Food for Thought: Automotive Downsizing and How it Could Affect the Economy
You see a lot of discussion in the news – and even in the comments of this and other blogs – about the state of the domestic auto industry and what the current economy means for the industry’s future. Some of you have even expressed the belief that this is something GM and the US industry brought on ourselves, and that the domestic industry should be allowed to fail. “So what if Detroit goes down,” the thinking seems to go. “It doesn’t affect me.” However, the reality may very well be that it does affect you.
The Center for Automotive Research has just released a study that examines the potential ramifications of two scenarios involving significant downsizing of the Big Three, and what such a development could mean to the larger economy. We didn’t write or fund this report… but we thought that you should see it, because it might make you think of things you hadn’t before. - Christopher Barger, Director, Global Communications Technology
- Posted in Business
Gerard
I am glad the FastLane team displayed this study. I pointed out John McElroy’s defense argument and the Detroit Three’s integral part of US industr before. One variable is the social impact of having three large, historic enterprises (that played a role in making America a superpower) collapse and bringing down millions of jobs and billions of dollars. From an objective global view, this would fuel the adversarial perception that the United States is in decline. A central part of its business economy would be erased. What about a military emergency? Where would the facilities or experienced mechanical labor be if America was pushed into global conflict?
I’m not excusing GM, Chrysler, or Ford (or the increasingly hated UAW) for poor judgment and short-sightedness. For General Motors especially, I am upset by some foolish acts that defy logic. I believe by expressing these points, management can understand why there is such frustration from the buying public and from a growing number of enthusiasts. To simplify it, the General has alienated both sides. I would like to further the points behind this:
1) It’s clear GM bureaucracy is still bloated, with many of its products and brands overlapping. I do not understand why GM made the choice of adding another large rebadged crossover, the $29K Chevy Traverse, to compete with the Saturn Outlook and GMC Acadia. Not only that, the Traverse’s high price, large size, modest fuel economy, and sheer girth is not what Americans are looking for. Even if a buyer was considering a large vehicle, why buy a $30K crossover when you can find a heavily discounted SUV for $7,000 less? This is why the Flex, Journey, and Edge crossovers have gone nowhere.
2) I initially refused to buy into the “merger” hysteria, but it appears that a merger idea is being conceived. Has anyone looked into the history of business mergers? From AOL TimeWarner to DaimlerChrysler, they have been disastrous. To have two of America’s three major carmakers unite (with help from the state) sounds too much like British Leyland. The Fiat plan GM was embroiled in was beyond idiotic and wrecked the company’s business judgment in the minds of thinking Americans. This Chrysler plan is just another costly error–one that taxpayers should oppose. Do not request federal assistance on certain disaster.
3) The General is, sadly, a sluggish P.R. nightmare. When gas prices surged mid-decade, GM opted to terminate the EV1 support program (which was fair) and put its emphasis on its new line of full-size SUVs and pickups. This fell right into Toyota’s court with its updated Prius. The Prius became both a fashion statement and a culture icon for environmentalism, as opposed to the Explorers, Hummers, F-150s, Tahoes, and Rams we saw from Motown. Then we have the Chevy micro-car triplets. All of the gimmicks and hype GM put into promoting these to Americans…for what? An announcement they were scrapped because of NHTSA guidelines? It was a waste of GM marketing dollars and Americans’ attention. Don’t get people’s hopes up to let them down.
4) No one cares about some unknown association’s award or air-powered Saabs. FastLane was supposed to be execs’ way of communicating with the public. Don’t wait two weeks, ignore public questions about business activity, and then release some pointless topic about a concept that’s never going to be made.
5) Finally, what is GM trying to achieve? What is GM doing to appeal to frugal customers turning to Asian imports? What is GM doing to keep loyal enthusiasts? These questions can cover a broad range of company errors, but I’ll settle with Pontiac. Bob Lutz seemed fond of restoring Pontiac to a performance division. Then word hits the Web that it’ll abandon rear-drive in the next decade. The only interesting products, the G8 and Solstice, are said to be the last of their kind. Hate to tell you this: no one wants a front-drive Pontiac. That’s why the G5, G6, and Torrent never took off with buyers or critics. Now news reports state a future G6 will be delayed. Where is Pontiac going? I see Buick and Saturn in worse condition, but I think Pontiac’s dilemma in purpose and direction properly displays the General’s own deficiency. As a car lover, when I see entertaining vehicles being axed, I see GM losing the one link it has to its fans.
The more I think of these problems, the more I lose empathy for the General. I hate to say it, but GM did bring a lot of this on itself. These current and coming decisions show that. GM can save itself and prosper, but that would require drastic action that I don’t believe its executives, certainly not the UAW, are willing to commit to.
I am one potential customer wanting a small economy car. What do I think of as choices? Sadly, the sporty Honda Fit, well-equipped VW Rabbit, and the all-wheel-drive Suzuki SX4. I’ve repeated that I wanted to appreciate the Saturn Astra, but driving it with its primitive automatic transmission and underpowered engine makes me feel as though GM wanted it to fail. Where did those dollars saved from the Astra’s importation go? The Traverse? The G3?
James Whitehead
While nobody likes to witness the demise of GM, to think that you didn’t bring this on yourselves is plain rubbish. GM squandered the market share it once enjoyed in this country by allowing the beancounters to cost cut your products until the perfformance, reliability, and “gotta have it” factor was completely gone. You allowed the Japanese car makers to eat your lunch, and continued in your old ways, all the while burying your heads in the sand and whipping up the marketing spin instead of fixing your problems. You destroyed the almost blind trust that American’s placed in your brands. You turned a generation against you.
Twenty years later, and cost reductions continue to be your #1 focus, instead of great products, excellent reliability and uncompromised performance. And you wonder why your business continues to decline. I don’t have to read the story - I have lived it. And GM - you ARE at fault, whether you choose to believe it or not. I really hope it works out, but you do not deserve a bailout.
Some Guy
Fist of all, I’m Canadian.
It’s annoying how the “artificial” gas price hike caused a domino effect, leading to the the fall in car sales, real estate values, and the stock market… and not just in America… it’s now spread around the world.
GM was just getting its mojo back with great new products… and now this financial mess happens! Hopefully Obama will have the charisma to get the nation working together and back on track. Encourage manufacturing in your own country, rather than importing products with lead and melamine. Maybe if America would stop wasting time in “artificial” wars like some depressed schoolyard bully trying to hide his low self-esteem, but instead engage in making the world a more positive place, Americans could all finally stand proud about their country and start to again view American made products as symbols of success and desire.
Products built at home keeps money at home, rather than sending it overseas. If only the media would stop praising imported products simply because of the name. BMW? Pffft. My cousin who has had two simply buys them because they fit her “successful lawyer” image. And she’s not the only one. She comes from a family that always pays a premium for their consumer products. They never took advantage of all their features, but they helped fill some empty void in their lives. How ridiculous.
Chris R
I’d personally hate to see GM go the way of the dodo. However, GM in it’s current form cannot last in my opinion. The culture and structure is all wrong. GM needs to be like Chrysler in the early 90’s before that supposed merger with Daimler. Mr Lutz I’m sure remembers how it was. He was a big part of Chrysler at the time, and I’m sure was as upset as the rest of us when Chrysler was essentially sold to the German company. GM needs to get rid of a bunch of excess and get back to basics. A business formula and structure that is solidly about making truly great automobiles. Actual auto execs running the divisions rather than former or current marketing people. A culture that does not see Chevrolet as a brand, but as a company within GM and does not see Malibu as a brand but as great cars. Brand management failed a long time ago in the auto industry. The products are much to dynamic, they change much to quickly and need a much different management style. Please let go of brand management before you kill GM with it.
GM needs to be much more flexible, and faster to market with these wonderful new cars that i know your designers and engineers are just dying to make. That way, when you have an awesome new car to tell us about, it will only be two years out rather than three or four. Not enough lead time for the competition to be ready with a counter.
jg
GM could easily sell more cars.
1. Why is it OK to offer so many more Buicks in China than the U.S?
2. Why can’t the Regal be offered here?
3. The name Invicta is hot, why not use it?
Cad Johnson
GM needs cash, cash flow is the key for survival through 2009/2010 before big savings starts to kick in. But more importantly, GM needs to develop strategy on how to get cash in this period, here are some thoughts:
1) Borrow money from future. Delay product development on all platforms except those absolute critical ones - Volt, Cruze.
2) Expand use of plug-in electric vehicle technology to apply to other existing platforms, to qualify the maximum loan from $25B congress approved aid.
3) Don’t sale the Chrysler merge idea to congress who worry about job losses. Instead talk to them about providing GM with aid as stand alone package.
4) Search outside investor. The Chinese may be interested in partial ownership of GM, as long as don’t give up board seat (eg.Chinese investment in Morgan Stanley - 10% without a seat). If government doesn’t like that (due to foreign policy), then ask government for aid. They can’t have a cake and eat too. Invite deep pocket and ambitious SAIC & FAW to invest in GM.
Nelson
I’m not going to write about what GM did or didn’t do to get themselves into this mess. I will say what I would do if I were in charge at GM.
I would start selling the Two-Mode Plug-In VUE and stop production on all other VUE models.
This would make it easier for a buyer, who is looking to buy a fuel efficient small SUV, to make a decision.
Beaugrand®™©
I live in Indiana, an important automobile manufacturing state (I think we’re about #3). I’ve already been affected by the car industry’s problems. It’s been a major concern for nearly 40 years, as manufacturing jobs have vanished.
At the heart of the domestic automobile industry’s difficulties is inadequate product. Detroit abandoned segments of the car business long ago.
Because of the economic downturn, all car and light truck manufacturers are suffering, but recovery is going to depend hugely on offering product that people want and can afford to buy. I don’t believe GM can afford to ignore any part of the car industry, especially the high-volume, low-margin economy vehicle segment. These kinds of vehicles MUST be made here, if GM is to survive as a manufacturer, and not simply as an importer of Asian-made product.
Yes, GM has made some bone-headed decisions in the past. I think we should get past that and focus on the present, and on the future.
You need to make vehicles that people want and can afford. (I’ve made many suggestions here, as have may others).
Your present product line has to be made more efficient (I’ve also suggested this before), initially by using existing technologies (”taller” gearing; remapping electronics chips; smaller displacement engines; 7, 9, even 10 speed automatic transmissions; Miller-cycle engines; lowering aero CD to under 0.19 for all vehicles).
The bureaucracy has to be made leaner. I think a government (or other form of) bailout would insist on this.
The “design cycle” has to be made shorter (I’ve suggested how to do that), so that new product can be brought to market more quickly, in response to changing demand.
Overlapping brands and models need to be eliminated. Brands must be made distinctive (I’ve suggested how this could be done, with platforms unique to each brand, yet sharing common components).
Bring back the GM minivan…
Matthew
Let me tell you a story. I have a picture of me and my dad with his first car, a 1955 Chevy. Its here in my office. I was about a year old, and the car is 5 years old.
My dad had a new 1965 Buick LeSabre. A new 1969 Buick LeSabre. A new 1973 Buick LeSabre. My first car was a used 1970 Olds Cutlass. I loved GM.
I recommended to my dad that he looked into a 1980 Pontiac Phoenix (front wheel drive X-Car). It was the biggest piece of garbage ever foisted on the American public.
I loved the comparison of the 1950’s Cadillac vs the 1980’s Cadillac on the CNBC show “Saving GM”. GM lost their way with quality and value. Instead of building quality it tried to just say that it had quality. It did not build quality cars for many years and you know it. Bob admitted it on TV.
