoo Leganza 100 Porsche Boxster

If 3bodyproblem can show that GM averages as reliable as Toyota, I'll cheerfully admit that I'm wrong. I didn't see any GM cars in that list above, though. What did I miss?

 

[Francesca R]

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

 

[Francesca R]

Fail yourself. Sunk costs are sunk costs. Retirees are, by definition, sunk costs.

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.