By on April 8, 2007

cimmaron.jpgGM circa 2007: bad investments and expensive labor contracts; excess capacity and crushing debt; a surfeit of brands and products. It’s also GM circa 1910, 1920, 1973, 1980, 1991 and 1998. In fact, wandering through GM’s history is like watching an endless loop of "Groundhog Day." Clearly, The General doesn’t share Phil Conners’ ability to learn from its mistakes. Can there ever be a happy ending for The General?

Automotive pioneer Billy Durant created General Motors by assembling a group of carmakers in the 1900’s. By 1910, his hands-off management style and buying spree left his creation high and dry. Durant’s backers jettisoned the conglomerate’s founding father. Bankers refinanced GM. Durant regained control in 1915 and restarted the cycle. In 1920, GM was broke, Durant was canned and GM got off the treadmill.

Under the watchful eye of Alfred P. Sloan, GM became an industrial juggernaut. The domestic automaker carved out a 40 to 50 share of the U.S. car market and never reported an annual loss (until 1980). But there was a dark side to GM’s fifty plus years of dominance: the company became fat, dumb and lazy.

The causes of GM’s cyclical mismanagement are rooted in the company’s– indeed Detroit’s– Golden Age. During the boom times, GM was a conglomeration of enormous semi-independent enterprises, all contributing to one big bank account marked “GM profits.” This structure worked well enough in an expanding market with few competitors. 

Despite the logo on their paychecks, the people within this corporate amalgam weren’t loyal to GM. They worked for Buick, or Fisher Body, or Delco, etc. GM gradually evolved into a maze of deeply entrenched hierarchies and fiercely competitive fiefdoms. Workers and management attended to their own interests or the interests of their unit, rather than GM as a whole. Any attempt at altering the status quo was greeted with “what’s in it for me/us?” rather than “Is it good for GM”?

The resulting bureaucracy lacked speed, strategy or shared motivation.

The ‘70’s oil shocks gave GM its first fish slap in fifty years. As GM’s lineup of gas guzzlers and uncompetitive small cars lost out to upstart foreigners, the company’s fortunes began a worrying decline.

In GM’s ossified corporate culture, only one recipe for “change” could satisfy all factions. Ignore problems (protect the status quo), fire workers (reassure Wall Street) and tout the Next Big Thing (deflect everyone’s attention from This Big Mess).

So The General laid off workers, demanded more from remaining employees, built more barges and waited for oil prices to drop. By the mid ‘70's, the imports had gained a secure foothold in GM’s backyard. To stop the rot, The General closed more plants, laid off more workers and declared that its new downsized FWD cars would ‘push Japan back into the sea.’

Faced with GM’s Byzantine bureaucracy, top management tried to foster change through big initiatives. This pattern hit its zenith when Roger Smith (of "Roger and Me" fame) led GM during the '80's. After a massive reorganization in 1984, Smith dismissed thousands of workers and began a buying spree of epic proportions.

GM’s CEO spent an estimated $40b on a laundry list of fashionable solutions distractions: NUMMI (New United Motor Manufacturing Inc.), EDS (Electronic Data Systems Corporation), Hughes Aircraft and more. Meanwhile, GM proclaimed that vehicles like the Saturn, GM-10 midsize cars and the Impact EV would reverse their declining fortunes.

GM’s culture ignored the benefits of these innovations. The Toyota-style production techniques learned at NUMMI and the union-friendly ideas implemented at Saturn’s Spring Hill plant never made it outside the factory gates. GM management remained impervious to EDS’ can-do culture. Saturn devolved into another badge-engineered GM platform brand.

During the SUV-based profits blip, GM couldn’t resist the old urge to bulk up, adding Saab, Hummer, Daewoo and parts of Isuzu, Suzuki, Subaru and FIAT to the portfolio. Now, once again, they’ve been caught up the creek without a small car shaped paddle. Once again, the next Beta-Zeta-Gamma-GMT900 will save them. And again, GM has resorted to layoffs (this time with payoffs).

The net result is GM 2007 looks an awful lot like GM 1910 (or 1920 or 1973). By not rationalizing its management structure, brands, product development process, capital outlays and labor contracts, GM has come full circle. Only now it has a 23 percent market share instead of 50 percent. And it’s running out of time and money.