I might consider a new CTS Sedan (it looks gorgeous) but the Toyota Camry and Prius are the gold standards of family sedans, along with the Honda Accord. You have an uphill battle to convince America that the Malibu is a good as either.
My father, the loyal GM buyer for many years is still so mad about that 1980 Pontiac that he has only owned Honda’s since then. And you know what? I can’t blame him.
Finally, can you do me a favor? The Volt looks great. Get it done already. But don’t you dare release it isn’t ready. Don’t go the way of that 1980 Pontiac Phoenix. If its junk, and won’t last more than 3 years, and the headliner sags, and the paint has to be redone at the dealer, or the battery technology isn’t quite good enough - you will lose another generation of buyers.
PS. I agree with your thesis that GM is too big to be allowed to fail. But when you take our tax dollars in a bailout - please fix the union problems, and the management bloat, and build great cars. And I might even buy one.
Sheth
james whitehead:
Your assertions are totally off base and I suspect you have little clue about GM’s products. It’s amazing how those who know the least about GM’s portfolio are the same people who have the most to say. GM’s current products are the best they have ever made. Self annointed auto experts tout all the tired stereotypes about GM products but they are untrue. I have heard them all: no fuel efficient products (lie), no products people want to buy (lie), no investment in cars (lie), low quality (lie), etc. GM is currently paying the price for decisions made by past management teams and a severely contracted credit market. Contrary to popular (and ignorant) belief GM has invested money in competitive cars (see CTS, Malibu, Aura, Corvette, G8, etc.) and fuel savings technology. GM has put out more hybrids and cars equipped with direct injection engines in recent years than anyone else.
The other factor that no one wants to touch is the increase in competition. While everyone is quick to cite marketshare drops no one mentions how the North American market is one of the most open in the world. Only Europe’s market rivals this one in terms of the intense competition. The primary reason GM has lost share is that Toyota, Honda and Hyundai have become full line manufacturers. For decades that concentrated in small and medium sized cars but within the last 20 years they have expanded to pickups, SUVs and luxury vehicles. GM could not hold on to their share under any circumstances. While Gm should have done many things differently it is foolish to suggest that the increase in options for consumers wasn’t going to lead to more parity in the US auto market. As consumers it would be stupid for us to hope for GM’s demise. Who wants less options? In addition to the thousands of job losses we would be faced with fewer choices, fewer dealers to compete on price and higher prices cars. Does anyone really think that Toyota, Honda and Ford wouldnt be able to raise prices if their largest competitor goes under? Does anyone think that those brands would simply expand to replace all the shuttered GM dealership?
People here need to get real and recognize that no economic superpower totally relies on foreign countries to build it’s cars. In Japan the overwhelming majority of vehicles are sold by Japanese automakers. They do not have an open market like we do and US and European automakers have virtually no presence there. Conversely the US market has been wide open to the point where Japanese automakers sell more vehicles here than in their home market. It would be OK if US automakers were exporting vehicles to Japan but that does not happen. We have a one way relationship and the US is the only one losing as a result. Allowing US based auto manufacturers to fail while offering hundreds of millions in subsidies to foreign automakers whenever they offer to build a plant is ridiculous and it would never happen in another country.
Dale
What the domestics problem is as old men running the companies and missing major markets.
Trucks, Minivans, Suv’s, even large crossovers are dead. Huge gas guzzling dino’s just like an Olds 98 was in the 70’s. Whats hot 5 doors or mini wagons like Matix, Impreza, Mazda 3 cars that have utility and are the right size. I know you have the vibe but that is it and it’s truly a Toyota and yes the Astra is a home run but has the wrong badge to be successful. Heck I think that would have worked out better as an Opel you might as well convert all Saturn dealers to such a branding. Mini cars like Yaris, Fit and look at the popularity of your Korean Aveo. Small cute utes like Patriot, Rav 4, Forester or CRV. Sorry Equinox don’t count it looks huge compared to the others. It just seems it is 1975 all over again and you didn’t learn and you don’t know how to market the good small cars you do have heck it took 2 days to get a key for my Optra when I had it. Instead it is shoving Cobalts out the door and bringing out the Cruize. 1st dum name second where is the wagon or 5 door missed the boat again. Hire a few 25 to 40 year olds instead of 45 to 60 year olds.Thats the problem with GM.
john
I think that the problems are everyone’s problem.
Yes, American cars built twenty tears ago left alot to be desired for quality, but this is no longer true.
American cars are built as well or better than many foreign cars.
The UAW was greedy and lost it’s real purpose. Fight for good work conditions, fair salaries. Not overly paid, benefit rich, jobs that when laid off have a jobs bank. What industry can sustain this type of handout.
This does not include Rick Wagoner , but previous CEO’s of GM made horrible decisions on running the company.
National Security includes a stong manufacturing base.
WWII would have turned out differently without the BIG 3.
I believe all these problems are fixable but the companies and UAW must work together to make it happen because the past is the past and WE NEED OUR AMERICAN AUTO INDUSTRY.
IF YOU THINK AMERICA IS BETTER OFF WITHOUT THE BIG THREE. YOU ARE MISTAKEN.
Tomoe1
I have been digesting tons of articles/studies, including this blog, regarding what’s wrong with GM, the car industry as a whole and many Monday morning quarterbacks with what GM needs to do to right itself. For the record I do have a vested interest as my livelihood is linked to the auto industry.
I agree with Beaugrand that GM’s decisions and handling of certain events in the past is just that, in the past. Anyone with a bit of patriotism will take pride in something that was designed, manufactured, sold and consumed in their own country, and this coming from a Canadian. GM and the auto industry needs help right now. Will the execs at GM, the head and members of the UAW learn from their past mistakes? Well I would like to think so - - this is now a matter of survival and not blaming each other or lining one’s own pockets with cash.
GM and the union needs to make some tough choices ahead. For sure it won’t be palatable to the majority but that’s what is required if GM is to survive (although as a pale comparison of it’s former glory days).
1. no to unions (if bankruptcy is what it takes to do it…so be it)
2. GM is made up of multiple brands and that’s got to go. Pick the highest, most recognized brand (and GM is a brand), and manufacture cars under that one brand.
3. In addition to 2) above, pick the best vehicle in each vehicle segment and produce just that vehicle well (limited trim availability is acceptable).
4. Call upon Government to allow the new company (point 2 again) to sell and service vehicles direct to the consumers. This will provide much needed competition among the dealer ranks.
5. Thin the herd of dealers. Some will leave on their own accord, others will need to be prodded. If they cannot meet minimum acceptable levels then their dealership can be revoked.
6. Government, GM, UAW and the public have to believe in the plan to get the domestic auto industry working again.
My 2 cents.
Sheth
To all:
Lets stop beating the “eliminate brands” dead horse. Closing up Olds cost GM a lot of money and they cannot afford to pay off dealers if they close other brands. GM has already said Pontiac/Buick/GMC are basically one brand. Also, there is no evidence that eliminating Olds did not cost GM sales. People here assume that everyone who currently owns a car made by the cancelled brands will simply flock to other GM brands but there is no historical evidence supporting that notion. GM needs more sales, not fewer brands. Unfortunately consume confidence is low and credit isnt as readily available so people are not buying the competitive vehicles that GM offers today. If GM cant get the money it needs today they wont be able to bring us the vehicles we are anticipating like Volt and Cruze.
“At the heart of the domestic automobile industry’s difficulties is inadequate product. Detroit abandoned segments of the car business long ago.”
Can you support that statement? The Malibu, Aura, CTS, etc. aren’t cars? When people make these oft repeated statements about GM “abandoning the car market” I would like to know how they came to that conclusion. It’s true that GM spent a lot of capital on trucks in the 90s and 2000s but they never stopped investing in cars. GM’s recent round of new cars can stand toe to toe with anything from the import manufacturers.
Sheth
“PS. I agree with your thesis that GM is too big to be allowed to fail. But when you take our tax dollars in a bailout - please fix the union problems, and the management bloat, and build great cars. And I might even buy one.”
GM has already “fixed” the union “problem” and savings kick in by 2010. I don’t know enough about GM’s number of managers to verify “bloat” but I would assume that they have been making cuts and will continue to do so. You cannot completely eliminate management if you are trying to survive and thrive in this market. GM is building some great cars. Check out the reviews of the CTS and CTS-V as well as ZR-1. The Malibu has done pretty well with the auto media as well. While there was a time when we could accept that GM may not have been committed to great cars that time has passed. The G8, Cobalt SS, CTS, ZR-1 and Malibu are vehicles designed to compete with the best of the best. The G8 GXP, Camaro, Cruze and Lacrosse look VERY good and I hope to see them make it to production. Companies that arent committed to building great cars don’t produce vehicles like the CTS-V and ZR-1 and Camaro. If you are suggesting that there isnt ONE GM product that you would buy in 2008 you must not be willing to give them a chance.
Dave T.
There are a few important points:
1. Clearly the Detroit 3 all can’t be allowed to fail. The impact will be just too huge.
2. However, I don’t think Chrysler should be included in the loans/bailout if their ownership is just planning to shutter the company anyway.
3. GM is obviously too big to run efficiently. Heck, I can’t tell you how many people we have to deal with and often still don’t get good answers out of anyone. Although that’s better than the other two when you deal with just one person who doesn’t get you answers
4. If Chrysler disappears I can see GM keeping most of its brands. But obviously Hummer, Saab and perhaps Saturn will have to go.
John R
IMHO
GM it is your fault, you allowed quality to go out the window by the fact most parts in your cars are NOT from the USA or even built in the USA.
Take the Corvette, engine made in Mexico ?
Transmission, Mexico,
Transaxle, Germany
Tires, no longer American
Electronics, seats, etc, Japan, China
So now you have failures from non American workers and vendors and then allow your name to be dragged in the mud along with Americans seen as bad workers when you imported the bad quality.
Then when the Non American products fail you blame it on your own customers
Good example in 1994 I paid over $60,000 for a ZR-1 Corvette.
The first one brand new the dealer blew the engine up and I had no choice but to lemon law it.
Second ZR-1 which used a German transmission had a common problem with the syncros. Mine had a slight problem on this, GM voids warranty saying since the car only once was drag raced ( wow ZR-1 and sold to be used in carshows
which had nothing to do with the design flaw cost me $5,000 for a rebuilt transmission plus they kept the orginal one.
This is how GM treated a customer who had bought 12 Corvettes since 1974, plus the profit GM got from the GMAC loans, plus many other GM cars / trucks since 1968 to present.
GM is more then happy to kill off US jobs where the plants existed and then pay to build plants worldwide for non American workers and then wonder why we are saying you made your bed now sleep in it.
GM if you want Americans to buy your products start being loyal to long term customers, American vendors and workers and your quality issues will be greatly reduced.
Instead of marketing via a pro golf star, go back to doing 1 hour TV spots showing what the new models are and what the pro is to buying American product.
Got out of paying for actor award shows and more about we the Joe the plumbers who made you a success in the first place
Lastly it is about time GM takes a big stick and cleans up the dealer mess as most GM failures occur by the dealers picking up a screwdriver when they cannot chew gum and walk at the same time.
Joe
I to have read and heard enough bad news about the entire industry, and also am perplexed by the wisdom or lack of it spewed out from all corners. What I have not heard is how to rationally fix the problems. But first we must examine how the problems came about. And there are endless explanations, however, the foundation has to identified. In that be we live in a country with a free enterprise system and market economy. In my experience it has been civilizations fault for all of our dire circumstances.
