By Robert Farago
December 12, 2007 -
Last November, all GM’s eight U.S. brands lost ground. As the automaker’s pretty much shot its vehicular wad, the falling stats have convinced many industry observers that GM’s turnaround is back in turnaround. Of course, there isn’t a turnaround to turnaround. Not now, and not in the last forty years. Since the sixties, GM’s market share has been on a downwards trajectory. In 1962, The General owned over 52 percent of the U.S. new car market. Today, The Big 2.8 combined can’t muster a simple majority. There’s a reason for that.
GM’s inability to see the big picture has led to its downfall. The irony is stunning– the carmaker that was once the world’s largest has proven itself to be the least capable of anticipating the large scale forces controlling its destiny.
For example, how did GM fail to see that the light truck boom was about to go bust? Years before Hurricane Katrina hit, the canaries in the coalmine were singing like Ethel Merman. Gas prices aren’t cheap! Gas prices aren’t cheap! If nothing else, the fact that Toyota, Honda and Nissan were eating GM’s passenger car lunch should have signaled management that the transplants knew something about making popular products– and money– that GM didn’t.
Never mind the inadvisability of GM putting all its eggs in a body-on-frame shaped basket. GM’s success in the car business depends on its ability to see ahead of its five year model cycle– which is often longer and should be shorter but that’s another story. It’s a sad state of affairs when a company with 99 years of automaking experience and virtually unlimited financial resources can’t predict trends as well as a bunch of pistonheads yakking on the internet.
Whether it’s due to executive hubris or bureaucratic bloat or both, GM has been flying blind for decades. More to the point, they’re STILL in the dark. Saturn gets a sports car. Cadillac gets a sports sedan. Buick gets GMC’s crossover. GMC gets Buick’s crossover. Saab gets bupkis. Chevy doesn’t get Pontiac’s El Camino, while Pontiac gets Saturn’s Aura/Chevy’s Malibu. If a decision is only as good as the information it’s based on, well, garbage in, garbage out.
Even if you set aside the ongoing series of duds failing to fill GM’s sales ledger, there’s no indication of a far more important “awareness” turnaround at RenCen. At the moment, GM blames its American doldrums on the general economic climate; the “falling tide sinks all boats” excuse. This GM genuinely believes, despite the fact that domestic boats are sinking a lot faster and farther than the transplants’. But worse, far worse, they’re telling the world that the tide will raise them up by the end of next year.
As Blogging Stock points out, GM expects the key driver of their profitable pickup truck sales– the U.S. housing market– to recover in 2008. In a recent article in the New York Times, GM execs said they expected the American housing market to pick up in the second half of 2008 and that “the industry would finish that year in better shape." Try and find an independent observer who agrees that the downturn will be over in six months. Most experts agree that we’re looking at a two to three year slump. Where will THAT leave GM?
Without a pot to piss in. Say what you will about the brilliance of the new Cadillac CTS or Chevrolet Malibu or Buick Enclave. Tell me that the new Chevy Volt electric - gas plug-in hybrid is the future of automobiling as we know it. I’m not going to dismiss their prospects out of hand. But the thing of it is, at this point, they are an irrelevance. GM’s eight brand hole is so deep and so wide that no one, two, three or half dozen vehicles can fill it.
Just as GM suffered defeats on all eight brand fronts in November, their survival depends on making advances on all eight brand fronts in the future. To do that, GM has to be smarter, faster and sharper than it’s been in its entire corporate history. To think GM can pull off an octo-brand turnaround with the same management that has singularly failed to anticipate future trends, that says it's waiting for the new Energy Bill before finalizing its products plans, is even more delusional than expecting the housing market to magically right itself.
How’s this for a long term view, from a Business Week article dated May Ninth, 2005: “The only question is whether that reckoning comes in the next year, if models developed by Vice-Chairman Robert A. Lutz fall flat; in 2007, when the union contract comes up for negotiation; or perhaps in five years, when GM may have burned through its substantial cash cushion.” So really, we only have part three of the prognosis to go.
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December 12th, 2007 at 5:54 pm
When they began building Saabs in Rüsselsheim, and Cadillacs at the Saab plant in Trollhättan, I kind of thought there wouldn’t be any more nuttiness to observe from GM. But then they began building Opel-Saturns.
This is a show that never fails to deliver … cases will be taught, examples will be made - not profits, though.
December 12th, 2007 at 6:09 pm
Shame on GM for not building a single large, rear-wheel drive, bench seat car anymore, like the Mercury Grand Marquis. What the hell happened to Cadillac? They used to make these nice, luxurious cars and now they emphasize sportiness and truckiness. No one, not Buick, not Pontiac, not Chevrolet makes a traditional large sedan anymore.
Tough for you GM that I’m buying a Mercury Grand Marquis. your loss!
December 12th, 2007 at 6:11 pm
What the GM kool-aid drinkers fail to see is that is as good as the CTS, Mailbu and stop gap imports like the G8 and Astra are, they are not enough to save the monolith that is GM. Moreover, GM doesn’t have the resources to spread the wealth to all of its eight brands. What it gives Saturn means there is less for Pontiac, what Pontiac gets means less for Chevy. And not just in terms of product or product development, but all important marketing as well. Look at what Honda can put to advertising the new Accord vs. GM for the new Malibu (while cutting the twin G6 and Aura budgets). One model like that may make all the difference to a lithe company like Honda or Toyota, but for GM its just a drop in the bucket of red ink.
December 12th, 2007 at 6:26 pm
Are they insane, anyone who believes the housing market is going to pick up in 2008 is delusional. It’s going to get much worse before it gets any better, plus the price of gas will keep people downsizing. Did they also forget there is a presidental election in 2008 and the pre-election minirecession we get with it. As long as the current idiots are still running the company they are doomed to fail.
I’m glad we mostly do military and eduction work because if we did strickly multifamily like some of the other places I worked I would be seriously worried about the upcoming mess. We only do section 8 housing and there should be some growth in that sector in the next few years.
December 12th, 2007 at 6:31 pm
If I read this right, GM is betting the company on strong demand for trucks/SUVs/CUVs in late 2008.
If they are wrong, then what? End game?
December 12th, 2007 at 6:33 pm
And to beat a horse to death again, GM must slash brands or reorganize as follows:
Cadillac = lux. (non-fleet)
Chevy = full-line, mass market & trucks (non-fleet)
Saturn = at most two car models and one CUV model aimed at high-end mass market (non-fleet)
Pontiac = two models only, GTO-like coupe and G8
GMC = fleet-only trucks
Buick = livery/rental sedans (decontented Impala or Grand Prix)
Unfortunately, since GM is the least poorly run US automaker, it’s easy for RenCen to believe that they’re doing a great job.
Though time is ticking as the the market has already spoken:
market capitalizations
GM $15.5b
Ford $14.9b
Honda $124b
Toyota $179b
December 12th, 2007 at 6:55 pm
So, they can sell trucks now at huge discounts and somehow survive, but when things get better in ‘08 we are supposed to let them return to making huge cash profits on our next truck? And we’ll buy them in droves?
It is somehow like seeing your “hot” date without makeup for the first time, isn’t it?
December 12th, 2007 at 6:56 pm
At today’s close, the market cap of Honda is $62B, not $124B. I know because I drive a Honda and I hold Honda shares.
Honda is the ultimate anti-GM. Honda doesn’t have too many models around. But most of them are leaders in their segments.
Civic: No.2 compact, after Corolla
Accord: No.2, after Camry, for the past several years, probably No.1 for 2007
CRV: No.1 light SUV/crossover
Odyssey: To be No.1 minivan in 2007
December 12th, 2007 at 6:59 pm
With due respect to the poster, I’m not sure the a GM Grand Marquis is the formula for saving GM. 100% emulation of the Japanese automakers isn’t the way either, but how about realizing that they are working a winning formula? Too much overlap, too little differentiation, and too little value are GM problems that have been harped about for years. Well…at least we’ve still got something to harp about.
December 12th, 2007 at 6:59 pm
Are they kidding? They don’t really think the housing market will rebound beginning in July ‘08? This is just another pie in the sky wish against reason statement.
The facts remain:
Consumers are way extended already on credit
Oil prices have gone way up and will probably continue to do so
The housing market is in very bad shape
There is a glut of new and used vehicles already out there to buy
Toyota and Honda have the massive resources to stay in the game, even through a recession
GM is saddled with monumental sized debt
They are importing the Astra and will lose money of every one of them
The rebates on the domestics continue to be huge, just to move the 2007 models
But I guess they are reducing fleet sales.
December 12th, 2007 at 7:02 pm
slateslate, I have a better idea. Just use GM as the car brand (just like the car brand Honda from the car company Honda), and make:
Chevy a single car model that competes with Civic;
Buick a single car model that competes with Accord;
Cadillac a single car model that competes with E-class;
Saab a single car model that competes with TSX;
and so on… got the idea?
December 12th, 2007 at 7:24 pm
Even if there is a housing rebound it isn’t going to result in a massive uptick in full sized truck sales.
About 1/2 of the body on frame trucks sold in recent years have been sold to people who have a pressing need for a large truck. The other half have gone to fashion buyers who rarely get the thing dirty.
