The Associated Press called it: GM is set to enter popular parlance as “Government Motors.” When the automaker files for Chapter 11, the nickname will stick, as the debate over GM’s future centers on whether or not the United States government should own a commercial enterprise. To which the only possible answer is no. It was no back when President Bush over-ruled Congress and authorized the first multi-billion dollar “loan.” It’s no now, as the feds prepare to stump-up another $20 billion dollars to keep GM in business. There are lots of reasons why “new” GM is a bad idea. But here’s the most important impediment: Government Motors doesn’t have the vehicles it needs to survive.
Let’s assume “good” GM lowers its cost base to transplant levels and single-out the models that could give the post-C11 automaker a fighting chance. We’ll combine objective information (last month’s sales data) and some subjective analysis (the enthusiast’s perspective).
Although we’ve long argued that Chevrolet and Cadillac are the only GM brands worth saving, that’s not how Government Motors will roll. So we need to identify potential money spinners lingering within Buick, Cadillac, Chevrolet and GMC.
Buick is a lost cause. The “take a look at me now” brand stands for nothing, save God’s waiting room on wheels. In April, the LaCrosse and Lucerne sedans combined generated 1481 sales. That’s more than the Enclave (5,194 vs. 3,731), but less than Toyota Tacoma sales (8,925 vs. 9,027). I’m no fan of the Enclave’s exterior, but we’ve got to keep something. The Enclave stays.
There’s no nice way to put this: Cadillac is another dead brand walking. Last month, the “standard of the world” also accounted or less sales than Ye Olde ToMoCo Taco. Sales of all eight Caddy models combined clocked-in at just 8,337 units. Caddy has some new models in the pipeline, but c’mon. CTS Sportswagon? SRX replacement? While waiting for a flagship, the CTS is the only Cadillac vehicle worth saving, in terms of product excellence and sales (3,876).
GM’s volume brand is looking decidedly lackluster. The Impala topped Chevy’s sales chart in April at 17,532 units. The Malibu and Cobalt are next up, at 14,665 and 10,627 sales respectively. So, despite the fact that the Impala is a low-profit fleet queen and the Cobalt’s a POS, we’ll keep the old girl, the new ‘Bu and the crap ‘Balt. We’ll also hang onto the Camaro. Corvette? If you must. Volt? Cruze? Equinox? More pie-in-the-sky from America’s master BS baker.
Chevy trucks are still where the money is. Incentives be damned; 26,437 Silverado pickup trucks moved off the lots in April. I’m also liking the Traverse (8,204). By [literally] the same token, GMC should keep the badge-engineered Sierra (8,273) and Acadia (4,764), and stay the course with the Tahoe/Suburban twins (12,586 combined).
And there you have it: one Buick, one Cadillac, five Chevy cars, two Chevy trucks and three GMC trucks. Your list may differ here and there, but I reckon these are the eleven vehicles upon which taxpayers will risk at least $40 billion dollars. Which would be OK, if that was the long and short of it. But it isn’t. In fact, it can’t be.
As the New York Times recently asserted (welcome!), we can blame GM’s sclerotic corporate culture for their abject failure to create a complete line of compelling/profitable vehicles. The idea that the United States government will reform GM’s way of being and reverse the curse is completely preposterous. It’s like asking a cocaine dealer to sponsor a crack addict.
Initially, the Chinese walls separating Government Motors’ management from its political masters will prevent excessive tinkering. But there’s no way GM can insulate itself from “undue” political influence. Not when the feds are both the automaker’s controlling stockholder AND its main lender. And certainly not when there are so many GM “stakeholders” ready, willing and able to play political hardball with GM’s new owners.
Why wouldn’t they? The bottom line is that there won’t be a bottom line. The Obama administration may genuinely want to create and then sell off a profitable GM but it’s under no obligation to do so. To wit: there’s no deadline for returning taxpayer’s money. Even if a reasonable turnaround strategy emerges—complete with performance-based reality checks—the new management team is destined to fall afoul of institutional apathy. I mean, we all know how many government-sponsored projects come in on time and/or under budget . . .
Think of it this way: the above list of cars GM needs to keep AND cull to survive presumes that Government Motors’ new overlords will ignore the blowback from closing factories in any given country, state or congressional district. That’s simply not realistic. If the survival of federally-funded weapons programs depend on their sponsors’ political pull as much the systems’ efficacy, why would we expect anything less (or more) from GM’s lineup?
To paraphrase Lowell George, GM’s been down—but not like this before.
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But here’s the most important impediment: Government Motors doesn’t have the vehicles it needs to survive.
Oh I disagree. GM does have some umm…unique product that could go away without much of a fuss…but the future looks very bright.
Mainly, I think, in no small part to the 2010 Equinox and it’s platform mates. The Equinox and SRX look fantastic inside and out and with an official 32 MPG highway…1 MPG BETTER than the HYBRID Escape, they seem to be slam dunks.
Add to that the new Cruze and the HCCI engines, and GM…as in GENERAL Motors…has a very bright future…but not without C11.
The U. S. Treasury’s share of Gummint Motors will be 70%. How do they plan eventually to unload that? The choices are (1) IPO, (2) sale to a private equity group (and we already know how well that works), or (3) gradually sell shares to the public in dribs and drabs so as not to cause the share price to plummet.
