Motor Trend's Angus MacKenzie is pissed-off at the autoblogosphere for crapping on his advertisers' inability to predict the death of the great American gas guzzler. "Don't you love Monday morning quarterbacks? The blogosphere is in seven shades of schadenfreude this week as a shocked Detroit wipes away the blood in the aftermath of May's brutal sales slump: Why didn't Motown see this coming? We told them relying on big trucks and SUVs was a dumb idea. It was obvious gas prices were going to rise. Fire the idiots! Oh yeah? If you're reading this, I'll bet my 401k that like Rick Wagoner and company, four years ago you didn't figure you'd be paying over four bucks for a gallon of gas today. Because if you had, you would now be richer than Croesus, and lying on a tropical island somewhere, kicking back with a mojito or three, without a care in the world. Hey, we're all still writing blogs. We didn't see it coming this fast, either." Ah, this fast. And there's your Detroit excuse of the day, as laid out by GM CEO Rick Wagoner in this startling video. Oh, and this is all your fault. "Automakers grudgingly built the more fuel efficient cars the government ordered them to, but we bought gas-guzzling pickups and SUVs by the millions instead because, hey, gas was cheaper than water. Who needed to drive a girly gas-miser? So maybe we ought to ease up a little on the finger-pointing at Motown; the truth is we're all a little bit complicit here." Speak for yourself Angus. Oh wait…
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Angus is absolutely correct.
Detroit has always met the CAFE standard, and offered vehicles with great mileage, but people still went out and bought 6000 pound behemoths.
This site is so eager to blame GM for everything. GM is not faultless. But we’re all to blame. (Except for me–I only drive 4cyl/sticks. Except for that brief flirtation with a Mustang 5.0, ten yrs ago. Aww, darn it all, I’m guilty too!!!!)
Angus really misses the point, doesn’t he?
It’s not a matter of the Big 2.8 being psychic, but of being prepared for whatever could happen.
Toyota provides the obvious counterpart. They’ve got frugal subcompacts, massive luxobarges, urban assault vehicles, run-of-the-mill midsizes and just about everything else. They are prepared for whatever happens. $15 oil or $150 oil, Toyota is still going to make money.
The fact that it is not possible to predict the future is the exact reason why it pays to be prepared for as many outcomes as possible. Instead of betting on the price of gas, have products that you can sell, no matter what the price of gas is. If some kid in the Boy Scouts understands the value being prepared, somebody in Detroit ought to be able to figure that one out.
Detroit can’t be faulted for building cars and trucks its customer wanted, but the CAN be faulted for spending those profits unwisely on non-core businesses, while letting less glamorous product lines get stale. Now that the tables are turned they have little to fall back on.
Toyota, Honda and Nissan could stop selling their gas guzzlers tomorrow and not miss a beat. The Big 3 would have to close up shop at this point.
4 years ago I didn’t think I’d paying this high but I knew that fuel was going to continue it’s escalation. Having that in mind, 3 years ago, is why I downsized from a 1/2 ton truck to a compact sport wagon.
Make sure your stock was in the crude producers, the oil companies that don’t produce or sell crude are hurting quite a bit right now.
The asian and european companies are better suited because their homemarkets preferred smaller, more efficient vehicles.
I don’t think Ford would have to close shop without trucks and suvs, but they surely wouldn’t be the size they formerly have been. Which is just fine, I’d rather see a smaller company that can change quickly to the market…something Honda has always succeeded well at due to it’s size. And it has no issue not being the biggest.
Pch puts it well. You diversify your product line and infuse quality in all of them. GM lived by the SUV and now dies by the SUV. There will always be a market for the Camry. The Avalanche? not so much.
It’s not a fault of GM for taking advantage of an SUV-favored market. Their mistake is not having a backup. To paraphrase:
If you’re reading this, [Angus,] I’ll bet my 401k that [un]like Rick Wagoner and company, four years ago you […] figure[d] you’d [eventually] be paying over four bucks for a gallon of gas […].
GM wasn’t prepared for such an eventuality. Simple as that.
Uh, does everyone realize that the major automakers pay tens of millions of dollars for short and long-term forecasting? Not to mention the fact that GM has been in the car business for 100 years. Surely, Detroit should have been the FIRST to analyze sales trends.
