“Our goal has never been to sell the most cars in the world.” For those who’ve been following GM’s fall from grace, this statement– following the revelation that GM has ceded its "world’s largest automaker" title to Toyota– probably comes as no surprise. Or maybe it does, because it arrived via Toyota spokesman Paul Nolasco. Or maybe it doesn’t. Toyota achieved this monumental victory by focusing on a process that led to a goal; whereas GM has been all about the money, for quite some time. And therein lies the tale.
You don’t need to compare long and short term business plans to understand the difference between Toyota and General Motors; although if you did, GM’s recent inability to devise a coherent platform strategy or develop a world class economy car would certainly give you pause for thought. All you have to do is sit in a few cars.
You can argue that the relative quality of GM's interior plastics don’t make no never mind. You could say that a four-speed gearbox is plenty of cogs, given their robust engineering, adequate performance and reasonable mileage. You could prevaricate over pushrods or defend GM's value-for-money vis-a-vis the competition. You could conclude that there isn’t any significant, appreciable difference between a current Toyota and an equivalent GM product. Not now. Not anymore. And you’d be wrong.
Don’t take my word for it. In the first three months of this year, Toyota sold 2.348m vehicles. In the same period, GM sold 2.26 million vehicles. All of these buyers had a choice. They chose Toyota over GM because they believed the Toyota product was superior. Yes, “believed.” Even if the “real” difference between a Toyota and a GM product exists entirely in their minds, well, it's still a product-related reality.
Automaking is not the French Revolution. GM can’t simply tell car buyers to forget the past, history starts here. No wait, here. OK, here. Consumers remember their past experiences with an automaker’s products. Just as a carmaker can build a reputation with years of consistent quality and service, bad quality and lousy service can destroy it by the same process, only faster.
Which is just as it should be, and exactly what GM has done. After years of alienating customers with shoddy, non-competitive products and indifferent (or worse) treatment, they’re reaping what they’ve sown. It’s a perfect example of a free market in action, or, if you prefer, simple Darwinism.
Here in the world’s biggest automotive marketplace, GM has provided a textbook example of de-evolution. When I started the GM Death Watch in April ’05, the company had a quiver full of domestic products ready to counter all those lingering bad vibes and “progress” its turnaround.
Including badge engineered products, GM launched the Saturn Sky, Aura and Outlook; Pontiac G5, Torrent and Solstice; Buick Enclave and Lucerne; Chevrolet HHR, Hummer H3 and Cadillac DTS. They updated the Chevrolet Tahoe, Suburban and Silverado; GMC Yukon and Sierra; and Cadillac Escalade.
While some of these models have created a buzz in the U.S. market, none has generated the predicted, mission critical market share uplift, or a return to profitability. How could they? With an estimated 7123 dealers for eight brands selling 42 models, no one model can possibly make up for the dogs, or significantly elevate earnings.
Meanwhile, in the same time period, Toyota has launched two new models: the Yaris and the FJ Cruiser. They’ve updated the Camry, Avalon, Tundra, RAV-4 and Lexus IS, ES, GS and LS. Toyota has less on its plate, and so (arguably) makes it better and (inarguably) keeps it fresher.
Why wouldn’t they? With 2422 dealers for three brands selling 30 models, the company has the development money, marketing budget, healthy dealer network and low cost structure it needs to stay ahead of the pack.
Make no mistake: Toyota knows exactly what it’s doing. It will continue on its current trajectory until GM’s world domination is a distant memory. Not that The General’s destruction is their goal. As company spokesman Nolasco said, "We simply want to be the best in quality. After that, sales will take care of themselves."
The truth is GM has cleared a path for Toyota. GM blurred its once proud brands through botched badge engineering, and then tried to fix the problem by adding brands rather than retrenching. Its fate was sealed. Given that GM’s now wearing two straitjackets– one with a union label and one enshrined in U.S. dealer franchise law– it cannot escape the consequences of its arrogance and short-sightedness. All that’s left is the unraveling.
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Its the Truth About GM, plain and simple.
This is one of the most concise editorials on the GM-Toyota Saga I’ve read.
