My New GM Car

[we vs us]

http://www.bloomberg.com/apps/news?pid=20601087&sid=ailpRc0A.y1s&refer=home

Bloomberg sez:

Sales tumbled 48 percent for Ford Motor Co., 44 percent for Chrysler, 38 percent for Honda Motor Co. and 37 percent for Nissan Motor Co. GM said it plans to build 34 percent fewer vehicles in North America next quarter, and Ford announced a 38 percent reduction from a year earlier . . . .

. . . Sales of Toyota's Lexus fell 38 percent, Bayerische Motoren Werke AG's BMW dropped 38 percent and Daimler AG's Mercedes-Benz declined 24 percent last month as the sagging U.S. economy crimped demand for luxury autos.

That's a pretty awful market for just about everybody, Japanese (and German) producers included. So awful that the lion of the Japanese makers, Toyota, "may ask Japan's government for 200 billion yen ($2 billion) in loans for its credit unit as private financing has become too expensive, public broadcaster NHK reported yesterday, without naming its source."

Point being, no one's in recovery mode from this yet, especially as consumer spending has followed the trends of debt availability into the basement.  While GM needs to be judged fairly (and harshly if need be), this isn't an environment that allows a fair judgment. 

[nathanm]

Quality & Reliability are huge problems for US automakers.  Even if they are only perceived problems they still influence buying decisions, and have a huge impact.  Honda turns out efficient, powerful 4 cylinder engines that run for decades with minimal maintenance, and the American public knows it.

As you alluded to, it's generally more of a perception issue these days, but still quite the impediment to selling cars.

[Neptune]

But that doesn't really explain it.  Hybrids are a minimal sector of the market.  They are just now growing in popularity, and the investment costs are coming down to where someday the initial investment will be overcome by the fuel savings.  They got a huge bump when gas prices went up, but not so much now.

The big Toyotas and Nissans, and Hondas are still selling against their US counterparts.  But I think most people who own foreign cars will tell you that the important factors that influenced their decision were quality & reliability over fuel efficiency.

Quality & Reliability are huge problems for US automakers.  Even if they are only perceived problems they still influence buying decisions, and have a huge impact.  Honda turns out efficient, powerful 4 cylinder engines that run for decades with minimal maintenance, and the American public knows it.

That's another thing too.  I have two American cars currently, both GM's.  I've had Nissans and Toyotas.  I've thought both were better made.

I think when fuel shot up, that's when the tooling gap really became noticeable in part because of Hybrids.  But, back to EV1; that car was way ahead of its time, and GM simply destroyed all evidence of it.  The tech is available, GM owns it, but they decided to scrap it.  They don't have the ability to start producing cars like the EV1 on a mass scale.  They just turned their back on it.

You're right, Hybrids don't fully explain GM's problems.  I think you have to take into consideration GM's "mindset" in regards to most new technology.  They were making gobs of money.  R&D is expensive.  Retooling is expensive.  They wanted to make money, not spend it.  Given that mindset, I'm also inclined to believe that they're only interested in a "relative" level of quality.  Certainly they don't want their cars to burst into flames once it leaves the lot, but on the other hand, they want that car to come back for parts.  Japan's auto industry is more inclined toward durability and fuel efficiency.  As opposed to parts.

GM seems too interested in short-term health.  Something that would show up in their stock sooner, rather than later. 

[nathanm]

GM seems too interested in short-term health.  Something that would show up in their stock sooner, rather than later. 

You've just described the entirety of the American business mindset. I blame CNBC, day traders, the idiotic stock analysts who can't see past next quarter, stock options as compensation, and the rise of 401(k) plans.

People are far too focused on current stock price and not on long term performance.

[Red Arrow]

My father complained at least 25 years ago about the shortsighted products the businsess schools (MBA factories) were turning out.  I guess he was right and now they are running ruining the place.

