By on June 23, 2008

toyota_prius_opt.jpgEarlier today, General Motors announced a "temporary" return to zero percent financing. It’s a clear, unavoidable sign that the automaker’s June sales slump is, as predicted, cataclysmic. Staring down the black hole begun on Black Tuesday, GM had to do something, anything to move the metal. And yet, at the same time, GM also revealed it’s raising its prices by 3.5 percent across the board. This second piece of news is equal parts bizarre and revealing. In essence, in the final hand of the poker game for its existence, GM has just doubled down. And now it’s Toyota’s bet. Here’s the thinking…

GM NA is desperate for cash. It simply doesn’t have enough liquidity to stave off bankruptcy. The automaker’s cash cow– high margin pickup trucks and SUVs– has become an endless supply of mad bovine burgers. So what can they do? They can discount the moribund metal, sacrificing profits to generate some cash flow. This GM's done, via zero percent financing. 

GM knows it’s not going to work. GM dealers know it’s not gong to work. Hell, even the stock market knows its not going to work (the share price reacted by falling to a 33-year low). The fact that some GM stores point blank refuse to accept SUVs and pickups in trade is only one of several unavoidable signs that light trucks– GM’s life sustaining market– is dead. There’s only one other way GM can raise some money fast: up the prices on those vehicles they ARE selling.

With GM’s U.S. market share past the point of sustainability, below 20 percent, all Toyota has to do is hold the line on their prices, amp-up production of its hot selling fuel sippers and wait for GM to die. Even by GM CEO Rick “We have enough cash for ’08" Wagoner’s own admission, it won’t be long. Especially not for Toyota— a company that’s taken the long view of its business prospects since they had a view to take.

Keep in mind that ToMoCo makes more profit it one year than GM’s entire market capitalization. Toyota could afford to give their cars away for the rest of the year and shrug off the loss. Literally. BUT… why would Toyota want GM to go out of business? Answer: they don’t.

GM still sets the floor for vehicle prices in the U.S.; a floor that allows low-cost, no-legacy Toyota to make a healthy margin on their North American products. If GM files for Chapter 11, car prices will crater. Even worse, a post- or even intra-bankruptcy GM– OK, Chevrolet– could emerge a lean, mean competitor, forcing Toyota to engage in some serious trench warfare. For a change. Yes it’s a far-fetched scenario. But don’t think it hasn’t occurred to Toyota, because it has. 

You may recall that the last time GM was generally recognized to be headed for extinction, Toyota’s Chairman offered to raise vehicle prices in North America to help the beleaguered automaker. At the time, Wagoner (for it was he) dismissed ToMoCo’s proposal with the kind of arrogance you’d expect for a man who's led GM to where it is today. But times have changed. Wagoner is up a river of excrement without a rowing implement. So he’s taking-up that offer.

Wagoner’s calculating that Toyota will also raise its prices, either to save GM or, at the very least, add to its mountainous profits. After all, the transplant’s raw commodity prices have risen by a similar amount, and their cars are flying off the lots. Surely they’ll take the path of least resistance– and maximum profits.

I reckon Rick’s right. Toyota is not GM. It will act in its long-term interests by taking a short term profit. (Oh, go on then.) GM will get its 3.5 percent extra margin on those products that are, somehow, making their way into customers’ driveways. If needs be, they can kick back that 3.5 percent to the customer and, hopefully, tread water— as opposed to watching their margins slip even further into the briny deep. 

Of course, even that won’t be enough. The inherent, fundamental, inescapable problem is that Toyondissan, and soon Ford, makes more popular products than GM in those vehicle genres that a U.S. automaker now needs to survive. The General’s general trend towards a declining share of the American pie is not about costs. It’s about a decades-long lack of competitive vehicles and loyalty-inducing customer service. Is there anyone left who genuinely believes that the Cobalt replacement or the Prius-fighter will kick Toyondissan’s ass? That a Buick-Pontiac-GMC dealership's a nice place to visit?

In truth, there are plenty of consumers who wouldn’t buy a GM product at any price. And won’t. This is the sad legacy of GM’s broken branding, dealer bloat and safe-fail engineering. One way of another, it’s only a matter of time before all bets are off.

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56 Comments on “General Motors Death Watch 182: He Who Owns the Gold...”


  • avatar
    Bill Wade

    Robert, I believe at this point Toyota could care less about GM. The politician’s and the public’s mind are so focused on fuel prices the GM story is pretty much background noise right now.

    Toyota will do nothing to help or hinder GM.

  • avatar
    motownr

    Auto Retailing 101: You mark ’em up so you can mark ’em down.