None of these scenarios look feasible. Or am I missing something?
P71_CrownVic
The future ALWAYS looks bright for GM. Except that it isn’t. And wasn’t.
You’re crazy. GM just doesn’t have the reputation for quality to sell vehicles. Their newest couple of cars are nice enough. The CUVs that are coming have leading MPG.
This comes at a time when Toyota and Lexus are especially vulnerable because their current products don’t have the quality or affordility as they once had, and their management is being shook up. Jim Press left earlier, probably for good reason.
And besides, GM pays its employees alot more than Toyota or Honda or Nissan, even when it couldn’t really afford to. GM supports a strong middle-class. Even though it’s like a Dad who’s broke but gives his kids huge allowances anyways by forcing Grandpa to cough up lots of cash. Idk if my analogy makes sense to you!
Overall, it sucks we’re going to have a pay a crap load of money for a crappy company, but it’s not as bad as it could be.
P71_CronwnVic,
The HCCI engine is still 5 years away from commercialization. Just like it was 5 years ago. I’d swear I read about that engine in PopSci back in the late ’60’s.
GM’s flagship advanced tech project, the Volt, is a Bad Idea with a capital Bad. It’s not leapfrogging the market to produce a mass-market car in niche quantities at niche pricing. Gas-electric drivetrains are on the road. THe days for a toe in the water are over, so GM needs to build something cost-effective and in big volume.
One of their chief problems with the Volt is that, even if it’s a success, they don’t really own any intellectual property worth having. The key tech is the battery, which they buy from someone else.
GM does have some edge elsewhere but it seems very limited.
Toyota does have DI engines but doesn’t seem to have moved them out of Lexus space yet… partly because Toyota’s implementation is both port-and-DI, I guess, and it’s expensive. Is it really good? If it is, Toyota’s pretty good at making the complex cheap.
Or they intend to use hybrid tech more widely. Against that, the benefits of DI are marginal.
Toyota also doesn’t seem to be moving on VCM. GM has it but, if I recall correctly, it’s married to pushrod engines. DOHC rules – at least in the minds of consumers, if not at NASCAR tracks. It’s hard to envision a marketing campaign built around technicallly advanced pushrod motors but GM can try it, I suppose.
Even with these slim edges, what does the future hold? Toyota can still build a car in a high-wage country and sell it for $10.5K without breaking a sweat. A car that everybody said they couldn’t sell profitably – the Prius – they sell profitably. GM can’t build a hybrid at anything like the cost Toyota has managed.
It looks to me like Toyota’s operations are just plain better.
Toyota has good customer satisfaction, retention and a better reputation. They’ll be setting benchmarks (For “Toyota” here, you can usually substitute “Honda,” if you like, I think).
Even with the paring down of GM, they’ll almost certainly need to move a lot of cars. As it is, they’ll lose some economies of scale.
Is the workforce going to demoralized? Resentful? Beaten? Reassured? Invigorated? Ready?
It seems to me that GM’s cash flow won’t improve much. We talk about legacy costs a lot but GM wasn’t really paying them, anyway, if I understand aright, just pushing them out to the future. This hurt profit statements but I don’t think it mattered to cash flow. The way they build cars and how much it costs them to do so isn’t going to change much, nor is the corporate culture.
There had to be a whole lot of yes-men involved in the decisions to bring back the Camaro, build a $55K hybrid for people that don’t care about fuel economy, build a hybrid that loses to the Prius on price but can’t compete on performance (mpg), rebadge the Aveo as the G3 and build the Epsilon three times in an attempt to get it right. Did they all get the boot?
If not, brace yourself for more of the same.
romanjetfighter: “Overall, it sucks we’re going to have a pay a crap load of money for a crappy company, but it’s not as bad as it could be.”
Did you read Steven Lang’s article a few days back about what we could do with that money, instead?
Even if everything said about the Equinox platform were true, it still doesn’t give GM a future. All it does is give it one more basic model, in a market segment that’s not all that popular at the moment.
The real issue, however, is what they’re going to do in the further future: if GM is supposed to turn a profit down the line, it’s going to need to be investing now in developing the cars it will build and sell then.
Nobody that’s talking about bailing out GM is discussing how much money it is going to take to both finance the development of new products AND keep the company alive until those new products come to market. Allow for a few misses in marketing, due to changes in consumer preferences during the time it takes to develop those new models and you have . . .
a huge investment, with a lot of long-shots for possible pay-offs.
That would be a pretty unlikely scenario for those who actually understand the car business. For the government – no chance.
Despite all the Lutzian ShaBangGlitz!; GM’s product portfolio remains a passel of also-rans.
At least Chrysler sort of has a post-apocalyptic product plan: Keep the Ram, minivan and core Jeeps while rebuilding the car lineup using Fiat bones.
Where is GM going to get the talent to build first class next gen cars? GM’s global design partners have all either hit the exits already or are about to. Oh, wait, except for GM-China.
You know what is really weird? When the dust settles, GM-China will be an industrial joint venture between the Chinese government and the US government.
A dedicated hybrid to compete with the Insight and Prius would be nice.