[cannon_fodder]

Red Arrow:

You realize that those same MBA factories are running companies that are very successful.  That those MBA factories built many of the most successful companies around.  Infallible?  Of course not, but to pretend a basic business model is somehow a problem is naive.  Particularly in this macro context where much of the competition uses the same pool of top level labor.

Gaspar:

Quality has been a problem.  On the Consumer Reports most recent rankings GM and Chrysler are both at or near the bottom in most categories (Ford is now equal with Toyota, which gives further credence to their solvency).    The decline of "American Car" quality through the late 1970's and continue to today has a persistent effect on the market.

Likewise, when the good times were rolling the Big 3 spent money like water.  GM in particular bought all sorts of unrelated companies instead of diving in to their core products and improving them.  They built duplicate brands and a dealer network that was too large to sustain itself (need to feed the beast).  When they were in charge it was largely a supplier driven model - and they have struggled to get away from it (see: hybrids, SUVs, etc.).

Likewise, when they were making profits they made lavish promises.  To labor, to white collar workers, to municipalities, building projects - all sorts of things that did not improve the competitiveness of the product but added to the long term cost.  Today, they still have to write those checks.

More recently, they have been using automobiles as a loss leader for finance.  Selling cares at a loss - worse than giving them away.  And they did it for years.  The model was upside down but they insisted on sustaining it.  Thus, in our current economic downturn there has been a glut of new GM cars sold on 0% financing and at a loss over the last few years - so no one is really in "need" of a new vehicle.  They flooded the market with loss-leader sales and now demand is suffering because of it in addition to the downturn in the economy.

Long term. Short term.  They've failed in tons of ways.

[Gaspar]

Red Arrow:

You realize that those same MBA factories are running companies that are very successful.  That those MBA factories built many of the most successful companies around.  Infallible?  Of course not, but to pretend a basic business model is somehow a problem is naive.  Particularly in this macro context where much of the competition uses the same pool of top level labor.

Gaspar:

Quality has been a problem.  On the Consumer Reports most recent rankings GM and Chrysler are both at or near the bottom in most categories (Ford is now equal with Toyota, which gives further credence to their solvency).    The decline of "American Car" quality through the late 1970's and continue to today has a persistent effect on the market.

Likewise, when the good times were rolling the Big 3 spent money like water.  GM in particular bought all sorts of unrelated companies instead of diving in to their core products and improving them.  They built duplicate brands and a dealer network that was too large to sustain itself (need to feed the beast).  When they were in charge it was largely a supplier driven model - and they have struggled to get away from it (see: hybrids, SUVs, etc.).

Likewise, when they were making profits they made lavish promises.  To labor, to white collar workers, to municipalities, building projects - all sorts of things that did not improve the competitiveness of the product but added to the long term cost.  Today, they still have to write those checks.

More recently, they have been using automobiles as a loss leader for finance.  Selling cares at a loss - worse than giving them away.  And they did it for years.  The model was upside down but they insisted on sustaining it.  Thus, in our current economic downturn there has been a glut of new GM cars sold on 0% financing and at a loss over the last few years - so no one is really in "need" of a new vehicle.  They flooded the market with loss-leader sales and now demand is suffering because of it in addition to the downturn in the economy.

Long term. Short term.  They've failed in tons of ways.

Thanks, I was hoping someone would come through.

Why does a company spend so much time and energy developing horizontal profit centers, and give up on their core interests unless their is a flaw in the core business that prevents them from achieving innovation?

I understand businesses diversifying as a means to capture new market dimensions and using the leverage from their core business to do so, but GM and many of the others literally abandon the core for easy profits elsewhere.  Could it be that every change, every innovation, every increase or decrease in production was met with outside scrutiny, resistance and months of negotiation and litigation?

If an improvement to your product costs an investment in a new jig for only $1,000, but you know that it will require a change in labor that will trigger millions of dollars of in negotiations do you make the change or do you focus on something else?  After all your consumer has become numb to the crooked tail pipe.

Perhaps doing business as a manufacturer became too much of a burden for them.  So they turned over the reigns to the very people who demanded control, suspended any effort to improve that would be met with resistance, and focused on other things.