Ironically, Durant’s reaction to the GM of 1910 still seems relevant today, “I saw cherished ideas laid aside for future actions, never to be revived. Opportunities that should have been taken care of with quickness and decision were not considered. The things that counted so much in the past, which gave General Motors its unique and powerful position were subordinated to liquidate and pay.”

How the mighty have fallen.

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34 Comments on “General Motors Death Watch 116: Groundhog Day...”


  • avatar
    troonbop

    I suspect the fact GM’s been there before will likely lull management into optimism. But, as the article states, the competition is lot nastier.

  • avatar
    postman

    In GM’s ossified corporate culture, only one recipe for “change” could satisfy all factions. Ignore problems (protect the status quo), fire workers (reassure Wall Street) and tout the Next Big Thing (deflect everyone’s attention from This Big Mess).

    Yup. You nailed GM (and 21st century American industry) in one paragraph.

  • avatar
    jerry weber

    Eric, your statistics do tell a somewhat different picture of gm. Betwen 1920 and 1973, the company had an unusually long period of dominance of the US market. That was some 50 years of being number one and having 40-50% of the market share. It’s those 50 years mostly under Alfred Sloane that we should concentrate on. These were the times of semi-independent divisions, a bottom to top tier marketing plan with little overlap, similarities between divisions mostly underneath not out front. A time of unparalleled design excellence (even if engineering was somewhat slower). How did Sloan do this? He told all managers, I don’t care what you build, but it has to show a profit and make sense.

  • avatar
    Matt51

    GM’s initial success until the 1970’s may have been due more to accident than good management. The great depression wiped out dozens of competitors. John DeLoreans 1970’s book “On a Clear Day You Can See General Motors” now seems accurate in hindsight. Maryann Keller’s 1989 book “Rude Awakening” is good reading today, 18 years later. In her book, she had asked GM old timers where the company went wrong. Their answer – replacing technical management – such as Ed Cole – with a takeover by the financial people – such as Roger Smith. With the beancounter takeover, GM only focused on cutting costs, along with quality, as GM had fine build quality in the 1960’s. GM no longer had an interest in technical excellence or innovation. The proof was in the disastrous cars of the 1970’s and 1980’s.

  • avatar
    NickR

    During the SUV-based profits blip, GM couldn’t resist the old urge to bulk-up, adding Saab, Hummer, Daewoo and part of Isuzu, Suzuki, Subaru and FIAT to the portfolio.

    If GM was a cat, the SUV blip would have been their 8th (or quite possibly 9th) life. GMs acquisitions during this time were, to say the least, baffling. One of GMs problems, as duly pointed out in this article, is extreme complexity. Adding to it at almost every opportunity? Totally counterintuitive.

  • avatar

    That old saw “As GM goes, so goes the nation” could not be more true. As technical excellence has been supplanted in virtually all of U.S. business by accounting leger de main. This black art, which allow management the opportunity to show the illusion of financial health, has replaced strategic planning and good engineering as fundamentalist, dogma-controlled “religion” in the U.S. in general. Don’t worry about what will happen five or ten years from now, we’re making money right now, and that’s all that’s important.

    It is doubtful this sickness originated at GM, but as the big, dumb and obvious canary in our coal mine, its blue little face is now staring us in the eye. “Managers” whose talents are limited only to creating the illusion of financial health have overtaken much of the business in America. The railroads were perhaps the first of these canaries to fail in a big way, laid waste by greedy management and tax laws designed for the short term.

    So, it is comforting to think that GM arrived at this point through its own stupidity, but it took lots of cultural help to get it here. Had they made the bold, and strategically visionary moves of Toyota in the 70’s and 80’s, we would today be wondering how it was that the Japanese relinquished their foothold in quality and gave the market back to GM. Unfortunately, that’s just a nice fiction. GM is succumbing to greed, just as it has in the past.

  • avatar
    KatiePuckrik

    GM are always complaining about how unlevel the playing field is. (Re: Currency fluctuations, build cars in the United States, etc) but continually get proved wrong by the foreigners calling their bluff. It seems to me that GM is running out of excuses. How long will it be before they start blaming the customer for being a traitor for not buying domestic? Oh sorry, already has!

    But the bit that baffles me is why GM can’t learn from the people who are kicking their arses. Like so:

    1: Across all brands start platform sharing and component exchanging. Renault and Nissan have mastered this and saved billions of dollars. The Nissan Micra and the Renault Clio III are the same car, only the badge is different. GM have made a step in the right direction with global platforms, but they could also steal ideas from Ford, who let Volvo and their partner Mazda run independently but if either has a good idea, install it across the board.