All of GM’s
applogists fans can make all the excuses they want, but the fact is GM is in decline and has done nothing significant in the last five years to change it.Great article. The parallels to what happend in the UK in the 1960s-1990s are striking. The UK auto industry was mostly forced together into the British Leyland fiasco. Too many brands, shoddy quality and horrid labor issues combined with management idiocy came together to level a once vibrant industry. The UK’s government involved itself heavily in the whole process as well. So far the US government has stayed mostly on the sidelines while GM and Ford strangle themselves, but other than that the similarities are striking. The last bits of the native UK auto industry can be seen in the Chinese buyout of the scraps left of MG-Rover, itself the remaining scraps of the British Leyland empire.
Perhaps we will live to see that day when GM’s 50% partner in China turns around and consumes whatever is left of the beast. GM’s position in China is made quite precarious by the fact that at any time the Chinese government could simply change it’s mind and send GM packing, thanking them for the training and technology provided along the way.
Agree – concise and to the point. To paraphrase a Ford spokesman from about 2 years ago: “One quarter does not a trend make.” But the trend for the past 8 or so years has not been good. Once Toyota surpasses GM for a full calendar year what will they say?
Housing market still tanking, gas prices wildly fluctuating, UAW chest thumping in a contract year, unending war in the Middle East, climate chaos, the “Green” movement, etc. The perfect storm. Even if their vehicles and strategy were world class they would still struggle. Scary.
Sure, but that mighty backlash against Toyota is going to come crashing along any minute now. Huge. Tsunami like. Grapes of wrath stuff.
There will be no backlash against Toyota. Who is going to do the lashing? Customers vote with their feet, the cars are made in the US now not imported, the facts are there: too many brands too many dealers, too many fleet sales.
Backlash against Toyota! For what exactly? For making reliable vehicles which hold their value and that customers really like? For building the best selling hybrid in the world?
The UAW has been trying for years to get a toehold into Toyota’s plants (besides the Nummi joint venture with GM) and has never gotten more than a dozen or so angry employees to join their cause. There are more UAW members fighting mad at the UAW than there are Toyota USA workers ready to organize Toyota.
The major southern and coastal urban areas of the US continue to grow strongly while the rust belt continues to rust. Outside of the rust belt you find very few consumers with any loyalty to GM or Ford, and those you do find are in the final years or decades of their lives. I participate in a local antique car club where 90%+ of the old cars being restored, shown and driven are US brands …. and the vast majority of the modern cars these same people use for daily drivers have names like Toyota, Honda, Infiniti, Mercedes or Lexus on the hood. GM has never demonstrated loyalty to it’s customers, so there is no reason to expect it in return. Loyalty is a two-way street.
Dreams of a backlash are fantasy. “Grapes of wrath” … tell me you are joking.
If GM were to stick with only Corvette (performance-should be a separate brand anyway), Caddies (lux), Chevy (mainstream + trucks + SUVs), and Saturn (budget), they would be much more focused and more appealing.
Why compete among your brands (Pontiac v. Chevy) when you can barely keep up with the competition?
Why import foreign-made cars and rebadge (Pontiac) to kill your domestic brands? Why take on useless born-from-jet craps? Why made 3 different versions of the same Chevy SUV (e.g., Buick, Saab, GMC, etc.)?
There maybe 31 flavors at Baskin Robbins, but we all know that only about 3 to 5 flavors will sell. The rest are craps. Focus on quality, not quantity.
For what it’s worth, Toyota appears to be inflicted with this same disease, albeit at only its earlier stages. I still can’t fihure out why they need to have 5 different SUV’s in their fleet (Landcruiser, Sequoia, 4runner, FJ cruiser, Higlander – not to mention the various RAVs).
Robert – this was a good piece, but typically I count on quotes from GM execs to make me giggle, and there weren’t enough of those in this piece.
I don’t want to have to surf phatphree.com…I prefer to get my automobile fix and humor fix in one place.
You couldn’t stick ONE little quote from Lutz in there?
My backlash comment was sarcastic.
I doubt people will give GM a mercy you-know-what just to keep them afloat, especially if it means having to drive GM’s junky, clunky, the loud sucking sound you hear is the resale value product offerings. The GM ownership experience also guarantees you’ll get a healthy dose of GM’s notorious take it and shove it dealer service network.
