GM: What Went Wrong?
Today is the deadline for 113,000 General Motors employees to decide whether or not to accept a buyout offer; that is, they can either keep their jobs with a company that, last year, lost $10.6 billion and faces an uncertain future, or they can walk away with a lump sum of up to $140,000. Until last year, when Toyota overtook it, GM was the world's largest auto manufacturer. Now it's in the midst of the largest corporate buyout in history. How did it come to this?
The PBS program NOW will investigate that question tonight. The answers are no doubt complicated and include issues like soaring health care costs, high wages and supply chain problems, but they also center around really poor business decisions by GM. As one analyst tells NOW, "They've guessed wrong on the market. They've guessed wrong on fuel costs, economy and consumer reaction to that price." Another says, "You could have just watched the turmoil in the Middle East unfold over the last two decades and you could have known that someday there was going to be a breaking point." Well, yeah.
And what is GM's current strategy for dealing with high prices at the pump? They're reimbursing (some) customers on their gas bill. I guess you've gotta move the merch somehow. On a brighter note, the company has (finally) jumped into the hybrid market, focusing on putting dual drive systems in trucks, SUVs, and perhaps best of all, buses. GM says putting hybrid systems in compact cars like the Prius doesn't make good business sense. At which point I'm tempted to respond: As if they had any.
5 Comments:
Well, while the hybrid buses are okay, GM really isn't moving at all into the hybrid passenger vehicle biz - their Silverado and Saturn Vue hybrids get only a marginal mpg bump. They are not really worth calling a hybrid.
Detroit has been too eager to cash in on the desires of aggressive and frustrated people who use their vehicles as compensation for their own sense of inferiority. They crave more horsepower and larger, more intimidating vehicles for their daily thrill ride to and from a job they hate. Most of GM's managers probably fit in that profile, so why would they want to make a "wimpy" subcompact that gets 40 MPG?
Actually, my car is a GM-made 1998 Saturn SL1. I paid $3400 for it two years ago, have had no major problems, and I average 35 to 40 MPG. It does not feel underpowered, but I rarely have a need for high performance. Driving should not be a competitive sport, anyway.
GM and other US auto makers, along with their employees, are now feeling the effects of their unchecked, bloated egos, blinded by years of cheap gas and a hot car mentality that should have faded away in the early 70s.
Many of their workers have been getting unrealistically high union wages for increasingly mediocre job performance, and they are now feeling the pinch as we in the US need to come more into line with the rest of the world. We are now part of the global economy and we no longer have the luxury of artificially low energy costs to sustain an environmentally irresponsible level of gross waste and overconsumption.
GM had some good opportunities, but they blew them because of their typical corporate greed and short-sightedness. They killed their successful EV program, most likely because they could make better profits with cheaply made and more sexy SUVs, and they laughed at environmentally conscious fuel efficient competitors. Now the last laugh is on them, although the management probably has golden parachutes. The ordinary workers are the ones who will suffer, but those who have been good at their jobs will likely find employment at their competitors' shops, and they will probably be happier with better managers.
Update: Between Delphi (the parts supplier) and GM, 35,000 workers took the buyout.
How about holding consumers responsible? In order to sell products, companies have to produce what the consumer wants to buy. Don't attack the bakery because they make unhealthy donuts - the consumer makes the decisions that create the demand for the product. When consumers change their demands, the products will change.
Anonymous above: Agreed. Consumers are indeed the other half of the equation and we shouldn't let ourselves off the hook entirely. In the end, I think the blame can be shared equally. After all, the car companies have had a big hand in shaping the market and it is in their long-term interest to find products that make sense for the long haul. That is, if they care about staying in business for the long haul. But that's one thing to which the Japanese business philosophy is better suited.
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