    2: Put more emphasis on quality and reliabilty. Yes, yes I know they’ve been rising up the ranks due to recent surveys, but as I’ve said before, it takes a lifetime to build a reputation for reliability and a second to destroy it! Keep working at it GM! You’ll get there!

    3: Look at your plants and look see where efficiency can be made. Remember, what I said about “platform sharing”? this is where more costs can be saved. If a plant has trouble keeping up with demand, another plant can take excess demand up to help the plant. No need for new equipment since the car share the same platform!

    4: Curtail your accountants! Remember, they are their to look after your money, NOT look after your cars! That’s why you employ engineers! You wouldn’t ask a car designer to do your accounts, so don’t ask an accountant to design your cars! It’s a trite point but a valid one. Exactly how will GM get a reputation for quality when a accountant continually says “Use cheaper materials here, the profitability will increase on this car.”. The profitability would increase on the car….if anyone bought it!

    4: But this one is the killer. Look at the German manufacturers and see how they deal with their unions. IG metall is so militant it make the UAW look like positively liberal and easy! But yet, VW work WITH IG metall and not against them. For instance, recently their was a stand off between VW and IG and a compromise was reached. VW could increase their working hours by 4 hours a week for no extra pay and IG would have job security until 2012. Everyone got what they wanted.

    Ultimately, my point is this. The point on which GM fail are being carried out well by other manufacturers. So logically, it isn’t witchcraft! It is attainable! So instead worrying about what will be the next best thing which will save GM until the next slump, learn from the people who know what they’re doing. I suppose it involve GM actually learning from history and making step to avoid making the same mistakes……………oh dear!

  • avatar
    hal

    That old saw “As GM goes, so goes the nation” could not be more true.

    I couldn’t disagree more. There are plenty of industries and corporations that were once crucial to the US economy and just aren’t anymore. You can add GM to the list.
    America is the most innovative economy in the world; GM is stuck in some kind of 1970’s timewarp it can’t escape.

    Platform and component sharing isn’t the answer for GM it has been part of the problem for years. Bigger isn’t always better and GM needs to be broken up so it’s various companies and brands can focus on their core strengths and compete.
    There’s no logic to having companies like Saab and Hummer under the same ownership, bringing Opels to the US branded as Saturns or selling Daewoo Lacettis in Europe as Chevrolets alongside Corvettes. There are world class companies inside GM if they were free to do what they could, instead warped logic produces abortions like the BLS.

  • avatar
    charleywhiskey

    Excellent article.
    We have CEOs of big American corporations that are paid more for keeping a chair warm for a month than the average college degreed person earns in ten years of hard work. Add in signing bonuses like NBA stars and golden parachutes bigger than third world economies and it is obvious there is absolutely no financial incentive for such CEOs to produce long-term corporate successes. The day the employment contract is signed, such CEOs are set for life no matter how badly they screw up their companies.

  • avatar
    Paul Niedermeyer

    hal: I agree and disagree with you. Change is the one constant, especially in the business world. Pick up a fifty or thirty-year old Fortune magazine, and you’ll see how little continuity there is in the business world, and rightfully so.

    But breaking up GM is not the solution either. The various brands are now too small to stand on their own. The incredable technology/electronics demands require huge investments. That’s one of the reasons Porsche is buying VW, and some are already worrying about Mecedes’s future as a much smaller company.

    GM needs to consolidate its brands, and become more “GM”, rather than many brands. Rather like Scion is a semi-division of Toyota, not a completely seperate one (same dealers/sales statistics consolidated).

    Actually, GM is rightfully heading this direction to some extent: Buick/Pontiac/GMC dealers are increasingly consolidated. Their models don’t compete against each other.

    The biggest problem I see is Saturn-Chevrolet. they compete/overlap too much.

    The GM structure of the 1920’s to 1970’s worked in the very different times then. it would be a nightmare today.

    One has to look at the market leader to see the future: Toyota. No competing divisions (except in the compex JDM market), and a single primary brand (plus premium Lexus).