    The difference these days is that cashflow, not market share, is the reason for the (discount) season. It’s not pretty for any of the Detroit 3 these days.

    The problem, IMO, is a crippling combination of SUV inventory sitting, and insufficient amounts of the products that are selling.

    The imbalances–too many 8 cylinders, not enough 4s–are killing factory and dealer alike.

    Go to any domestic dealership, and count the number of 4 cyl. vehicles of any single model on the lot. If you hit double digits, you are among blessed company. Some of the largest dealers in the Midwest–the ones who have the home numbers of every exec that matters–are down to single digit inventory at big stores.

    No 4 cyl Cobalt/HHR/Patriot/etc….while drowning in the floorplan costs of the big rigs on the new and used lots…that is the doomsday recipe. One or the other is surmountable, but not both.

    The real question: why has it taken so long for Chryslerbus and GM (I can’t speak for Ford) to react to the market and get the production numbers up on what is selling?

  • avatar

    Bill Wade:

    Toyota will do nothing to help or hinder GM.

    If Toyota does nothing, it hinders GM. And make no mistake: Toyota is always thinking about Toyota– no matter what anyone else is or isn’t thinking.

  • avatar
    Dan8000rpm

    Hmmm you paint a compelling end game picture there, Robert. Talking about one scenario, how long would it take,if (when) GM files for C11 for a leaner meaner GM to emerge to fight the good fight against Toyota? Two years? Three? What happens to model development in a company under C11 laws?

  • avatar
    RayH

    Wagoner’s calculating that Toyota will also raise its prices, either to save GM or, at the very least, add to its mountainous profits. Initially I agreed, but the added sales resulting from GM North America bankruptcy would surely make up for those profits.

    GM still sets the floor for vehicle prices in the U.S.; a floor that allows low-cost, no-legacy Toyota to make a healthy margin on their North American products.
    As surely as Toyota has thought out all scenarios, this is one I’m sure they’ve been working on for 5 or 10 years.

    If GM files for Chapter 11, car prices will crater
    For GM car prices, yes. In my opinion, wouldn’t other car maker’s prices, at least those not a bad quarter away from bankruptcy, stay the same or go up? I can see the argument the GM vehicles they’d be trying to be trading in would have a lot less value, but I don’t see Toyota/Honda/Nissan/Kia/Hyundai prices falling.
    Good segment, but I don’t think it’s in the foreign automakers interest for GM (or Ford or Chrysler) to stay out of bankruptcy, unless they fear those companies after shedding their legacy cost. They’ll ultimately never shed their management.

  • avatar
    Bill Wade

    # Robert Farago :
    June 23rd, 2008 at 11:11 pm

    Bill Wade:

    Toyota will do nothing to help or hinder GM.

    If Toyota does nothing, it hinders GM. And make no mistake: Toyota is always thinking about Toyota– no matter what anyone else is or isn’t thinking.

    Good point.

  • avatar
    melllvar

    Even worse, a post- or even intra-bankruptcy GM– OK, Chevrolet– could emerge a lean, mean competitor

    Has any car manufacturer survived bankruptcy?

  • avatar
    Dan8000rpm

    melllvar :
    June 23rd, 2008 at 11:55 pm

    Even worse, a post- or even intra-bankruptcy GM– OK, Chevrolet– could emerge a lean, mean competitor

    Has any car manufacturer survived bankruptcy?

    Not really. Aston Martin has “gone under” i think about 4 times. I think they sold, like 25 cars in 1992. They are a niche player not a major player like GM.This is going to be so ugly.

  • avatar
    tracy

    I think your forgetting that a lot of people won’t buy a GM at ANY price. I wouldn’t buy a GM car if it was only 1/10 the price of a Honda.

    For a lot of people I know, GM is not even an option. Doesn’t matter what GM does. Time for that company to die.

  • avatar
    Jon Paul

    The only thing that scares me is that this is an election year. Which candidate wants to look like it won’t do something to help the poor workers at GM??

  • avatar
    mikey

    I just hope tracy is not running.

  • avatar
    John Horner

    Toyota also has the problem that they have to look over their shoulders at Honda, Nissan and even Hyundai. Honda is breathing down Toyota’s neck strategically big time right now after having long since passed up former Japanese #2 Nissan. Two years ago Honda’s weak efforts in pickup trucks and luxury nameplate vehicles made it look bad compared to Toyota. Now, Toyota’s Tundra misadventure, bloated SUV lineup and suddenly superfluous big dollar Lexus status mobiles are all relatively rather out of touch with the market. The point: Toyota has more than GM to worry about and has itself made a few of the kind of errors which got GM into it’s fix.