Good point jthorner.
I wonder if, everytime a customer considers extending some goodwill to G.M. and buying local, he thinks about stinkbombs like the Chevette.
Then he says “why the hell do I owe these guys anything?”
That’s for the old crowd, the ones whose loyalty GM has pissed away by cutting corners.
The new kids like me, well, let me tell you a story. When I was at the NY Auto show with a few friends, the only Detroit car I could get them to look at was a Corvette. It’s already ingrained in their heards that American Iron is junk. This may or may not be true, but the perception is what counts (as RF highlighted in his article).
They’ve already lost the battle for my generation.
I always compare reputation to the game of golf; you can spend seventeen holes building up a steady lead, then blow it all by slicing your ball into the water off the last tee. GM are currently in a bunker hacking away with their sand wedge while Toyota are in the 19th buying everybody drinks.
Toyota’s success simply lies in three S’s
1. Steering
2. Suspension
3. Sound Insulation
for day to day commuting, toyotas are best.
Notice that I am not including “sport” as Toyota’s strong suit and for average consumer, that is not an issue.
Kudos Robert on a great editorial. The best quote:
“Consumers remember their past experiences with an automaker’s products. Just as a carmaker can build a reputation with years of consistent quality and service, they can destroy it by the same process, only faster.”
This should be on a sign hung up in the boardrooms, cafeterias, factories, offices, cubes, heck even the bathrooms of EVERY automaker.
My other favorite:
“Even if the “real” difference between a Toyota and a GM product exists entirely in their minds, well, that’s still a product-related reality.”
Now to the numbers. Does anyone know if GM’s efforts to reduce fleet sales and Toyota’s (apparent) increase in fleet sales made the difference this quarter? Because the difference is what, 88-90 thousand vehicles?
Excellent editorial. What a sad state of affairs that has befallen the 2.5. No one truly knows the future but there is nothing, absolutely nothing on the horizon, near or distant that would indicate the 2.5 futures are not going to be bleak, and perhaps finalized. As one writer commented in one of the responses to this editorial, the perfect storm is now upon the 2.5, and their leaking boats are going to get it from all directions. People will not or cannot borrow against their houses as much in the future to buy a new car. Debt is at out of sight levels with consumers. Here in California, fuel prices are averaging $3.30 plus a gallon and all experts are saying the prices are going to continue to climb. What is Ford’s response to all of this, oh yeah, the Ford Edge and some tricked out parts on their existing line of vehicles? Pathetic. There will be no backlash against Toyota, in some ways it is more American now than the 2.5, they are building plants here, not shipping the work to Mexico or elsewhere. Meawhile the “leaders” of the 2.5 continue to enjoy their private jets, huge perks, millions of dollars in salaries, bankruptcy proof retirements.. and the union members have enjoyed way above market wages and benefits for too long. Sad, very sad.
TeeKay: “I still can’t figure out why they need to have 5 different SUV’s in their fleet (Landcruiser, Sequoia, 4runner, FJ cruiser, Higlander – not to mention the various RAVs). ”
The same argument could be made about cars why do you need Yaris, Corolla, Camry, and Avalon and all manner of Lexus and Scions. The answer is size and price point. Although I agree there does seem to be some overlap in their SUV’s, but I am not an SUV guy so they all seem the same to me except for the RAV4 and the FJ.
“Darwinism”? Aren’t we talking about intelligent design here?
Good op-ed Robert, thanks.
And now Automotive news report that Chrysler has overtaken Pontiac for highest percentage of fleet sales compared to overall sales. Looks like the Chrysler excess inventory lots have moved to Avis lots!
Really spot on article Robert, my take is that you have been highlighting two separate yet related problems for GM. One is their flawed business model and the other is their less than stellar vehicles many of which are a result of their flawed business model. Too few resources to support too many brands. If they are to fix their product lineup they must fix their business model.
Some of GM’s cars are not so bad when they are new, but the problem they have is that these days lots of people finance cars and for a long time. Some loans are as long as 5 years.
If they had to drive a 5 year old US made car they would realize that by that time they are more then disgusting (wear, rattles, repairs, etc), not just GM, Ford and Chrysler are even worse.