The fashion buyers have been going away fast and there is no reason for them to come back.
If GM really wanted to participate in any growth in the truck market they would be bringing out a world class compact truck and companion van available with a small turbo diesel to sell as a more efficient solution. Remember all those compact Japanese pickup trucks we used to see in the 1970s and 1980s? GM even had a rebadged Isuzu and Ford sold a Mazda unit.
There is still a substantial market opportunity there. No way, however, is GM working to seize the day. Once upon a time GM led the US light vehicle market, but today they bobble and follow.
December 12th, 2007 at 7:41 pm
An overpriced car based Pontiac truck thing is there answer to that unserved market, but it will be too expensive for the people who would like one, like me. I need some thing small and efficient that I can put my bike in the back of and to move small things. Delusional execs riding high on their egos.
December 12th, 2007 at 7:46 pm
The effect of corporate culture in the Tubes sounds like what happened to someone I know who got laid off from a pharmaceutical company that’s just undergoing its first ever downturn. Everyone new and with different (and realistic) views on the upcoming products and markets got the pink slip, old timers (many pathologic optimists) and brown-nosers kept their jobs. The Culture says the downturn will be temporary, and the new products will make billions. The effect of the Kool Aid overrides all.
Except, they won’t. The spiraling cost of health care, generic (cheaper) competition preceding the launch of an upcoming anticipated blockbuster, increased federal regulation of their primary cash cow products. The Culture has never before encountered decreased sales in their entire history and has no clue how to deal with it.
There are many few parallels between that company’s and GM’s cultures, the inability to deal with failure after having been a market leader for a relatively long time. Arrogant optimism is how I’d describe both that company’s as well as GM’s culture. The difference is that GM has been riding its corporate ass raw on the slippery slope for 3 decades with no end in sight.
Will we be seeing another $39 billion dollar writeoff due to overestimation of market demand a few years from now?
December 12th, 2007 at 7:54 pm
wsn:
Accord: No.2, after Camry, for the past several years, probably No.1 for 2007
Nope. Camry will be #1 again for 2007, and probably for 2008.
December 12th, 2007 at 8:00 pm
Starlight - excellent point.
jthorner - also a good point.
If it were not for union contracts and several other bad influences GM could still be making a profit by doing what they do well. Unfortunately, the government, unions, and management egos make that impossible. The truck market could shrink by a huge margin, but if you were a truck maker they could still weather it well. The problem with GM is that they also have to weather losing tons of cash on all the stuff they keep doing that they stink at.
December 12th, 2007 at 8:03 pm
Nothing wrong with the el Camino concept ,in general, but the lack of a de-contented version with an economical V-6 and stickshift, a delete option on fancy music systems for those of us who just want to be able to feed our MP3 players into a standard radio, rubber matting/composite flooring in place of carpet, manual windows, etc., will turn this vehicle from tool to toy.
December 12th, 2007 at 8:52 pm
Does anyone have any information on GM’s total debt and their ability to pay the interest? On commentator has said that they need to earn at least B$5+ just to pay the debt.
December 12th, 2007 at 9:03 pm
The roots of GM’s malaise are clearly visible as far back as the 50’s. The confusion of brand identities — Buick, Oldsmobile, and Pontiac were at war throughout the late 50’s into the 60’s. The slowness to respond to market trends — for example, it took GM almost five years to respond to the four-seater Thunderbird, which was a hugely popular item for Ford. The tendency to miss the mark when they did respond; the Corvair, for instance, was an interesting piece, but compact buyers showed they’d rather have a Falcon, which was far more conventional, so Chevy lost two more years rushing out the Chevy II. The worrying habit of bringing an advanced piece of hardware to market before it was ready for primetime, then dropping it before (or sometimes just after) engineering worked out the bugs — leading 50’s examples include fuel injection, air suspension, and continuously variable automatic transmissions. (The latter, Buick’s Flight Pitch Turbine Drive and Chevy’s Turboglide, might never have worked well, but GM spend bags of money on them and then dropped them quickly.)
These things are deeply ingrained in GM’s corporate culture, but because GM had enough brand loyalty and momentum it took a long time before the damage became critical. It’s like a heavy smoker with high cholesterol who just won’t change his habits. It might be years before the damage becomes apparent, but eventually it kills him.
December 12th, 2007 at 10:06 pm
I don’t how to save GM, but I do know that my company is replacing its Chevy and Ford vans with Dodge Sprinters, rebadged Mercedes-Benz diesel vans, and that I looked at the Cadillac CTS and concluded that whatever the excellence of its engine, transmission, and suspension, the car lacks many features and benefits that its competitors have at a similar price. I’d like to buy a Cadillac, but its cars are not competitive. I’m glad that I don’t hold GM shares. I’d like to buy American, but every time I have done so, I bought junk: 1983 Chevy X-11, 1986 Chevy Celebrity wagon, 1984 Pontiac 6000 GTE, 1987 Pontiac 6000 GTE, 1987 Jeep Cherokee, 1989 Ford SHO. All troublesome. Now we have two 2007 Subarus, a Legacy spec.B and a Outback LLBean 3.0 R, both of which have been totally reliable and satisfying.
December 12th, 2007 at 11:58 pm
Can anyone tell me why a GM vehicle should be anything other than a….
Chevy
Cadillac
Hummer
Toyota has three brands at the moment. Maybe Subaru will become the fourth.
Honda has two.
Nissan has two
VW has three although Europe is a far different story for them.
Mitsubishi has one
Mazda has… well they’re owned by Ford which has about 7 for right now (Ford, Mercury, Lincoln, Jaguar, Volvo, Mazda, and Land Rover). They may be down to 5 by March 2008.
GM needs to split itself into two different companies. Or at least sell the names and distribution channels of the other five divisions to someone who could use them like the Chinese or Indian firms.
December 13th, 2007 at 12:41 am
Housing rebound in 08? That IS some strong kool-aid.
December 13th, 2007 at 1:54 am
To slateslate’s response on how GM should be organized- I really like your ideas. It’s easy to look at the big picture and think… what the hell would I do with this company. But it definitely makes sense to have separate models in the respective brands that don’t cannibalize on each other… like say, every single car made by GM and it’s twin/triplet. Acadia and Outlook… are they even different? Having overlap like that just muddles the brand image that Saturn once had as a “free thinking” company, or something. Also, GMC = WTF. Chevy? What? I just don’t know. I concede that many of their new products are good, but as long as they compete against their GM brothers and sisters, they’re really sort of useless. What’s good Malibu sales to GM when G6, LaCrosse, and Aura sales are all in the toilet? Sigh.
December 13th, 2007 at 2:22 am
This housing market recovery … I’ve learned that corporate planners can put a spin on everything, why not say that: “The continued fall in the housing market will free considerable capital that Americans will invest in their cars, instead of taking up large mortgages.”
Actually sounds more likely than a recovery in housing. Just ask http://www.doctorhousingbubble.com, who will be mightily surprised if housing continues its exuberant trajectory in 2008.
December 13th, 2007 at 4:45 am
How can we save gm? how can we compell a lazy obese man , who has been mouthfed all his life, to get up his buttcheeks and start working? How do you build up muscles, without working out? how do you make a shark vegetarian? how do you sell a tanning lotion to an Arabian nomad? How can you make a country stand for achievements, if all it stands today for ,is clay legs of services ,debts and no-brainer.
How can you teach a company, that if they are a car company they should make more products?
how can you teach a car company that quality is a must, not an option?
How can you teach a car company that a fair game is a must, and rebadging and outsourcing is like a morphine-just a pain reliever?
How can you teach a car company that as diverse is the holy costumer, so should be your product range?
How can you teach a car company that,if they need more cash for investment, they simply make more better products that simply generate more revenues?
How can you teach a car company that they should take care of the products, and the sales will take care of themselves?
How can you push a car company not to be allergic to a physical input and presence in real engineering?
You little poor CEOs , how much money do we have to pump in you before you get stuffed with money and say ` enough`? before you say, now I can really take care of the company? Little, obese, bald, and lonely, buiding a greenback hideway to drink away the bitterness of wasted life and strangling lack of true love………sorry.
December 13th, 2007 at 9:34 am
As Starlightmica and Argentla wrote, corporate culture is a huge factor in GM’s problems.
When you get into the heart of RenCen, it looks like a completely different, Bizarro world. The Michigan media fawns over each and every Detriot vehicle and makes thinly-veiled racist/commie/terrorist associations with “foreign” cars.
Everyone needs a SUV to go hauling, hunting, fishing and towing. Everyone. Because GM’s old-boy network of aging executives say so, despite being given mountains of research saying otherwise. They call it “vision”. Others call it “madness”.
As I said before, I think the only way that real, significant change can happen is for the 2.8 to pick up and move their management out of Detriot. The enabling culture is too strong there.
December 13th, 2007 at 10:15 am
Moving the horrible corporate culture someplace else wont solve the problems, that culture in it’s entirety needs to be eliminated. Easier said then done, obviously. They need to replace this tired old gaggle of execs with people who will hold them selves accountable for the decisions they make. And the corporate infighting does no good for the companny as a whole. It would probably require a lot of the people at the top to fire themselves and find visionary replacements, which is not going to happen.
I think GM is too broken to fix.