I have no doubt that The Big 2.8’s in-house researchers presented timely information on gas prices. I also have no doubt this information was buried, ignored and dismissed.
When GM was launching their GMT900 SUVs, days before Hurricane Katrina (August ’05), PLENTY of people questioned Wagoner’s decision to re-invest in SUVs and pickups rather than fuel efficient cars (including this website).
And there was an anti-SUV safety and environmental backlash well before that; the proverbial canary in the coal mine. High and Mighty was published in September 2002.
dwford offers the best perspective of this. The polar opposites presented by Angus and the majority of bloggers hit significant issues, but the pragmatic answer always lies in between the absolutes.
We care about vehicle sales and market size because they reflect the pull-aspect of customer demand. It is not an automaker’s fault for finding a huge profit opportunity at the supply and demand equilibrium of massive 3-ton behemoths. Where the automaker is to blame is for not reinvesting these profits in itself to improve its future viability.
The improvement in the firm can come numerous ways. Some concepts are as simple as finding improvements in efficiencies from a cost accounting perspective. Another brilliant decision would revolve around the research of more efficient powertrain components (that includes axles, transmissions, and engines). And I’m sure we can see how flexible manufacturing process that Toyota invested in now lets them shift production between Highlanders and Camrys at the same plant. Name a Big 3 plant that can switch between two disparate vehicle types as fast as the Japanese. No, Charger/Magnum does not count since axing a vehicle line doesn’t reflect a proper change.
Instead the Big 3 focused their investment in ridiculous arenas. You’ve got draconian levels of slashing to lower the precious hours-per-vehicle as reflected int he Harbour report. Granted, lower HPV is cheaper on a per unit basis. Unfortunately, if this “efficiency boost” is done incorrectly you get horrible build quality and reliability. Mercedes laughs at these HPV reports because their attempts at reducing HPV resulted in the disasters you see in the MLs. If a little HPV reduction is good – then an even greater HPV reduction must be better? No.
The Japanese always had the leg-up in the small car arena because they weren’t tied to the NAFTA markets. Europe and the Pacific rim allowed the Japanese to sell economies of scale with efficient vehicles so they could persist in America as well. The Big 3’s poor globalization efforts for small cars is why they could never build a business case for good, small cars in the USA. Instead they relied on importing others’ small cars because they never invested in a plan to enable them to build small cars effectively. Chrysler still hasn’t learned its lesson. Ford actually seems like the best-poised to execute small cars. Unfortunately, the process to get there takes many years. And I don’t think bloggers have the patience to wait that long.
Only thing the Big 3 is guilty of is building and selling what the buying public demanded. Thats it. Nothing more.
Yes, we are in a “free” market and the deciders pay with their cash (or credit.)
I can’t help but wonder if Detroit would be in quite as much trouble if they had developed competitive small vehicles (including Utes and trucklets) years ago instead of feeding at the fullsize truck trough for so long…
I am NOT defending Rick Wagoner here, but several years ago, seems like centuries now, when the first PCs were coming out, IBM owned the computer business. The competitor companies that were called "The Seven Dwarfs", including Univac, Control Data Corp., Burroughs, and others had pretty much killed themselves off through incompetence. So IBM reigned supreme. IBM had enormous engineering talent and historical institutional knowledge of the computer business starting from the punched card era, through vacuum tubes, early transistors, integrated circuits; the whole thing. Not only did they know how to use the technology, they pioneered in building machines to make the stuff. But they were utterly incapable of appreciating the coming tidal wave. Certainly not every individual in the company, but, as a company, they were unable to respond. On, I think, their third attempt to make a PC they thought might sell, they did it on the cheap using off the shelf components instead of designing a proprietary chip that would have allowed them to control their products. By using an Intel chip, the way was opened for Compaq to build a compatible PC that eventually garnered credibility. Then when IBM lagged in adopting advances in the Intel X86 chips from the 8088 to the 80286 to the 80386, Compaq didn't, and leapt ahead of IBM. Instead of IBM investing in developing their own puny little operating system and Basic compiler, which was all that was needed at that time, they turned to Microsoft which had nothing either but bought DOS from the developer for all of $50k and thus got a foot in the door and a leg up on the whole game. Instead of Wagoner's being excused by such earlier errors though, I think he, and the GM board, should have learned from them. Too late now. Eventually the IBM board dumped John F. Akers, known unaffectionately within as John Fakers, and brought in an outsider to enable IBM to survive.