Even inexpensive Japaneses cars are not much worse then new after 5 years and at least stay together as long as the loans on them.
People don’t have to understand long and short term strategies, they can feel these things in their own wallets. It’s the old “you can fool some of the people some of the time, but …….”
And now we have Toyota building its cars for the US market in the US, while GM is trying to save its bacon by foisting foreign built (read China ideally) cars on its home market.
I am personally of the opinion that GM management, from the early 90s onwards, have been tasked with destroying GM.
GM really needs to Beat some Trax to get back in the Groove.
Sorry, had to be said.
Toyota has six SUVs. Each serves a specific market purpose.
First category: The “real” off-road SUVs
Small: FJ Cruiser
Medium: 4Runner
Large: Land Cruiser
Second category: The wanna-be, “CUV”, car-like SUVs
Small: RAV4
Medium: Highlander
Large: Sequoia
Granted, that’s a lot, especially for a company that is more known for thier cars than thier trucks, but each one has a specific market position, and, for example, adding the FJ Cruiser didn’t cause sales of the other five to drop much, if at all (no canibalization).
That sound you hear are nails being hit on the head. Not too much point in continuing the death watch on GM – as said all there is left is the unravelling.
The similarity to the fate of the once proud British motor industry is almost spooky.
Stein X Leikanger if you have ever worked in an organization full of yes men where telling the boss the truth is seen as not being a team player and where being a kissass is rewarded then you would not think they are deliberately destroying GM. I hate to use this analogy but the best one I can think of is Hitler and his general staff during the last few years of the war. Telling the truth and being right were punished and just going along with delusional thinking was rewarded.
Maybe a subject for the next Deathwatch but it’s being reported that GMAC’s exposure to the sub-prime mortgage meltdown is greater than expected. Surprise surprise.
GM only has 49% ownership, but they were still counting on GMAC for a steady stream of cash to keep the lights on. The article also alluded to the fact that Cerberus was sh!^^!ng a brick, but the official Cerberus party line was “We did more that due diligence before making the deal.”
Like I said – Scary.
Very accurate and concise editorial.
My twenty Eurocents. There are plenty of examples of car companies that have pulled themselves up by their bootstraps. Toyota is excellent but GM doesn’t have to be as good as the best — it only has to be good.
As soon as an even mediocre car maker comes up with something that is sexy and useful, people forgive and buy. Look at the 300C; look at the Grande Punto. These are not particularly worthy cars (and I wouldn’t dream of buying one of them) but somehow people are attacted to the underdog if he looks good enough.
So where are the good-enough GM cars? Which ones are both sexy and useful? Damnit, I can’t think of one.
Now if you could just throw in some comments about how the unions have contributed to the failure you would have covered it all quite well.
“This is one of the most concise editorials on the GM-Toyota Saga I’ve read.”
Ditto. Well done RF. GM NA is a vampire sucking the life-blood out of itself…Thanks mostly to US government laws I might add which will only get worse for them.
This year’s intersection of the Toyota and GM vehicle sales lines is a notable indicator of the 2.5’s decline. Even the mass media may pick up on that particular factoid.
Less publicized but revealing: According to financial statements as of 12/31/06, both GM and Ford have negative equity; that is, their liabilities exceed their assets. GM: minus $5.4 billion; Ford: minus $3.5 billion.
Negative equity is one way to define insolvency. A century of operation–and no net worth (at least as the accountants’ measure it.)
Yet both continued to pay dividends last year. When there are no earnings, dividends have the effect of further cannibalizing a company. One can hope that directors, management and the UAW now accept that survival is at stake.
The FJ Cruiser, as many people reading this site know, was simply an update on the vintage FJ-40. How many sold and what it might have contributed to the numbers which made Toyota number one in sales, were probably minimal; but as editor Farago noted, it is, after all, about perception.
GM has missed an opportunity that it could retrieve. EMI, a company in Sterling Heights, Michigan, is making a replica body of the 1957 Chevrolet two-door convertible – the car which is such an icon, it has appeared everywhere from within the lyrics of an Eric Clapton song (”I get off on ‘57 Chevies/I get off on rockin’ guitars”) to Virginia Street in Reno, during Hot August Nights.