First we were an agrarian economy, then the industrial revolution hit, finally the technical evolution emerged. As a civilization, we are always striving to make things better, faster and cheaper. I believe what has happened is that we are at the end our string of success with the information age in maturity. So it seems that there are natural tendancies which in the end bring about obsolescence. America’s finest hour has past and the torch has been handed to China and India, where people are now enjoying the same economy we had as a nation following the end of WWII and during the age of modernization.
Technology has made our lives easier, safer and longer. What the negative results from is the vast amounts of wealth created and sought for continuously. That leads to investing in ways to make more from less. A natural thought from economics. What the downside is, is that we have had to leave our borders to do so, finding ways to pay cheap labor to do the work once dominated by people here, but taken over by machine because frankly the work was dangerous, dirty or plain dumb. Blame technology! Same thing for every industry with exception of the services; Law, Health, Education and Infrastructure. Something had to give once we adopted the notion that modern is better. And that society benefits from leaps in technology. Think its all wet thinking? The US Airforce is in the middle of developing the F35 Fighter which basically does’nt need a pilot! Blame that on all those kids who were told that math and science was the foundation for a good education and future career pursuits!
Yes our auto industry is in dire straits, but it isn’t simply the fault of ‘Old Guys’ making decisions, it’s a whole lot of issues which affect our entire society, it’s also that the Auto industry happens to be one which affects many jobs in many industries accross the tapestry of these ole United States, therefore the pain is felt all around. We just need to figure out ways to create a new economy which utilizes the foot print of the ‘Domestic’ Auto industriy, which made this country hum with jobs and expansion not seen since the 1950’s that employ people at a good wage until that to becomes saturated and obsolete. By then we should be living on some kind of social pension or whatever is available if we lose what our parents had before! Remember without the Big Three, who knows how we would have won WW2?
In conclusion the auto industry domestically cannot simply go away, too many people depend on it, and we will always need transportation to continue living with the choice of travel.
d wagner
Bet you sure wish you would have kept the blueprints to the electric car. Who killed the electric car and don’t you wish you would have had it now?
SteveG
I believe the Feds need to infuse GM, Ford and Chrysler with cash immediately.
However I also think GM and Chrsyler need new CEO’s. Mullaley is the only one who ‘gets’ it.
Look at GM:
Instead of coming out with an improved Cobalt, a car that you spent 5 years building up, you change the name to Cruze (ugh). That move alone would prompt me to deny GM cash for a bailout on the basis of the sheer stupidity of the move.
Saturn needs to be killed off. Opels should come over here as Buicks-We should also be getting the Insignia-Regal. Not just China. The Astra can come over as the Buick Skylark. Buick has a reputation for quality here-they just need better cars. LaCrosse? Lucerne? Dump those names and go with Regal and Park Avenue or Invicta or Electra.
Pontiac? If it stays just go back to rebadged Chevy’s which it looks like you are doing anyway-just please ditch the ‘G’ names. If the G8 were the Grand Prix sales would double.
Bring over new cars at the same time as Europe, not a year later. For crying out loud the NA market is dying, why the hell are you not bringing new product here ASAP!?
Don’t wait for the 1.4 turbo before selling the Cruze (ugh) here-just drop in a direct injected 2.2 Ecotec. The turbo can come out later as an option.
And DO NOT call it Cruze!!
Get your act together, GM.
Alex
I am afraid that the news about the trouble of the domestic car companies has a cascading effect similar to the banking and real estate markets. In other words, when people hear about the financial state of GM, they may avoid buying a GM car fearing that if the company goes bankrupt, they will get stuck with a car that will have very low resale value. This in return causes more trouble for the car maker and accelerates its demise. It is a nasty situation that is very hard to deal with. Of course the company is ultimately responsible to get itself out of this mess. But government and consumers can help. The government can help with some of the R&D expenses of the company. Consumers can help even more by going against their instincts and seriously consider domestic cars when purchasing a car, and stop foolish nitpicking. This should not be very difficult because GM and Ford make really good cars these days. If the consumers don’t get involve, they will soon feel the pain when near 3m domestic jobs are lost!
gmo
To Sheth:
About the Japanese car market - The reason the American car makers have failed in Japan can also be because.
The Japanese car makers make special cars for the American and European markets, but the American car makers does not, example:
Japan has taxes and customs by the size of the car, Japan is crowded and big cars is something they want to avoid. Cars sold in Japan are hence a lot smaller than those sold in the US. Do GM and Ford develop small cars specifically targeted for the Japanese market, and produce them in Japanses factories?
No.
James Whitehead
Sheth,
It’s interesting to see your obvious passion for GM - no matter what. But you can’t ignore the countless stories time after time after time where people have had really bad experiences with GM cars and trucks. GM WAS a very large company and MANY people got to experience first hand the products that GM built back when they were a very large company. And MANY people got burned by GM and never looked back.
Can you dispute that GM’s #1 priority isn’t cutting costs? Spend some time in Michigan, and ask any GM employee and they will tell you that it’s all about survival, and they have been in this mode for a long time. Cost is the #1 priority and it has been for the past 5-10 years. Do you want to buy from a company that is constantly looking for ways to make the car cheaper instead of more reliable, or with better performance and features?
And I don’t buy your argument that GM’s market share suffered simply because there were more choices. People didn’t start buying Japanese cars just because they were there. Some folks like my Dad who swore he would NEVER buy a Japanese car were pushed there because of the very poor build quality of GM cars and trucks. Again - same tired GM mentality - build it for as cheap as you can and hope nobody notices. People moved away from GM after getting burned. Yes and to your point there were far more choices and I will add that were better built, far more reliable, had features that worked and didn’t fall apart, paint that was free of orange peel, higher quality switches and soft touch plastics. Great products at a good value - that was not GM.
Has GM gotten better - of course. But don’t think for a second that they are not responsible for the demise of their business. They continue to pay for the mismanagement and subpar quality from the 80’s and 90’s. Do you think for a second that they would be in this predicament if their focus had always been on delivering a high quality and reliable product at a fair price? Do you think maybe they should focus on that now instead of cost reductions?
You’re on a sinking ship called General Motors Sheth, and you can keep telling yourself that it’s not sinking, and shouting to others that it’s not sinking. When the bankruptcy is filed, and this blog gets shut down, and you have to find something else to do, remember those of us that did have a clue.
Noel GM FOREVER
I am a Chevy dealer employee.I have been at this for 22 years. I am deeply scared for my job now more than ever.I am also deeply dissapointed that GM didnt keep up with the imports. GM,you should have an answer to the Prius. I still dont understand why you let Toyota walk all over you. I know you were giving the public the SUV’s they demanded but you should have had a back up plan in cars as the other companies did. Now we are all suffering. My dealer,who is the largest seller in the area,went from selling 125 cars/trucks per month to 25 per month. A lot of dealers are going to close this year.We have been here since 1955. I only drive GM cars and will continue to do so for as long as I can. There is a lot of blame,GM fatcats,Unions, the public buying imports………I dont want GM to fail obviously, as this is my source of income. It seems to me that GM is headed for bankruptcy.I wish GM could get a bailout…..but what then?? Business as usual?? Burn through that cash?? You need to get the respect of the american people who foolishly support the Japanese economy by buying these imports. I want GM to succeed. I am nervous as hell though and am looking into another career if possible.But after 22 years,its all I know. How or why we ever let the imports get a foothold in our economy is beyond me. That was one nail in the coffin. Maybe a downsizing in the corporation area,I am sure there are plenty of GM uppers making millions who should not be. As said,a lot of GM dealers are going to close and its a shame. If GM closes up shop,it will be a huge and horrible impact on the economy.
I hate to point fingers but GM….you really should have seen this coming and you should have changed your ways. I watch tv,GM’s marketing sucks in plain english. I hardly ever see a commercial for the cars. Toyota,Honda,Lexus,…..see them all the time…..GM…nothing….
I really hope you can recover somehow……but it is looking dismal right now. At my dealer,its very depressing right now. Car sales are awful……people are getting laid off every week and there is NOTHING out there as far dealer jobs anymore.
Buy American…………..I do. No more buying imports people.Time to support our economy more and not the Japanese economy. GM cars are just as good if not better.
Beaugrand®™©
“Can you support that statement?”
I don’t have to. GM brass has better access to car sales figures than we do, and it was to GM brass that my comments were directed, not the cheerleading section.
“The Malibu, Aura, CTS, etc. aren’t cars?”
Some of those are well-made cars, and would have been very competitive 12 years ago.
“When people make these oft repeated statements about GM “abandoning the car market” I would like to know how they came to that conclusion.”
Look at a GM brand new car lot- overflowing with highly rebated SUVs they can’t sell, and nearly devoid of economy cars. Compare that to any import lot. Lots of big “American” SUVs in the used car “trade-in” section, lots of shiny new economy cars in the new car section.
Just about every time I set foot on a GM car lot, I’m steered toward the big SUVs and pickup trucks. When it comes down to the actual sale, GMAC financing is biased toward the SUVs with the hefty “rebates,” and nearly impossible to get with the “economy” models. Coincidence? I don’t think so.
Quick quiz question- where would I go to look for economy cars? The lot full of SUVs- or the lot full of economy cars?
Noel GM FOREVER
Oh….and in the fuel economy crunch and current economy crisis,just want to say thanks for sending us Chevy dealers a Traverse to sell…..nice truck……but $40,000??? Are you high?? Thanks for giving us something that consumers dont really want right now. A fully loaded LT is on our showroom floor for a whopping $46,000!!!! WHAT????
Get rid of Saab……dump Buick…..maybe Saturn…..stop building the same car for each line….ie: Equinox,Torrent,Vue………Enclave,Acadia,Outlook,Traverse.
It does not work. Get rid of GMC and just sell the Chevy truck….If people want a Denali package,offer it in the Chevy line as an option. Do we really need a $70,000 Escalade!!!!!???? Dump it.Most people driving them these days are people who cant even afford it anyway. Putting themselves in debt just show off is a part of how this country is in this finacial crisis…..overspending and not being able to afford what they buy.
Joe
Thanks for this…some food for thought, indeed.
I’ll be spreading it around.
Take Care
Sheth
GMO:
Gm and Ford make market specific products in Europe. This is common knowledge. if the Japanese market is open as you are suggesting why havent they been able to set up shop in Japan and sell product there? They do it in Europe, Latin America, China and Australia. Why don’t you explain to me they Japan is the only major industrialized country that has virtually no foreign automaker presence.
beaugrand:
Your statements show that you havent done much research on GM’s recent products. The CTS was MT Car of the Year and the Malibu was a finalist. The Malibu and Aura won North American Car of the Year as voted by industry journalists. These are not cars that are 12 years behind the Japanese competition as you suggest. The materials, design and finish of the Malibu are superior to that of the Camry. Trust me, my mother in law owns a Camry and I have checked out the hard plastics and flashing that are abundant inside the car. Trucks from all manufacturers are not selling these days and thus rebates are common. GM has drastically reduced production of large SUVs and pickups this year and some of their best selling models (Cobalt, Malbu, Impala, CTS) are cars, not trucks. Their bread and butter family sedan gets 22/33 (superior to Camry) and you are on here suggesting that GM isn’t selling any fuel efficient products. For those that still want trucks and SUVs GM actually has the most efficient models on the market, including hybrids. In case you havent been following the market recently sales of almost every type of car are down. The Accord, Camry, Civic, Altima and Prius are just a few of the models that have experienced drastic sales declines over the past few months. If you visit a GM dealer and cant find an efficient car you need to keep looking. The G5, Vibe, G6, Aura, Astra, Cobalt, Impala, Malibu, HHR and Aveo all get decent mileage and in today’s sales environment I would imagine anyone could pick up one relatively easily. Based on the misinformation you are spreading about Gm’s offerings I sincerely doubt you have been to a GM dealer recently.