I think the new Lacrosse is going to show if Buick is a viable brand going in the future. It looks to be a very nice car and fits into the brand image that GM wants for Buick. However, will it sell? Or, are we going to find out that most people won’t touch it, and the traditional Buick customers would rather own a 3800-powered W-body?
As a taxpayer and therefore an investor in GM I can now demand that the company I have a stake in to take a line from a Rage Against the Machine song and tell the Obama administration, “Fuck you, I won’t do what you tell me”. (Sorry, couldn’t resist the irony of quoting a band with socialist leanings in referrence to a once capitalist company.) If GM would tell the government to stick CAFE regs up their ass where they belong, stick to what they’re best at (muscle cars, trucks, SUVs), sell those vehicles at a price that would offset future gas prices/taxes, and then market the hell out of the fact that they’re the only company with the balls to say, “We’d rather make cars people want as opposed to what the government tells us to” they’d be able to differntiate themselves from the rest of the pack.
It’d be like the time Marilyn Manson first came to my area. Originally only 600 tickets were sold, but after people started bitching, whining, and demanding he be banned from the city the stadium was sold out.
GM is at last making some very good cars. Among too many also-rans. But too many models, too late with the good ones. GM should cut out all the fat. And it will- one way or the other. All they need is ONE model for EACH segment- not fifteen.
On the TV news tonight (May 27):
Saudi Arabia wants oil at $80 a barrel. It is about $63 now.
Recluse, I understand your angst. But the hand that gives is above the hand that receives. GM at the moment is in no position to make any demands whatsoever.
If GM were as full of macho bullshit as you’d love to see…then they would have done just what you say. But they haven’t. If they wanted to sell only trucks and Camaros, then why haven’t they done so? Just because CAFE is on the books doesn’t prevent them from doing so. If there are fines involved with such an approach…they can simply pass them along to the customer.
IE, they could have taken the market approach.
Instead they have gone on a begging binge the likes of which we’ve never seen before.
No, it’s “management’s” fault they wished to sell trucks to “subsidize” their money-losing crap (ie, Cobalts, etc.).
This socialization of the auto-industry is beyond disgusting. But in the case of GM and Chrysler- be careful what you ask for!!! You want a fucking handout- well by God you’ve got one.
“reclusive_in_nature” posted :If GM would tell the government to stick CAFE regs up their ass where they belong, stick to what they’re best at (muscle cars, trucks, SUVs), sell those vehicles at a price that would offset future gas prices/taxes, and then market the hell out of the fact that they’re the only company with the balls to say, “We’d rather make cars people want as opposed to what the government tells us to” they’d be able to differentiate themselves from the rest of the pack”
Kinda hard to bite the hand that feeds you, dontcha think? And when did they start to make cars that people want?
a huge investment, with a lot of long-shots for possible pay-offs.
GM will likely turn into American Leyland, but it’s important to have perspective. American Leyland during good times would be a poor choice, but during terrible times, it’s not so bad in comparison to sudden mass unemployment of a large econ sector.
Remember to place the blame properly on under-regulated bubble-inducing financial products and the laisse faire attitude that allowed them (and more importantly the bastards who suckered you into believing it’s all about “freedom”) next time you’re reminded of how much American Leyland sucks.
It’s just mindblowing that days before GM finally goes into BK that the apologists for the company just keep going. Really, what do these folks know about GM, it’s lack of leadership and lack of product pipeline that the rest of the world doesn’t?
I don’t know. I think having Malibu and Impala at the same price/size is a mistake. Of course, keeping GMC is a mistake too.
The thing few want to talk about is oil prices. AS long as we keep printing money to keep the economy afloat, the dollar is going to weaken. So the countries that provide oil for us are going to want a lot more of those green pieces of paper for it. Not to mention that supplies are dwindling. Mexico will be out soon. The North Sea is drained. Alaska running out. And Israel seems intent of attacking Iran. Those trucks that are the only source of profit for GM will not sell if gas is $5 or $6(or more) a gallon. The Volt isn’t a bad idea. It just costs twice as much as it should.
GM needs a GOOD small car. The size of the wretched AVEO. Just good quality, design, warranty, and reliability. It can’t be that hard to just copy a Honda Fit, can it?
They also could use a good cheap small pickup. For both commericial use, and for young people who actually like that sort of thing.
Corvette…it would break my heart to see it go. But with oil prices rising and new mileage requirements, I don’t think it would survive.
There also needs to be a small sporty car. Under $20000. They need to attract a new generation of buyers that would never consider a GM product.
Caddy needs something. Fast. Something like Lexus Ls600, but not, you know, boring. A high tech flagship. But, not $100000. I have seen a lot of the CTS wagons around lately, and I liked them.
I really think the US government should not be in the car business. I really don’t think any of this is legal or constitutional. However, I live in Warren. All of this directly affects me and mine. There has to be some hope.
http://online.wsj.com/article/SB124348182921461501.html?mod=googlenews_wsj
There goes Visteon.
It’s pretty easy to bite the hand that’s feeding you when the other hand’s castrating you. The two best selling vehicles this year have been pickups (F-150 and Silverado) so there is a market for what they sell.