EMI’s 150 employees made the prototypes for the current Ford Mustang and the F-150, as well as the Pontiac Solstice. GM might want to consider marketing the 57 Chevrolet convertible via select GM dealerships; placing one on the showroom floor and having salespeople on hand to explain what a “glider” is and how interested customers could spec-out their own.
It might be a chance for GM to change the entire way that the auto business is done, using customer input to build cars, as needed and as they want them – truly and completely.
Yeah, it’s a gamble. But at this point, a little creative thinking might take the General a long way.
“We simply want to be the best in quality. After that, sales will take care of themselves.”
I loved this quote. Pretty much says it all. And has for many years. Why oh why does it always have to come down to this? And why don’t others get it?
Great editorial Robert F. I will say this about the Toyota FJ Cruiser — I’m not big on SUVs…but that one sure does interest me. I’m kinda too tree-friendly to go off-roading…but man that’s a cool SUV.
I agree with the last paragraph. GM waters down their rbands with pointless badge engineering, and when nobody wants to buy it, they kill the brand. Oldsmobile is a perfect example of that.
Hey look at this Toyota leads in a different category also.
533,417 vehicles recalls so far this year.
The Chevy beating Tundra?allready been recalled.
In 2006 JD Power shows Mercury,Buick and Cadillac beat Toyota in a list of dependable cars.
Toyota has recalled 9.3 million vehicles in the last 3 years.
2.26 Million vehicles in the first 1/4,and the General is going belly up soon?
After reading 40+ comments some great,sherman Lins was right on the money and very true.I thought I better put some arguements in from the other side.
All in the name of balanced debate,don’t you know.
mikey – I don’t think recalls are a good metric of quality. Recalls (unless they’re forced by the NHTSA) are when the company ADMITS they screwed up and offer to fix the problem for free. Lack of recalls does not imply lack of problems. It just means that the NHTSA hasn’t forced anyone to do a recall, or that the company is covering up known problems so that they don’t have to pay fix it. (e.g. Ford didn’t put out a recall on their cruise control issues until a few houses burnt down).
Cudos to Robert for sounding the alarm earlier than most. Boo for not mentioning the incredible sums of japanese taxpayers yen and govt collusion that has allowed their auto industry to blow by the U.S. They have effectively cheated the game for the past 60 years. There are many books on this – look them up!
Seth: a very astute observation. I would also point out that new, a Toyota or Honda just plain looks better – exterior and interior.
GM has for decades gotten away with reacting to the market, remember the original Mustang was out for over 2 years before GM jumped into the fray. Watching GM bounce up and down on rwd autos over the last couple of years reminds us that the default mechanism of GM remains reaction. If Gm is no longer the world’s largest auto manufacturer, who exactly are they? They no longer have the market dominance, sophistication and money to react to other’s moves. Yet they pretend they still can. I think they will pull a Hoover, and move their entire operation off shore while pretending they are still an American company. If they last long enough to accomplish the feat, that is.
Blautens:
You couldn’t stick ONE little quote from Lutz in there?
This isn’t Lutz, but almost as good – Rick Wagoner. How about this oldie but goodie from an interview with Automotive News last November? We’ve used it once, but it bears repeating:
Wagoner concedes that trends indicate that Toyota will surpass GM in global vehicle sales in the near future.
“Is it inevitable?” Wagoner said. “No. No it’s not inevitable.
“Trends don’t last forever. The only question is — when do they change, and who’s involved in the change? I don’t think it’s inevitable, but I can’t argue that if you keep drawing the trend lines, your conclusion is correct.”
“If Toyota passes us, I guess they pass us,” Wagoner said. “Do I like it? No. Am I willing to take us off our plan or to sacrifice our profitability or the implementation of our marketing strategy here?
“No, I’m not willing to do that. If we’re going to stay ahead, we’re going to stay ahead doing it the right way and a sustainable way.”
I don’t think recalls are a good metric of quality. Recalls (unless they’re forced by the NHTSA) are when the company ADMITS they screwed up and offer to fix the problem for free. Lack of recalls does not imply lack of problems.