This is a ridiculous strawman of an argument. This argument is the equivalent of the day traders that complained when the tech bubble burst. Well, I knew it was going to burst and that I had all of my money tied up in a single sector, but I didn’t think it was going to happen now. Well, that is why you diversify!
You don’t blame the market for tanking because you lacked the foresight to plan for such an occurence. That is the reason why Buffet stays away from fads and is so successful.
I do think that Hummer would be helped by a light duty pickup and a Wrangler competitor with the ‘Hummer’ look.
Angus MacKenzie: World class tool.
Seriously, though, “blame the consumer” is a bunch of bunk. As was said, a good business should be able to forecast trends and have more than a loose idea about future factors that impact their core business. It reminds me of Henry Ford’s reliance on the Model T even after everyone else knew that time had passed it by. Can GM find itself an Edsel Ford?
The public gets most of its information from the Main Stream Media. They have been clueless or worse in the past 4 years about Peak Oil. Some say it was purposely down played to protect advertising dollars which makes sense.
Those who know about Peak Oil were treated as crack pots. Peak Oil aware have been trying to get public attention for years now and only lately with the fast rising gas prices have they met with much success. Peak Oil is bad news and no one wants to hear it.
Partial solutions like ethanol to help mitigate the immediate effects of Peak Oil are now under attack even on this web site.
A perfect storm of the Export Land Model kicking in, hurricane season damage to gulf oil extraction and refining, anti ethanol rhetoric which slows or stops ethanol production, and the Iraq war for oil may all happen at once.
If it all happens, gas prices may reach levels that bring the auto industry to a near standstill except for those who have models to deal with it like Honda and Toyota. Even they may have to resort to smaller, more efficient stripped down models like they sell at home.
I’d be driving two gas guzzlers if gas was cheaper. I detest small cars, but there is more important things to spend money on than your vehicle. I better buy something in the next year or two, since after that the only thing available will be little crackerbox cars that will take a supercomputer on board to keep working properly.
That being said, I look at the total ownership costs of a vehicle – gasoline is just part of the equation, albeit a more important one than it was 2-3 years ago.
people (some of you):
please stop equating fuel efficient cars with cheap, stripped down cars…
as was mentioned before, cars don’t have to be ‘tiny, dangerous penalty boxes on wheels’ to be fuel efficient…
take a look at foreign markets with high gas prices.
Sure, they have lots of small car options, but they also have lots of medium sized car options as well, and their medium sized car options often get better mileage than our sub-compact car options…
there’s nothing wrong with having a accord sized vehicle with a 1.6L petrol engine producing 105 hp. It will get you anywhere you want to go at legal speeds in virtually the same time as the same car with a 3.6L petrol engine producing 250+ hp…
Only thing the Big 3 is guilty of is building and selling what the buying public demanded.
Unfortunately, nobody can accuse them of that. They have been losing market share steadily for the last two decades. Clearly, they are out of touch with most of the market.
Two of the three are full line automakers, with both mainstream and luxury brands. In theory, they should have a product that serves every primary category in the market.
The problem is that those products, while competitive in theory, are not competitive in fact. They are inferior to the competition, so they cannot be sold without substantial discounts, and even then can’t be sold at the same volumes as the transplants who lead the market.
If cars such as the Cobalt, Aveo, Caliber and Sebring were great cars, we wouldn’t be having this discussion. But they can’t beat the Civic and Camry in a head-to-heap competition. Instead, these bottom feeders lead the race to the bottom of their classes, and appeal mostly to Hertz and Avis.
People who work for their money buy other products. I don’t blame them, there’s no reason that they shouldn’t.