GM makes plenty of vehicles people want (Corvette, CTS-V, Cobalt SS, and of course the pickups). The problem is the cost of those types of vehicles need to be low enough to negate expenses associated with size and power. A correctly executed Chapter 11 would make this much easier to accomplish.
Try selling the average American a 25K+ tiny car (with average interior) that gets 40MPG, or a 10K medium size car (with average interior) capable of doing 0-60 in about 5 seconds and it’d be a safe bet where that guy’s hard earned money is going to go towards.
People can (and a lot of posters here do) go on a self righteous rant about how much better/enlightened/responsible they are, and how stupid they think the average American is, but it is what it is. There’s no substitute for raw horsepower, or any type of power for that matter. If it can be had on the cheap, people will want it. Always have always will.
GM should capitalize on filling the “power” vaccuum that’ll be left after CAFE finishes pussifying the rest of the auto industry. One of the fundamentals of business is being able to offer customers something desirable that no one else can/is at a price that can counteract perceived liability. GM has the means (or will after bankruptcy), it just doesn’t have the balls.
Notice I said “cars”, and not “trucks”? Are the cars you mentioned bread and butter vehicles that account for much of GM’s bottom line?
“Try selling the average American a 25K+ tiny car (with average interior) that gets 40MPG, or a 10K medium size car (with average interior) capable of doing 0-60 in about 5 seconds and it’d be a safe bet where that guy’s hard earned money is going to go towards.”
Camry/Accord/Altima
Game over.
I don’t know…I’ve been watching Buick and China and I can’t help but think that the ex-rulers of the universe will be delighted to be rid of the responsibilities of GM in the US of A and leave it to the Japanese/Koreans/Germans. A small lean company underwritten by the China/Asia banking sector sounds about right and the rest of the world be damned.
I actually could imagine a plan that goes back close to a decade leading to this outcome.
Paranoid? Maybe. The Art of War? In the pocket.
1600mkII…
They think in Dynasty’s, not just little 4 year election terms!! I am sure their hoarding of the US$ over the last 20 years is all part of a bigger economic(-war) plan that is already unfolding…
A plan that at some point includes dumping all of those trillions of treasury bonds on the market to massively devalue the dollar and help implement a new global currency….supported perhaps by the fact that they have quietly increased their gold reserves by 75% in the last 12 months!!
GM’s LMK diesel will be a big winner. It can fit in vehicles as a direct replacement for the Chevy small block.
GM, through Chapter 11, will be able to beat Ford on cost. Cobalts will look a lot better to people if they are priced $3,000 lower.
My guess is GM makes it, but with fewer models, priced lower.
Notice you previously posted “when did they start to make cars that people want” and not when did they start to make “bread and butter vehicles that account for much of GM’s bottom line” that people want? While we’re quering noticing abilities, did you notice that the point of my post was that those vehicles should BE the bread and butter vehicles?
As for Camry/Accord/Altima and “Game Over” I stand by my argument of which vehicle the Average American would choose especially if GM undercut those models in price. Sadly, none of the domestics seem to be defiant enough to settle this one for us. I think “Continue?” with an elapsing time to insert more quarters (cajones) summarizes GM’s situation best.
Even if GM managed to build a good car and offer it at a good price, there are a lot of people, like me, who would not buy it, as a protest to the government takeover of a private business. I’ll buy a Ford. If Obama takes over Ford, I will buy foreign, or used. It’s one small, easy way to protest.
Alcibiades,
The average American like me won’t give a shit when it comes to paying out our hard earned dollars. If I can buy a Cobalt for two grand less than a Focus, I will buy the Cobalt. Same for Silverado over an F150. Ford has too much debt to compete with a debt free post chapter 11 GM.
Plus or minus $2000 has never been a deciding factor in the purchase of a new vehicle for me or anyone else I’ve ever known, such is typically under 10% difference (i.e. +/- $10/mo for the average schmoe), not significant. Rather, prospective customers look for distinguishing characteristics, i.e. more comfortable seats, better handling, better mileage, better reliability, better resell value, 4 doors vs. 2, etc. Marketing vehicles based on a small discount versus a “better” (perception is reality) competitor has always failed GM, and will continue to do so just as it has for the last 25 years.
Matt51,
That two grand less for the Cobalt will be paid for by our kids and grandkids, or it will just be one hell of a default.
Why don’t all the intellects who get off on belittling the US workers and other workers realize that the overpayed auto worker spends most of his money paying for your over priced service or product. If all the people who worked with their hands made 8 dollars an hour would anyone be abe to afford the product or service you you are providing? When you get everyone elses salary or product cost adjusted to where you think is appropriate do you plan on adjusting yours accordingly? I know many union workers and don’t consider their lifestyles extravagant for their work efforts. I’d love to witness what all the winers’ work days involve and see how loyal and unselfish they are. I’d like to know how much they earn and know how much they believe they should earn. Going to school for 4 years at Daddies’ expense and partying much of that time doesn’t earn you any special status in my eyes. Go buy an import and that worker in Japan, Korea, Mexico and China will surely spend his money on your product.
As enthusiasts we focus too much on reality at times. Have you seen the crap that people buy? Most people don’t make rational buying decisions, they buy based on perception of a brand, vague things they heard from their friends, styling and hype. There are all kinds of cars that are rubbish but are big hits anyway.