December 13th, 2007 at 10:45 am
“It’s a sad state of affairs when a company with 99 years of automaking experience and virtually unlimited financial resources can’t predict trends as well as a bunch of pistonheads yakking on the internet.”
I’d have to disagree the majority of the time. In fact I lauged out loud when I read this. It’s so easy for us to take pot shots, because we’re judging decisions that GM made 7 years ago. Hindsight is truly 20/20 as they say.
December 13th, 2007 at 11:12 am
Redbarchetta, you’re making me look like an optimist. Yikes! :)
December 13th, 2007 at 11:42 am
“It’s so easy for us to take pot shots, because we’re judging decisions that GM made 7 years ago.”
And we ‘net pistonheads have been criticizing GM for not having competitive CARS for longer than that. How long have outsiders been screaming at Detroit that if they don’t get their reliability up to Japanese standards they aren’t going to survive?
Then there is the California dataset. For many, many years California has been the first state in the nation to demonstrate and establish new trends. Detroit lost the marketshare war in California decades ago. What did they do, fight back? No, they closed their west coast factories (well except for the one which was gift wrapped and given to Toyota). Ford got the bright idea to put top management and design for their Premier Auto Group in Southern California, then quickly said never mind and left.
Meanwhile Toyota USA is headquartered in …. Torrance, California.
Now the Japanese juggernaut has captured the market on both coasts and is steadily hollowing out the heartland. Only trucks have kept Detroit alive. They gave up even trying to be competitive in cars for a decade or two. GM and Ford are trying to claw their way back into the car part of the market, but their efforts are mostly too little too late.
The top management of these companies is paid obscene amounts of money for their irreplaceable talent, insight and skill. The shareholders, employees and customers are not getting their hundreds of millions of dollars worth of management they are paying for.
December 13th, 2007 at 12:01 pm
GM executives are so mind-boggingly stupid. It just amazes me. The first manufacturer to come out with a small pickup with a turbo-diesel will have a huge sales increase, and I bet incentives wouldn’t even be needed. With current fuel prices, why would anyone want to buy a truck with a massive gas powered V8 when you can potentially do the job with something smaller and more fuel efficient? Even if you want a diesel GM pickup now, you have to buy a Silverado 2500 and pay ~$6000 for the Duramax option, which brings the price to ~$35000 (before discounts). Bring out an updated S10 and put a 6 cylinder Turbodiesel in it that averages about 35 MPG or more. I’m still waiting for VW to bring back the Rabbit pickup, but I don’t see that happening. There’s obviously money to be made with the right products. But if GM is counting on the housing market improving overnight and sales of their trucks magically shooting back up to levels from 3-4 years ago, they are extremely delusional/f#&ked in the head.
December 13th, 2007 at 1:18 pm
If GM cars are so bad, then why is GM the largest car company in the world? Doesn’t that mean that GM sells more cars than anyone else? Doesn’t sound like a company that makes crappy cars in the public view, if more people buy their cars than anyone else’s.
December 13th, 2007 at 1:37 pm
ionosphere:
An oversimplification: say, car GM is going at 75mph, but slowing down. Car Toyota is driving alongside in the next lane but is going at 74mph, but speeding up with the pedal to the metal.
What’s going to happen next?
December 13th, 2007 at 1:38 pm
ionosphere- Habit, blind loyalty, family pressure, ignorance, psuedo-patriotism, employee discounts…there are many reasons people by cars that are not the best for them (not just GM cars). And don’t forget that fleet sales are a big part of the “lead” (some estimates of the retail gap between GM and TMC are small, Toyota is the number one retail brand in the USA)
The retail sales trend lines tell us how the buyers “shopping the field” are moving. GM’s getting creamed. Remember how big they were?
Keep in mind when you see “owner loyalty” surveys that the domestics have one large advantage (and it’s not enough. In Smalltown & Flyover USA (grew up there, live there) they operate virtually without competition from transplants. Each of these dealers contributes a small amount to the figures but there are thousands of them and you can bet the loyalty scores they have are huge.
In competitive metro areas I suspect the domestic market share is pathetic. Their problems are probably worse than they think.
Just some thoughts.
Bunter
December 13th, 2007 at 3:27 pm
Keep in mind when you see “owner loyalty” surveys that the domestics have one large advantage (and it’s not enough. In Smalltown & Flyover USA (grew up there, live there) they operate virtually without competition from transplants. Each of these dealers contributes a small amount to the figures but there are thousands of them and you can bet the loyalty scores they have are huge. In competitive metro areas I suspect the domestic market share is pathetic. Their problems are probably worse than they think.
Swap domestic for import and smalltown flyover USA for east and west coast and it’s the exact same sentiment.
December 13th, 2007 at 5:30 pm
korvetkeith-not sure you got my point.
With it’s 7000 dealers GM is (over?)represented in every market. If few on the coasts chose to buy from them it is not because there are no dealers close by. Out in Da Middle there are a lot of folks who have nothing but domestic dealers nearby. Especially GM.
My contention is that this will inflate the domestics “loyalty” ratings, not because the product retains the buyer, but because the geography does.
Toyota has less than 2000 dealers and their retail share is close to GM’s (estimate) without accessing all markets.
Every market they are in has a wide spectrum of other choices. They have to earn all the loyalty marks in a competitive pool.
BTW, I’ve only had one Toy, 3 GMs, and find most of Toy’s products to be Yawn City. This isn’t “fanboy” stuff.
Worth a thought.
Take care,
Bunter
December 13th, 2007 at 5:42 pm
” The top management of these companies is paid obscene amounts of money for their irreplaceable talent, insight and skill. The shareholders, employees and customers are not getting their hundreds of millions of dollars worth of management they are paying for.”
That was worth repeating.
It ticks me off that the economy (especially here in MI) is highly dependant on the decissions these guys make.
December 13th, 2007 at 5:46 pm
All this confirms a conversation with one of the assembly line workers I had whilst touring the Arlington, Texas factory way back in 1998 when the truck was king of the sales chart.
Sitting in the then-new GMC truck that graced the lobby of the building, said employee indicated that trucks and SUVs were responsible for 90% of GM’s operating profits at the time. Keep in mind that this was in the deepest part of the 90s “oil-glut” that depressed prices to the point that a gallon of regular sold for as little as 66.9 cents in my Georgia neighborhood.
I asked him what would happen when gas prices begin their inevitable climb out of the cellar.
He said, “We’re f—ed”.
It doesn’t take a management genius to figure out that, even when the party was at it’s height, bad times lay ahead.
We don’t have to look far to see how true this employee’s sage (and obvious) prediction has become.
December 13th, 2007 at 5:48 pm
In competitive metro areas I suspect the domestic market share is pathetic. Their problems are probably worse than they think. Said another poster.
TRUE. Here in the NYC area, american cars are rare…but once I get past the NYC “money line” I see a lot of those sad, forgettable boxes.
It’s because in NYC, 50 k year is a good secretary, but outside, that’s real $$$, hence the Cobalts and stripper Caravans, not the BMW’s and Full Boat Siennas here in the gilded NYC burbs.
December 13th, 2007 at 5:55 pm
The issue here is, how much does it cost GM to build a car. It seems they have been going broke for a long time.
This is the great “secret” of the car biz, how high the profit margins really are. Now, I’m sure this is like asking for the Record industry to give a straight accounting, but there has to be a LOT of profit for the constant loss of money, huge executive bonuses, and decent union contracts (you can’t get angry…in this world, these guys are just tossed a bone).
What does it cost to make a Cobalt ? What does it cost to make an Escalade ? What does it cost to make a Vette ?
How bout the high end ? What does M-B pay to make an S Classe ? How about the low end…what does it cost to make a Rabbit stripper ?
Is this why everyone fears the Chinese ? While the first few generations will be a “no buy”, they threaten to do to the car industry what they have done to the electronics industry…
OK TTAC, do a “what it costs to make a car” article.
December 13th, 2007 at 6:05 pm
I don’t think the Chinese carmakers have a chance unless they make good cars. Remember the Yugo? Cheap alone won’t cut it anymore….at least not in this country. We won’t buy garbage.
December 13th, 2007 at 6:42 pm
FunkyD:
Ford’s attitude at that time was, we’re building the Expedigator in 3 shifts around the clock, in the world’s most profitable car plant. What do we need to worry about? A decade later, Ford’s survival is in doubt.
ionosphere:
If you’re typing a message here on this forum, most likely most of the computer or other hardware was built in China. Good enough, right?
Chinese cars will likely arrive stateside within a few years. Chrysler and Ford are expected to then be importing B-cars under their nameplates, and Honda is exporting Chinese built Fits to Europe. Chinese companies under their own nameplates? we’ll see, Europe’s already getting them with mixed results.
December 13th, 2007 at 7:16 pm
True most electronics here are made in China and their quality is fine. But if Chinese car companies think they can sell cars here if they are super cheap yet the quality of Yugos, they will be in for a rude awakening. We won’t buy them.
December 13th, 2007 at 8:31 pm
The Chinese have been selling super cheap almost junk motorcycles and scooters here for a few years now and people by them. I like to think of them as disposable junk but they have been selling in small quantities.