    Most business strategist have concluded that a company needs a minimum of 33% market share to be able to push the market around. GM once had that kind of share and that kind of influence. Intel, Microsoft and Google command that kind of power today. But in automobiles, nobody has it right now. One of GM’s problems is that it got used to dictating terms in the marketplace and never figured out when it lost that power … and that it lost it by giving it away.

  • avatar
    Dynamic88

    The General’s general trend towards a declining share of the American pie is not about costs. It’s about a decades-long lack of competitive vehicles and loyalty-inducing customer service. Is there anyone left who genuinely believes that the Cobalt replacement or the Prius-fighter will kick Toyondissan’s ass? That a Buick-Pontiac-GMC dealership’s a nice place to visit?

    It’s definitely about the product. I have to point out though, that many Toyota dealers are not nice places to visit either.

    Toyota has an advantage though – they own Lexus. So they know how to make the dealer experience pleasant. Immagine if they made their Toyota dealerships pleasant. The D3 don’t have a clue how to compete on dealer experience.

  • avatar
    KatiePuckrik

    Something doesn’t make sense here.

    Mr Farago infers that Toyota will, in all probability, help GM maintain its current structure as it helps Toyota in the long run. But if GM files, it may come back leaner and meaner and cause problems for Toyota.

    But we’ve already established on TTAC that if GM (or any of the Detroit 2.801) file for chapter 11, they might as well file Chapter 7; because virtually no-one would buy a car off a bankrupt car maker. So GM out of the picture would mean more market up for grabs with Toyota as a favourite to get the most. This is a favourable situation for Toyota. So why wouldn’t they want GM to fail? They have more to gain out of that scenario……

  • avatar

    KatiePuckrik : But we’ve already established on TTAC that if GM (or any of the Detroit 2.801) file for chapter 11, they might as well file Chapter 7; because virtually no-one would buy a car off a bankrupt car maker. So GM out of the picture would mean more market up for grabs with Toyota as a favourite to get the most. This is a favourable situation for Toyota. So why wouldn’t they want GM to fail? They have more to gain out of that scenario…… First, people will buy a car from a bankrupt automaker. Everything sells at a price. It will cause both short term and long term market share losses, but it’s not a death sentence. What matters is what happens AFTER the mother of all fire sales. Second. a GM C11 creates enormous political fallout. Who knows what Washington will do to prop-up GM? Whatever it is, it will not help Toynadissan. Anyone remember the series of Toyota ads telling Americans that Toyota is 'Merican? They didn't put that idea out there cause they wanted to; they ran the ads because they thought they had to.  Toyota wants long term stable growth (strange concept, but there you go). The status quo suits them just fine.

  • avatar
    RayH

    I think your forgetting that a lot of people won’t buy a GM at ANY price. I wouldn’t buy a GM car if it was only 1/10 the price of a Honda.
    What bodes well in a GMNA chapter 11 for Ford or possibly Chrysler is a lot of people who buy “American” feel the same way, and would shift to a Ford before buying a “foreign” nameplate. I live in a GM-ish area (Trailblazer), so there is a view I run across every so often that they’d never take a Honda for free (even though they’ve been making Accords in Ohio since the 80’s). I know people who throw hissyfits if you drive Japanese cars into their driveways, and that’s not an exaggeration. Just last week someone I helped baling hay complained the whole time I was parked there in my Smyrna, Tennessee-built Sentra.

  • avatar

    Sic transit GM.

    A scenario so predictable as to be completely awe inspiring. You’re looking at a tanker truck that’s jack-knifed and is sliding along sparks flying, heavy with inertia, towards the rigid concrete post that’s going to rupture the tank and set off the blast.
    And there’s nothing you can do about it.
    That’s what running GM must feel like now, for Mr Wagoner.

  • avatar
    GS650G

    If GM cars were equal to Toyota in terms of resale, customer value, price, performance reliability then this would be a matter of choice on the name. But it’s not and everyone knows it.

    Toyota now builds here, so buy American applies even if profit go to Tokyo. GM builds all over the globe, and profits may trickle back but not all of it and surely the foreign workers don’t count towards a buy American label.

    The other transplants have done this as well. Americans now don’t feel as much guilt buying foreign, if they ever did. They do remember the problems with their vehicles and the double whammy of poor resale. The information age caught the domestics and really kicked them. You can find out everything about a car’s reliability, resale, recalls, all the bit Rs. Todays customer is well informed and not swayed by bells and whistles like before.

  • avatar
    KatiePuckrik

    Mr Farago,

    You’re right EVERYTHING sells at a price, but how low will that price go before it is sold. It’s one thing to sell moribund metal at half the profit margin and another to sell it at 25% into the cost price. That move will do GM no favours at all other than shift stock and have less to show for it. I remember Rover selling their stock at stupidly low prices and they STILL could get rid of much.