The problem for GM is that they’re even *worse* off in the world of perception than in the objective quality of their products. They have several OK to good products, but the whole brand is associated with low quality, poor reliability, bad service, government bailouts everyone hates and the smell of failure. They really have no positive identity at all – Chevy is low-end, Cadillac doesn’t have prestige like BMW or Mercedes or even Audi, Buick is old people waiting to die, etc. That’s not all fair, but it is the perception – and perception is reality. It will take a crazy image makeover to even make a dent in that.
“Go buy an import and that worker in Japan, Korea, Mexico and China will surely spend his money on your product.”
As opposed to “domestics” actually made in Mexico and Canada? Or “imports” made in the US?
Robert Farago.
The idea that the United States government will reform GM’s way of being and reverse the curse is completely preposterous. It’s like asking a cocaine dealer to sponsor a crack addict.
Most excellent description of our government in virtually all aspects.
Alcibiades :
May 28th, 2009 at 6:26 am
Even if GM managed to build a good car and offer it at a good price, there are a lot of people, like me, who would not buy it, as a protest to the government takeover of a private business. I’ll buy a Ford. If Obama takes over Ford, I will buy foreign, or used. It’s one small, easy way to protest.
I purchase over a dozen vehicles a year for my service business, mostly Silverados. I will not EVER buy another GM or Chrysler product in my life. It’s one thing for these companies to earn my hard earned money, it’s a different matter entirely for them to steal it from my pocket using the full force and threat of the government taxing authorities.
I’ve had nothing but trouble with GM products I’ve owned and nothing but good luck with the Honda products I’ve owned. So here’s the million-dollar question: how is GM going to win me back?
A new GM or a new Chrysler has the tough task of winning back the customers they lost in the past, due to lack of quality. That’s not easy to do.
…CTS Sportswagon
Just as I was grudgingly deciding the CTS was not completely without its charms — a judgment owing ENTIRELY to the fact that Bruce Campbell drove one for awhile on “Burn Notice”, how bad can it be if Bruce Campbell drives it — I see this ludicrous CTS wagon on the roads and nearly threw up. Why? Why? Why? It’s like some hack artist accidentally turns out a Mona Lisa, and then decides what she really needs is a mustache.
MikeyDee is correct. The biggest challenges to “new” Chrysler and “good” GM is win over the customers who have consistently bought from other brands.
Chrysler’s product portfolio is set up to keep away customers who don’t want minivans or SUVs. If they live long enough for Fiat-designed products to appear in showrooms, then those Fiat-designed products will have to compete with Hondas, Toyotas, Nissans, Hyundais, Kias and even a Fiat-designed Suzuki.
Chrysler will need more than a boatload of luck.
GM is in the same boat. Once they get through bankruptcy, they’ll have to stay alive on a product mix that has consistently driven customers to other brands.
We’re watching slow death.
This mess has no chance of succeeding. Over the last several months, I have asked the B&B for an example of a successful corporate turnaround that happened without new blood at the top of the organization. If someone has cited an example, I have missed it. Here? A change from Waggoner to Henderson is not new blood. This company is being run by the same people, all raised in the same corporate culture with the same worldview.
This is a recipe for failure. The GM culture does not understand why it is failing. It does not truly understand how awful its cars have been over the past 20 years. And its corporate DNA is completely lacking in the ability to spot a new market trend and respond with a class-leading vehicle. A generation ago, this culture bragged that GM did not make cars, GM made money. This culture is still there.
It is true that some of the current vehicles are better than they used to be. Why is this? Bob Lutz. He was the only fresh air into the RenCen in the last 20 years. He may not have bet on the right product, but at least he was passionate about product. Now he is gone. And so is GM.
the Buick Enclave is a beautiful machine.
“Even if a reasonable turnaround strategy emerges—complete with performance-based reality checks—the new management team is destined to fall afoul of institutional apathy. I mean, we all know how many government-sponsored projects come in on time and/or under budget . . .”
Looks like Chrysler which will be de-facto owned by FIAT will have a better chance of coming out of this than GM “the government is my co-pilot (actually master)” will.
There is a niche market of guys out there that love street-pounding, floor-shaking muscle cars.
God bless them.
This could be a great market for Chevy and Dodge. It’s not a big market, but it’s a market nonetheless. Keep making the Camaro and Vette and make an affordable Viper. Take all the modern technology out of these cars and make them like they did in 1968, the golden age of muscle cars.
Take all the modern technology out of these cars and make them like they did in 1968, the golden age of muscle cars.
The number of people who would buy them is miniscule and much of that technology cannot be removed without running afoul of government regulations. Which is not to say I wouldn’t be interested, but realistically, it’s not going to happen. Pity!
Funny, I work in the healthcare sector (which in this part of the world answers is funded by tax dollars). By and large, the people are very good…up to a certain level. Beyond that level they are either a) appointed through cronyism (a disaster in the making or b) so subject to their political masters that they constantly have to set aside their own good judgement to respond to their political masters. It leads to disaster. Throwing an already unwieldy, unprofitable and not terribly well run organization into the equation is not going to produce more positive results.
I’ve had nothing but trouble with GM products I’ve owned and nothing but good luck with the Honda products I’ve owned. So here’s the million-dollar question: how is GM going to win me back?