  • avatar
    hal

    Paul, The investments required are huge but that cost is increasingly shared with suppliers who have become development partners rather than just deliverers of widgets (Magna) or shared between automakers in joint ventures either to develop a particular technology (Bluetec) or a new model (Vibe/Matrix). PSA(Peugeot/Citroen) is small but has remained independent and profitable by creating joint ventures with just about every other automaker. FIAT auto was nearly taken over by GM, would you really argue it would be better off inside GM?
    By my count there are 6 major EU auto groups PSA / Renault / FIAT / VAG / MB / BMW. The US should be able to support at least as many.
    I reckon there are 6 viable independent automakers inside GM: Opel/Saturn/Saab; Daewoo/BuickChina/Buick; Holden/Pontiac; Chevrolet/Cadillac; LightTrucks/Hummer; Corvette. Maybe not all those combos are logical but they all make more sense than the Caddy BLS. On the other hand consolidating brands sounds like sacrificing yet more market share.
    Mercedes derived zero benefit from it’s partnership with Chrysler so I doubt it will miss it. I won’t even speculate about what’s driving the Porsche/VAG deal but I suspect it’s more Piech’s ego than industrial logic.

  • avatar
    rtz

    I really like the concept of GM’s E-flex System. Similar to a railroad locomotive’s diesel electric setup.

    Take every current GM vehicle and use various sizes of electric motors in them. Then put in a generator that runs off virtually anything. What’s available? E85, E100, bio diesel, propane, cng. Even gasoline or diesel.. Maybe even someday, full blown electric. If the battery pack could go 650 miles between charges, would that be “good enough”? There is an “ultra capacitor” in the works down in Texas that could change everything…

    http://electricperformance.com/forum/index.php/topic,11.0.html

    Send some man power down there GM and help them out. They are “in a nondescript facility on Discovery Boulevard in Cedar Park”:

    http://www.hillcountrynews.com/articles/2007/03/30/news/news14.txt

    Check out this recent video of an electric car lifting the front tires on drag radials:

    http://youtube.com/watch?v=0rl4MULktgc

    Here is one of an electric drag bike: http://www.youtube.com/watch?v=GDHJNG2PngQ

    Those two vehicles currently run low 8’s and 12’s. In the very near future, they will run 7’s and 11’s.

    Forget about building the Volt for now(takes too long). Take the concept and stick it in all existing vehicles. High performance vehicles and economy vehicles. I’m ready for a mid year change. There is a Chinese clone of the A123 battery. Volume pricing should be good…

    Or stick some big Korean batteries in it!

    http://www.proev.com/P1Batt.htm

  • avatar

    KatiePuckrik “the bit that baffles me is why GM can’t learn from the people who are kicking their arses”

    Their pride and arrogance prevent them from seeing the truth about cars. They actually believe the world revolves around them and that they are world class in their products.

  • avatar
    cheezeweggie

    Outstanding editorial.

  • avatar
    Terry Parkhurst

    The current downfall of GM began when it ceased to allow each division to have its own unique engine, circa 1977, as I recall.

    If a car’s engine is its heart – and for most people interested in cars, that is either first, or second behind the exterior design – then the General’s minions on the 14th floor, by trying to save money, took the character from each division.

    Hence, today we have Buick, Chevrolet, Pontiac, GMC and even corporate partner Suzuki, sharing so many components, the success of each division lies in the ability of the dealer network to out low-ball each other; while keeping the store’s lights on. That’s another reason that dealer parts and service are so important to dealerships – that and warranty claims (where a clever service/warranty writer can make the store money, from factory reimbursement).

    Roger Smith just added more debt. In many ways, it is amazing that GM has survived until today. Other corporations, who could not have sustained some of the loss of the past few years, would have just gone under.

    Can GM make it? As the Beach Boys sang, “God only knows.”

  • avatar
    jerry weber

    The naysayers to all of this seem to take comfort that gm like a worked over heavy weight fighter is still standing. It is also still carrying all of those models and divisions as if it still carried upwards of one half of the US market. Until gm looks like and is sized like a 22% market share company the losses will continue. Even in the old days of al Sloan gm cut divisions to stay profitable, lasalle was the junior cadillac division axed before WWll. But sloan would have never allowed gm to take it’s focus off of product. He knew it was the only reason there were profits. Ron Zarella the p&g soap salesman would have never been allowed in the old gm heirachy.

  • avatar
    Dave M.

