General Motors at a Fork in the Road ……And…… A Possible Solution for a Robust Resurgence

Automotive News ^ | January 10, 2006 | Jerome B. York

[dirtboy]

The cure is obviously simple.

Yep.

Ten years ago, I would have never considered buying a Hyundai.

Three months ago, I bought one for my wife, because it was the best value I could find.

And that included Toyota and Honda as well - they've rested on their laurels while the folks at Hyundai apparently have stayed up late to catch up. That is the key now - quality improvement and better value year after year. I never seriously considered an American vehicle - all my research showed they simply could not make a better product offering. And that sucks, because I grew up in an American-car or nothing family.

But it's now a global economy - if you are not willing to do what it takes to make a solid product, you will go down. It's that simple now. If GM could have offered my anything close to a Hyundai Tucson, I would have bought it. But they couldn't. That is the benchmark they need to meet now.

[AFreeBird]

and Soltice(with LS2 option)

Holy $#!t, wedge a LS2 V8 in the Soltice?

Talk about thrust to weight ratios.

[gogeo]

Wages are only half the cost of employment. Does anyone seriously argue there will be a need to rapidly ramp up production, or that it could not be handled by higher productivity?

[Iris7]

Looked at your home page. What a pretty place.

There will be a lot of scared old timers working at that sawmill. Be a job fixing things. Fear busts out as rage. Take care.

[Iris7]

I agree that the Feds will intervene at least once. This thing will look like it is going to last forever until suddenly things fall to pieces.

The Feds are involved already, though, and have been for seventy years. The UAW is a creation of the National Labor Relations Act of 1935. The National Labor Relations Board has 5,000 lawyers, all unionized, and all of them Lefties.

[Iris7]

"What imbecile at GM thought Fiat would be the key to anything?"

The blame is usually laid on the previous Jack Smith administration. My take is that MBAs are trained, indoctrinated, and convinced that they don't need to know anything whatever about the car business to run General Motors. Whistle a happy tune, sprinkle on a little pixie dust, and everyone lives happily ever after.

[1Old Pro]

GM could easily fix their problems, convert their defined benefit plan to a 401k and become a non-union shop.

[Eric in the Ozarks]

Its the current "win the ties' biz school mentality; You don't have to make a superior product. Just make it as good as Ford's, and if you win the ties, you haven't spent any money unnecessarily.

[Iris7]

A Z06 is a pretty good buy. A C5 Z06 could be had brand new at the end of the run for $35K. Might as well be a million dollars for me, can't afford them nohow, noway, as they used to say.

The original Cobras, first few hundreds of them, and the first year Shelby Mustangs were good cars.

I suppose if I were to build something up these days I would use an ex-police Grand Vic, a Chevy big block, and maybe a used ZF 6 speed manual from the diesel truck. Leave the hole in the floor for last. Still a lot of money but it would be a fun car. Probably get by with dropping the front end an inch and a half. Spray it some mild mannered color.

[Fraxinus]

Does anyone seriously argue there will be a need to rapidly ramp up production, or that it could not be handled by higher productivity?

During the great depression several companies kept their workforce by having them work half-shifts, thus when demand resumed they were able to go to two full shifts without hiring neophytes. Company-wide, GM will be shedding workers for the foreseeable future, however there will be the occasional plant building a high-demand vehicle that will need to expand production faster than productivity improvements will allow.

[Iris7]

"I think they always thought that GMC could be sold at non-Chevy dealerships so they weren't competing with the bow tie badge at, say, a Pontiac dealership. How stupid."

GMC pickups are sold at a local Buick dealership. Brand engineering cannibalizes the future.

[Iris7]

"GM could easily fix their problems, convert their defined benefit plan to a 401k and become a non-union shop."

Unfortunately that is the mice talking about belling the cat.

The Feds regulate pension and union stuff very closely and aggressively.

Defined benefit pensions have to be paid off with cash up front annuities (a $million or more per head) to close down those regulated plans.

The Unions are covered under the National Labor Relations Act of 1935. Even Chapter 11 bankruptcy cannot make the unions go away. Chapter 7, liquidation, closing down forever, can.