GM needs to start with a strong, reliable entry level car. They need to get the next generation on board early. That is where the mistake was. They lost the 80s-90s young generation of drivers with garbage rides. When you start out driving a POS cavalier, which doesn’t ride nice, breaks down, and feels cheap, but your buddy is in a much higher quality civic, its easy to see how a generation moved to foreign cars.
I have owned an 04 MDX, 01 CL type S, 05 TL, all of which were great cars. That said, I will pit my current LTZ Traverse or a New CTS against any foreign car of comparable price, and they will do well. Problem is, if you aren’t shopping across a market of cars, rather than just a specific brand, ie Lexus, Acura, etc, you would never realize that.
GM needs to get younger buyers to feel good about their initial cheap cars. This way, once people get a little older and start making more money, they will consider their higher end vehicles which I assume have more profit margin. It will not be an easy overnight fix, but rather a long term plan/investment.
I think it woiuld be useful to start a new thread to discuss hypothetical “what if” scenarios – WHAT IF the government did not step in and lend money to GM in December 08. Where would we be now, and in the foreseeable future?
Personally, I think that if the government (governments actually, because Canada is a player too) had not stepped in and supported General Motors we would be looking at a large region of the country that would have fallen into a 1930’s level depression rather than the Maxi-recession that has now almost levelled off. I’m curious as to other points of view.
summerx :
May 28th, 2009 at 9:59 am
GM needs to get younger buyers to feel good about their initial cheap cars. This way, once people get a little older and start making more money, they will consider their higher end vehicles which I assume have more profit margin. It will not be an easy overnight fix, but rather a long term plan/investment.
But that’s the problem. GM hasn’t thought long term in ages. That’s why they were so dependent on SUV and truck sales. They couldn’t make money on smaller passenger cars and didn’t want to invest the time and money in them to become money makers when they could sell a truck for every need. They missed out on the fact that entry level buyers can’t afford new trucks. And GM’s entry level vehicles just plain suck. So, like you said they lost an entire generation of consumers.
agenthex: American Leyland during good times would be a poor choice, but during terrible times, it’s not so bad in comparison to sudden mass unemployment of a large econ sector.
Except that actions such as this can prolong the bad times (which aren’t as bad yet as in 1980-82, for example, so things must be kept in perspective).
Plus, one wonders if the federal government really has the guts to cut GM (and the UAW) adrift if the new company continues to bleed money after the economy has recovered. I haven’t seen much in GM’s future product portfolio that is likely to cause a stampede to GM showrooms.
I also note that there really hasn’t been a wholesale restructing of GM’s corporate culture. Certainly nothing on the order of what William Clay Ford, Jr., and Alan Mulally have instituted at Ford (and even Ford isn’t out of the woods yet).
agenthex: Remember to place the blame properly on under-regulated bubble-inducing financial products and the laisse faire attitude that allowed them (and more importantly the bastards who suckered you into believing it’s all about “freedom”) next time you’re reminded of how much American Leyland sucks.
Please answer these questions:
1. Please provide a link or checkable citation to a mainstream Democratic proposal for regulation circa 1/1/05 that looks like it would have prevented the current financial crisis.
2. (a) A link or checkable citation to which specific regulation(s) were removed or not enforced during the Bush administration, together with (b) a plausible explanation of how the continuation of or more aggressive enforcement of the regulation(s) would have prevented the crisis. In addition, please provide (c) some evidence that mainstream Democrats opposed the removal/non-enforcement of the particular regulation.
It’s easy to blame this on a free-market mindset or Republicans Gone Wild. As I am certainly not interesting in having this happen again, I want to know EXACTLY which non-enforced regulations or unenacted rules would have prevented this financial crisis from happening. Thank you.
“It’s easy to blame this on a free-market mindset or Republicans Gone Wild. As I am certainly not interesting in having this happen again, I want to know EXACTLY which non-enforced regulations or unenacted rules would have prevented this financial crisis from happening. Thank you.”
Exactly…Because the US Auto industry was SOO EFFICIENT back in the 70’s and 80’s before deregulation.
geeber:
Finding Democrat-sponsored regulations that would have blunted the current post-credit-bubble recession, had Republicans not blocked such rules, is easy.
Here is a prime example: In 2003, the Office of the Comptroller of the Currency (OCC) pre-empted a number of state regulations aimed at curbing problematic sub-prime mortgages. Had the OCC not cut off this reform effort, the states which had such laws would have almost certainly had fewer subprime loans and fewer foreclosures, and with fewer such loans in the pipeline, the entire financial market would have probably been better off. Moreover, had such regulations not been cut off in 2003, it is entirely likely that in 2004 and 2005 more states would have adopted such rules, making the positive impact even wider.
It is hard to say that this one thing would have averted the entire crisis that we are now facing. But this one simple thing did go to a central part of the present crisis, and is thus significant on its own. It is also at least suggestive of the way in which other areas were systematically under-regulated by Washington in the 2000-2007 period. Arguably, Bill Clinton (prompted by a Republican Congress) went down the wrong road when he signed laws such as the repeal of Glass-Steagall. But with a good decade between those acts and the worst of the “bubble days,” (I mark those as 2005-2007) there was plenty of time for a responsible leader to see the problem coming and steer a better course. Unfortunately, George W. Bush and the Republicans in Congress were not up to the task.