    And sometimes it’s just time for something new. GM, and by extension Ford and an (hopefully) independent Chrysler, will never be the same. Times change, tastes changes, ‘the kids’ want something new. My dad thought a Caddy was top shelf, I strive for a BMW 7….what will my daughter desire in her time?

    I can only think of a handful of products that have remained at the top of their genres since my childhood….Crest, Windex, a few others….it is nearly mission impossible to do so. Growing up, I remember constantly hearing of the ‘cheap Japanese toys and electronics’…and yet here we are seeing the Japanese electronic market getting overridden by the Korean and Chinese imports.

    Things change. I just wish it didn’t have to be so painful.

  • avatar
    ejacobs

    Quiz: What car has rust holes in the driver’s floor, cracked “pleather” seats, the weakest 1.8 carburated four cylinder engine in the history of internal combustion engines, and a Cadillac emblem?

    Answer: My first car, a 1982 Cimarron with just 52K miles on it, not unlike the picture shown above. I can’t even count the ways of how bad that car was. Needless to say, I have never and will never buy another GM product.

  • avatar
    jthorner

    I would argue that it was the 1970s destruction of the independent divisions which has had the biggest role in GM’s fall. All of that division pride drove a lot of great engineering and great marketing. Now the divisions are completely gone. Everything comes from centralized groups and centralized decision making. It is harder than ever to get anything done in GM because there is no way for renegades to get their ideas into the market.

    Remember the customer outcry when people discovered Chevrolet engines in their new Buicks! In “rationalizing” GM the bean counters ripped out any remaining soul and made a mockery of brand images which had taken decades to build up.

  • avatar
    FunkyD

    The thing that puzzles me incessantly is the fact that GM has, and still does, put out some awesome products once in a (increasingly great) while. The Avalanche is a truly innovative truck and remains so, with Honda’s Ridgeline a pale imitation at best. Corvettes are still the class of their field (with the Z06 being in a league of its own). Both of my current vehicles are GM for the simple reason that nobody else made anything similar to them.

    For this reason, it’s painful to watch them floundering around. The marketplace has changed, and GM, like the Titanic, has been unable to react in time to avoid the iceberg. GM’s (lack of) brand management, overbloated dealer network, “cavalier” attitude toward customer service, union contracts which serves as an albatross around the corporate neck, and (with the noted exceptions) lack of distinctive product, are killing it. Death may be slow in coming, but it will come, unless something cracks the status-quo.

  • avatar
    bfg9k

    FunkyD:
    April 9th, 2007 at 9:17 am

    The thing that puzzles me incessantly is the fact that GM has, and still does, put out some awesome products once in a (increasingly great) while. The Avalanche is a truly innovative truck and remains so, with Honda’s Ridgeline a pale imitation at best.

    The Ridgeline is not an imitation of the Avalanche. The ‘sails’ from the cab to the bed on the Avalanche are for style. The Ridgeline is the world’s first unibody pickup truck (with an IRS too), and it needed a similar-looking addition to increase the rigidity of the bed. So, in the Ridgeline it’s an engineering solution. The Avalanche is just a warmed over SUV, I fail to seem much innovation in it.

  • avatar
    Martin Albright

    BFG: The innovation of the Avalanche is with the bed and disappearing midgate, a feature which no other manufacturer has yet to copy. There are lots of folks out there (I’m one of them) who would love the idea of a car that can carry 4 passengers, transform into a pickup when needed, and then transform back. When Subaru introduced the Baja in 2002, I was excited because I thought that they’d adopt the same disappering midgate design (which the prototype had) but they watered down the disappering midgate into a small “access door” that would supposedly allow the carrying of long objects. IMO this is one of the reasons the Baja bombed.

    Right now, those of us who want the utility of the truck and the passenger carrying capability of a car are forced to compromise (in my case, by driving an extended cab mini truck) but it would be nice if a manufacturer could offer, essentially, a downsized Avalanche that had both a 4-5 passenger carrying ability as well as the ability to have a genuine 6’+ bed.

    True, there are a couple of companies (Toyota and Nissan) that offer double – cab trucks with 6′ beds, but (a) it’s hard to think of the huge Tacoma and Frontier as “mini trucks” anymore, and (b) these things have the wheelbase of a stretch limo – and the fuel consumption of one as well.

  • avatar
    kaisen

    The ‘sails’ on the Avalanche are as necessary as the Ridgeline. The entire body structure is one-piece, not two as a pickup with an independent bed. It does ride on a frame, but a Suburban’s not a Silverado’s.