    Secondly, Washington bailing out GM WILL help Toyota because a bailout will almost certainly involve keeping current management, so we can expect the same scenario in a few years time. But this is all conjecture. We don’t know what DC will do. Incidentally, if DC DO bail GM out then it’ll make a mockery of the United States and their so called “free market” system.

    What will make Toyota fearful is if GM change their management, not chapter 11. Alan Mullaly at Ford, whilst there’s still a lot of work to be done which I don’t think Mr Mullaly can fix yet, has done a sterling job so far and is making Toyota and Honda sweat. Chrysler isn’t even worth worrying about.

    Also, with regards to Toyota’s “we’re ‘merkins too” adverts, that was (more than likely) to push their trucks to “ol’ boys”. The ones who “buy American” no matter what. A marketing strategy, if you will…..

    Unless GM change management (especially, if a Carlos Ghosn clone applies for the job) then Toyota have very little to worry about. People are buying their cars and trucks regardless of their heritage (in fact, some buy their products BECAUSE they are Japanese) and GM coming out of chapter 11 leaner and meaner will be unlikely. Look at Delphi, they’ve been in chapter 11 for years, do YOU see any signs of them being leaner and meaner…..?

  • avatar
    menno

    melllvar asked:
    “Has any car manufacturer survived bankruptcy?”

    Yes, a major US automobile manufacturer did in fact survive Chapter 11 and bounced back for 30 years.

    Studebaker went bankrupt in 1933, after management foolishly paid dividends from 1930-1933 while losing money. A few months after losing his position, the President of the company suicided.

    New management came in and saved the company. Notice the words, NEW MANAGEMENT.

    The company sold off its Pierce-Arrow luxury car division to investors only a few years after obtaining it, pared down in size, and came out of bankruptcy.

    No other mass production automobile manufacturer in US history has pulled it off.

    Of course in subsequent years, the company was weakened by a poor workforce, which was amongst the most “spoiled” in the industry (piece-work, high wages, strikes at the drop of a hat, etc) – sound familiar, GM? By the time the piece work was eliminated in the late 1950’s, Studebaker had already sucked Packard’s dowry dry and killed off it’s host like any good parasite (since, in 1954, Packard actually foolishly purchased Studebaker after Studebaker management lied straight to their faces about the potential for profits at South Bend – which had a break-even point of 210,000 cars and production in 1954 of 68,708).

    Incredibly, after an ex-Packard man, Harold Churchill, took the controls of Studebaker, and tooled up a compact Lark late in 1958 just in time to hit the market during a recession (sales went from 44,759 in 1958 to a now-profitable 126,156 in 1959), which helped small car sales. More incredibly, after a crash in sales for 1961, and an uptick in sales in 1962 (due to the cars being restyled by Brooks Stevens, giving them an expensive Mercedes look), the South Bend workforce went out on strike again (are you reading this, anyone from CAW?). That was the final nail in the coffin, as dealers actually had an interested public and too few cars available. By Christmas 1963, US production ended in South Bend, and by early 1966, all Studebaker production ended, in the Canadian rump plant.

    Warning, therefore, to any company willing to buy GM; you’re going to get a pig in a poke, too.

  • avatar

    Imagine you had a child and the kid really liked ice cream even though you knew it wasn’t healthy for him. So, to avoid his whining you created an environment where the kid could eat all of the ice cream he wanted. Suddenly the “kid” is approaching adulthood and weighs 300 pounds. He starts complaining that everyone is beating up on him and he is too fat to even run away. He keeps eating ice cream.

    GM finds itself in its present condition because they first ceded the small car business to anyone who wanted it, since “…no one makes money on small cars anyway.” Then, despite two significant oil disruptions and in a masterstroke of genius, they lobbied hard to ensure that safety and pollution standards applied to automobiles were pushed into the future for trucks, creating a profitable niche, and their cars turned to crap as they put more and more money into their remaining profitable product. There remain some great minds and talented automobile builders and engineers at GM, but the fat corporate body has no means to take advantage of these inner talents. They’re addicted to ice cream.

    The existence of more dedicated manufacturers will mean that those talented folks at GM will still be able to find jobs and their Jabba-the-hulk parent slides into oblivion. But thousands of lives will be disrupted in the process. On a high note, I doubt Rick’s vacation homes will take a hit.

  • avatar
    menno

    Just for laughs, I looked up some figures.