GM is finished in the future for the same reason it’s dead today: the UAW. The Federal Government has made it all too clear that there is NO amount of money they will not spend to bail out their union cohorts.
The UAW will be worse than ever. Pissed that they had to make concessions, they will cut every corner, extend every break and wring every last drop of unproductivity out of every chance possible. Maybe even sabotage cars for spite.
What are you gonna do, fire them? Go out of business?
And since the new owner is the Federal Government, the inventor of ineffiency, bureaucracy and unresponsiveness, do you think they’ll really care? When GM is done burning through the next $20 billion (6 months, tops) and still not viable, will they shut down GM and piss off all those union voters? Or just steal another $20 billion from your grandkids and throw it to this Frankenstein experiment?
And what private entity in its right mind would ever invest a nickel in GM stock or bonds, only to have Obama rip into them as “reckless speculators” when he needed a new applause line?
GM is dead dead dead but it will never never never go out of business, no matter how much it costs the taxpayers.
NBK,
That’s not necessarily a Democratic proposal. I see no evidence that anyone in Congress was pushing those proposals. And were Congressional Democrats really going to allow states to pre-empt federal regulations in this area? That’s quite a stetch.
Note this excerpt in the article you linked to:
Michigan countered that Wachovia Mortgage was not itself a national bank. The Constitution preserves state authority to protect its residents when federal statutes don’t explicitly bar such regulation, Michigan contended. Ken Ross, the state’s top financial regulator, says his department fought Wachovia all the way to the U.S. Supreme Court in part because it feared a growing subprime mortgage problem: “We knew there needed to be [state] regulation in place or there could be gaps.” The OCC, he adds, “did not have robust regulatory provisions over these operating subsidiaries.”
The nation’s highest court sided with the Bush Administration, ruling in April 2007 that the OCC had exclusive authority over Wachovia Mortgage. Justice Ruth Bader Ginsburg, writing for a five-member majority, pointed to the potential burdens on mortgage lending if there were “duplicative state examination, supervision, and regulation.” In a dissenting opinion, Justice John Paul Stevens said that it is “especially troubling that the court so blithely preempts Michigan laws designed to protect consumers.” (emphasis added)
Justice Ginsburg was appointed by the Clinton Administration, and has hardly been known for her Republican or libertarian views, either before or after she joined the nation’s highest court.
Second, this relies on the idea that predatory lending is behind this crisis. There are a couple of problems with this scenario.
One, having dealt personally with representatives of ACORN, the definition of what constitutes “predatory lending” is fluid, and basically boils down to complaints that people with poor credit histories can’t expect to obtain mortgages or loans with the low interest rates and low fees that someone with stellar credit does.
Well, duh!
That’s why people with poor credit should focus on rebuilding their credit scores instead of going for what looks like “free money.”
Two, people would still be in trouble, even with loan modifications made in the name of punishing “predatory lending.” Well over half of those who have had their mortgages modified still end up losing their homes within a year. The problem isn’t “predatory” lending; the problem is that they can’t afford the house in the first place, unless someone virtually gives it to them.
Three, many of the people who have poor credit scores are poor and minorities. The federal government has been pushing financial institutions to increase credit availability to these groups since the early 1990s.
Unfortunately, they usually have worse credit scores than comparable whites (even when compared to whites with the same income). Crack down on issuing credit to people who have poorer credit scores, and you deny access to credit for many minorities. Unless you require financial institutions to relax lending guidelines. (Which IS what happened in the 1990s and continued on through the 21st century.) Financial institutions did eventually jump in with both feet, but the simple fact is that a return to stricter lending criteria is going to leave certain groups without access to credit – as it was in the past.
Even Congressional Democrats were not going to require banks to issue mortgages with the same interest rate and terms to everyone, regardless of credit scores or payment history.
If Congressional Democrats do advocate that policy, they will quickly become a minority party again.
NBK-Bosto: Arguably, Bill Clinton (prompted by a Republican Congress) went down the wrong road when he signed laws such as the repeal of Glass-Steagall.
That had nothing to do with it. If anything, it alleviated the present crisis.
The Glass-Steagall Act separated investment and commercial banking. It prohibited commercial banks from underwriting or dealing in securities, and from affiliating with firms that engaged principally in that business. The Gramm Leach Bliley Act repealed only the second of these provisions, allowing banks and securities firms to be affiliated under the same holding company. Thus J.P. Morgan Chase was able to acquire Bear Stearns, and Bank of America could acquire Merrill Lynch.
Banks themselves were and still are prohibited from underwriting or dealing in securities.
Allowing banks and securities firms to affiliate under the same holding company has had no effect on the current financial crisis. None of the investment banks that have gotten into trouble — Bear, Lehman, Merrill, Goldman or Morgan Stanley — were affiliated with commercial banks. And none of the banks that have major securities affiliates — Citibank, Bank of America, and J.P. Morgan Chase, to name a few — are among the banks that have thus far encountered serious financial problems. Indeed, the ability of these banks to diversify into nonbanking activities has been a source of their strength.