The question is:  "Is this behavior worthy of reward?"

[nathanm]

Thanks, I was hoping someone would come through.

Why does a company spend so much time and energy developing horizontal profit centers, and give up on their core interests unless their is a flaw in the core business that prevents them from achieving innovation?

I understand businesses diversifying as a means to capture new market dimensions and using the leverage from their core business to do so, but GM and many of the others literally abandon the core for easy profits elsewhere.  Could it be that every change, every innovation, every increase or decrease in production was met with outside scrutiny, resistance and months of negotiation and litigation?

If an improvement to your product costs an investment in a new jig for only $1,000, but you know that it will require a change in labor that will trigger millions of dollars of in negotiations do you make the change or do you focus on something else?  After all your consumer has become numb to the crooked tail pipe.

Perhaps doing business as a manufacturer became too much of a burden for them.  So they turned over the reigns to the very people who demanded control, suspended any effort to improve that would be met with resistance, and focused on other things.









The question is:  "Is this behavior worthy of reward?"

Much of GM's non-core businesses were company-owned suppliers that ended up branching out into other profitable fields. Hughes and Delphi are the two big ones I'm thinking of.

Vertical integration has been going on for a long time.

[Gaspar]

Much of GM's non-core businesses were company-owned suppliers that ended up branching out into other profitable fields. Hughes and Delphi are the two big ones I'm thinking of.

Vertical integration has been going on for a long time.

Great examples.  Both were union shops that were held hostage by the Union until they were destroyed or bankrupt.  Delphi is the worst example of how the power struggle can implode an organization.

I'm talking of the company's horizontal pursuits into the world of finance, insurance, and other profit centers as a means to escape dealing with the unions.  They abandon their core, they abandon their vertical pursuits.  By the time they reacted to what was going on in their own shops and on the floor at Delphi, it was too late.

I ask again, do we reward this behavior?

[nathanm]

Great examples.  Both were union shops that were held hostage by the Union until they were destroyed or bankrupt.  Delphi is the worst example of how the power struggle can implode an organization.

I'm talking of the company's horizontal pursuits into the world of finance, insurance, and other profit centers as a means to escape dealing with the unions.  They abandon their core, they abandon their vertical pursuits.  By the time they reacted to what was going on in their own shops and on the floor at Delphi, it was too late.

I ask again, do we reward this behavior?

Again, finance and insurance are arguably vertical integration of the automotive product. Why let somebody else make the money on the financing? Why let them make the money on the insurance?

[Gaspar]

Again, finance and insurance are arguably vertical integration of the automotive product. Why let somebody else make the money on the financing? Why let them make the money on the insurance?

I stand corrected.  It would be considered vertical, just outside of the supply line (as it's related to the manufacture of vehicles). 

[nathanm]

I stand corrected.  It would be considered vertical, just outside of the supply line (as it's related to the manufacture of vehicles). 

You are correct that it doesn't make much sense in this economic environment but as with so many things, "it seemed like a good idea at the time."

[guido911]

Well, we are finally in full facism mode. Our government is now telling the CEO of GM to resign:

http://www.politico.com/news/stories/0309/20625.html

[we vs us]

Well, we are finally in full facism mode. Our government is now telling the CEO of GM to resign:

http://www.politico.com/news/stories/0309/20625.html

Let me fetch your fainting couch and some spirits of camphor!  Lawdy, lawdy . . . Guido has the vapors!

On another note, I'm glad to see that the owners of GM are finally starting to flex a little muscle and hold management accountable.  The owners, of course, being We the People.

[guido911]

Let me fetch your fainting couch and some spirits of camphor!  Lawdy, lawdy . . . Guido has the vapors!

On another note, I'm glad to see that the owners of GM are finally starting to flex a little muscle and hold management accountable.  The owners, of course, being We the People.

I was wondering how long it would take the first Obama waistbander to come to his defense.