  • avatar
    omnivore

    It really frustrates me when people treat GM’s woes as a moral failing. Using words like “arrogance” and “laziness” to describe the roots of the General’s problems hides more than it reveals, I think. Giant bureaucracies can’t have human attributes like arrogance and laziness. They are either well organized to compete in their environment or they aren’t. Unless you want to argue that everyone within GM is lazy or arrogant, it doesn’t make sense to me to explain their problems in those terms. What I think it more interesting is to diagnose the problems with their operating structure, something which I think Farrago does well (even if he does sometimes allow a moralistic tone to creep into his analysis). Essentially, GM is juggernaust designed to compete effectively in the marketplace of the 1950s and the 1960s, and it is having a hard time adapting itself to new competitive realities due to the legacies of that earlier business plan (multiple brands, extensive dealer networks, manufacturing facilities designed for mass production rather than flexible production).

    An illustrative comparison is the airline industry. The major airlines designed their businesses to compete in the era of regulation, so (for example) they have large fleets with a large variety of jets that they needed to fly to all of their mandated destinations. After deregulation, they got stuck with jet fleets and corporated organizations that are very inefficient for new competitive realities. The new airlines that have grown since deregulation such as Southwest and Jet Blue are kicking their butts because their jet fleets and corporate organization were designed from the beginning to compete in a deregulated marketplace. The majors’ pre-deregulation investment in people and infrastructure is so massive that it’s going to take years for them to change course, if they even can. That’s why you keep seeing them in bankruptcy.

    It’s the same with GM. It was designed to compete in a market that isn’t there any more. Toyota, Honda, and Hyundai evolved later and thus are designed to compete in today’s marketplace. The only question is whether GM can get its hands around its massive legacy investments to remake itself. That’s not a question of morality, it’s a pure question of business.

  • avatar

    · Omnivore corporations and bureaucracies most certainly can and do exhibit human characteristics such as laziness and arrogance.
    Every company has a company culture. Most companies have the ins and the outs. Many companies have people that parrot the party line of the in’s.
    You know the “the reason our cars don’t sell is because of biased media”
    “We cannot compete because the competition has an unfair currency advantage”.
    We don’t make small cars because Americans don’t want small cars.”
    Sound familiar. Go to any auto forum including this one and you will not have to look far to see the arrogance that still permeates the remaining 2.5. Yes arrogance

  • avatar
    powerglide

    Martin Albright: Not trying to be a pedantic know-it-all, (if only for today), but actually I think the bed-and-disappearing-midgate Avalanche “innovation” is itself, uh, copied from the Skoda Felicia Fun, a Brat-like Czech unibody mini-pickup…

  • avatar
    Johnson

    It really frustrates me when people treat GM’s woes as a moral failing. Using words like “arrogance” and “laziness” to describe the roots of the General’s problems hides more than it reveals, I think. Giant bureaucracies can’t have human attributes like arrogance and laziness.

    You don’t understand the context these words are being used in. They are being used in context of the senior executives, and the corporate culture. The attitude of senior executives affects masses of workers below them. Factory workers at GM obviously don’t make the big decisions, the execs do. Management has a big influence over corporate culture.

    Whenever it is mentioned that GM is “arrogant” or “lazy”, by virtue of common sense this is referring to GM management.

    Toyota, Honda, and Hyundai evolved later and thus are designed to compete in today’s marketplace.

    Did you know that when Toyota was still starting up (in the 1940s), the company came up with a 50 year long-term market plan. Hyundai evolved latest of all, and Honda and Toyota in Japan started to become international at around the same time, 1950s-1960s. Honda and Toyota both competed in the “old” marketplace when GM still dominated. The difference is Honda and Toyota pride themselves on long-term thinking; long-term thinking is a fundamental part of both companies’ corporate culture.

  • avatar
    ihatetrees

    Re: Omnivore…
    It’s the same with GM. It was designed to compete in a market that isn’t there any more. Toyota, Honda, and Hyundai evolved later and thus are designed to compete in today’s marketplace. The only question is whether GM can get its hands around its massive legacy investments to remake itself.