Sheth
james:
You accuse me of ignoring facts while you incorrectly suggest that GM has not been addressing performance, features and quality. All that I ask is that you provide some context for your remarks. With vehicles like the CTS/CTS-V, Malibu and Corvette on the market I fail to see where you are coming from. The Enclave has class leading power, design and features. Have you done any research on the model? GM is offering more direct injection engines that anyone else and you state that they are not investing in performance. Please explain this to me. It seems to me that you are posting based on your personal experiences with GM products from the past with no regards for what is in the showroom today. I am merely stating undeniable facts in order to clear the air. While people like you claim to support GM and their survival it appears to me that you are here to lecture and oversimplify problems. We can all agree that some poor decisons were made in the past. We cannot all agree that GM has no competent product on sale. The crazy part is what I am saying has been verified by the automotive press. I don’t thin you will find one significant auto writer who would deny that GM is making its best products ever.
“And I don’t buy your argument that GM’s market share suffered simply because there were more choices. People didn’t start buying Japanese cars just because they were there. Some folks like my Dad who swore he would NEVER buy a Japanese car were pushed there because of the very poor build quality of GM cars and trucks. Again - same tired GM mentality - build it for as cheap as you can and hope nobody notices. ”
The reason Japanese cars took off was because they were small and efficient. They were NOT intially known for quality. When the oil crisis hit in the early 70s the Japanese were perfectly positioned because they had small cars designed for the Japanese market. In the early days people actually thought that imports were low quality and unrefined. Once they got a foothold here they started adding models and making bigger, more powerful cars. People who fail to acknowledge the significance of competition need to look at Europe. I am willing to bet that VW and MB had more share in 1960 than they have now. Why? Less competition. Now the European market is fragmented and no one controls 20% of the market. The American market is headed in the same direction. In the future GM, Ford and Toyota will probably have almost equal share of the market. Much of the marketshare loss has come within the last decade as Japanese brands aggressively expanded into pickups, crossovers, SUVs and minivans. Its a simple fact that new competitors will reduce the share of the established players. The ONLY segment where the Japanese have failed to gain customers is large pickups. Let me illustrate this in terms you may understand: Toyota’s marketshare of hybrids will be greater in 2008 than it will be in 2010. This has nothing to do with quality or design or poor decision making. It has everything to do with the fact that Honda, GM and Ford will be expanding their hybrid offerings considerably in the future. Toyota’s dominance of the hybrid market is based on the fact that they have virtually no competition at this time. That will change within the next 5 years.
“They continue to pay for the mismanagement and subpar quality from the 80’s and 90’s. Do you think for a second that they would be in this predicament if their focus had always been on delivering a high quality and reliable product at a fair price? ”
I dont recall praising management from the 80s and 90s. In fact, I was the one who said the current regime is paying a price for decisions made years ago. Everyone knows it took GM too long to adopt the quality control and production methods of the Japanese.
“You’re on a sinking ship called General Motors Sheth, and you can keep telling yourself that it’s not sinking, and shouting to others that it’s not sinking. ”
Not sure what you are referring to here. Anyone who reads the latest headlines knows about the predicament of the Big 3. My point is that they should be given a chance to allow their turn around plans to work. If you think less consumer choice is a good thing that is your business. I am not rooting for the demise of the American auto industry because I like choices and there are only a handful of Japanese products that interest me. I didnt claim GM wasnt sinking but I was saying that they deserve to be offered a life preserver to make it through this economic downturn. I see know reason why they should be allowed to fail because of a collapse of the credit market that was caused by others.
edvard
The thought of GM, Ford, Chrysler, or all three auto makers going under is a scary thought to me. The industry represents a cultural icon of American ingenuity. It also represents hundreds of thousands of jobs which we cannot afford to lose, hence the US government must do something to help.
I have a few ideas as to what might help to turn things around for the US auto industry.One being advertising and branding. In this case, it is useful to study the now complete presidential election. Mr. Obama ran the most successful campaign in US history. He won for a number of reasons, but one of the biggest was how he his campaign, image, and even speaking style was branded. It was completely different than Mr. Mccain’s. Obama’s campaign was modern and fresh. Mccain’s… not so much. Additionally, Mr. Obama proved that advertising is a powerful tool. He won the election in many ways by relying heavily on TV and radio ads. In this vein, perhaps one area of concentration for GM should be to ramp up advertising on a massive scale. Additionally, the kind of advertising and branding needs to be changed to me different from what GM has produced in the past, and furthermore, be so different from the competition that it stands out. Find new ways to present products that make them appealing. Perhaps take a nod to the current economic problems and create messaging that generates interest from consumers with financial concerns. The public can be swayed in directions to buy products even if the products aren’t groundbreaking. In other words- make every effort to stand out.
Secondly, the product lineup needs some changes. I’m not the only one who has mentioned this, but you need to let the crossovers go. I think many in the auto industry assumed that such vehicles were to be a sure-fire hit. They aren’t. I have yet to see a Traverse on the road, nor do I see many Enclaves, Acadias, or any of the other crossovers released recently. This is in California- the largest car driving state in the US. If they aren’t selling here, then that’s clearly a sign that they aren’t blockbuster hits. Secondly- the Volt program. As much as I like the Volt, there is no way people are going to pay $40,000 for a sedan even if it is semi-electric when they can get a plain-ole’ Prius for 20-25k. So in the spirit of drastic decisions, perhaps considerations should be made to keep the Volt, but perhaps consider a stepped-down model with a more conventional battery such as a Nickel metal hydride unit. Lastly, you need to get the Cruze and any other value economy car here soon as possible. The Aveo is garbage. Get rid of the thing because all it does is hurt your brand. Everyone knows its basically a Daewoo anyway.
I’m pulling for you guys. I hope we can get through this mess together. Please keep us posted.
Noel GM FOREVER
While my comments above may have sounded negative,I am merely disgusted and upset with the notion that I may lose my job with Chevy. If any of you work for a dealer,you know what I mean.We are all scared. GM has sat on their butts in certain areas thinking they would always be on top. They waited too long to change with the times and the imports took the market.
SHETH:
I always agree with your posts. I drive an 07 HHR and get just about 30 mpg with it. Plus I absolutely love it and will buy another. GM is competitive with fuel efficient cars and trucks and it is sad how many people are uneducated about that. Malibu?? MUCH nicer than a Camry.
Most of our cars get 30 + mpg and our trucks lead all others in fuel efficiency. I really wish more people would realize that. And now gas is down to $2.52 a gallon here in NY and does it even matter that much anymore anyways??
Beaugrand®™©
Sheth:
Clearly, you’ve got it all figured out: it’s all a giant liberal, leftist, global conspiracy led by the liberal media and funded by the UAW and all the other car manufacturers in the world. GM products have no quality defects at all, the product mix is perfect, it’s just a matter of overcoming all the misconceptions, no need to improve product or quality or product mix…
Cheerleading is the last thing GM needs, if they stick with that delusion, they’ll be history within a couple years.
And yes, I’ve taken a close look at the new GM offerings. They don’t make minivans any more, and what economy cars they sell are made in Asia.
Nate
GM should not be bailed out, believe it or not these people will find jobs other places, probably not as the nice they have but there is no way my tax dollars should be used to subsidize an industry that has plenty of other companies that can perform properly. GM should downsize, or be allowed to fail. American auto makers arn’t the only ones making cars in America. Who is there to blame, just about everyone, GM, the overpaid workers (aka the Unions) which makes it to expensive for the automotive industries to operate. If you want your job so bad, take a reduction in pay & benefits. You are in an industry that is not providing what america people desire, no way I should have to pay for that.
st34
GM’s business model needs to change. Long overdue restructuring is needed to save the General
The case for rightsizing….
While I am sypathetic to the industry, and a domestic supporter. I have driven mostly GM products throughout my life. I have been an automotive enthusiast my entire life as well. So the following transcript pains me to say the least, but I feel it is paramount that the case for downsizing be made for GM’s survival. I have given much thought into this and repectfully am submitting my thoughts, along with a recent discussion with my answers to some tough decisions that need to be made. Please bear in mind that I am not an auto analyst, but rather a fan of GM, Chrysler and Ford for all of their influence and rivalries that have been embedded into the culture I grew up in. I have been a bowtie fan all of my life, and owned GMC trucks, several Pontiacs, and a few Buicks too. My first car was a 79 Chevette, and I loved it for what it was.
Here goes….
Argument; “GM does not have too many brands, it just needs to improve each brand’s image and place in the market.
Not true at all. With 8 brands GM needs to rid itself of 5 of them. They need to right size their operations! They no longer have nor will they ever have 80% of the marketshare to justify this many brands with redundant products.
Argument;
“Eliminating any brand is a disastrous plan. The cost of closing Olds was over $1.2 billion and another $1 billion in lawsuits are still pending; not to mention the loss of about a half a million customers who migrated to other non-GM brands. Oldsmobile was the smallest division at the time.”
With the shared platforms that many of these cars have in common, there truly is product redundancy across the board. This is nothing new to the General. I grew up in GM family with both parents being employed by G.M., and drove their products for years too. I know what I’m talking about. They are the same cars. There are subtle differences that goes into badge engineering, that help to distinguish them apart but they are the same animal. FWIW, this is not a news flash.
Argument;
“The cost of closing PONTIAC would likely be $2-4 billion with another 500,000 customers lost.
The cost of closing BUICK would likely be $2-3 billion with another 500,000 customers lost. Buick probably could not survive just on sales in China either.”
I am going to adress both of these brands together. Those figures of 500,00 customers are spread out over the many products under each brand, but all but a few products of each are suffering from poor sales, resulting in unsustainable losses. The cars that are selling of each already have sister cars within those platforms at either Chevy or Saturn. It is also no secret that they have too many dealerships. Pontiacs best sellers are the G-6, G-8, and the Vibe, a rebadged Toyota Matrix. The G-6 could just as easily become the new and improved, new Aura, and the G-8 could easily become a Chevy. The Lacrosse, who knows, but aside from that Buick’s crossover’s are already duplicated throughout GM. While the cost of doing this is going to be painful, sometimes it is necessary to severe a limb or two to save the body, specifically if they are infected with gangreen.
Argument;
“The cost of closing SATURN would likely be $ 1 billion with another 300,000 customers lost.”
I believe there is a case to keep Saturn as they do not have too many dealerships, and they are already right sized. They also fit right in between a premium brand and an entry level brand like Chevy. They also allow for integration of the Euro models, like Opel, and Vauxhall. I believe the most viable of Buick, Pontiac and GMC should live on through Chevy, Saturn and Cadillac.
Argument;
“The cost of closing SAAB would likely be $1-2 billion with another 300,000 customers lost.”
I believe Saab should be sold. It has lost money since it has been acquired.
Argument;
“The cost of closing HUMMER would likely be $500 million with another 20,000 customers lost.”
Hummer should also be sold. Only 20,000 customers spells big loser!
It takes between 75,000 and 100,000 in sales per product just to be able to break even on manufacturing costs and product development.