If it’s cheap enough people will buy it, just look at the old Hyundai’s, 2 for the price of 1 normal car. Sure it damaged their brand but if the Chinese improve quickly(which they have been doing very fast over the last decade) they will start to sell in numbers.
December 13th, 2007 at 11:42 pm
Yesterday, in the Los Angeles Times, Dan Neil flatly wrote that Cadillac makes a better car than BMW, Mercedes, Infiniti and Lexus, in the form of the 2008 CTS. His declaration is unequivocal:
“So here’s a new thought, worthy of defending: Cadillac makes a better car than BMW or Mercedes or Lexus or Infiniti, and that car is the 2008 CTS. No other car in the mass market, with so much at stake for its makers, dares so much as this expressive and audacious bit of automotive avant-gardism. In a segment that lives and dies by European benchmarks, the CTS sets fire to the bench and throws it through the shopkeepers’ window.”
http://www.latimes.com/classified/automotive/highway1/la-hy-neil12dec12,0,2495261.story?coll=la-class-autos-highway1
Thanksgiving week, I spent two solid days at the Los Angeles Auto Show, taking the time to see every vehicle on display but more important, to watch and listen. I gathered notes on hundreds of tire-kickers up and down the automotive class ladder.
At the Saturn stand, what looked to be a run-of-the-mill, making-progress cubicle inhabitor (polo shirt, khakis, clean-cut, glasses), seeming about 37, sat in a Saturn Sky Redline, beaming. Mrs. Polo, a chipper, generic, California coastal middle class workout blonde (first crowlines forming and possibly sporting a spray tan) stood alongside.
Mr. Polo (gripping the wheel with both hands and eyeing the view over the sculpted hood): “I can see myself liking this car as my commuter for a long time.”
Mrs. Polo (wrinkling her nose): “It’s a beautiful car, honey, but all the people you work with would see you driving into your building in a Saturn!”
Mr. Polo: “So?”
Mrs. Polo (looking annoyed that Mr. P hadn’t gotten the point): “Isn’t this an American car? Don’t you want to look at the Honda sports car instead?”
Mr. Polo (arching eyebrows): “No! It looks too plain. I love this car!”
Mrs. Polo: “Well, how about the BMW?”
Mr. Polo: “It’s ugly.” (referring to the Z4)
Mrs. Polo: “Well, I’d rather drive an ugly foreign car than a pretty American one. My cars have to be imports.”
Mr. Polo gets out of the car looking both exasperated and dejected; says nothing, walks off in the direction of a Corvette nextdoor.
Me: Reminded myself, chuckling, how many people in an 1100 message thread tried to convince me import bigots don’t exist.
The point of raising these two extremes is to highlight the scope and complexity of GM’s problem. True; a combination of epic misjudgment, persistent arrogance and the inevitability of a more competitive market have conspired to erode market share for 40 years. It’s also true that a few model introductions in one season aren’t going to prompt a “V” in the trend, that you can pinpoint to the day, week or month. In fact, I’d guess you’ll only be able discern the trough and the point of turn-around in retrospect.
Only prospects getting quickly interested in the contextual reasons for fairly and squarely evaluating GM’s newer products can drive the immediate, this-month, turn-around you keep looking for. Lacking community interest and foresight, it’s going to take longer. When spouses are putting a drag on American car purchases because they’re worried about their husband’s street cred at the office, it’s going to take more than a few good cars to win back share.
As for a housing recovery, the fact is, no one knows. Housing is going to perform very differently region-to-region. We even see this in SoCal, with median sales prices still going up in some zip codes, holding stable in others, slipping in others, and plunging in the exurbs. Further, we don’t know how far the Fed is willing to go to ease credit and solve the jumbo mortgage problem. Nor how far the Chinese are willing to let the American economy slip. We also don’t know how well employment will hold up in the US. If it stays solid, housing’s slump will mitigate. Growth will prevail.
Everyone thinks that it takes a housing recovery in the form of new home building to spur improvement in truck sales. Not exclusively. As we saw routinely in the market sags and credit crunches between 1978 - 1983, when people couldn’t buy an upgrade, they improved what they had, even in high stagflation years. DIY and the roots of today’s Home Depot / Lowe’s economy were laid. When homeowners boost DIY, they are inclined to buy more trucks or utility vehicles for personal transportation. Americans have also shown continuing ability to absorb energy costs. Both the economy and personal spending are much less energy-intensive in share and real dollars than during the peak-cost energy years 1980/81. The Ford F150 will continue in 2007 as the country’s most popular vehicle. Pickups and SUVs of all types continue to show general lack of concern for serious improvement in the economics of fuel.
I wouldn’t bet on a housing recovery as cornerstone for corporate strategy in 2008, but on the other hand I would not pull my hat over my eyes and ears if housing stays in the doldrums either. The truth is that the entire auto industry got hooked on exceptional unit sales years in the US as some kind of new average, not just GM.
I agree that a flash initiative to bring a modern S10/Ranger to market would be rewarded with success. CUVs are surging. At the bottom, the Chevy HHR is becoming ubiquitous here as an accessible trucklet/wagon.
However, breaking Toyota’s and Honda’s grip on the perception by the polo shirt set that they make a superior car, on an economically meaningful schedule, is going to require a combination of incisive marketing by the brands, and conscious open-mindedness by the market of calcified-perception prospects. Product isn’t any longer the kink. With Malibu, Fusion, Taurus, Impala, Aura, real domestic alternatives for mainstream sedans with sufficient competitiveness are here. CTS is a real luxury contender. Putting aside the onus I place on import bigots and the great middle who are just apathetic to change, marketing is now the fat man standing on the hose. That’s a separate post topic. Market behaviors are prone to inertia. Monthly inspection of the data for evidence of turnaround is likely to be frustrating for awhile. GM has to turn the pivotal mainstream sedan buyer in its direction to win momentum in the rest of the contests outside of body-on-frame trucks, Corvette and Viper.
Phil
December 14th, 2007 at 12:51 am
“GM has to turn the pivotal mainstream sedan buyer in its direction to win momentum … ”
So far we have seen exactly zero indication that GM has a clue about how to do so.
Big $150M Malibu ad campaign when there are hardly any vehicles in the sales channel?
Big advertising campaign for the Saturn Aura which is already dead in the water?
Bringing in the Astra but forgetting to fix the clock to US style timekeeping?
Paying big bucks to get the New Camaro a movie placement deal years before it will be available to buy?
The guys at the top still have their heads in the sand.
December 14th, 2007 at 1:41 am
Phil,
That’s two. The SL-550 guy and Mrs. Polo. Keep hunting, you’ve only got 999,998 to go. They may exist but as market forces, they’re not significant. Not anywhere near as significant as Detroit’s history and their current lackluster product lineup.
Of course, on reflection, I can see where the really uptight might think Detroit cars are associated with “loser” status. So many of Detroit’s cars are really… junk. Junk with low resale value and a history of failure. Who wants that? More of it simply appeals to rednecks. I’m thinking of the Monte Carlo; 300hp, wrong-wheel drive and two-doors. That’s sooo 1979. And some of it is just a blunt instrument, like the Chrysler 300s. Sure, some people like the style but if you don’t, what’s the point in buying that car? None whatever.
A friend just bought an ‘07 Honda. Since it’s the end of the year, he saved $5K off list to get a really well-equipped car that’s shockingly nice. I’m tall, yet I’m comfortable in the back. And the V6 really moves the thing out when he wants and it turns in over 32mpg on the highway. And, if he tires of it, he can unload it quickly on favorable terms. And Honda has a well-deserved reputation for building reliable cars.
Why would I buy a GM? A Chrysler? A Ford?
They pissed off - and away - a generation. That was stupid.
Look on the bright side; it appears they’re getting a $25B bailout. I hope they don’t waste it on a new line of giant, gas-sucking SUVs. But I won’t be surprised if they do. The Tahoe hybrid suggests that’s exactly what’s going to happen.
December 14th, 2007 at 1:52 am
Oh, and Home Depot will rent you a truck, with a bigger load bed than any normal pickup, for $20/hour. I wouldn’t waste any more time daydreaming about truck sales picking up. Crappy housing market, mediocre employment numbers, declining median wage, rising gas prices… it’s a perfect storm of reasons not to buy a pickup truck.
You might go back and re-read FunkyD’s note from a few hours ago. It was painfully obvious to people on the lower rungs that rising gas prices would screw Detroit over. Did they prepare? No.
Did they take care to keep their customers, as recommended in Business 101? No.
Should I step up to the plate and buy Detroit car to fix their past sins? No.
December 14th, 2007 at 5:31 am
That’s two. The SL-550 guy and Mrs. Polo. Keep hunting, you’ve only got 999,998 to go. They may exist but as market forces, they’re not significant.
Well, actually, I simply committed two examples to writing here on TTAC so far. In two days at one 10 day auto show in one city, I observed many hundreds of individual interactions with cars, and easily hundreds of examples of import bigotry were among them. It’s not the exclusive market force putting drag on the Detroit 3, but it’s one of the big 3 or 4, and enough to make a difference if it weren’t present.
More of it simply appeals to rednecks. I’m thinking of the Monte Carlo; 300hp, wrong-wheel drive and two-doors.
What’s wrong with giving a certain subculture what it likes?
