The Tragedy of General Motors -- Fortune article 4

[kenvlach]

Sales of dinosaur gas-guzzlers are down, potential buyers are worried about long-term warranty coverage, the so-called leagacy cost of $1500 per vehicle produced in N. America, guarantees to Delphi pensions, difficulty of GMAC in obtaining funds.
Fortune magazine story:

http://money.cnn.com/magazines/fortune/fortune_archive/2006/02/20/8369111/index.htm

Delphi problems & timeline, 18-Feb 2006 Detroit Free Press.

http://www.freep.com/apps/pbcs.dll/article?AID=2006602180315

Does anyone believe GM in survive?
Could Chapter 11 allow enough cutting of salaries & pension benefits to allow profitable N. American operations?

Should the govt. help, as it once did with Chrysler loan guarantees (loans which Ioccoca repaid early)?
GWB has said no bailout for either GM or Ford.

Do GM employees, who received relatively high salary & benefits w.r.t. other mfg. jobs, deserve govt. help when many people get no pension or benefits other than Social Security & MediCare?

 

[GregLocock]

Good thorough article.

...and very scary.

Cheers

Greg Locock

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[swall]

In a WSJ interview with Carlos Goshn, CEO of Nissan/Renault, he is quoted as saying that he believes GM will survive.

 

[patdaly]

As a long time GM loyalist, I believe they will survive. As a practical man, I think they will be a bit player in the new order, not because they cannot remain strong, but because they lack the will to do what is necessary.

Personally, I hope the Gvt. stays away from any bailouts until they show they have a leader on the caliber of Iacocca.

Perhaps they could lure Dieter away from Daimler.....

 

[TVP]

The legacy problems of Ford and GM are significant, and really illustrate how much authority their management and board of directors have abdicated over the years. Having said that, GM will certainly survive, but probably not in the same form that it is in now. The Delphi thing is a huge unknown, and will likely determine how GM performs for the next 5-10 years. Regarding the CEO position, I would not be surprised to see an announcement that Roger Penske has agreed to lead either Ford or GM.

 

[CoryPad]

I don't see a new CEO at Ford unless Bill has health problems (like a stroke or heart attack from the stress).

The Detroit Free Press had an article Saturday (sorry, can't find a link on their Internet site) from a bankruptcy expert. He stated that bankruptcy is not a pancea, and that Ford and GM had little to gain from it, while the shareholders would have significant erosion of their value.

I don't see bankruptcy for GM, but I do see further contraction. I don't understand why they don't see their product problems - Cobalt, Lucerne, etc. are supposed to be world-class?

Regards,

Cory

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[kenvlach]

Good points. The Sunday DFP editorial pointed out that people will lack confidence in warranties offered by a automaker in Chapter 11, thereby worsening the situation.

Contraction/plant closure only raises the legacy load on the remaining fewer employees. People are still buying huge numbers of vehicles. The real problem for GM is that nobody buys a Cobalt, Lucerne or gas guzzler Suburban when they can get a Avalon, Camry, Prius or Tundra.

Any way to swap management with Toyota?

 

[MikeHalloran]

When GM or Ford closes a plant and Toyota or Nissan or Honda builds one, they _are_ swapping management.

They just aren't doing it very smoothly, especially from the point of view of the workforce.




Mike Halloran
Pembroke Pines, FL, USA

 

[GregLocock]

Yes, that's the whole problem with capacity reduction - there's always plenty of new construction going on. For a start GM is building new assembly lines in China...

Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[patdaly]

I must say, I have no issues buying US product, though I would hardly consider a Cobalt any more than I would consider a Civic. I do have an all GM fleet right now, with the youngest, freshest car being a 1997 with 123,000 miles. My poor old truck just clicked 285,000 miles. You know what? They have all given exceptional service and returned good efficiency for which they were designed.

Where I see the real issue with American manufacturers is the poor management of company resources, from idiotic pay and perks for company men, to lacking the will to hold down the very legacy costs which cripple them now. The sad thing is, this goes far beyond just GM and Ford, it is endemic in every organization from United Air Lines to our very own Federal Government. Retirement benefits which are not fully vested are the next threat this country faces, and to be honest, it scares the bejesus out of me, for the level of price increases for private concerns or the level of Taxation required to support this system is onerous.
I will say, in 1995, my company took our pension away, and subsituted a 401K. They made no bones about whose responsibility it was for a secure retirement. At that point, I was hopping mad, and just about quit. Now, some 11 years later, I realize it was the best thing they could have done, for I control my destiny.

I guess my point is, painfull or not, until we address the issue of legacy costs nationwide, we will have our shorts handed to us by those who face lesser ones.

 

[swall]

I seem to recall that "lucerne" is Belgian or possibly French for "alfafa". Silly name for a car.

 

[kenvlach]

Worse than that. Vons (grocery chain) sells Lucerne cottage cheese and other dairy products, presumably after Lucerne, Switzerland (remember Heidi's grandfather)?

 

[Underdamped]

Lucerne was a better choice than than Lacrosse - at least in Quebec.