Additionally, you also are listing sales numbers by brands not products! Listing sales figures by each product is when things start to really look unsustainable!
Argument;
“closing any GM brand is cost prohibitive. ”
That’s where you are wrong. It’s the dismall sales of the worst performers that are tanking the company. We are not living in 1970’s anymore. GM no longer has the market share it needs to sustain all of these brands. I am sorry if the truth hurts, but the facts are in the sales numbers.
Also GM could not survive on its own with just Cadillac, Chevrolet and GMC to feed its enormous debt and financial obligations. They would be out of business within a month. “
You need to wake up to the reality of how bad things really are. Unfortunately that is what is needed to stop the current burn rate of cash.
At a cash flow burn rate of a billion dollars a month, G.M. needs to consolidate it’s’ 8 brands into 3 before it does anything else. The three that should live on are its’ best performing, Cadillac, Chevy, and Saturn. The five insignificant, if not redundant brands that should be cut before G.M. considers anything else should be; GMC, Buick, Pontiac, Saab and Hummer. Although there was a time when GMC was more upscale, it is now nothing more than a Chevy clone having the same amenities both inside and out. Aside from China, Buick is a loser in the sales arena and has lost it’s’ base. Pontiac, no longer an excitement brand, really only has the G-8 and Vibe going for it. Both could consolidate into Chevy and Saturn. The Malibu and Aura already replace the need for a redundant G-6, filling that segment. Hummer and Saab, barely even worth mentioning, should have been on the chopping block a long time ago. I believe they should be sold if at all possible. G.M. no longer has the market share it once did to justify either underachievers or under-performers for the sake of being bigger, regardless of their brands rich heritage, or the niche segments/markets once catered to. Additionally, all three of the Chrysler brands outperform each of the five brands G.M. needs to cut before it even considers such a move, as a merger. Even Chrysler’s premium brand “Chrysler”, which is their worst performer in sales, is still better than Buick, with the exception of cross-over vehicles that Chrysler doesn’t have! Dodge is a better sales performer than Pontiac as well. Oddly enough, I keep hearing and reading about Chrysler’s’ offerings being redundant in the media from self proclaimed auto analysts, yet no one seems to acknowledge that G.M. has more redundant, bad performing products out there than anyone.
Chrysler has reported a billion dollars in losses for the first half of the year. G.M. has lost six times that amount in the same time! G.M. needs to take a scalpel to the cancerous tumors in their own product line-up before acquiring and dismantling someone else’s just to prolong the inevitable by keeping it’s own even more redundant brands alive.
In closing…
Even if it costs 10 billion dollars to cut GMC, Buick and Pontiac it would be worth it in the end if you consider that is a one time cost. Absorb the most viable of those three brands into Chevy Saturn and Cadillac and the company will do just fine. For the most part Chevy Saturn and Cadillac already have those products though. There is a word for that, it’s called product redundancy! Hummer and Saab should be sold! Presently they are burning through more than a billion dollars a month! We are in a recession! Things do not look like they are going to get any better in the foreseeable future. The current economic storm that we are battling could drag out for two to seven years. Now I ask you, what would you do if the future of your company depended upon it and you couldn’t get a hold of enough money in more loans to ride out such a storm?
Charlie H
sheth writes, “Let me illustrate this in terms you may understand: Toyota’s marketshare of hybrids will be greater in 2008 than it will be in 2010. This has nothing to do with quality or design or poor decision making. It has everything to do with the fact that Honda, GM and Ford will be expanding their hybrid offerings considerably in the future. Toyota’s dominance of the hybrid market is based on the fact that they have virtually no competition at this time. That will change within the next 5 years.”
Let’s look at that differently… Thinking and acting very strategically, Toyota has had a decade to become the unquestioned market leader. GM has introduced a variety of low-effect and/or overly expensive hybrids, which sell in negligible quantity. GM’s next offerings will be high-effect but very expensive hybrids which are intended to sell in negligible quantities but, representing an absolute increase from near-zero production levels, do erode Toyota’s share in some miniscule way. In the interim, Toyota gains experience, reputation and knowledge. Toyota uses economies of scale to drive down the production cost of their hybrids, increasing their technical marketplace advantages. By the end of 2010, Toyota will have the capacity to build nearly 60K Priuses per month, plus some significant number of other hybrids, all based on the same fundamental powertrain. GM’s production may ramp to perhaps 5K per month and will still be struggling against large fixed costs and economies of scale are compromised because that 5K/month represents perhaps 10 different models and hybrids of 3 different types of powertrain.
Where in this prediction do we see GM doing what it must do in hybrids… make money?
Also, it’s an open question whether or not GM can actually gain any market share in hybrids at all, even if they go to 5K/month. Toyota is nearly tripling capacity and some of that capacity will be domestic US. Honda will build 200K Insights/year, 100K of which are due to come to the US. Other manufacturers will be adding models and capacity. Ford, for example, starts to sell the Fusion hybrid in early 2009. The overall hybrid market may actually expand faster than GM’s production and GM may see share remain constant at its current negligible portion or even decline. If capacity expands faster than the market, GM could still see negligible increases in share, or even declines, as they are forced to compete vigorously on features and price. If GM’s hybids are costly to build or not as high-content, they won’t sell (or GM will be forced to take a loss on each).
Mark C
With all that is happening, it is truly to see such a crushing blow to our once strong automotive industry.
However, serious thinking must go on for the sake of survival and that means that everyone, UAW included, needs to suck it up and deal with the new reality.
I agree that all this rebadging of cars is a silly exercise. Automakers suffer for such silly acts by eating their young and having to undermine a brand with like me copies of cars from other divisions.
I can’t see why GM just doesn’t pull the pin and finally eliminates brands to concentrate on what has clearly met sales goals ad elimante car platforms that don’t. Keeping Cheverolet, Pontiac, Saturn, GMC and Cadillac can do wonders by allowing each division to share car platforms while designing good cars. Let GMC make all your trucks and pick-ups and SUV’s, Pontiac be your performance brand, Saturn a good value brand with Chevy and Cadillac bringing to the forefront the best in style, performance and luxory.
With one or more factories, but certainly fewer than present, able to make mutliple brand platforms, you truly are able to respond to demand as it ebbs and flows in the lifecycle of a product.
As a Saturn owner x2, I can tell you I love the product and would hate to see the demise of our auto industry, but if you don’t start thinking light on your feet by designing what people want, not what you think they want, there may be a chance of survival.
As for the those losing their jobs, there can be no greater pain. But, perhaps a retinkering of benefit programs that will retrain and keep a laidoff worker in their home will ease the pain until they can reenter the workforce again.
RB
Noel GM forever:
you hit it right on the nose. why is GM introducing a pricey new crossover (Traverse) when they already have 3 nearly identical others scattered across the GM line (Enclave,Outlook, and Acadia), when they should be introducing a high quality small car. it amazes me to this day why GM still doesnt have a number of fun to drive small cars that get great gas milage. now they have to play catch up while the other foreign companies have had these cars for years. getting back to the crossovers, why does GM continue to issue the same vehicle to multiple lines? it not only dilutes the brands but it also creates a huge problem when vehicle sales slow down. GM you need to contract the company. Ax GMC, Buick, & Pontiac. these companies are just creating internal competition between your brands. You need a truck? go to Chevy not GMC. you need a luxury car? go to cadillac, not Buick. you need a sporty sedan? offer a sport package on a chevy. get the drift? i know its tough but you have to let go of the past and downsize. in the past all these brands made sense. there were no Honda, Toyota, Hyundai, Mazda, etc. but now GM has too many diluted brands to sustain itself. they cant just keep inserting a SUV or Truck into any of the brands to help keep them afloat. the government giving all this money doesnt make sense to a company that is just too big. Sure the money will help prevent people from losing jobs but the problem will not go away. telling people to by American wont work either.
RB
ST34- my thoughts exactly.
Jeff
st34,
While I agree with the notion that GM has to rightsize itself and discard quite a few brands in the US, there simply is not enough cash in the company to do anything like that right now. As reported in today’s earnings announcement, GM is getting very close to the minimum amount of cash necessary to run the company, and closing down brands is not something that can be done overnight - it takes quite a bit of planning and time to do so. One can get into all the specifics on dealer franchise laws and the buyouts that would have to happen, along with the rightsizing of the manufacturing capacity within the company (they have too much as it is right now), as well as the effects on the suppliers of such a move.
However, unless something drastically changes within the industry (i.e. more sales) in the next couple months, GM will have less cash than it needs on a monthly basis to meet its requirements. Right now, the focus in the company has to be cash conservation and short-term survival, and closing down brands is not a short-term solution, but one that would have to play itself out over a number of years.
Blue
Dear Sirs,
I have been driving Chevy trucks since 1970. Please give us a full sized pick up truck with an electric motor that will produce power that equals a 300 horse power V-8. We need these trucks to haul equipment etc. for our jobs. We will buy them if you make them.
Blue
Robert Farago
From TTAC:
Cerberus Capital, a highly secretive NYC-based vulture investment fund, wants the U.S. government and taxpayers to bailout its failed investment in Chrysler and its failing investment in GMAC. Its partner in this raid on the US Treasury is General Motors, a woefully insolvent automobile manufacturer whose CEO is paid $40k each day. Here’s why a bailout for GM and/or Chrysler is a bad idea.
Background
Cerberus Capital uses hedge funds as the vehicles in which to invest in various companies. Apparently, the hedge fund known as Cerberus Series 4 is the owner of an 80 percent interest in Chrysler and a related fund owns or controls a 51 percent interest in GMAC. Not surprisingly for a company known for its secrecy, Cerberus has not disclosed which entities actually own the interests in Chrysler and GMAC, has not disclosed what fees Cerberus has taken or accrued from its investments, and has not disclosed what severance payments would have to be made if GM actually acquired Chrysler. For example, would Chrysler CEO Bob Nardelli get another big payday if he’s cut loose in a merger? The interrelationships among GMAC, Chrysler Financial, Cerberus and other entities are also a well-kept secret.
Secrecy, Secrecy, Secrecy
Why is everything so secret? What happened to the idea of open government? A few questions come to mind:
1. Exactly what is the Cerberus/GM proposal to borrow $10b from the US Treasury in order to fund a merger, the terms of which are also secret? Is it in writing? Where is a copy? What were the proposed terms that were rejected by the current US Treasury? Is another proposal in the works? How is the $10b going to be repaid by two insolvent auto manufacturers?
2. Which lobbyists represented GM and Cerberus in getting their loan application before the US Treasury? How much were the lobbyists paid? With whom did GM/Cerberus meet? Where are the notes of any meeting or other communications about the loan proposal?
3. What do we know about the financial condition of the proposed borrowers? Where is Chrysler’s current balance sheet and income statement? Surely Chrysler is insolvent on an equitable basis, and probably insolvent on a balance sheet basis. Why is basic financial information not available for public inspection and comment?
4. Where are the financial statements for the Cerberus Series Four hedge fund? US taxpayers are being asked to bailout the failed auto related investments by Cerberus Series Four, while the profitable investments in the same fund are not being shared with taxpayers.
GM is woefully insolvent and should file Chapter 11
5. As of June 30, 2008, GM had total assets of $136b and total liabilities of $191b, a $55b deficiency. Thus, GM is insolvent. How can GM ever repay a $10b bailout, or any bailout for that matter? As of June 30, 2008, its current liabilities were $70b, dwarfing its current assets of $55b. Moreover, we do not know what deals GM has made to stretch/defer repayment of its account payables.