Most important, the banks that have succumbed to financial problems — Wachovia, Washington Mutual and IndyMac, among others — got into trouble by investing in bad mortgages or mortgage-backed securities, not because of the securities activities of an affiliated securities firm. Federal Reserve regulations significantly restrict transactions between banks and their affiliates.
So, sorry, those examples do not constitute the proof that I need.
Add to that the new Cruze
Why should we assume the Cruze will be a great car? When Cobalt was being developed and at the same stage the Cruze is at now, it was expected to be a great car. Is it?
GM makes plenty of vehicles people want (Corvette, CTS-V, Cobalt SS, and of course the pickups).
The problem with that list is that Corvette, CTS-V, and Cobalt SS all have a very limited market. Few people have enough money for the Corvette and CTS-V. Costs are simply never going to come down enough for most people to be in the market for one. Few people want a great track car but is limited in most other applications, like the Cobalt SS.
geeber:
Oh, when you said “Democrats,” I thought you meant, well, “Democrats,” not “Congressional Democrats” or some other arbitrary sub-group.
No matter. Congressional Democrats were also on board the sub-prime-regulation train at the same time as their state legislature counterparts. And they were equally shut down by Republicans.
As the minority party in Congress, it is no surprise that they never got far with the Republicans blocking the way. The real surprise is that Republicans went out of their way to preempt state law action on the same subject — a rare instance of Republicans siding with Ruth Bader Ginsburg and being happy with big, central government intervention at the expense of state and local self-determination.
A few other miscellaneous observations:
1. You write: And none of the banks that have major securities affiliates — Citibank, Bank of America, and J.P. Morgan Chase, to name a few — are among the banks that have thus far encountered serious financial problems.
What are you smoking? To argue that Citi and Bank of America are not deeply troubled institutions, and would not have gone the way of Lehman if not for some extraordinary government interventions, is simply to be detached from reality. These banks have indeed encountered serious financial problems. No two ways about it. You lose massive credibility for even suggesting otherwise.
2. I don’t understand where you are going with the Ruth Bader Ginsburg argument. Just because she — a liberal — approves of a broad reading of the doctrine of federal preemption does not mean that she approved of, or even understood, what it was that the federal government was preempting in 2003. She provided the constitutional tool which allowed a Republican administration to do some very stupid things. Unfortunately, as any believer in the rule of law will tell you, the rules are the rules — if strong preemption really is the constitutional rule, you can’t ignore it just because you dislike what the federal government is doing with it. As they say in federal jurisprudence, that’s a question for the elected branches.
But here’s the most important impediment: Government Motors doesn’t have the vehicles it needs to survive.
And the credit for it’s customers who have been on a spending spree for 20 years. Just wait until this generation retires. No savings, SS has no real spending power, etc.
brucestmpl3: Going to school for 4 years at Daddies’ expense and partying much of that time doesn’t earn you any special status in my eyes. Go buy an import and that worker in Japan, Korea, Mexico and China will surely spend his money on your product.
Not all college students go to school all expenses pay. My friends and I went to school working our way through. Parties were fun but we knew how much tuition “hurt” to save up.
As the middle class continues to be wrecked by lack of stable jobs, careful consumer spending, and the blue collar folks continue to see their jobs evaporate as well – AND commodities prices begin to rise (my predictions) as the rest of the world tries to climb into the 1st world lifestyle – then America will have more and more problems selling things like cars and homes and $3K lawn tractors and $1500 stainless steel BBQs. In this regard we’ll become more like Europe I think where people generally have good lives but fewer expensive toys to “play” with. Fewer boats, motorcycles (the expensive kind), and RVs among other things. We’ll be wiser for it but it won’t necessarily be a fun experience to watch our spending power dry up.
Not too many MSM talking heads discussion inflation but it’ll come too. Again fewer cars sold. Nobody talking much about the Obama adminsitration’s healthcare plan expenses. How are we going to pay for that? Noble idea, but expensive. Will we see a re-election of the Democrats as more and more identify with the “underclass” and minorities – strong supporters of the Democrats?
I have to wonder if we won’t see more boom and bust cycles in the near future with more volatile prices.
We either need huge amounts of credit available to everyone (just had that) or little credit available to anyone that needs it leading to a smarter group of consumers long term who can’t rely on credit so they learn to live without it. Imagine families going generation after generation without car loans and mortgages. That’s alot of interest money that stays in the family’s accounts or translates into more stuff and no debt. I think that would be a healthier America and much more like Italy when I lived there. Italy has problems to be sure but few people I knew carried any debt.
Kevin: Just as I was grudgingly deciding the CTS was not completely without its charms… It’s like some hack artist accidentally turns out a Mona Lisa, and then decides what she really needs is a mustache.
Oh I disagee! The wagon (have not seen one in person, only pics) is REALLY nice looking. Would MUCH rather have a wagon than a sedan or SUV or Minivan. Fingers crossed that it is a GOOD vehicle (if it every makes it to market).
If all the people who worked with their hands made 8 dollars an hour would anyone be abe to afford the product or service you you are providing?
Standby – we’ll see… Give us a few more years. I live in the south where wages are low. We get by just fine. Perhaps the pace of spending is a little slower than other regions…