The domestic 2.8 were certainly distracted by the sudden surge in popularity of very profitable SUVs and trucks. But so were Toyota and Nissan which both invested heavily in such vehicles for the ADM. Where GM, Ford and Chrysler went wrong is that their product portfolio was focused too much on US domestic demand, pouring R&D into producing vehicles that can’t be sold anywhere else in the world. While the F150, Silverado and Ram may be very common in the US, the rest of the world isn’t really interested in them. So when large vehicle sales tanked Nissan and Toyota fell back on their staple of competitive international vehicles but GM, Ford and Chrysler had very little to fall back on.
holydonut :
The Big 3’s poor globalization efforts for small cars is why they could never build a business case for good, small cars in the USA. Instead they relied on importing others’ small cars because they never invested in a plan to enable them to build small cars effectively. Chrysler still hasn’t learned its lesson. Ford actually seems like the best-poised to execute small cars. Unfortunately, the process to get there takes many years. And I don’t think bloggers have the patience to wait that long.
Interesting point about the Big 3’s lack of globalization. It makes all the more sense why Ford is in the best shape now, since Ford Europe is much more relevant than GM and Chrysler’s divisions worldwide. Without its European operations, the Fiesta wouldn’t even be on the map. Ford also has Mazda and Volvo, which can also provide (and have provided) outside help.
Good management anticipates the end of one fad and prepares for the start of another, or the company perishes.
Speaking of fads, MacKenzie’s Breck Girl hairdo was out of fashion by about 1970.
http://tinyurl.com/4wj7q
Gosh, I do admit that hairdo sure makes it hard to take him seriously. However, he must nail the aging hipster demographic.
Robert Farago :
June 7th, 2008 at 12:24 pm
When GM was launching their GMT900 SUVs, days before Hurricane Katrina (August ‘05), PLENTY of people questioned Wagoner’s decision to re-invest in SUVs and pickups rather than fuel efficient cars (including this website).
Shoving the GMT900s out the door earlier than planned was, IMHO, probably the best move GM has made in a decade.
Look at Ford and Dodge. They are both due to release their redesigned full sized pickups approximately tommorow. In a market with $5 a gallon gasoline. They are, in a word, fucked. GM got a full two years worth of sales out of their redesigned models before the shit really hit the fan last month.
Now, does this mean GM is really prepared for $5 a gallon gasoline? Of course not. But they did foresee that their goose that laid the golden egg might just fall over and die soon, so they needed to milk it for all it had while the getting was still good.
None of the big three really have a clue how to make good small cars, or to make them at a profit. Even Ford’s recent success with the Focus was due to blundering into it, with the Microsoft Sync system driving sales more than the quality of the actual car itself.
Please get comfortable and be seated.
OK, I repeat, you’d better sit down for this one.
We don’t want anyone fainting, falling and hurting themselves, okay? Ready?
About 8 or 9 months ago, I predicted that by Memorial Day, in northwestern Michigan, gas would be $4 a gallon.
It was $3.98, close enough, and within days, $4.19. I’m no psychic. I just looked at what was very likely, and my prediction was met by gasps of “oh, gawd, I hope not” by colleagues.
My prediction for a year from now, as in Memorial Day 2009? $12.00 per gallon. $10.50 per gallon if the Demoncraps and Repugnicans don’t pass the “global warming” laws now being puth through the Congress of idiots.
I hope I’m wrong this time.
Carguy is right on with his statement
i remember talking to GM guys in the early 90s. the truck craze really saved things for them, as they almost went bankrupt until the truck profits started rolling in. i think it was a market pull proposition, and their only fault was not planning enough for the eventual crash. it was after all, inevitable.
Then when IBM lagged in adopting advances in the Intel X86 chips from the 8088 to the 80286 to the 80386, Compaq didn’t, and leapt ahead of IBM.…
Actually,IBM realized that they were not making any money on the PC because the open architecture that they originally chose for the basic building blocks of the PC was available to anybody. That only left the equity in the IBM name to differentiate their computer from the “clones”. So, in the great American tradition, IBM designed a new, proprietary architecture called “Micro Channel”. IBM hoped that other computer makers would buy licensing agreements to make Micro Channel compatible machines. The PC world met that with a collective yawn. Micro Channel died a quiet death…
Geotpf:
I remember something about pulling the 900s ahead of the schedule but don’t remember why. I do remember reading that some exec decided that they should put out the SUVs before the trucks since they made more profit on the SUVs and could do one or the other first.