    1930: (1st full year of the depression)

    GM’s Chevrolet sold 640,980 cars #2 in market (Ford was #1)
    Studebaker sold 123,216 cars, #4 in market (just behind GM’s Buick)

    By 1933 (the year Studebaker declared bankruptcy) it was:
    GM’s Chevrolet sold 486,261 cars #1 in market (Ford sales had gone down 70%, to #2)
    Studebaker sold 43,024 cars (including the low priced Rockne sub-brand).

    It took until the all-new, lower priced, light weight and economical Studebaker Champion introduction in 1939 before Studebaker came back onto the list of the top-8 US sales for a year. Retained #8 spot for 1940 and 1942. #8 spot for 1947. #7 for 1948, with the all-new “first post war car”. #8 in 1950. Dropped to #9 in 1951, despite an all-new, modern V8 and lock-up torque converter Studebaker Automatic Drive option. Dropped to #10 in 1953, despite some of the most beautiful cars ever designed (Budd body screwed them up by mis-tooling, delaying the more beautiful hardtop coupe production). Budd also supplied Ford, interestingly…

    1954 was the most disorganized auto market ever in the US since the depression (for the independent manufacturers and Chrysler), since GM and Ford decided to do a sales war (sending unordered cars to dealers, who were told when they complained “you like you franchise…?”) and Studebaker plummeted to #13. 68,708 cars (break-even point 210,000 cars, remember?) Studebaker only managed #11 and 116,333 cars in the biggest sales year ever to-date, 1955. Back to #13 in 1956, with 69,593 cars and same place in 1957.

    So from 1930 – #4 in the biggest most wealthy auto market in the world (just beginning to slow down rapidly as the depression deepened), Studebaker fell to a historic “also-ran” status after bankruptcy in 1933.

    It may have survived as a company, but it never truly had a chance.

    Investors threw in good money after bad, in the cash burn over the next 30 years, with only sporadic years of profits.

    That’s GM’s future, if it indeed has any future at all in North America.

  • avatar
    mel23

    If GM files, the media will have to mention Ford’s dire condition as well, and this won’t do Ford any good in the eyes of potential customers. I don’t see how Ford is helped in this. The problem with bailing out GM is what’s to bail? It has NO management. Wagoner is a crook, Lutz is nuts, the board is useless at best, and the stock holders are… I don’t know what they are. What burns me is that Wagoner will swagger off with the bundle he has and more bundle to come.

    To do anything constructive you’d have to find a person with integrity who knows something about the car business or one similar. No Steve Miller, I said integrity, remember? Look at the Ford situation. I don’t know what Mulally could have done that he hasn’t and isn’t. But even he says he has ‘no idea’ if Ford will make it.

  • avatar
    browner

    I recall reading a profile of Toyota (NY Times Magazine?) where Toyota’s position was laid out quite clearly: Toyota doesn’t want GM to go bankrupt, per se, they just want GM to decline at the same rate that Toyota can expand. Any further decline on GM’s part is opportunity lost for Toyota.

  • avatar

    True browner Toyota would prefer an incompetent competitor in GM rather than Hyundai Honda or even Ford

  • avatar
    motownr

    Pre-Pack.

    Penske.

  • avatar
    Steve_K

    A GM Chapter 11 filing would royally screw many of the workers who took the buyouts, because many aren’t old enough to collect social security! Certainly the UAW’s VEBA isn’t funded sufficiently yet to keep the pensions going, and I doubt union dues and Ford’s current contributions would be enough. This is the situation my folks are in. It would be unfortunate if they had to tap their 401k given current market conditions.

  • avatar
    ex gm guy

    I only hope GM outlasts my father, who was and is fiercely proud of the company he worked at for over 30 years. But I am not betting on it. The CEO of my company is in trouble for missing his numbers in one quarter. Why does Rick Wagoner still have a job?

  • avatar
    geeber

    menno: Dropped to #10 in 1953, despite some of the most beautiful cars ever designed (Budd body screwed them up by mis-tooling, delaying the more beautiful hardtop coupe production). Budd also supplied Ford, interestingly…

    Interesting post, but the problems with coupe tooling were caused by Studebaker. The cars used a frame with a fair amount of “flex” designed in for a smoother ride (it was supposed to absorb the smaller bumps). Unfortunately, Studebaker forgot to account for the extra weight of the engines when it designed the frames, so when the engines – particularly the V-8s – were placed on the frame, they caused it to flex. The front end clip thus didn’t mate properly to the rest of the body.

    I seriously doubt that Ford was worried enough about little Studebaker to work with Budd to deliberately sabotage tooling for the new 1953 line.

    And while the 1953 Starliners and Starlights were beautiful cars, the companion sedans were not. They were so unattractive that sales of those models FELL in an otherwise good year. The fall in sedan sales was enough to almost wipe out the gain from coupe sales.