6. Is Chrysler in any better shape than GM? Probably not, but without a current balance sheet the definitive answer is a secret.
7. Assuming Chrysler is insolvent (liabilities exceed assets), then the equity interest of Cerberus and Daimler (the 20 percent equity owner) are worthless and these entities are not even entitled to a seat at the merger negotiating table. The real economic owners of Chrysler are its creditors and employees, who are also in the dark about the proposed US treasury bailout.
Who really benefits from a GM/Cerberus/Chrysler merger?
8. The US taxpayers can’t benefit since there is no repayment plan. Not surprisingly, Cerberus and its hedge fund are back door beneficiaries, because the 51 percent Cerberus ownership interest in GMAC will increase in value if GM and GMAC survive. Chrysler is a lost cause, but with the value of the Cerberus investment in GMAC also plummeting, Cerberus is trying to prop-up GMAC by helping GM survive. Is Cerberus pledging its equity interest in GMAC to the US Treasury as security for a government loan to GM? Why not? Is GM pledging its 49 percent equity interest in GMAC to secure repayment of any loan by the US Treasury? More secrets kept from the public.
9. The self-dealing by Cerberus extends to wanting to cherry-pick the Chrysler assets and keep the auto financing arm for itself. What is the value of the Chrysler auto financing business, and why should Cerberus benefit?
10. GMAC had negative net income of $3b for the first 6 months of 2008. GM’s ownership interest in GMAC was impaired by at least $2.7b during the same six month period, meaning that Cerberus Series Four hedge fund had suffered a similar loss in value in its investment in GMAC. Why should taxpayers bailout the millionaire investors in the Cerberus hedge funds?
More secrecy and lack of disclosure
11. Does GM plan to make any payments to GMAC, payments that directly benefit Cerberus? As vehicle residual values decrease, GM is obligated to make payments to GMAC under “residual support and risk sharing” agreements. On August 6, 2008, GM paid GMAC/Cerberus $646m, money which could have been used by GM to fund its ongoing operations and its obligations to employees.
12. Should any taxpayer money be used to fund payments to GMAC/Cerberus, whether that money is used directly or indirectly? How much, if anything is Cerberus investing in new money to prop up its investment in GMAC? If it is not investing in Chrysler or GMAC we can reasonably conclude that its analysis shows that the investment is a bad one. What’s bad for Cerberus is bad for the US Treasury.
Although it appears that the Cerberus Series Four has money available to make follow-on investments, it makes no sense to throw good money after bad if you can lobby the US Treasury to make the bad investment for you. A related question is whether the Cerberus equity interests in GMAC are going to be used as collateral for the loans that will be used (albeit indirectly) to bailout GMAC. Why should equity bear none of the risk but get all of the benefit?
More non-disclosure
13. What is Cerberus ResCap Financing LLC and who has seen its financial statements or the agreements relating to the $3.5b secured loan facility? How is this secured loan impacted by the bailout of Cerberus/GM/Chrysler?
Deepening insolvency is likely
14. GM’s current insolvency and continuing losses will trigger additional liabilities, and make it doubtful that GM will be able to make payments promised to employees and former employees or perform its labor agreements. GM’s worsening financial condition also deepens its losses from its derivative contracts. How would a GM/Cerberus Chrysler merger affect these liabilities? Will any government loans be used to reduce the $30b of GM accounts payable, or, in the event of a merger, to pay down Chrysler accounts payable in some still unknown amount? Sadly, we don’t even know what Cerberus proposed as the use of funds and we have no idea how Cerberus will benefit since we have no financial information on Chrysler or Cerberus.
15. As GM and Chrysler idle plants and facilities, more employees are laid off the employee related liabilities of GM/Chrysler will increase by hundreds of millions. Since GM and Chrysler are insolvent, who will pay these increased costs? Can any of these costs be avoided in a Chapter 11 case of Chrysler or GM?
16. Should taxpayer money be used, directly or indirectly, to pay GM and Chrysler obligations that are coming due while these entities are unable to pay from their own assets. Surely not, but what is being proposed, and who will benefit if GM debt is redeemed at par by vulture investors that bought the debt at pennies on the dollar? A related question: will any Cerberus entities benefit from government funded redemptions of auto maker debt? Is it possible that Cerberus is trading in credit default swaps and actually benefiting from the difficulties of Chrysler, GM and GMAC? Yet more items of non-disclosure on a long list of secret items.
Conclusion
17. GM, GMAC and Chrysler are not credit worthy and are unable to borrow money on any basis, secured or unsecured.
What’s Good for GM/Chrysler is a Chapter 11 Filing
18. GM needs to be restructured, which means it must change the terms of its legal obligations to suppliers, bondholders and employees. The only vehicle to accomplish the needed changes is Chapter 11, which lets GM reject unfavorable contracts, renegotiate its debt obligations, defer interest and principal payments and gives it time to fix its business. Without a chapter 11 filing a government infusion of $10b cash will be gone in six months when GM uses the money in 2009 to pay bondholders and employees billions of dollars, payments which do nothing to help GM survive.
19. Chrysler, the stepchild of a distressed debt vulture fund, is also a prime candidate for Chapter 11. But Chrysler should be liquidated, not reorganized. A liquidating Chapter 11 case, expressly permitted by the Bankruptcy Code, can be used to keep Chrysler operating while its divisions are sold. With adequate Chapter 11 funding line workers can keep their jobs and benefits, and non-essential executives can be fired at minimal cost to the Chapter 11 debtor, known as the debtor-in-possession. Trade creditors will continue to ship to Chrysler because their post-petition claims will have a priority in payment. Chapter 11 also lets the Bankruptcy Judge appoint an examiner to conduct an investigation into the financial affairs of Chrysler and its equity owners, and to sue to recover any improper payments. Chapter 11 will also make it clear to Daimler and Cerberus that their investment is worthless and they will not be able to use their position of control to improperly benefit.
20. Cerberus should acknowledge the financial reality and either file a Chapter 11 case for Chrysler or have a federal receiver appointed so that the value of the Chrysler assets can be maximized in an orderly sale procedure. The US government should fund the Chapter 11 case and keep Chrysler operating by giving Chrysler a debtor-in-possession loan having seniority over all other liabilities of Chrysler, thereby assuring taxpayers that the money will be repaid out of the proceeds of asset sales. The US could also give a senior secured loan to GM to help GM acquire assets from Chrysler, but this would require the cooperation of bondholders, cooperation not likely to be forthcoming. On the other hand, if GM is in Chapter 11 then the government could refinance the GM operations without fear that taxpayer money would be diverted to pay existing creditors.
motorman
the cost of fuel to run your vehicle is below the cost of depreciation,interest on the loan and insurance so i can not see what the big deal is if you get 20 MPG or get 30 MPG. the difference between 20 MPG or 30 MPG with driving 15,000 miles a years is 250 gallons of gas and at $2,50 a gallon that equals $625.
Noel GM FOREVER
RB wrote : . “it amazes me to this day why GM still doesnt have a number of fun to drive small cars that get great gas milage”
Chevy does. I bought an HHR last year after owning an Equinox. I bought a fully loaded 2.4 liter model. It has 175 hp,not bad for a 4 cyl. First off,it has every option one could need from leather heated seats to an mp3 radio to power everything.It handles awesome,its peppy and is a joy to drive.Now we have an HHR SS Turbo with 260 hp for a manual tranny and 230 hp for an automatic.I drove on here at the dealer and this thing just kicks ass.The Cobalt SS Turbo has the same powerplant.The Impala SS with its 300 hp v8 is just sick.We do have these types of cars.
My HHR gets just about 30 mpg. Its a shame these cool cars dont get more recognition……..
Buddy Dean del Rio
“You need a truck? go to Chevy not GMC.”
My thoughts exactly RB. I have never been able to understand why GM makes and sells both Chevrolet trucks and GMC trucks that compete against each other. What was (and is) the point of making and selling re-badged brands of what are nearly identical trucks?
Does each appeal to a different demographic? In my mind it’s unlikely, but who knows? Someone in GM marketing must know (I would hope), and it would be nice to hear an explanation for something I’ve puzzled over for years.
Nate
I’d like to first off say that the study is quite one sided and really misses a lot of other points that are equally important. The fall of any or all of the Three automakers in this country won’t be as big a problem as people think. If anything good will come out of the facilities and people being released to better more efficient uses of American energy, resources and time. Quite simply what do you do when an entire industry collapses? Well you of course figure out why it collapsed and form a new one. Thats exactly what the US needs is the ability to actually keep pace with technology and the world. Something GM no doubt prevents its employees from properly doing just as most large companies do.
The fall of GM would open the doors for small automakers who can innovated and advance technology that GM was too afraid to put on the streets… Overall I don’t see THAT as a bad thing. No to mention the iconic small block chevy will live on somehow. Good designs USUALLY get lost in history, they just move from organization to organization.
Gerald,
I don’t feel a central part of its business economy would be erased. Its physically not going anywhere… all that would happen is the dieing of an inefficienct organization of those tallented people and the resources they manage.
As to military emergencies, the manufacturing facilities will be around for a while and as the Japanese and Germans have shown aren’t that hard to re-establish in the US when all the overhead is removed. The Japanese and Germans have put up quite a few new auto plants in the US with what would appear to be minimal difficulty. So I’m sure in a military emergency the US gov’t could reuse the old plants around, the closed down facilities from WWII that are still around and if need be build new buildings (putting people back to work).
The mechanical labor is still there the teaching of that labor to new generations though is a totally different question. The power industry in the US faces a similar problem. The US no longer has the manufacturing facilities to produce nuclear reactor pressure vessels (they are all outsourced to France now). Talk about
Gerard,
To respond to your first point… lets not forget the Buick Enclave is the same basic vehicle as the traverse.
Regarding your fifth point. As a Pontiac, and Buick owner, and someone who has driven Chevy trucks, and Oldsmobiles I understand your point but disagree. I think the idea of a loyal enthusiast is out of place and quickly becoming outdated. I too am/was an enthusiast of GM. As should be apparent from the simple fact that I comment on this blog site. However, I think getting rid of Pontiac is the best thing GM could do. I really could care less about what GM calls their brands and products. I’m sure I’m not alone when I say that above everything else I would LIKE to continue buying American products (and cars/trucks). But, when American automakers can’t keep pace with the competition and I go looking for my next car it may not be a GM or even American. And thats something I don’t like to say. But the reality is that GM isn’t doing what it needs to grab consumers attention.
I don’t agree that a car NEEDS to be rear wheel drive to be interesting (though I will say it helps). GM’s foreign competition has shown that people will buy Front drive and Reardrive alike if they get it right. I think the G5 and G6 have the potential to be great cars, if GM invests the money to refine them.
I think the real problem is just poor decisions on how to build the cars and a misjudgement of what consumers want and are willing to pay for.
But if GM refines them to the point they are needed to be there is little that differentiates the G5 from the Cobalt and the G6 from the Malibu, and Aura. I think GM needs to ax Pontiac and make their other cars more sporty.
Why don’t you consider the Malibu, Aura, Cobalt, and other GM cars entertaining? GM’s other cars are no more or less entertaining as a Pontiac. Why not have a Buick build on the G8 Architecture?
There simply is no real need for Pontiac anymore the cars can be carried in another brand.
If GM made the Astra into a sporty small car they’d do great. Put a small turbo in there and a nice modern looking interior.
James Whitehead,
I couldn’t agree with you more.