Maybe the Feds will change the rules? Be nice.

[Iris7]

"The biggest flaw of all in all that's been proposed is that it allows GM to survive, not thrive. It's just the first step."

Looks like just talk to me. Realitiy is in the details.

[Iris7]

Now to "win the ties" means Hyundai now and later Chery and most of the other Chinese outfits working together. Daewoo might be able to take Hyundai but for sure no North American operation can.

[sam_paine]

Brand engineering cannibalizes the future.

How d'ya mean?

[Iris7]

I speculate that GMC pickup customers want their new pickup to be different from a $500 cheaper Chevrolet pickup. In fact only the badges are different. Happened to me once upon a time!!!

More seriously, folks wanted to believe that their Oldsmobile or Buick was a better car than a vulgar Chevrolet. The customers didn't mind too much that "beauty is in the eye of the beholder" but they wanted something special for their extra money. When Chevrolet engines were built into Olds and Buicks, with only the valve covers different (if that), these people were angry and felt they had been played for suckers. Instead of bragging rights because of the new Olds in the driveway they got "Isn't that the one with a Chevrolet engine?"

I think keeping the brands different enough was necessary to keep up the aspiration for upper scale brands. I don't think that a lowest priced Chevy badged as a Cadillac was a good idea at all. Cadillac is just now recovering from those days.

Cars become all the same, the brand names come and go, and who wants to keep track.

[Eric in the Ozarks]

I remember when the first lawsuits were filed against local Olds dealers (in state courts) after new Olds owners couldn't find a rocket engine under the hood. Olds was once the hot division that got to test the new stuff. I used to call on a guy in Keokuk, IA who had worked for GM in the mid 1950s. He and two other GM engineers took a 1955 4 door 88 with the new J-2 engine down through Mexico to test the motor's durability for a couple weeks. GM figured if it could run on Mexican gasoline, it would survive anywhere in the US.

[Iris7]

Thinking of roads not taken the Oldsmobile could have branched into cars more like the 1955 Chrysler 300C, seen here getting prepared for a flying mile run. Notice that the hood is tied down to the bumper with rope. Children's modeling clay is being used to reduce air drag around the headlights, the top of the windscreen, etc. This is a factory sponsored operation.

Below is a 1955 300C;

A 1957 Convertable. Still an icon.

[Sergio]

Very insightful analysis. You took a very long speech and pared it down to the essentials.

One thing I found interesting about the speech was where it was said that Chrysler bought out excess capacity with the UAW. IOW Chrysler asked the UAW, how much is it gonna cost us to close an unneeded plant and not have you give us a hard time about it. GM needs to do this desperately.

The other thing IMO that GM needs to do is to stop competing against itself. The Saturn Ion is the Chevy Cobalt. The Chevy Tahoe is the GMC Yukon. Why does GM go out of it's way to dilute it's own market share.

I believe that GM should do like the military does and put out a request, say for a small car, to all of it's divisions. The winning division and only the winning division gets to sell that car. Use the same process for mid-size and large cars trucks and SUVs.

In the long run, you save on marketing and advertising, and each division can have a smaller engineering staff.

Best Regards

Sergio

[Dark Skies]

The other thing IMO that GM needs to do is to stop competing against itself. The Saturn Ion is the Chevy Cobalt. The Chevy Tahoe is the GMC Yukon. Why does GM go out of it's way to dilute it's own market share.

I believe that GM should do like the military does and put out a request, say for a small car, to all of it's divisions.

Excellent thinking on your part.

Thx Sergio:

It is truly insanity to own divisions that compete with each other in the market place. Only politics, insularity or hubris (or a combination thereof) can cause a company to hold onto useless concepts or divisions such as that.

Your idea of putting product requests out to its divisions is an excellent way for GM to turn its competing divisions into winners. If GM's various divisions are going to compete in the market place (with GM the loser), make them compete internally, eliminate costs associated with duplication, and let the savings fall right to the bottom line.

Regards,

DS