I don’t think the early release of the 900s was due to anticipation of high gas prices though any more than the sale of 51% of GMAC was due to seeing the housing market crash ahead.
Angus was recruited out of the UK (“Car” magazine) in 2004 and should know how much hot air he is blowing.
The NAFTA market dependency argument doesn’t cut it because GM was THE LARGEST AUTOMAKER on the planet for decades, with major operations in almost every market (save Japan). They should know how to build great vehicles in all sizes, but don’t. Ditto Ford, but Ford also has a strong presence in Japan with Mazda. GM built a set of global alliance partners including Fiat, Suzuki and Isuzu but was a complete idiot at managing those relationships and got divorces. Fiat w/o GM has gone on to prove it can build very profitable smaller vehicles. In 2002 GM was hyping the Hy-Wire and saying quite clearly that the day was coming when we would need to move away from gasoline, so somebody inside GM had a clue that they needed to prepare for trouble.
Then there was this: “The Partnership for a New Generation of Vehicles was a cooperative research program between the U.S. government and major auto corporations, aimed at establishing U.S. leadership in the development of extremely fuel-efficient (up to 80 mpg) vehicles while retaining the features that make them marketable and affordable. The partnership, formed in 1993, involved 8 federal agencies….”
“…. GM, Ford, and Chrysler all created working concept vehicles of 5 passenger family cars that achieved at least 72 mpg. GM created the 80 mpg Precept, Ford created the 72 mpg Prodigy, and Chrysler created the 72 mpg ESX-3.”
http://en.wikipedia.org/wiki/Partnership_for_a_New_Generation_of_Vehicles
That is 15 years ago folks that Detroit and Washington went on record that the day we now face is coming and they spent taxpayer money to prepare. Only, no production vehicles ever emerged.
The problem is that the most influential people inside companies like GM has been dolts like Lutz who never saw a wheel, truck or engine that would be better if it was just a little bigger. Anyone who flies a fighter jet for fun doesn’t understand the concept of fuel efficiency.
Not feeling old Angus..
Actually,when I paid 0.99/gallon in KY.,circa 2002,I really thought that the chances of this
forecasting a trend were slim.I have a sensible mid size sedan(Yawn),and a light 4wd truck(Kind of OK)..So I wasn’t in on the Excursionesque orgy but,having walked the fence,I am not looking for the strong beam in my garage now..Not knocking back a cold one in celebration either,but.(Saw an Excursion on the road today..poor sap..That was a stupid vehicle in 2005!)Proper forecasting,and preparedness are a job requirement for me. I feel no guilt in holding GM management responsible for their lack of foresight.As for Angus’s look..kind of a Ted Nugent /Jackson Browne vibe there. Out of date,yeah,but I bet he scores more than the Overweight,Bald Goatee guys in the “Yeah it’s a Hemi” set.
golden2husky:
Boy I’d forgotten about the microchannel. Me and everybody else I guess. Really when Compaq put out the 386 machine before IBM had one, that damaged IBM’s influence even in the IBM compatible world. I’ve read that when Microsoft was supposedly working with IBM to develop OS/2, but was doing more on Windows, some IBM whizzes developed a windowed OS that would run multiple virtual OSes simultaneously. But it was shot down by upper level execs because they didn’t want to piss off MS. It nearly caused a revolt from what I’ve read. So, IBM had loads of capability and multiple chances to pull things out of the fire, just as GM, but…
Off Topic Warning.
mel23 — Your history of IBM and the PC is incorrect, though it has been so often repeated in the press it has taken on a patina of truth. The short version of what happened is this: IBM was under a consent decree regarding market practices in main frames and had to tread lightly in new (computer) markets. In the late 70s they had to make a choice between the mid-sized computers (the small business, workstation computers of those days) and the PC. They chose to give away the PC market because they judged it less profitable in the long run. Hence the use of non-IBM components and the remarkable openess of the design — they released all of the technical specs (which had never happened before) allowing anyone to design equipment that could work with or expand the computer. The only part of the computer controlled by IBM was the BIOS.
The on-topic bit
It has been said over and over and over here and elsewhere for a very long time, Detroit’s failure is not failed vision but simple greed. Any strategic planning would have identified expensive gas as a lowish to moderate probability event in a five-year horizon — if only because of the historical volatility of oil prices. The consequences of such an event would have been understood as devestating to profits. The senior management understood that risk and accepted it.