    Also note that ALL of the independents increasingly fell to also-ran status as the 1930s progressed…Hudson/Essex claimed third place in 1929, and saw sales fall dramatically throughout the 1930s, even though it never came close to filing for bankruptcy. Willys-Overland was also quite strong in the late 1920s, but sales virtually collapsed by 1931. Again, it never filed for bankruptcy.

    Studebaker’s factories were outmoded by the mid-1950s, its dealer body was weak and demoralized and its engineering and styling staffs were pretty well decimated long before December 1963.

    GM still has a strong dealer body (there are just too many of them), it has modern, up-to-date factories, and the main problem with its engineering and styling departments is that they are stifled by clueless management. The main question is whether people will buy a vehicle from a bankrupt manufacturer.

  • avatar
    theflyersfan

    My grandfather was an engineer up there in South Bend with Studebaker – next phone call, I’m going to ask a few extra questions about what it was like when everyone and everything lost control up there. I think he was working with the suspension and brakes but I need to verify. Much like (military) Hummer, Studebaker is still burned into South Bend and some of those coupe designs still look great today.
    I’m drawing a blank – doesn’t another automaker still build the Avanti in tiny numbers?

  • avatar
    Cicero

    Would Toyota ever buy GM?

    If Toyota’s long-term strategy is enhanced by the survival of GM, would it be worth it for Toyota to jump in with both feet to ensure GM’s future as a going concern?

    One downside would be the possible dilution of Toyota’s vaunted reputation for reliability — a close relationship to GM could be toxic in that respect. On the other hand, what more could Toyota do to prove its domestic-manufacturer bona fides than to own the largest (so-called) domestic auto manufacturer outright.

  • avatar

    geeber: GM … has modern, up-to-date factories, and the main problem with its engineering and styling departments is that they are stifled by clueless management.

    You hit the nail precisely on center. And guess who will be packing up their tools and walking away when C11 is announced… The truly talented people will leave (those who haven’t already gone) and GM will be left with a bunch of clueless suits like Rick “Trust Me” Wagoner and people who don’t want to give up their retirement.

  • avatar
    50merc

    tracy: “I wouldn’t buy a GM car if it was only 1/10 the price of a Honda.”

    Hey, I will! A new Impala, Malibu or Lucerne is definitely worth $2,500 to $3,000, even without a warranty. Now, at 8/10 the price of a Honda, I’d have to think about it.

  • avatar
    Geotpf

    theflyersfan :
    June 24th, 2008 at 1:00 pm

    I’m drawing a blank – doesn’t another automaker still build the Avanti in tiny numbers?

    Yes.

    http://www.avantimotors.com/

  • avatar
    ihatetrees

    50merc:
    Hey, I will! A new Impala, Malibu or Lucerne is definitely worth $2,500 to $3,000, even without a warranty.

    Warranty shmarranty! If you’ve got the storage, buy two and use one for parts!

  • avatar
    Kevin Kluttz

    Toyota and GM are already related…for the last 21 years!!! Ever heard of NUMMI? It’s in Fremont, CA. In 1987, they were shooting FXs and Corollas out the Toyota side, and Geo Prizms out the GM side. I love it when someone says their Prizm is a Chevrolet. Makes me laugh. Probably makes Toyota laugh, too.

    And tose FXs were fairly reliable, too, even WITH GM’s meddling.

  • avatar
    ZoomZoom

    Wow, that picture of the Prius in the corral evokes imagery of a showdown at the OK…

  • avatar
    ZoomZoom

    By Robert Farago

    In truth, there are plenty of consumers who wouldn’t buy a GM product at any price. And won’t. This is the sad legacy of GM’s broken branding, dealer bloat and safe-fail engineering. One way of another, it’s only a matter of time before all bets are off.

    I resemble that remark. I’m not the only one, and therein lies the rub.

    But if Toyota raises its prices in some sort of tacit agreement with The General, then there’s a good collusion case for the antitrust lawyers.

  • avatar
    toxicroach

    The political blow out of Toyota trying to buy GM would be immense, wouldn’t it?

    If its not, it would be proof positive that the GM fans are really, really, really desperate.

  • avatar
    vento97

    At this point, GM is the dinosaur waiting for the meteor to strike…

  • avatar
    Dynamic88

    Re: ’53 Studebaker.

    I had a chance to sit in a ’53 Stude coupe. Beautiful car. Ergonomic nightmare. The steering wheel rubs the top of your thighs. Any company that can’t even get the steering column angle correct deserves to go under.

  • avatar
    npbheights

    Ray H said:

    I know people who would throw hissyfits if you drive Japanese cars in their driveways.