I think if GM axes Pontiac, Chevy, and GMC and brings Opel into the US and focuses on the remaining products they have, they will do well. As the movie field of dreams said “Build it and they will come”.
If GM built truly amazing cars people would buy them. Not cars that pretend to keep up with their competition and 15 to 20K miles later rattle and have problems.
Some Guy,
I like to think that if GM manufactured all its products in America things would be a lot better. Certainly they’d get a bit more sympathy from me. But since a large portion of their products are imported……
Chris R,
I’m not sure I agree with you. I haven’t figured out if Mr. Lutz did more good or harm to the companies he was at. Of them BMW is probably the only one still doing decently. GM and Chrysler both have issues. I’m not sure what to make of that fact.
As far as the Chevy Brand goes… I just see it as a cheap looking car (even though it costs quite a bit).
If GM focuses on great cars people will buy them. And if they put the best technology they can in them people will be willing to pay what it costs for a car that lasts. Perhaps they need to focus on the vehicle’s life rather then the ownership period of one owner.
I’d much prefer a car 6 months out. I can wait 6 months to buy a car… not 2-4 years.
JG,
I agree GM could be doing more with Buick. But they are affraid no doubt of alienating the loyal base of current Buick buyers. Truth be told I’d rather see the China Buicks here then some of the other models GM makes in their other brands (Chevy and Pontiac and Saturn specifically).
If GM put those names on the cars younger buyers would no doubt want them. If they can backup the mechanicals and interiors and interior mechanicals they would no doubt get a lot of young buyers.
Cad Johnson,
GM doesn’t need cash, it needs less poor uses of the cash they have. They need to be more efficient. They need LESS vehicles and they need to drop the current ones as soon as possible. No matter what it costs. They need new products that capture what the CURRENT market wants. And that most certainly isn’t their current fleet of vehicle offerings.
The best thing they could do is sell off as many of their current cars as possible, ax Chevy and Pontiac, Bring Opel over and reshuffle their vehicles to the left over brands. Then they will have more cash/vehicle to make each vehicle better.
I think the platforms to keep are: Caddy CTS, Chevy Trucks, Buick Enclave and Saturn version of it, Saturn Vue/GMC version of it, Corvette, G8 (Opel version of it), Saturn Aura, Cruze and Volt. They should bring the Buicks over from China. The rest of them can go as far as I’m concerned.
I do agree though that more vehicles need to be plug ins.
I think GM would be foolish to ask our Gov’t to assist them. GM should be able to manage on its own. And should do what it takes to make that happen.
Selling shares of GM to the Chineese is a very foolish move. Why would you want to do that?
I think GM would be better off reinventing itself rather then sell to SAIC or FAW. A government bailout wouldn’t be to much different then selling to the Chineese, or SAIC or FAW. And besides that companies like SAIC probably wouldn’t buy GM because the customer base isn’t right for the kind of business they do.
Nelson,
That would almost work except buyers like me who want trailer towing capacity don’t get it and there fore go elsewhere. Now if GM could make a Vue with towing capacity and hybrid… or a hybrid diesel Vue, I would be up for that.
Beaugrand,
Perhaps you have been affected by the car industry’s problems, but how would selling product that people can afford and want change that?
I don’t see how GM can sell more affordable cars then they do now. The reality is to make a car cheaper something has to give… the prices of materials, the cost of labor or the cost of energy. I don’t see any one of those changing immediately without some action on the behalf of the American people who work for GM (or want to).
I agree that GM does need to sell more economy cars but why don’t they? I suspect they can’t compete with other country’s offerings.
The only way for GM to get past that is to immediately remedy the way they do business and to have American workers and suppliers willing to work for less to help GM get back on their feet. I don’t see that happening.
If it were as simple as using taller gearing and remapping chips why wouldn’t GM have done that? And on the note of taller gearing, what does it cost to change the gear ratios on an assembly line?
7,9 and 10 speed transmissions mean more vehicle weight (that isn’t being used) or less torque handling capacity (ie less Horse Power capability). The Miller cycle seems interesting though I have my doubts as to whether it will really help with fuel economy. Lowering Aero CD to less then 0.19 wouldn’t be to hard if styling sacrifices were willing to be made by the consumer.
Ever hear of lean engineering? Hmmm interesting idea.
If the design cycle is shorter and if GM were better able to predict the market they would be doing much much better.
I like your idea of overlapping components but not brands, though from an engineering point of view I wonder how you do that.
Mathew,
I agree, my dad still has my grandfather’s 1950’s Chevy and it still runs well. GM sold out a long time ago to quality. Its time to emphasize quality. I almost wish GM would pick a car and try it on, don’t worry about the cost just make the thing as good as they can and see how the buying public reacts to it (in terms of how many they sell).
I agree, convincing America that Malibu is as good isn’t going to be easy… because its really not. I’ve driven one, I’ve driven in the back of one and I’ve driven in Hondas, Toyotas and even a 4 year old Acura and the Malibu just doesn’t cut it. GM is getting close though. They just miss the attention to detail and quality issues that other companies “get”.
That is the truth it only takes 1 bad GM product to sour GM’s image with a consumer. Couple that with all the consumers and you have what is going on with things at GM now!!
I think if they can put the Cruze interior into the Volt and a nice sound system/nav system GM will have a winner. But before they release it make sure the interior controls parts (AC controls, Heater controls, Power windows, mirrors etc..) will hold up for more then 10 years. And make sure that after 20K miles it doesn’t develop rattles or any other problems. If GM can do all of that and still release the Volt they will be headed in the right direction again.
Sheth,
I think people are still waiting for GM to hear them.
Increased competition only furthers the points that people make. GM isn’t getting it (just yet) because if they were their products would be competing. If GM’s competition is making full line autos then GM needs to be making their full line better. And if they can’t afford that they need to get rid of un needed product lines until they are competitive.
When I goto my local shopping mall and see a Saturn or GM rep there advertising their cars they should actually know something about them. In addition GM should be in every mall, every town with their cars getting feedback from customers and opinions of what customers like and don’t like. If GM did that and actually looked at what people say, it would only be a short time before their products were what people wanted. But I don’t see GM doing that, I see them hiring some advertising agency with people that really don’t know the product or understand it and who could care less what interested people have to say about the car.
Its not a matter of wanting less options, its that I don’t want to pay for a GM that can’t learn and fix its problems, but would rather complain to the government then make better products.
This is America home of free market. The free market voted for everyone but GM with their dollars and GM lost. Thats just how it is. The only way to fix that is the next time around do better or go out trying. I don’t see why people won’t let GM do that. Jobs won’t be lost forever only for a short while until someone else fills the void that GM left and then they can work for that company, or find a new line of work.
I think inter-dealer competition is what hurts GM. Everyone is in the rat race for the lowest price and GM gets hurt because their dealers scream for cheaper products and GM responds by lowering their quality and thus price.
I don’t think Toyota, Honda and Ford (and all the other car companies out there) would raise prices. I think they would sell more cars. I don’t think GM missing is going to effect the competition that Toyota, Honda and Ford have amongst themselves not to mention all the other brands out there.
No economic super power (how many are there really)? Maybe they don’t rely on other countries to build their cars but then again how many countries are getting by without cars or by buying our used ones?
In Japan you can only keep your vehicle so long before it is taxed heavily. So there is a lot of incentive to buy new cars. I don’t see that in the US.
Can US automakers even make vehicles that meet the market demands of Japan?
I agree our foreign policy is a bit off. I guess we’ll have to wait and see how that gets fixed.
Dale,
GM didn’t learn. They need younger people at the wheel of the company. End of story.
John,
Do you really think American cars are built as well as foreign cars?
I think they are getting close but not there yet.
We have a strong manufacturing base without GM. Do you think the people that work for GM, and other auto makers in the US just disappear when GM goes under?
Heck if GM goes under it frees those engineers and workers to go build new different things. Perhaps some of the ambitious ones will start a new auto company that addresses the markets better then GM was ever able to… you never know what the future brings.
What about the Big Two and the Little Four (or seven or ten or whatever)? Isn’t that an option?
Tomoe1,
If America took pride in America we wouldn’t be having this problem. And on top of that GM products aren’t produced in the US, a lot of their parts are made outside the country in Mexico and Canada. Its tough to have pride in american products when I pop the hood open on my car to change oil and I see in big prominent letters on an engine casting “Made in Mexico” … or was that “Hecho en Mexico”.
I think people today take pride in NOT owning American cars. But even so GM has people who care enough and take the time to read these blogs and can’t even really respond to us. Imagine if GM had an in person open blogging session where they invited the general public to GM headquarters… Maybe the feedback would get heard. As it is I feel like this blog is just a way to appease GM fans rather then anyone seriously listening to comments. Heck once I even sent GM an idea and they declined it saying their system was good as it is… I’ve never heard of a company turning down a money making idea.
I agree unions need to go.
GM needs to get rid of the GM brand name. They need to push Opel, Saturn, Buick, Caddy and GMC, and Corvette. And if thats to many… Caddy, Opel, Buick and Corvette. And if thats still to many then just Caddy Opel and Corvette.
I disagree on picking a vehicle. Trim availability is a tricky word to use. I think customers need different trim levels. I for instance like ultra modern sleek interiors with all the bells and whistles and a sleek exterior. Some customers like boxy interiors with only a radio and heater. I think GM needs to address these types of things. but I don’t see any reason to do it with different brand and model cars. I think one brand one model is what they need.
I don’t understand what you mean by allow the new company to sell and service vehicles direct to the consumers.
The public is a hard sell when they can go out and buy a foreign car today.
Sheth,
Eliminating brands is the smart way to fix GM. And one of many steps required.
Why would GM have to pay off their dealers?
If Pontiac/Buick/GMC are one brand why not name it that way.
There is no way to predict one way or another whether cutting olds cost GM sales or not. Thats not the point. Changing public image of GM and reducing costs and inter-company competition IS the point. How much money does GM waste supporting its brands?
If consumers aren’t buying then GM won’t get more sales. Its a very simple concept. If they can’t get more sales then they won’t be able to afford the R&D to make new cars in each brand. So why not preemptively eliminate the unneeded brands and replace them with something new and different that will make Americans stop, scratch their heads and say “Who makes that”. I think Opel is just the thing for that. Replace Pontiac and Chevy with Opel and all will be much better.
If people aren’t buying competitive GM vehicles them GM isn’t being competitive. Part of the competition is making dollars by selling cars. To not do that is to not be competitive.
If GM and its employees were that concerned about the Volt and Cruze and company at large they would put in the extra hours and voluntarily offer to give up their pay.
GM did abandon the car market when they refused to offer products that were competitive and refused to listen to consumer requests. Or for that matter didn’t even think of asking its consumers what they wanted.
GM may have invested in cars in the 1990s but they sure didn’t invest as much in them as they did their trucks. And certainly didn’t go above and beyond to make sure their cars were top notch.
The CTS and CTS-V and ZR-1 are extremely high end cars that demonstrate GM’s capabilities. But even the CTS has some things about it that make it not worth the price tag in my mind. GM needs to apply what they have learned from the CTS, Corvette, and G8 to their smaller cars. And then they need to buy one of everything their competition makes and pass them around their employees so they know what the competition is and isn’t.
If you want to see how nice GM can make cars take a look at Opel’s web site. The Opel insignia looks amazing but its only in europe. I’m not surprised.