Oh, and Home Depot will rent you a truck, with a bigger load bed than any normal pickup, for $20/hour. I wouldn’t waste any more time daydreaming about truck sales picking up. Crappy housing market, mediocre employment numbers, declining median wage, rising gas prices… it’s a perfect storm of reasons not to buy a pickup truck.
Yeah, that truck rental thing at HD works some of the time. Like when the truck is there when you need it. There’s more to home improvement than transporting what you buy from HD back to the house.
Daydreaming is bad for business unless it’s the kind that leads to an innovation. Truck sales “picked up” continuously from 1970 through 2005, through multiple recessions, double-digit inflation, double-digit prime rates, 14% mortgages, record real dollars (1981) fuel prices, a couple of stock market crashes, terror attacks…you name it. Take the Detroit 3 full-size pickups alone and it’s clear it’s a sector that is far from finished. What will change is that if cars are offered that deliver what car people went to trucks for, then car people will revert to cars.
You might go back and re-read FunkyD’s note from a few hours ago. It was painfully obvious to people on the lower rungs that rising gas prices would screw Detroit over. Did they prepare? No.
You’re right, Detroit’s management didn’t prepare for a shift in fuel pricing and an emotional shift on environmental perceptions. I’d slap them up one side of their heads and down the other if they were in front of me for that. Especially since it’s a mistake they’ve made at least 3 times now in 35 years. BUT, the trucks are incrementally more efficient and powerful. There are more good medium and small engines in GM’s stable than 7 - 10 years ago. And quality and execution on new automobile models from Ford and GM is markedly up. The dogs among Detroit 3 car models are declining in number and proportion; there are plenty of good American alternatives that meet a wide range of differing owner requirements.
A friend just bought an ‘07 Honda. Since it’s the end of the year, he saved $5K off list to get a really well-equipped car that’s shockingly nice. I’m tall, yet I’m comfortable in the back. And the V6 really moves the thing out when he wants and it turns in over 32mpg on the highway. And, if he tires of it, he can unload it quickly on favorable terms. And Honda has a well-deserved reputation for building reliable cars.
I spent a lot of time in each and every Honda, Toyota and Nissan at the LA show, and then went out and drove some. One thing was shockingly clear just having all those cars juxtaposed for easy comparison — plastic is plastic. No one can wax about the Civic’s interior and then complain about Cobalt and Focus. Just stop pretending there’s an actionable difference. People who claim a Honda interior is somehow nicer due to materials than that of any equivalent domestic model are deluding themselves and anyone they make the claim to. “Cheap” feeling controls? They’re the norm now throughout autodom. Maserati, Bentley and some exotics like Spyker being the exception. Mercedes interiors photograph much better than they are experienced through tactile and visual senses. Same with Lincoln. BMW, Audi, Jaguar? Please, don’t insult me. Going from a Cadillac CTS, STS-V, XLR-V, SRX, Malibu, Denali to other mass market marques, the advantage went to GM. Which was a turnaround from a few years ago. Lincoln on the other hand, while having a brand-specific visual design, has slipped badly in touch terms from the magnificent Mark VIII interior from 10 years ago. The switchgear on a Cadillac now feels more robust than does same on a Mercedes S-class. The interior door panels of a Cadillac now feel plusher and more firmly attached than do same on a Mercedes or BMW sedan. That Honda you refer has all the interior charm and flex of a postwar California GI ranch house. That’s not criticism in the way you might think — it’s a sector problem and an industry problem. Materials are more durable than 10 and 20 years ago. Interface gaps are tighter. But it all feels progressively cheaper, and cheaper and cheaper. Except for GM right now. Nothing lays bare the lack of objectivity people have about cars than witnessing in close proximity the reality of modern car interiors vs. the claims made about them.
And as for the post-show refresher on driving some mainstream machines I’m unlikely to buy: I’ll declare the Camry evidence of communal madness, like the Pet Rock, the Chiapet, Wayne Newton and Celine Dion. It’s a horrible, annoying car, not merely bland but both emotionally cryogenic and dynamically numb compared to superior alternatives. That the vastly better Honda Accord, Chevy Malibu, Ford duo, Buicks and Pontiacs post inferior sales numbers singularly illuminates either the power of marketing or the deep dysfunction of our market — or both. But that Honda is merely good, not great. Different drivers with specific preferences can find dozens of reasons to prefer a Detroit alternative. The appeal of a Nissan sedan is completely lost on me. A Mazda 6 shows its makers really took an interest in it. As does Malibu. Lexus has mastered the illusion of a quality interior. Beauty is now but a femtometer deep….
Phil
December 14th, 2007 at 5:40 am
“When spouses are putting a drag on American car purchases because they’re worried about their husband’s street cred at the office, it’s going to take more than a few good cars to win back share.”
But since there’s hardly any real people who are too timid to drive what they like, that is the least of GM’s worries.
December 14th, 2007 at 6:15 am
But since there’s hardly any real people who are too timid to drive what they like, that is the least of GM’s worries
Then one of us would be out of touch with “real people” — and it isn’t me. Worse, when people aren’t even trying cars, they don’t even know the scope of what they might like.
Phil
December 14th, 2007 at 7:59 am
There’s nothing wrong with “giving a certain subculture what it wants.” However, Mrs. Polo might not like what that brand comes to represent and then she’s not likely to buy it. There’s a difference between simple snobbery and import bigotry. I’d recommend catering to the demographics with money.
And as for “committed two examples to writing,” there’s a problem with your anectdotal evidence… what you perceive as “import bigotry” may, in fact, be something else. A different observer might come to a different conclusion.
There are plenty of very good reasons to avoid GM, Ford or Chrysler. In my friend’s case, he got a really nice car at an excellent price and he has been satisfied with those cars for years.
As for the Camry being bland, numb, etc… the market finds something in that car that’s appealing. If it was that bad, the test drive would turn them off; they’d go elsewhere.
December 14th, 2007 at 9:32 am
The four times I’ve put my hard-earned dough for a car, an import has earned it every time. The Detroit 3 have not made products with the most up to date safety features, or simply not made products in a market category in which I was looking to purchase. I wouldn’t be surprised if a bunch of other buyers have found themselves in the same situation, finding features or options wanting.
My father-in-law, age 75 asked me what he ought to get in case he needs to replace his decade-old Camry. My response: 2008 Accord, as it has side torso + pelvis airbags - a feature few, if any other vehicles on the US market have. Elderly folks in car accidents die at a higher rate than the non-elderly, and they need all the cushioning they can get.
December 14th, 2007 at 11:43 am
I know this might be a shocking controversial view but believe it or not not everyone in this world has the same likes and taste in cars. Just because one finds something distaste full or objectionable does not mean others will see thing in the same way as your self. People buy cars according to their own taste and budget. Believe it or not people who buy Camrys actually like them.
December 14th, 2007 at 11:57 am
Believe it or not people who buy Camrys actually like them.
Say it ain’t so. I’ve read the GM Inside News forums, and according to them, everyone who buys these things has been brainwashed by a league of conspiring Asians who have allied with Consumer Reports to plot the overthrow of the United States.
My plan is to fight them on the beaches, with my trusty Cobalt to take me there. Well, that is if the tow truck operator ever arrives.
December 14th, 2007 at 12:36 pm
There’s nothing wrong with “giving a certain subculture what it wants.” However, Mrs. Polo might not like what that brand comes to represent and then she’s not likely to buy it. There’s a difference between simple snobbery and import bigotry. I’d recommend catering to the demographics with money.
Well, Saturn didn’t build the Monte. There isn’t a difference between simple snobbery and import bigotry if said snobbery also snubs luxury cars that aren’t imports. If all car companies only catered to the demographics with money, people with less money would exclusively have to drive used cars. No volume manufacturer caters only to the money demo.
And as for “committed two examples to writing,” there’s a problem with your anectdotal evidence… what you perceive as “import bigotry” may, in fact, be something else. A different observer might come to a different conclusion.
For the sake of brevity I relayed only a portion of the conversation I heard. The import bigotry was explicit and unmistakable. In all the conversations I heard where this was present as a sentiment, the vast majority of any other observers would have the same conclusion, though some might endorse the sentiment themselves and not see it as a problem.
Believe it or not people who buy Camrys actually like them.
I don’t doubt this at all. But the reasons people say they like the Camry and the actual experience of the car don’t align. This misalignment between claim and experience isn’t apparent with the Accord however, nor with Malibu in the few cases where I’ve met people who have bought them. Nor Passat, G6, etc. If you’re Honda or anyone else trying to make a car that will knock the Camry out of the number 1 sedan position, you’d be forgiven for concluding that the market is urging you to make your car worse in every way.
Still, the basic premise of the editorial does hold. GM has an opportunity to become the fastest adapter to market changes and doing so would no doubt help them. Market drag will retard the rate at which such a change would be recognized and rewarded, however and for that both GM and the market of buyers share blame.
Phil
December 14th, 2007 at 4:50 pm
I want to know what happened to Saturn. Wasn’t that the company to take on Toyota and Honda?
Back when Saturn started they offered two cars, the sedan and the coupe. I believe they only had two engine options as well. How did they turn into the same bloated mess that all other GM brands are?