    Would they throw a hissyfit if I parked my 1999 Cadillac in their driveway? It pukes out an oil spot that measures about 12×18 inches everytime it’s driven. I have had the car since it was a year old, took very good care of it and changed the oil regularly.

    The Cadillac Dealer would fix it for about $3500.00. A regular mechanic does not even want to touch it. Toyota offered me $500.00 for it on trade.

    (by the way, I’m not buying another GM product)

  • avatar
    geeber

    Dynamic88: I had a chance to sit in a ‘53 Stude coupe. Beautiful car. Ergonomic nightmare. The steering wheel rubs the top of your thighs. Any company that can’t even get the steering column angle correct deserves to go under.

    The 1953 line also had poor assembly quality. The sheetmetal didn’t fit well. The flexing of the frame over rough roads was also noisy, which resulted in “thumps” and “bumps” being transmitted to the passenger compartment as the car went down the road.

    Ironically, in view of the trashing that GM gets for what it has produced over the last 30 or so years, in the 1950s, GM vehicles had good assembly quality, and its cars were well thought-out for the times. If GM had built the Starliner/Starlight, it would have been a much better developed car, and probably a big success (as it initially sold well for Studebaker).

  • avatar
    autocorrelation

    Take a wild guess what kind of premiums they will be paying on any debt placements.

  • avatar
    HEATHROI

    if I ran Toyota of course I would agree to help GM. In return for Corvette.

  • avatar
    James2

    A Toyota-built Corvette? A few thoughts:

    1. probably built to tighter tolerances, though not necessarily with ‘better’ materials (unless it was a Lexus-branded Corvette). Fiberglass body is immediately swapped with aluminum.

    2. pushrod V8 replaced with DOHC motor. High-end HP probably the same, but low-end torque suffers.

    3. all steering feel is sucked out of the beast. ToMoCo engineers spend more time fiddling with the NVH than on the suspension.

    4. disjointed, drawn-by-a-blind-man styling rules here; all kinds of dissonant, contrasting and contrary angles dominate! Proportions –that’s a word Toyota designers have never heard of…

    5. Toyota has a plant in Kentucky, right? No change here.

    6. but the car’s name is promptly changed to Supra…

  • avatar
    tiger260

    I tend to agree with previous post that Toyota’s likely preference would simply be to sit back and watch GM self-destruct slowly over a period of years with every point of market share lost by GM being effectively ceded to Toyota.

    I can’t really see what benefit Toyota would gain by buying GM outright? other than monumental bragging rights, but I’ve seen little evidence of Toyota indulging in gestures like bragging just for the sake of it if there is a more subtle and pragmatic route to further their business aims?

  • avatar
    jerry weber

    According to Dan Howes of the DEtroit Press (a newspaper very friendly to the domestic mfgs.) this is it for these companies. The cash burn that Farago has been talking about for months, make that years, has finally burned down to the end of the fuse and is at the powder. You cannot borrow to see as in the case of GM 1 billion a month gone forever. There comes a time when re-organization is all that's left. All of the business models that were put in place to turn the Detroit three around are trashed. They all had one thing in common. Trucks and SUV's would provide the profits to retool the companies. In about 4 months this dream has evaporated. Someone wrote in the blog, they simply have to make more money on the small cars. Yes, but profits have become a function of a percentage of the selling price. You would have to double the selling price of a sub-compact to about 30K to replace large vehicle profits. Even if you doubled the selling rate of small cars by the domestic mfgs. Unless all of the foreign builders follow suit that is not going to happen. If you could raise a subcompact $1K a year evert year and book all of the increase as profits it would take 20 years to see the formula be successful. The idea of selling more small cars by simply retooling the present truck plants won't work because the margins are too small on the small cars. Guess who doesn' have even 2 years to do this?

  • avatar

    The last paragraph is so well put.

    I would not buy a GM product at ANY price.

  • avatar
    Ronin317

    Wait, so some GM dealers are outright refusing trade-ins of SUVs and Trucks? Wow…how can they get away with that? I mean, I could see them making the trade-in value prohibitively low, but to flat-out refuse is quite extreme, no?

  • avatar
    ttacgreg

    GM’s legacy will be that now a large percentage of us drive around burning fuel to operate our headlights by day.
    Their twisting the government’s arm in the 90’s to allow DRL’s, and then to have the DRL’s disconnected when doing CAFE qualifications. I remember their advertising, bragging about the benefits of DRL’s, and in my mind all I saw was a half baked failure of a corporation forcing a half baked failure of a “safety” feature on all of us all for marketing reasons. Symptomatic of GM’s sad total incompetence in most all areas.
    The witnessing of their pouring of all their engineering efforts on gargantuan guzzlers to the neglect of every other niche, it could be seen the die was being cast. HELLO! who could not see cheap oil was bound to end?
    For decades now, looking at Consumer’s Magazine’s reader polled surveys for their “Frequency of repair” charts, all one had to do to pick out the GM vehicles is by looking for the models with the most black & half black circles.
    When GM dies I have to say “good riddance”. They have earned it.