NO, companies that aren’t commited to performance cars don’t build CTS-V and ZR-1. They are priced out of the reach of most of their buyers… AND had GM really been committed to showing how good the Corvette is they would have made an extremely limited edition, hand built $250K based on the Corvette to show the world that they could compete with Ferrari, Maserati, and Aston Martin. It would have been a car with better style then the Vette, not a dressed up ZR-1 (not that I’m downplaying the ZR-1s performance).
That is the GM problem they are performance focused at the wrong products.
How about a smaller CTS that could compete with Audi and VW? Or how about a car thats competitive with the Mazda 3 and Mazda 3 Speed?
Nudge
Hi all, sorry about being late to join the thread. Have not been by this blog in awhile.
Roughly two years ago I posted here for a few weeks in an effort to learn more, from the folks connected to Lutz, about why GM was doing what it was doing then. We all know the story: many plants were still working overtime making (wait for it) heavy, clunky SUVs with poor fuel efficiency. I asked this question rather openly, and pointed out that during the last auto purchase cycle I opted for a small high-efficiency hybrid not made in the USA. (if there are any domestic-made highway-capable cars that can get above 60mpg, please point me to them)
The responses here, to say the least, were not encouraging. Approximately 80% of it was openly hostile testosterone-infected garbage like, “Hahaha! You moron! My giant truck will crush your tin can! That’s why your car sucks!” The few less blatantly useless responses, presumably from folks in the know, were to the effect that GM wanted to focus on providing good product value to its customers, and that its customers were primarily seeking heavy SUVs with poor fuel efficiency.
Time passes; the wheels turn.
As a taxpayer (and not one from that rich bracket paying reduced taxes – thanks Mr Bush) I am beyond horrified at the amount of government money being given to the domestic auto manufacturers for, of all things, to help them make vehicles that are more fuel-efficient. These are the very same automakers who have resisted a plethora of market signals, several times over, telling them to do exactly what they’re now requesting federal assistance to do. Only someone living under a rock in the Australian bush, for example, could have missed the hyperbolic rise of the common hybrid sedan (the Toyota Prius) this past decade, or the pricing volatility in the motor fuels market.
But let’s not dwell on the fact that this is essentially an act of rewarding failure; there’s more at stake here. No one wants to see even more former employees seeking welfare or helping to empty the food banks; no one wants to see more home foreclosures or more money being spent to support the homeless and unemployed. With the size of the combined operations of the Big Three, and their potential impact on the economy (both good and bad) it’s imperative that we find the right way out of this mess.
In that vein, here is a modest proposal for the requirements that GM & Ford should agree to follow if they are to accept government monies:
limit the maximum top-to-bottom compensation ratios to something like, say 20-to-1;
provide an extraordinarily complete accounting of how the money is being spent or has been spent, and the efficaciousness of these funds at achieving the desired goals;
if the desired goals are not met, provide an accounting of why & how and a plan for resolving the problem(s);
provide a detailed plan (obviously it will be an ongoing thing) as to how to return to profitability;
agree to produce the vehicle design(s) selected by an independent group for such criteria as fuel efficiency, ease of assembly, durability, limited environmental impact on the sourcing side, etc, if GM is unable to provide any designs of its own which cannot be proven to meet the criteria;
Nudge from CFN
Roy Lions
3 strikes and your out;
Take a good look at the 3 major hurdles GM has!
1) Ask a GM hourly employee what they want, and the reponse is a simple ” I want to get out of here, retire and get my pension!” Mundane work assignments with little pride in the job other than the fact the UAW has forced managment to pay ludicrous non competetive rates and benefits, a television and newspaper at every station.
Ask a GM middle management or salary employee what they want and the response is a simple
” I want to cover my butt so I don’t get canned, retire, and collect my pension” Forced to work in conditions of severe intimidation and management by fear.
Ask a GM supplier what they want and the answer is simple!
Give me work from Honda or Toyota ,as the supply base despises how purchasing squeezes every last penny from them until they go bankrupt. Engineering can’t design a product without making a ton of changes right into start of production and the expect the supplier to absorb ridiculous costs.
These 3 simple issues make GM non competetive and never able to compete against the JOEMs
A bailout at this point in time is a total waste of money. The spending spree in regards to big salaries, bonuses, stock options should have been over years ago. Buying the Renaissance centre when GM is already on a downward slide and now attempting to buy a defunct Chrysler corporation just proves there is little fiscal responsibility at GM.
Nate
John R,
Couldn’t have said it better myself!!!
I have never had a good experience at a GM dealer except when I walk out the door without buying OR when I walk out the door with the part I need at less then the price I expected to pay.
Joe,
What IS the problem. As an engineer the first thing you do is define the problem. What is GM’s problem?
In my opinion its declining sales and that is caused by non interested buyers and that is caused by GM’s products and the mentality that goes into them.
I think more correctly its a question of where the wealth has gone!! There is plenty of wealth in America today but what is being done with it?
I don’t see a pilotless F35 as a bad thing (and as a Pilot and engineer myself I don’t know how you could possibly think an F35 could effectively perform its “job” without a pilot).
The one thread you miss is that the work has merely shifted from physical to mental work. Our economy isn’t able to handle a society where people have to work less. Thats how people seem to be going, they want to work less, but someone has to do the work because it has to get done. All outsourcing does is cost us money in the long run.
How is math and science to blame for this? It is the foundation upon which our entire species is based.
If there is one mistake it is over emphasizing college degrees and not emphasizing hard work and physical labor enough in our society.
It can be said though that our whole society suffers from similar or even the same problem as GM… not being able to keep pace with things.
Perhaps what we need is an economy where less is better. And resources and energy are actually used wisely and valued.
Why do we need expansion? Why do we need an economy thats expanding as it was in the 1950’s isn’t there a point when big enough is big enough? Isn’t there a point when the market becomes saturated with goods and new ones aren’t needed as much.
WWII was won because we had no alternative. With or without the Big Three we would have been mostly at the same place. WWII merely stirred up the dormant labor force that this country has. It was a need to act. If you look at WWII the contribution of facilities owned by the Big Three were but a small portion of the overall labor and industry. Take a look at the overall production of the US back then it was incredible. At one point we turned whole ships out in less then a day!!!
If you want proof of this take a trip to your local old military base (Philadelphia comes to mind for me) and look at the differences in the industrial buildings made in 1930 vs 1940, the 1930 buildings are beautiful brick and ornate while the 1940 buildings are quick, and “dirty” and not very pretty. WWII buildings were built in a hurry.
The point is people were out there working toward a common cause because they had to. I doubt you’ll see that kind of labor until a major conflict that scares enough Americans into action.
Ok enough on that from me.
The industry will not go away anytime soon, only change and evolve under whatever name the people running it choose.
SteveG,
The Feds don’t need to bail GM out. GM needs to bail itself out so it manages itself better in the future.
There is nothing wrong with the Cruze, though I do think the Cobalt is a stronger name (it certainly is a stronger material). Either way if GM makes the product right the name won’t much matter.I much rather the G series names from pontiac, they are much more concise and don’t stir up such a conflict of viewpoints regarding what to call a car.
I think Saturn should be kept around. Opel needs to replace Pontiac and Chevy.
I whole heartedly disagree with you. GM needs to dump ALL of its classic names from the last 30 years. The G series is a great way to call a product. the G8 shouldn’t be associated with the Grand Prix at all. The G8 is a totally unique name. The G8 is a large, niche market car thats why it doesn’t sell. Other then that its not to bad, it could use a diet and some handling improvement but its not bad enough to call a Grand Prix.
Alex,
I agree with you. I have been seriously looking at a CTS but if GM goes under where will I buy parts for it? Inevitably something will break and then what? And a warranty means nothing if the company isn’t around to back it up. Its a good thing I’m looking into Acura I suppose.
Consumers aren’t going to buy current GMs.
James Whitehead,
I agree once again people did experience the bad products GM sold. I still drive a few of them. And they aren’t that great. I only drive them because its cheaper to fix them then drive a new GM.
You are 100% right people got burned by GM. A friend of mine purchased a G5 a few years ago and after 20K miles it had all kinds of rattles and things going wrong on the interior. Ironically this is the SAME experience I had and have with my current GMs (one is a 1990 the other is a 1987) as well as my parents GMs (they are both 2003s).
Noel GM FOREVER,
Well put, what will GM do with a bailout cash supply?
What about dumping Pontiac and Chevy and bringing Opel to the states?
Sheth,
I have been in both a 2008 Malibu and a 2008 Honda Accord. I have to say the Honda feels and seems nicer from any seat in the car. Perception is everything. Quality is everything else. How does the Malibu deliver both of these? I tapped around the interior of the Accord and couldn’t find anything that felt or sounded like hard plastic. And I found no hollow sounding plastic panels. The Malibu had them all over.
Decent mileage? What happened to good or great mileage?
Where are the small RWD performance cars? What does GM have to counter the Nissan Z and the Infiniti G37? Nothing I can think of not in that size class.
What about Subaru WRX does GM have anything small like that.. nope
How about something like the Mazda Speed 3… nope again…
Performance cars are about more then just numbers. The Cobalt might be close to a Mazda 3 but interior quality is extremely lacking according to many people who HAVE shopped for these types of cars.
GM may be making a few great products but I can ague that they aren’t price competitive yet.
I suggest anyone who can’t understand why the Japanese are so successful need to look at Japanese culture. The japanese place great pride in what they do and how they do it and even take their own lives over messing up at work. This is why they do so well. Because they are dedicated to doing the best they can. And this is why they are so competitive.
Why should they need a chance. They’ve had more then 10 years in the market and very easily could do it now. If GM focused its US efforts on say 5 to 8 models of cars and redirected all their personnel and cash they could and would be able to pull themselves out of this mess in less then 5 years. But instead they will get a bailout and continue operations as normal, not nearly as valuable a learning experience for them.
Edvard,
The country can’t afford to have a bailout unless some serious serious changes are made. Out with the OLD in with the NEW.
I think advertising is needed but a quality product will be enough to turn GM around.
Noel GM FOREVER and Sheth,
I don’t really consider 30 MPG that good when one of my Buicks gets 29 MPG and its 20 years old.
Any of GMs mid sized cars should be getting 33MPG.
st34,
Rightsizing is the best way to put it. I think though that axing Chevy and Pontiac would work. Make it Buick, Caddy, Opel and Corvette and then Chevy Trucks.
I agre GM has Gangreen. Though I don’t agree on which limbs have it. I really think Chevy and Pontiac are replaceable. And I think that GM needs a new brand to capture the attention of the import buying public. I think Opel could be just that. And personally I think the Aura is a much nicer car then the G6 interms of styling. Then again I like the Acura TL.
Saturn I think is a poor brand to close down. They have always done pretty well and always catered to the economy car segment. Though I suppose I have a thing for less then 5 letter brand names.
I think Buick can market the China designed Rivera to young people move the G8 to either the Opel or Buick name, Caddy the CTS and STS, Buick Can keep a few old people cars as I call them (they really are great for traveling) and Saturn can sell the inexpensive entry level and economy cars rather then GM. This leaves Opel, Buick and Caddy to compete with Infinit, Acura, Lexus, Audi, BMW, and Mercedes….
I Disagree that GM needs to keep the best performing brands. Performance isn’t everything. The problem is fighting the imports and what they have. I don’t think Chevy can make an import fighting car. Buick is Luxury, Caddy is Luxury Sport and Saturn is economy/entry level. I don’t think with Saturn around there is a need for Chevy. Just consolidation of models. I think though Buick and Caddy have a spot at some interesting products if they let Buick turn into a young people’s brand.
Because Buick has lost its base it needs to be kept. Buick doesnR