December 14th, 2007 at 5:14 pm
Hi Phil,
More than half of GMs brands are below average in the JDP VDS.
More than half of their models are below average in CR, and they dominate the bottom 20 or 30 slots, 5 of the bottom 6.
Their highest scoring model is a Toyota (Vibe).
As data accumulates at True Delta a similar scenario is unfolding.
Sure GM is starting to have SOME good designs.
Sure they have SOME reliable cars.
They may even have a car or two that combine good design AND above average reliability in the same package. Maybe not.
There are companies that are far more consistent in both design and reliability (combined!)in nearly every category, that the consumer has excellent reasons, even today, to have more confidence in. Maybe that does result in some “bigotry”.
But the “bigotry”, if it exists in meaningful numbers, is not the problem. It is a result of the PROBLEM. GM is inconsistent.
Why should the average consumer pour effort into examining their product line looking for “pearls in the cowpies” when they can get what they want somewhere else with well justified confidence?
We, as enthusiasts, are anomolies in the market, pouring over data, reading tests, argueing like half-wits (come on, smile) about cars.
Most have and should have, other priorities. It is entirely up to the domestics to change the consumers perception. Half measures presented as “job complete”, won’t cut it. GMs reliability (outside of the mind of fanboys and Mr. Lutz) is a loooooooooong way from the top as a whole. Comparing the last few years of data from VDS and CR it might even be sinking again. Not saying it is, just might be.
Most of their products falls short of competitve in either reliability or design. Or both.
“Import Bigot”, blah, blah, blah…
The PRODUCT is still GMs biggest problem and that is why their retail sales are still slidding.
BTW, Ford’s reliability scores are starting to impress.
Just some thoughts.
Have a lovely weekend.
Bunter
December 14th, 2007 at 5:16 pm
Back when Saturn started they offered two cars, the sedan and the coupe. I believe they only had two engine options as well. How did they turn into the same bloated mess that all other GM brands are?
Loss of bureaucratic independence within GM and prevailing lack of marketing and strategic planning discipline throughout the corporation. Additionally, since Saturn’s creation, the market has further fragmented from the 1980s conditions that instigated its founding, making additional vehicle types advisable to support its proposition. However, those vehicle types have lost the original idea’s differentiation.
Phil
December 15th, 2007 at 12:50 am
My oh my, I leave a few days and miss a whole new round of “import bigot debate 2007″! Phil, I’m not sure how to say this … at least your stories are entertaining. I mean no disrespect, but first it was timid Mr. Mercedes, then it was kids who were unimpressed by a Veyron, and now it’s Mr. and Mrs. Polo. Is the polo-shirt set related to the milquetoast set? I know this is your pet theory, and all 1k+ posts in the original “debate” (if you could call it that) served to do nothing but show that you wouldn’t budge an inch in your domestic (GM, especially) kool-aid stance. In fact, I’m going to go ahead and dub my own ’set’ - the ‘kool-aid set’.
I’m not trying to be rude, but I can’t help but read denial into your posts. To your credit, however, you did say this:
“…a combination of epic misjudgment, persistent arrogance and the inevitability of a more competitive market have conspired to erode market share for 40 years.”
only to follow it with this:
“When spouses are putting a drag on American car purchases because they’re worried about their husband’s street cred at the office, it’s going to take more than a few good cars to win back share.”
Sigh.
But, I do wholeheartedly agree with you on two counts.
A) I don’t find the HD/Lowe’s rental trucks a viable solution for needing a vehicle with greater cargo capacity than my small sedan. “There’s more to home improvement than transporting what you buy from HD back to the house.” How true.
B) “Hard”/”low-grade” interior plastics are nearly ubiquitous. Reviewers harp on interior plastics in some models, but nary a mention pops up for others. Case in point, I’m shopping CUVs, and many Outlander reviews point out ‘hard’ plastics - but very few RAV4 reviews make the same complaint, despite its presence - I’ve spent time in both.
I’ve just taken up a lot of comment space without much relevance to the topic at hand, but I’m not sure what to add to the GM deathwatch discussion - other than every time I read one of these entries I’m even more astounded by the ineptitude of the folks running GM.
December 15th, 2007 at 6:19 am
But the “bigotry”, if it exists in meaningful numbers, is not the problem. It is a result of the PROBLEM. GM is inconsistent.
Bigotry becomes its own problem when an existential threat to the domestic companies removes the luxury of waiting for unmistakable proof of their reform, if you care about their survival for other reasons. For the actionable time horizon, I don’t care about GM’s inconsistencies. Buy what’s good from them and the bad will whither. As I’ve written in other threads, I’ve owned and driven over a dozen Detroit 3 cars over the past 25 years with Lexus-like reliability and consistency. You just have to choose correctly.
I know this is your pet theory,
No, it’s not my “pet theory.” It’s an observation of a *one* real phenomenon imposing drag on the pace of market recognition and reward for what the Detroit 3 are doing right. It’s not the only one. But consumers bear a responsibility in any market where they care about the survival of domestic companies. With thousands writing about the Detroit 3’s mistakes, my voice isn’t needed there. That volume is deafening here, and now overstated.
I’m not trying to be rude, but I can’t help but read denial into your posts.
Denial of what? I haven’t ever denied there have been and remain deficient, uncompetitive American cars. That’s just not the whole story.
served to do nothing but show that you wouldn’t budge an inch in your domestic (GM, especially) kool-aid stance.
Show me what I’ve said that qualifies as “Kool-Aid.” My premise is simple. There’s more to a car purchase than the car; your buying decisions have consequences and are a vote for something beyond product whether you like it or not; good American cars have been continuously available and we have more today than, say, 10 or 15 years ago; the best Detroit 3 cars are competitive, narrowing sufficiently or eliminating meaningful differences with imports. There’s no denial of what’s gone wrong at Ford, GM and Chrysler in that chain.
I’m even more astounded by the ineptitude of the folks running GM.
You cannot in the 21st century recruit the best business executive talent available in the US to live & work in Michigan, nor in a hidebound bureaucratic social and management culture. And Ford flying Mark Fields in from Florida doesn’t qualify as hiring talent where it lives.
Phil
December 15th, 2007 at 11:11 am
You cannot in the 21st century recruit the best business executive talent available in the US to live & work in Michigan, nor in a hidebound bureaucratic social and management culture.
amen
December 15th, 2007 at 12:07 pm
Phil,
You said
“But consumers bear a responsibility in any market where they care about the survival of domestic companies.”
But you see, the average consumer doesn’t care. they care about the price of their car, the resale value and the looks and performance. Consumers have been inundated with “Buy Ammerican, Buy American no matter how crappy, because otherwise you are a terrorist (or trator, or stupid, or contributing to the downfall of the country)” Then those same companies go to China, Mexico, or anywhere else they can get the cheepest parts and labor.
Sure my latest car was built in Japan, the one before that was built in Mexico from German plans with an engine from Argentina, The one before was built in America in a Japanese factory by American workers. The only thing I care about is which one runs better, an which one I can sell for more when it’s time to trade it in. One of those criteria is very subjective, but the other is extremely market controlled.
GM, Ford and Chrysler have as far as I (and many other consumers) are concerned screwed themselves. They produce crappy cars for years, screw their customers, then announce “hey we’ve changed, our cars are great now!” but experience with the companies makes former customers worry, so they say “Buy American! but don’t look where that American car is made.” Then we are told to ignore the reliability and resale and buy the car damn it.
The upshot of all this is that the American car makers will eventually go out of business. There will no longer be an “American” car maker. That is sad, but the economics and lack of foresight by management have forced this. Is there a chance for a turn around? Perhaps, but it will take a lot of change, and at most one of the 3 will probably make it.
Does that suck for the country? Absolutely. Does that suck for the US economy, probably not any more. Is it sad, absolutely. The car industry was practically invented here and we are pissing it away, but you can’t blame the public for making the choices that are the best for their situation.
December 15th, 2007 at 12:49 pm
Phil, can I get some of whatever it is you’re smoking? ‘Cause it must be some kickin’ weed!
You wrote:
“Still, the basic premise of the editorial does hold. GM has an opportunity to become the fastest adapter to market changes and doing so would no doubt help them.”
That made me laugh out loud. Their top car guy hasn’t seen a problem that couldn’t be solved with a transverse V-8 or an “SS” sticker. He’s such an egomaniac that his business cards say “Fighter Pilot.” He’s from the “Because I Say So” school of management and he’s still at GM in spite of what is probably the biggest blunder in recent automtive history, the decision to ignore hybrids until Toyota could get themselves firmly established in the market.
GM is not going to be the fastest adapter to anything except bankruptcy until they get rid of at least one layer of dinosaurs.
Then you wrote:
“Market drag will retard the rate at which such a change would be recognized and rewarded, however and for that both GM and the market of buyers share blame.”
If you’re not drinking the Koo-Aid, you’re surely carrying it for them. Market drag is a fact of life. And the customer is NEVER to blame for low acceptance of product.
Finally, in 1K+ worth of posts last month, you repeatedly declined to provide numbers to back up your assertions that import bigots were of any statistical significant, nor could you point out where Detroit is actually “competitive” as you frequently asserted. These are not insignificant omissions, they go to the core of your argument.