Recalls are recalls. If the NHTSA is involved, it was a ‘recall’. If the manufacturer is ‘just being nice’ (i.e. trying to avoid a recall) it is a ‘campaign’. Your point appears to be in favor of Toyota’s situation, but could indeed be a condemnation just the same. Toyota tried to avoid recalls for years (think sludge) and has been unable to avoid them lately (think ball joints). No big deal, every manufacturer has them. But Toyota is no longer the Teflon Don it once was.
North American capitalism is geared towards short-term gains. Accordingly, the domestic automakers think short-term, not long-term. Capitalism should be about designing and producing reliable quality cars people want to buy, not manipulating the books and stock prices to satisfy the Wall Street gods. Change will come only if executive compensation is tied to long-term company performance and returns. Management stock options should not be guaranteed, but instead tied to company performance over a decade or more.
Thanks for the good report. I myself am immensely pleased that Toyota (quality manufacturer) has taken over GM (garbage manufacturer) for the top spot. GM has been screwing up for a while now, and they don’t deserve that title anymore.
“I think they will pull a Hoover, and move their entire operation off shore…..”
I think you are right. GM, in ten years time, will de-list from US exchange and HQ in a, um, more business-friendly place (Bermuda? UAE?) and manufacture in India/Asia and maybe Central/South America and Africa. GM liabilities exceeding assets is not a good thing and I doubt they can turn this around. When EPA starts limiting CO2 and thus wrecking their high-margin vehicles market, GM is toast in the US.
“Trends don’t last forever. The only question is — when do they change, and who’s involved in the change?”
Yes, Rickypoo, I’ve been asking that VERY SAME question for …..oh, ….just a tad over 30 years.
Sir, when exactly WILL this “trend” of yours end…and MORE IMPORTANTLY….*WHO* is going to change them???
Toyota, I’m having a nice cold Budweiser right about now in your honor. Cheers for a damn well executed effort.
You see, every one wants a “magic pill” (57 Chevy, please…it might sell about as well as that Corvette-engined retro pickup they just canceled about 6 months ago).
When even Hyundai is bringing out world-class sedans, …the TOTAL LACK of EFFORT by GM’s management is not only obvious, but GLARINGLY so!
Negative equity, huh? Excellent…I always knew GM was morally bankrupt.
Toyota tried to avoid recalls for years (think sludge) and has been unable to avoid them lately (think ball joints). No big deal, every manufacturer has them. But Toyota is no longer the Teflon Don it once was.
Another one of the huge recalls, I believe, was for seat track grease on the Tacoma.
Concerning the engine sludge thing, once the ball started rolling Toyota went nuts with replacing engines or giving discounts.
A motor vehicle is a very complex thing, much more so than even 5 years ago. Yes, recalls are inevitable….but it really depends on what is being recalled.
Hate to be pessimistic, but 10 years from now it will only be GM left of the “Big 3″, with Jeep being cherry-picked off from the scraps of Chrysler, and Ford ultimately getting sucked into someone more successful.
Crazy times, these. Two years ago I thought RF was crazy to start the Death Watch series. Sadly….he was not.
Two years?
Try *18* years, my friend:
http://www.amazon.com/Rude-Awakening-Struggle-Recovery-General/dp/0060973420/ref=sr_1_1/104-5850995-8926319?ie=UTF8&s=books&qid=1177461228&sr=8-1
Read it today and see if M.K. is was not dead on 18 years ago. She sure as hell was!!
I think today, April 24, 2007 it can be said in all honesty that GM has finally had a “Rude Awakening”.
…and I quote: “sorry industrial saga”.
How can one not love that??? That’s priceless my friends!! :)
kaisen – I’m not trying to be a Toyota fan boy or anything. I’m just trying to say that recalls are not a good metric for quality.
Rastus — I based a lot of this editorial:
http://www.thetruthaboutcars.com/?p=3442
On Maryann Keller’s books about GM.
I believe that the only thing that can save the US 2.5 would be to follow the Hyundai model. Produce an acceptable basic car with all safety features at an modest price point, give it a true 7/100,000 bumper to bumper. Produce such a car for 2-3 buying generations (7-10 years) and then maybe people will believe the hype. The 2.5 have at least 30 years of sins to atone for. Impossible to do no, will it happen very unlikely.