What they probably didn’t count on was the continuing decline in market share of their not-so-profitable but still high volume car business. I suspect the management actually believed their cars were good enough to continue the status quo share in the market.
So the formula was to invest the resources to win the truck/SUV game for high profits to deliver earnings to the shareholders and personal glory (and $$$) to themselves. The other part of the equation was to do as little as possible to remain ‘competitive’ in their segment of the car market.
The profits from SUVs and truck rolled in for over ten years without a serious (next generation F150-like investment) effort from Detroit to become competitive in small cars. As they say, it’s easy to smile when the luck is running.
Executives are paid to weigh risks and opportunities and invest appropriately. They were reckless and the luck has now run out. The management and the boards have failed. It is no surprise the businesses fail. Shareholders should not be surprised — the business strategy has been obvious enough. I do feel sorry for the workers. Though overpaid and often embued with a sense of entitlement that goes down badly with many, they did not decide to take the gamble.
That big, ugly girl in the photo is a guy named Angus?!
seabrjim:
You beat me to it! I was gonna say, “Angus, it’s not 1972 anymore, so lose the long hair that makes you look so girly!”
michaelC (off topic): mel23 is actually correct in all respects (historically speaking, that is — I’m not sure there’s a valid parallel to be drawn with Detroit’s failures). See the IBM PC entry on Wikipedia for accurate details. I don’t know where you heard that version of the story, but there was no such consent degree.
The consent decree IBM was involved in was that it would not get into telecommunications (and AT&T would not get into general purpose computing). IBM was free to get involved with microcomputers.
The original IBM PC of 1981 was available with your choice of three operating systems. It was looked upon as a cute toy by business, until the availability os a spreadsheet called Lotus 1-2-3 started earning it a place on desks. And it was fun for people to have something with the name “IBM” sitting on top of their desks.
Within a few years IBM saw that it had been outmaneuvered, not by superior technology, but by pure stubborness, by Redmond and by Intel.
IBM came out with something called a PS2 and an OS called OS2 and a LAN called Token Ring. The goal was to offer a PC completely incompatible with its prior version, and completely under the control of IBM. It flopped and soon was disappeared.
Some early IBM PCs had a button on the box. It was labeled “Turbo” Apparently people had a choice whether to make their PCs run at ordinary speed, or to make it turbocharged. Apparently they believed that some people prefer slower PCs.
It’s not clear whether the non-turbo versions were naturally aspirated (eg, with carburetor and venturi) or fuel-injected. Some ricers experimented with superchargers, and used fatcat suppressors because the CPU fans required would run really hot. Turbocharged PCs just plain worked better regardless, and geeky enthusiasts often added a boost gauge to the system unit.
Back on topic – Motortrend lives in a bubble.
GM needs to build a couple of their European models in North America and build them well – but they have to pick which dealer network gets them, no more than two.
“Apparently they believed that some people prefer slower PCs.”
Actually the problem was that some programs relied on the exact speed of the original IBM-PC version to run correctly. Turning the “Turbo” button off simply cut the clock speed of the improved PC back to that of the original for compatibility with certain poorly written programs.
The parallels between the PC’s evolution and the fate of the 2.8 are very weak. Analogies generally make for poor reasoning in any case, and in this situation they are not even close.
I know a lot about the history of computing from the 1970s on as I worked in that industry and live in Silicon Valley, but this isn’t the place for it.
Who’s the Michael Bolton look alike in that picture. I don’t mind that one song “there’s a lump of poop in my eye”.
Some of you guys are pretty hard on GM for not looking ahead and developing better small cars. But there is no need to resort to the Evil Diabolical Conspiracy argument when Fat, Happy and Boxed In By Legacy Commitments is sufficient. We all tend to rely on experience to make decisions about the future. GM prospered the most from the old way of running a car company, so GM found it hardest to adapt to the harsh new world. So did the old AT&T. Or Pan Am, etc.