If you’d like to “discuss” this further, I suggest we meet over in “In Defense of…” and drive it to 2K posts.
December 15th, 2007 at 3:28 pm
You said
“But consumers bear a responsibility in any market where they care about the survival of domestic companies.”
But you see, the average consumer doesn’t care. they care about the price of their car, the resale value and the looks and performance. Consumers have been inundated with “Buy Ammerican, Buy American no matter how crappy, because otherwise you are a terrorist (or trator, or stupid, or contributing to the downfall of the country)” Then those same companies go to China, Mexico, or anywhere else they can get the cheapest parts and labor.
Obviously, not enough consumers care beyond the price & attributes of the car. I made the point amply elsewhere that caring about a larger context is in American consumers’ self-interest, but too many just can’t or don’t see it. This is emphatically *not* a “Buy-American-no-matter-how-crappy” proposition. It’s a “Buy-Competitive-American” proposition and consider the effects of your purchase decisions. Bad product should not be rewarded.
The upshot of all this is that the American car makers will eventually go out of business. There will no longer be an “American” car maker. That is sad, but the economics and lack of foresight by management have forced this.
No, management hasn’t “forced” this. They may have instigated the long crisis, but consumers interested in the configuration of their own economy have the option to keep these companies in the game. You can cede your influence and view yourself as a passive spectator or you can make yourself a contributor.
The car industry was practically invented here and we are pissing it away, but you can’t blame the public for making the choices that are the best for their situation.
I can when choices that would be equally suitable for their situation are available domestically and ignored.
You wrote:
“Still, the basic premise of the editorial does hold. GM has an opportunity to become the fastest adapter to market changes and doing so would no doubt help them.”
That made me laugh out loud. Their top car guy hasn’t seen a problem that couldn’t be solved with a transverse V-8 or an “SS” sticker. He’s such an egomaniac that his business cards say “Fighter Pilot.” He’s from the “Because I Say So” school of management and he’s still at GM in spite of what is probably the biggest blunder in recent automtive history, the decision to ignore hybrids until Toyota could get themselves firmly established in the market.
Your rejoinder is a non-sequitur. I wrote “GM has an opportunity….” It does. It may not grab it.
However, on your points about Bob Lutz: what you say is true insofar as they also don’t exclusively define the man nor his contribution to success and failure at GM. I don’t know him except through the lens of media. The media stupidly feeds the ego of guys like Lutz by building disproportionate hope around them. GM needs a fair dose of “because I say so” management to cut through the ass-covering committee bureaucracy and the product-killing power of the small-minded finance folks permeating influence throughout that company. Sometimes that style of management will be wrong. Still, don’t you have to admit that there has been more positive product change at GM since Lutz arrived than in any comparable period of the last 30 years? Who gets the credit? Maybe it’s not Lutz. Is it Wagner? Is it someone unsung Lutz has empowered? Alot of people?
If you’re not drinking the Koo-Aid, you’re surely carrying it for them. Market drag is a fact of life. And the customer is NEVER to blame for low acceptance of product.
We differ here. I’m not endorsing of America’s prevailing “It’s-not-my-fault” social outlook. Markets are complex systems with economic consequences. You can’t unlink the relationships between major production and consuming sectors, economics, social consequence, politics and the individual’s ability to shape his world. We certainly have the *right* to maintain an illusion that a US without a domestic auto industry just happened and buying a Camry instead of a Malibu or a Tundra instead of a Silverado or a Mercedes instead of a Cadillac had nothing to do with it. We want out companies to be responsive? OK. Now when they are, I want consumers to be responsive too.
Finally, in 1K+ worth of posts last month, you repeatedly declined to provide numbers to back up your assertions that import bigots were of any statistical significant, nor could you point out where Detroit is actually “competitive” as you frequently asserted. These are not insignificant omissions, they go to the core of your argument.
I’ve never seen an independent third party research this explicitly. So in that thread you saw a lot of back-and-forth of statistics that triangulate to conclusions that support each side. But I don’t need a third-party study. The evidence is all around me every day, no matter what city I travel to or what economic strata I listen and observe in. Moreover, bigotry is the aim of brand marketing, so bigotry is an ingrained buyer behavior even when it isn’t pernicious in the form of American’s being unresponsive to improved products from their own companies.
I could point out which Detroit 3 products I think are competitive, and it wouldn’t be too hard to infer what that list might look like in my aggregate posts there. I didn’t, because what I think is competitive is unimportant. I pointed out that a neighbor came to the conclusion that a Cobalt is a better car than a Civic. Everyone has their own idea. The only thing that matters to me is that people give Detroit 3 cars equal, objective consideration and evaluation while deciding how they’ll spend. I’m not interested in arguing that a Malibu is better than a Fusion or Taurus if a shopper thinks the opposite because I’m neutral about who gets that business.
We have a near-term existential threat to the Detroit 3. Some people here on TTAC would be happy to see them die. Others wish for their success. Most seem to think they’re stupid and doomed. Americans as a whole can ensure these companies get back on their feet *if they want to*. There are two phases to fixing this industry as an American concern. If we get through the immediate threat, which is at least as much up to consumers as it is management, then revamping the American auto industry requires that its management move out of Michigan to a location with a more global outlook and more favorable environment for recruiting talent. And that’s just a start. Citing Apple’s daring and successful thrust into music, I love Andy Grove’s appeal to Jeffrey Immelt for GE to build an electric car.
Phil
December 15th, 2007 at 5:44 pm
It’s deja vu all over again! Phil contributes a thoughtful and well-reasoned post, and it triggers a visceral response from those who feel they–or their views–were maligned.
BTW, I live with an import bigot, and it’s my own fault. When my wife and I got married, she thought a Chevy was the only car to have. And I have to admit, that first Impala was a nice ride. (Though it had a host of quality-control failures.) Later we got to buying Japanese sedans, and she became convinced those cars are better built and have superior engineering. It’d be tough now to convince her a LaCrosse or a Fusion is as reliable or nice to drive.
December 15th, 2007 at 8:40 pm
Phil contributes a thoughtful and well-reasoned post…
Forgive me, but I’m not seeing how these fantastical anecdotes and a dearth of factual evidence to support one’s claims can be construed as being either “thoughtful” or “well reasoned.” Repeating the same unsubstantiated argument with vigor and frequency does not prove it.
Nor is an anecdote, real or imagined, a substitute for data. An anecdote that can be used to illustrate a point otherwise proven or supported by data can be useful; an anecdote used to defend an unsupported argument utterly lacking in factual basis is not.
I’m fearing that Mr. Ressler is becoming a one-trick “bigotry” pony, riding a horse that no one else who doesn’t loiter at the GM Inside News forum is able to see. There is an abundance of data posted on this site and elsewhere that shows why the Detroit automakers are losing share. Those have everything to do with consumer product preferences and requirements not being met, and nothing to do with the Klan. Kixstart said it best: “And the customer is NEVER to blame for low acceptance of product.”
December 15th, 2007 at 8:58 pm
“There are two phases to fixing this industry as an American concern. If we get through the immediate threat, which is at least as much up to consumers as it is management, then revamping the American auto industry requires that its management move out of Michigan to a location with a more global outlook and more favorable environment for recruiting talent. And that’s just a start. Citing Apple’s daring and successful thrust into music, I love Andy Grove’s appeal to Jeffrey Immelt for GE to build an electric car.”
I’m not sure about either of those points.
I live in MI, so I’m familiar with the crappy weather. But people have always made a decent life here - at least those with money. Bloomfield Hills really isn’t such a bad place to live. If the state itself were the problem, MI wouldn’t have any businesses at all - everything would be located in Hawaii.
Rather than GE building a car, they should just concentrate on an electric motor specifically desinged for an electric car. A team approach between GM and GE would make sense.
December 15th, 2007 at 9:01 pm
GM should never have dumped Oldsmobile. Oldsmobile had a lot of nice, large sedans. Saturn serves no purpose and should be dumped, as they did to Geo.
The new Chevy Malibu tv ads are silly. All they say is “a car you can’t ignore” without showing anything about it or why we should buy. Because chevy might have built a car that doesn’t suck, we’re supposed to be excited by it?
I can and am ignoring it GM. I’m buying a Mercury Grand Marquis. A REAL car!
December 15th, 2007 at 10:23 pm
You know, I found it humorous when one of the posters here was trying to deny that there was any import bigotry and then made the statement that GM builds some cars for “rednecks”. That is a bigoted term because it is a perjorative term like “nigger” or “kike”. but while the latter two are acknowledged as being bigoted the former is considered to be “ok”.
We are all bigoted to some degree. So I believe Phil, because he has observed it first hand. The real argument isn’t that it exists, but how widespread it is and how much damage does it do. Some will say a lot and some will say it’s negligible. That’s all well and good. But don’t deny it doesn’t exist when you can’t even refer to fellow citizens who live in rural areas without a discriminating label.
December 15th, 2007 at 11:42 pm
Forgive me, but I’m not seeing how these fantastical anecdotes and a dearth of factual evidence to support one’s claims can be construed as being either “thoughtful” or “well reasoned.” Repeating the same unsubstantiated argument with vigor and frequency does not prove it.