  • avatar

    I love this site, but how many times can you post articles declaring that something is the final straw for GM? They keep scraping by, somehow. Much to the continuing frustration of those who’d either like to see them die, or like to see a true cataclysm force them to become a smarter company.

  • avatar
    jerry weber

    To Ronin as someone who was invested in a dealership, you have to know that used cars are your cash and profits tied up. If you thought that you are “stealing”the trade from the customer, but instead it sits on your lot for one or two months until you take it to the auction. Here, instead of retailing the piece it takes a dive wholesale way below the number you put in the car. In addition you owe transportation and auction fees just to get out.Used cars are like a commodidty such as fruit, the longer you hold on to it the more rotten it gets. It may be that some dealers can’t afford one more piece of Detroit iron on their books. It’s like the housing crisis, you don’t build any more houses until the old inventory is cleared. Thus, we come to the final act, you would have to fire sale your vehicle on your own and then buy a new one. I do know this, if you finally sold your suv/pickup and now had to buy something new, you would probably not go back to say GM 0% or not.

  • avatar
    BKW

    Has any car manufacturer survived bankruptcy?

    Studebaker went bankrupt in 1933. Studebaker’s president Albert Erskine then committed suicide.

    This all came about because Erskine continued to pay stock dividends from working capital after the market crashed on Black Tuesday…October 29, 1929.

    The company rebounded, but failed entirely in 1966.

  • avatar
    Martin Albright

    Hmmm…these are the kinds of discussions that keep me coming back to TTAC!

    Here’s something else to consider: Assuming that GM goes Ch 11, which then gives them the opportunity to stiff (or at least strong-arm) their creditors, who gets the worst screwing?

    Seems to me the warranty holders (the GM car owners) have to be protected at all costs. Going into bankruptcy is going to create huge “trust” issues anyway, so any backing down on warranty claims would create the automotive equivalent of a run on the bank – people would be doing anything they could to ditch their GM vehicles before they started breaking down and needless to say, nobody with half a brain would buy a new GM vehicle with the warranty coverage a questionable thing. So GM would have to shout from the rooftops that warranty claims would continue to be honored, regardless of the fallout.

    But then comes the question of who takes the fall? My guess is the unions. And if that happens, then what happens to GMs union-friendly reputation? Do they hire a non-union workforce? If so, then they’d likely become automota-non-grata at any union shop in the country. Parking lots that now only admit US made vehicles might start adding GM vehicles to their “not welcome here” list. I saw what our hometown brewer Coors did to the unions back in the 80’s (I think it was) and staunch union supporters to this day refer to Coors as “That Scab beer.” Does the newly-streamlined GM get the same rep?

    And assuming arguendo that GM is able to escape being forced into Chapter 7 and emerges a leaner, meaner company with lower prices to match, what then? Does once-proud GM start over again at the bottom of the automotive heap (somewhere below even Hyundai and Kia) offering vehicles whose primary attraction is their low price? Do Corvette and Caddy remain the flagships of the GM fleet or does reorganization mean the death knell of such extravagant rides?

    As for whether an automotive company can survive bankruptcy, it’s not a perfect analogy, but International Harvester was once one of the most prominent truck and farm machinery builders in the US, and even had a line of light trucks and SUVs that were quite well respected in their time. By the late 70’s they were in bad shape and they finally went under in the early 80’s, only to emerge some years later as Navistar. After a few years of the Navistar brand, they slowly started switching back to the “international” name (though apparently “Harvester” was dropped, more’s the pity.)

    I wonder if something similar could happen with GM: Bankruptcy, dissolution (I think IH went ch. 7 but I’m not certain,) reemergence under a different name, and then, after years, rehabilitation.

    Any thoughts? I’m really enjoying this discussion.

  • avatar
    BKW

    I see menno beat me to the punch inre to Studebaker going bankrupt, then recovering. My bad…I should read all the posts first before posting.

    Dynamic88: While the 1953/60 Studebaker Coupe/Hardtops can be tight for tall drivers, the 1961/64 Hawks with bucket seats have more leg room than most cars of the time frame.

    My 1963 Studebaker R2 Super Hawk has more leg room than my 1968 Olds Delta 88 2dr HT has, and I’m not short or light of weight: 6-5 335.


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