Actually, I can now reveal just how GM got into the present predicament. Here is an excerpt from the long-lost Board Meeting Minutes of February 29, 2001:
CHAIRMAN: “Tne next item on the agenda is a proposal from Long-Range Planning to switch $5 Billion of the research and development budget. Instead of the high-profit, high-volume GMT900 trucks project, the fund will be used to create a car the size of the Toyota Corolla, equal or better in fit, finish, features and performance, and capable of 36 mpg on the highway. In addition to the direct costs, the new model would mean a sacrifice of $8 Billion of profits from diversion of sales of higher-margin models. The projected profitability of the new car itself rests on four contingencies. First, that the UAW will agree to a 40% cut in compensation for the new jobs; second, we’ll discover other ways the new model will be cheaper to build than the Cobalt; third, our competitors will not ‘move the goalposts’; and fourth, gasoline prices will triple by 2008 and ruin the market for SUVs and pickups. We will now vote.”
BOARD SECRETARY: “All in favor, say AYE.”
BOARD MEMBERS: … silence …
“that the UAW will agree to a 40% cut in compensation for the new jobs”
GM, Ford and Chrysler all have factories up and running in Mexico. No need to negotiate with the UAW about them.
Also, GM didn’t need a big development program unique to the US. All they needed to do was to make sure than every product in their design portfolio was designed to be compatible with the US market if and when conditions merited the sale of said models in the home market. The Honda Fit, Toyota Yaris and Nissan Versa were all Japanese and European market cars which were quickly brought to the US when demand materialized. You have to think that their manufacturers considered the possibility of selling them in the US during the design phase.
John Horner said “All [GM] needed to do was to make sure that every product in their design portfolio was designed to be compatible with the US market if and when conditions merited the sale of said models in the home market.”
Quite right. And it was stupid for Ford to have two designs, US and European, for the Escort and the Focus. But in my fanciful scenario, the proposal before the Board reflects historic organizational dynamics wherein each unit fights to preserve their status and perquisites. So, Opel designs cars for Europe, but American domestic products are Detroit’s “turf.” A crisis was needed to override such sub-optimization.
“A crisis was needed to override such sub-optimization.”
Either that or top management worth it’s >$10M / year annual compensation! If we lowly bloggers know now AND KNEW THEN what needed doing, why didn’t these people who are so rare and blindingly smart as to require NFL star quarterback like salaries to be lured into the big chair see what was needed?
&()&*)(& Ford had a huge internal reorganization called Ford 2000 (as in it was supposed to be completely by the year 2000) that was supposed to have Ford designing world cars with worldwide teams and common components from the get go. How did the bosses let it all go wrong?
“I’ll bet my 401k that like Rick Wagoner and company, four years ago you didn’t figure you’d be paying over four bucks for a gallon of gas today.”
It was several years ago when I sold my GM stock and bought Toyota, even though Toyota’s price:earnings ratio gave me a headache. My judgment then was that Toyota was fielding excellent vehicles in almost every category they chose to compete in while GM was a mishmash of good, ok and horrible vehicles. I decided I was much more comfortable having my money in a well managed diversified automotive company than in management disaster zone like GM. The decision didn’t make me millions, but it did make me money.
the big 3 in this country always sold really crappy small cars and really nice big ones. Just like in the last gas surprise in the ’70’s. They made more money on the behemoths, and its all about short term profits, isnt it?
To this day, with few exceptions, the same is true.
No, slapping a turbocharger on an otherwise crappy car doen NOT make it desirable, except to kids who cant afford them anyway. Drive a civic and then a dodge anything. You’d have to be nuts to buy the dodge. A cobalt? AVEO??? oh god help us! My 12 year VW golf is a better car today than a new one of these shit boxes is new.
Serves them right. Out with you. Bye.
John Horner: GM built a set of global alliance partners including Fiat, Suzuki and Isuzu but was a complete idiot at managing those relationships and got divorces. Fiat w/o GM has gone on to prove it can build very profitable smaller vehicles.
In all fairness, GM had to pay Fiat BILLIONS of dollars to get out of the deal that basically required GM to buy Fiat, if certain conditions were met. Fiat used GM’s billions to buy it some time, as it was almost broke. So Fiat’s recovery isn’t entirely due to the brilliance of its management.
And note that, outside of Italy, Fiat is still considered a bottom-feeder brand in many ways.