The anecdotes you refuse to believe are real are factual evidence and are cited as anecdotes because they are useful for making real in writing what is in fact a significant problem. I don’t think anyone objective who has been through a previously-mentioned prior thread will agree my view is unsubstantiated. So we’re going to disagree on that and it’s fine with me.
I’m fearing that Mr. Ressler is becoming a one-trick “bigotry” pony, riding a horse that no one else who doesn’t loiter at the GM Inside News forum is able to see. There is an abundance of data posted on this site and elsewhere that shows why the Detroit automakers are losing share. Those have everything to do with consumer product preferences and requirements not being met, and nothing to do with the Klan. Kixstart said it best: “And the customer is NEVER to blame for low acceptance of product.”
I am sure also that anyone who has followed the full scope of my posts here will agree that I have more than a single opinion to voice. The data that “shows why the Detroit automarkers are losing share” is mostly valid but also an incomplete explanation of why the market is slow to reward change. In any case, I don’t spend my time contributing further to the argument that they dug their own hole because there is nothing further to be said. Again, true but incomplete. While the Detroit 3 were digging their own grave, I was still able to buy and drive their products with nothing more than routine maintenance as an expense most of the time spanning 1982 through today. And I am far from the only one. The Detroit 3 put something near 250,000,000 vehicles into our market during that time. Lots of people did just fine owning and driving the better products among them. When I take the time to write here, I’m alert to what’s missing. Hence…..:
Those have everything to do with consumer product preferences and requirements not being met, and nothing to do with the Klan.
Product is only part of the story but you’re right, the Ku Klux Klan is completely out of the picture.
“And the customer is NEVER to blame for low acceptance of product.”
Said customer is responsible when there is something larger at stake and success is impeded by irrational behavior. Again, we’ll probably permanently disagree on this, and that’s fine with me.
I live in MI, so I’m familiar with the crappy weather. But people have always made a decent life here - at least those with money. Bloomfield Hills really isn’t such a bad place to live. If the state itself were the problem, MI wouldn’t have any businesses at all - everything would be located in Hawaii.
Weather is only a minority factor but it’s significant. When the auto industry started in the US, the Michigan location was set by the proximity to raw materials, installed transportation (including the great lakes) and proximity to the bulk of the market population. Culturally, the country was northeast and upper-midwest oriented and conservative. Business talent tended to stay close to where it grew up and was trained.
Today, we have a national transportation and distribution system, and the west coast is woven into the Pacific economic sphere. The country is no longer dominated by trends and life in the northeast and upper midwest. California is a major world economic and talent engine all by itself. I grew up in a four-seasons state and know Michigan’s weather. Detroit is off the grid. You can have a nice life in Bloomfield Hills or Grosse Point, and many other areas of Michigan, but the best executive talent has many more options now. Michigan isn’t a competitive magnet. In fact, the Michigan location of the auto business deters some people from even considering the industry, even if it interests them. They think about how career progress leads to Detroit and some say “no.” I’ll do something else.
Hawaii only has weather as an advantage, nothing else, and hence its economy is always a little worse than the mainland’s. But HQing the Detroit 3 in California, New York metro, Boston — hell, even Chicago — or decentralizing operations so CEO and the business side are in an area with a more global outlook, roads that require steering and, and the cultural attributes top executive talent seeks, and you’ll see the conduct of these companies improve. Of course, the boards have to be fixed too. They’re as much of a problem as the onsite management.
Rather than GE building a car, they should just concentrate on an electric motor specifically desinged for an electric car. A team approach between GM and GE would make sense.
That’s the traditional way to think about it, but it misses Andy Grove’s point. Apple took a computing, design and software-driven / UI-intensive approach to its rethink of personal music players. Sony, Matsushita, Toshiba, et al missed the integrated play completely. And as gadget makers they couldn’t imagine the contribution of software and i-Tunes. A rethink of how to innovate the automobile for dramatic change and keep the wealth accumulation in the US is more likely to come from a hugely-resourced company like General Electric that has many of the requisite skills and assets pertinent to the problem.
That said, alone among our companies, General Motors rethought the car in a GE manner with the Hy-Wire concept that puts all the electric running gear in a skateboard platform, on which a variety of bodies can be mounted with control and service connections through a standard interface. The Volt is cool and I hope they make 2010, but HyWire would be a much bigger reset that would put GM’s foes back on their heels. They just have to segregate it from its fuel cell dream.
The new Chevy Malibu tv ads are silly. All they say is “a car you can’t ignore” without showing anything about it or why we should buy. Because chevy might have built a car that doesn’t suck, we’re supposed to be excited by it?
Yup, Malibu’s messaging is more evidence that the real crisis in Detroit isn’t product. It’s marketing. They pretty much suck at it, and that’s a looooooooong fall from 1965.
Phil
December 16th, 2007 at 12:58 am
You’re all in for a treat - I was able to observe the kool-aid set first-hand at the local auto show today.
At the Nissan stand, a typical 40-something-trying-to-be-20-something (donning a rugby shirt with the collar popped and distressed jeans no self-respecting middle-aged man should don) was looking over a Nissan Altima. His disinterested wife, sporting what appeared to be a seriously botoxed visage, kept looking at her watch and gave longing glances to the GM displays. I observed their conversation regarding the new Altima they perused.
Mr. Kool-Aid: “You know, honey, I think I could actually see myself driving a sedan like this…”
Mrs. Kool-Aid: “Like this” she said in an incredulous tone.
Mr. Kool-Aid: “Well, I know…it isn’t what I’d typically be interested in”
Mrs. Kool-Aid: “I should think not! You do realize this is a…a…” lowing her voice to a near whisper, “…Japanese car, honey.”
Mr. Kool-Aid: “Well, it isn’t entirely Japanese, you know, this one was built in Smyrna, Tennessee…”
Mrs. Kool-Aid: “That’s not the point. Surely you realize there’s still less economic leverage in a transplanted import than a truly American car.”
Mr. Kool-Aid: “Honey - I don’t mean to insult your intelligence, but where did you read that? Just 2 hours ago I could barely drag you to this car show and now suddenly you’re almost too interested.”
Mrs. Kool-Aid: “Never mind that…perhaps I like my automotive blogs a little too much. Either way, how are you going to face your coworkers when they see you driving this?”
Mr. Kool-Aid: “True, true. I might have to change jobs. We might have to move, in fact. I’m not even sure I could look my father in the face anymore.”
Mrs. Kool-Aid: “Think about the kids, honey. They’d have to change schools and probably couldn’t make any new friends when the kids see you pull up and drop them off in some Nissan. Let’s go look at the GM lineups…the new Aura received all sorts of awards only to become yet another lot-queen, and it’s cousin [the G6] has had much the same disappointing fate. I just do wish you’d come to your senses…”
“…and then there’s the new Malibu. Sure, it lacks a lot of features on this Altima, including Xenon headlamps, satellite radio, navigation, dual zone climate control, rear seat arm-rest, has less horsepower, has a smaller interior, and gets worse gas mileage - but HONEY, I’m imploring you, get a hold of your self and check it out - it’s the car you can’t ignore.”
“…you said yourself that despite all the issues you had with your first-gen Malibu that you didn’t believe all the reliability reports…and it really is our duty to ensure the turnaround that is Chevy’s American Revolution occurs…”
Mr. Kool-Aid then slumps out of the Altima and begrudgingly heads to the Chevy display - trying to muster some enthusiasm about a car that he’s truly less interested in now that he’s seen the stiff competition.
Funny enough, they didn’t find it a bit strange that I was in the backseat of the Altima during the entire 5 minute conversation - with a pen and pad, no less - recording every word verbatim. But such an encounter with the Kool-Aid set could not go unrecorded.
December 16th, 2007 at 5:38 am
lol.
December 16th, 2007 at 10:51 am
ShermanLin + PCH101 “Believe it or not people who buy Camrys actually like them”
They also drink some of Macca’s Kool-Aid—only this time the Kool-Aid is served by Toyota.
Camry stood for one thing and one thing only—-reliability. They no longer own the reliability space on a “real” basis and importantly dents are being made on a “perceptual” basis. Think the latest and greatest Tundra recall doesn’t hurt the Camry ? Think again.
Simply—the market will speak—and the inferior, boring, ugly, plastic ridden, grandpa like travesty on wheels called the Camry will suffer.
There are too many other “reliable” alternatives out there….both foreign and domestic !
Not saying there should be a Camry Deathwatch or anything—but I do predict they see a RETAIL sales slide in 2008 and a big increase in fleet.
December 16th, 2007 at 11:07 am
umterp85: while I agree the Camry is setting itself up for the automotive equivalent of a mudslide, the decrease in retail sales isn’t gonna happen in 2008. It took the Taurus 5-ish years to go from #1 to the fleet queen fallacy…and the Camry is no different.
And if Toyota is smart enough to notice the drop in residuals, angry faces at Consumer Reports, GM-grade plastics, etc plaguing the current model, it won’t be long before they scale back (just a little) and pull a Honda Accord out of their hat.
But if Toyota is as greedy as Detroit, its still gonna take a few years before the you-know-what hits the fan.
December 16th, 2007 at 1:37 pm
Sajeev: You may be correct—but I would argue times are different now than when the Taurus slide began….thus my 2008 prediction on the Camry.