 

[icrman]

Its really pretty simple. Back in ole Henery Fords day, he had one old secretary that did everything. Book keeping,
payroll etc. Now most all big business keeps adding thousands of "non producers" that usually make more than the
worker in the factory. So there is a lot of non producing
over paid employees.
And GM's biggest problem is, they can't seem to be able to
design a nice looking vehicle any more. So it is either part of a master plan to go outa business and let China have
the car manufacturing or ??? Learn by this Ford and GM.
Ford has a nice looking car on the market now. The big
problem is. It is priced so high that no one can afford it.
Well unless you are an over paid "nonproducer".
The GT-40 look a like. And you GM had the Firebird and Camaro. All you have to do is bring the price down to the
$12,000. area, and you will have massive waiting lists.
Every teenage kid in the country would be buying one, and
same goes for us 50ish generation also.
So the problem is wake up and design something that is appealing. And bring back the good little Geo Metro. Just
use the same old tooling. It looks just fine like it is.

 

[safetydan]

The real problem is all of the people on the shop floor who only know how put a door on a car, or put a couple of bolts on are making $60k a year! Talk about over-paid. Teachers, health care workers (non-doctors) and others are barely surviving on bare bones salaries, but they are non-producers. Whenever a plant closes, the non-producers are left to run all over trying to find a new job, while the shop workers are still paid their full salary for another 3 years. Where is the logic in that? Those are some of the real issues in the American auto industry.

Someone makes bad parts at a Japanese car company, they can lose their job, because they care about quality. A line worker at a Ford plant cracks 500 truck frames and he goes home laughing and shows up the next day, while the trucks are scrapped.

 

[kenvlach]

The bloated salary & benefits structure evolved as a joint creation of the UAW and auto management back in the days when the US cos. could ignore imports.
The UAW would selectively strike workers at one company & draw on the non-striking workers at the others to support the strikers. The struck company eventually gave in, and then the other companies gave matching labor contracts (AMC & Chrysler occasionally got reprieves); but management didn't care as long as they didn't pay any more than at their competitors. Worked OK for the first 30 post-World War II years, but then a dose of reality in the form of global competition hit.

Labor contracts and US & state labor laws protect incompetent workers. If fired, they collect unemployment benefits unless the company can prove to a labor board judge that intentional damage was done.

Japanese Brands Sweep Top 10 Auto List
It's the first time that U.S. firms are absent from Consumer Reports' annual survey.
By John O'Dell, [Los Angeles] Times Staff Writer
March 2, 2006

"Detroit's automakers were shut out Wednesday as Consumer Reports awarded all top 10 new-car picks to Japanese brands in its annual auto issue.

It marked the first time since the magazine began its "top picks" nine years ago that no American vehicle made the list.
...
The magazine has found that Toyota and Honda vehicles consistently have fewer problems as they age than those of other manufacturers, Champion said. An 8-year-old Toyota "is about as reliable as a 3-year-old Ford," he said.

Among American brands, Ford "consistently" has lower problem rates for older vehicles than do General Motors Corp. and DaimlerChrysler's Chrysler Group, Champion said.

Of the 36 major brands surveyed, German automaker Porsche was the least reliable, with Hummer, Land Rover, Volkswagen and Mercedes-Benz filling out the bottom five.
..."

The top-rated vehicles in each category:
"Small sedan: Honda Civic
Family sedan: Honda Accord
Upscale sedan: Acura TL
Luxury sedan: Infiniti M35
Small SUV: Subaru Forester
Mid-size SUV: Toyota Highlander Hybrid
Minivan: Honda Odyssey
Green car: Toyota Prius
Fun to drive: Subaru Impreza WRX STi
Pickup: Honda Ridgeline"
-- Consumers Union

http://www.consumerreports.org/cro/home.htm

[subscription required for the full report]

 

[GregLocock]

So, just to emphasise how arbitrary these annual surveys are, we could say: most GM brands, and all Ford brands, are more reliable than Porsche, Mercedes and VW.

You wouldn't have expected that 5 years ago, would you?

Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[Ashereng]

The gov't is allowing the airlines (United?) to seek protection under various bankdruptcy laws, along with the steel (Bethleham?). Why not automotive?

Ultimately, it is the American people that pays, either way. More specifically, it is the younger generation Americans, and those yet to come, who will be paying.

 

[AXP]

In response to the consumer reports top ten:

Journalists are not engineers

Politicians are not engineers

Consumer population isn’t educated enough to pick the best engineered car, but would rather rely on what their liberal arts educated friend told them, or how popular the car is within their network of friends. Most people don’t buy cars any more because they are practical, but how that car conveys them to their piers. Since the early 80’s, the overall growing consensus has been; you must be smart if you drive a foreign car. When was is cool, or smart, to drive a Ford or Buick? I say GM and Ford need to wise up on how they spend their marketing $$$.

 

[Shredcheddar]

In my opinion, GM's problems from a purely automotive standpoint can be summed up by its newest Corvette. Pushrods and leaf springs in the newest iteration of "THE" American sports car?

Weak to say the least. GM, make the jump to DOHC that you should have made twenty years ago, and eliminate the 2,000-year-old rear suspension technology and THEN I will be interested in the best that you have to offer. If you can't do better than that on your top-of-the-line sports car then I don't know how you can expect to be considered a serious contender in that market.