    The above is very true. Another interesting point is that the Japanese (and to a lesser extent the German) manufacturers started from small cars (and worked their way larger) – just as the cost of fuel was becoming a factor in consumer decisions. Small and efficient are adjectives for the imports – whether it be cars, engines or their business planning. The domestics’ business model still has trouble with this – just look at Ford essentially betting the company on F-150 sales increasing forever.

    Another factor: CAFE standards and Detroit’s myopic response – the forced selling of crappy small cars to average their fleets.

    Back in the early 80’s, a better strategy (and more offensive and risky) may have been to post a ‘Federal CAFE Tax’ on big cars/trucks. Had that been done, Detroit may have been able to improve their quality in larger vehicles (their bread and butter) sooner.

  • avatar
    jurisb

    what should you do to save the company? even an idiot like me can guess it- build cars people want.
    a legend of an american uthopia.

    1. american build and designed platforms.-
    a small car front drive platform,
    a medium size rear drive platform,
    a large rear drive platform.
    an suv platform- rear independent.
    a truck platform- live axle allowed.
    2. american built and designed engines- from 1,6 liters to 6,5 liters. 4valve per cyl,dohc including vvt, for most of them.
    3. gearboxes- american built and designed cvt and 7 and an 8 speed automatic and manual gearboxes.
    4. spread the platforms among divisions. every division gets the same engines, gearboxes, chassis, but comletely different exteriors. no windshiled or front door switching.make a rebadge a taboo.
    5.add versions to your model line up- coupe, hatch , wagon.
    6. overhaul th model line, if discontinuing a model, replace it with at least one.
    7. change generations on time- 5-8 years not more for one gen.
    8. sell non -american units.(who needs saabaru?)
    9. improve fit and finish dramatically. have a standard of gap tolerances.
    10. add innovations , learn from r&d facilities.
    11. improve reliability by accepting only those modules that have gone through the harshest endurance tests.
    12. fight for the highest quality materials suppliers. buy in bulk , push down prices.
    13. add new models continuously. the range of products should grow.
    14. compare your products to competitors, not to your previous gen models.

  • avatar
    chris2

    I thought this was interesting…

    http://www.chicagotribune.com/business/chi-0704090401apr10,0,1765735.column?coll=chi-bizfront-hed

  • avatar
    Jeffer

    I think the critcal point in GM’s history may be the establishment of the GMAD’s (GM assembly division) It took control of vehicle assembly from the divisions.It may have been done to make it harder to break up GM, there were still anti-trust rumblings in Washington at the time,but it also removed any control over quality that the divisions had.I recall John Delorean’s account of a final inspection and test drive he implemented to catch defects on the Vega, which caused the management to hit the ceiling.

  • avatar

    From the article “We don’t know how to get 30 percent better mileage from” RWD cars.”
    GroundHog Day Indeed

  • avatar
    jthorner

    From the Lutz interview: “We’ll decide on our rear-drive cars when the government decides on CO(-2) levels and CAFE regulations,” Lutz said, adding that limiting CO(-2) would increase mileage, too.”

    Wow, what a smart business man he is, eh? You cannot put a development program on “pause”. These things aren’t DVD players. One of Detroit’s many problems is start-stop-start-stop development. The executives think you can just turn the development process on and off like a light switch. Doesn’t work that way.

    I can imagine that the latest political developments have Honda and Toyota management also going back to their desks and working out various product contingency plans, but you aren’t going to see those guys shoot their mouths off in some lame attempt to pressure the government into making a decision. The idea that you can just sit on your hands and make mad faces untill the government makes up it’s mind is foolishness. In a democracy the “goverment” can change it’s mind at any time. There is no firm plan for anything, and he who waits for the final plan is a fool.

  • avatar
    jthorner

    P.S. The organizational structure of GM today looks nothing like it did 50 years. Those who think GM’s current problems are the result of an outdated structure have not studied the structural history of GM at all. GM in the 1950s consistent of highly independent divisions, most of which made cars, but some of which made components (AC-Delco, Rochester Products, etc.), some made trains, some made big trucks, some made large diesel engines for sale to the commercial market, some made tanks, some made appliances (Frigidaire). GM corporate was basically oversight, advanced R&D labs and finace. The individual divisions had their own designs (sometimes sharing platform elements), their own engines, their own factories, their own marketing, their own dealer networks, their own everything.

    GM today is a completely top-down centralized organization which looks nothing like the 1950s GM. It has been rationalized and neutered. No wonder it now lacks the flexibility to compete.


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