General Motors Death Watch 157: The Fog of War

Robert Farago
by Robert Farago

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.

Robert Farago
Robert Farago

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  • Jefty_jeff Jefty_jeff on Dec 18, 2007

    I agree with a previous post by ZoomZoom saying that there is a lot of back-and-forth quoting and arguments in this discussion. Having read it all (over 2 days) I'm not sure I've learned a lot. It reminds of the numerous other similar discussions on import vs. domestic issues, be that in online forums such as this, or interviews with industry experts appearing on national radio. We all have our good and bad experiences and that's what it really comes down to. I'm a believer into the product quality though, and I think that's mainly what drives any business up or down. That, and the product support. I have to say I've never had a pleasure of owning a GM product, but I wanted to add a couple of points to the import vs. domestic bias based on my limited experience with Ford and other cars. I'm not your average car shopper. My father is a mechanic, and I grew up helping him work on all kinds of cars, from European to Japanese to American ones. Having seen all these cars in intimate detail, while taken apart and being repaired, he has a very firm position in terms of his preferences: 1. Japanese, 2. German, 3. American In the past 15 or so years that I can remember, we've owned about 8 cars, 5 of which were Japanese, and 3 American. We may not have owned enough of various non-Japanese cars to know about their reliability first-hand, but we've surely fixed many of them. And when one is exposed to the quality of components that go into in a car, and is able to compare this quality between several major car-makers, it's easy to notice that Japanese and German cars are just made better. Everything is smaller, neater, smoother and more efficient or economical. Notably the Japanese ones. And here's a subtle but important example I like to use that a mechanic have to deal with everyday: there is almost no anti-seize and anti-rust treatment on any fasteners in American cars, whereas there is in Japanese ones. This means that when some part on the car needs maintenance on a Japanese car, the bolts can be undone, and the part can be taken apart and repaired. On an American car, the bolts will probably be rusted to the point that they will have to be cut off or will otherwise break off, requiring a lot more unnecessary work (and money) to go into maintenance. This is but one small side of things, but it shows the attitude that goes into building these cars. Do you think this affects my father's preferences when he chooses a car? You bet! He's the one that has to work on them! Do you think it affects other people he knows? Of course, because they go to him for advice, and he bases his advice on his experience. In my family and my circle of friends I'm the only one who has an open mind towards all manufacturers. I'm the kind of person who likes to go to auto shows every year and to various dealerships every couple of months, to sit in cars, feel them, read about them and drive them, even if I'm not actually interested in them. I like to see where things are going in the automotive industry because I love cars. And I can't help but find myself disappointed in the general quality of the domestic products, even if was initially very inspired by the ads. The fit and finish, the materials, the styling, or the features - it's just not quite there. In addition, there's also the annual reliability data. The personal experiences differ widely from one owner to another though. Some people swear by their Ford Taurus (for example), and some can't stand it. I've had three Ford cars - an 89 Probe, a 92 Taurus and a 2004 Mustang. The Taurus was probably a good car on paper, but it required an inordinate amount of maintenance. Granted that between my father and I we always do all the work ourselves. I can't imagine what a burden it is for people who need to rely on others to fix their "problem" cars. A colleague of mine owns a 97 Taurus, and that car is in constant need of replacement parts and unscheduled maintenance. Even if the new Taurus is worlds apart from the old one, this particular person will never buy Ford again. And he is not alone. Another friend of mine has a Pontiac Sunfire and it's been very good to him. I know people who love their Impalas, and people who hate their Oldsmobile Aleros. There are clearly good and not so good products out there. But because each average person can only have so many cars in their lifetime, people tend to jump ships after one bad experience, and I don't think you can blame them because cars can be large financial burdens. I used to own a brand new Mustang which was an emotional purchase. After the initial 'honeymoon' period wore off two years later, I was disappointed to find it not only impractical (which I knew from the get go) but also technologically obsolete. In 2004 it had an ancient engine and ancient suspension, both dating to '79, and it lacked many things that became obvious later on. Other Ford products had better engines and suspensions at the same time. Why didn't they use those in the Mustang? It beats me. But I wasn't going to continue paying for a car that was sub-par by my standards and didn't fit my needs. And then when I decided to part ways with it, I was slapped with a ridiculously low resale value and the fact that nobody wanted to buy it. I haven't considered resale values until then, but I surely will from now on! That's just one experience, but in general I think that many products can be "good on paper" and not good in reality. How does one know if the new Aura/Malibu/Taurus/Mustang/etc. is going to actually perform 5 years down the road? It would take an owning experience to find out, and not everyone is willing to risk it. The Camry had earned a reputation of a very reliable car over the years, so many frustrated people buy it in spite of the plain interior and boring driving characteristics. This may not continue indefinitely, and the Accord may become the new Camry. To date, the Accord is probably the best car I've driven yet, and sets a whole new standard to measure everything against. That counts for something, even with my limited experience. If Ford's or GM's cars really improve in quality, just like they say they would, it will still take time for all the factual evidence to accumulate before those who have once switched to import brands consider switching back. And statistics shows that many are switching away from the domestics rather than in favor of them. They can't all be wrong. In fact, I don't personally know anyone except one person who would even consider buying American now. When I bought the Mustang, it downright surprised all of my friends. Two years later I came to a realization that I was wrong and they were right, only to confirm their beliefs. At the place where I work the majority of people drive either a Civic or Accord or a Camry, with very few others. I think people are just going with the safe bets, despite that there's already a million Civics in every town :) I'm all for the US auto industry to recover, and I hope that they do. But it can't happen without them improving their products first. And that includes improving the appeal and the features as well as the reliability. I have yet to see a Detroit product that would match my experience with the Accord, in the same price range. The new Taurus is not even close. I've heard in several interviews with high-ranking industry representatives complain about their inability to sell the Detroit products in foreign markets, and using that as an excuse for the entire industry's demise. What foreign markets are they referring to? Japan? Japan is but one small country. There's still Europe and Middle East and basically the rest of the World where American cars are widely available. But somehow people don't buy them as much as the competing brands. Why is that? I think people choose one brand over another based on either a personal experience or the experience of other people that they know. How many times does one person need to make a bad choice before they decide to look elsewhere? Probably only once! A car is a very expensive luxury that people in many parts of the world can't even afford, let alone experimenting with the same brand for years until one is convinced it was a bad idea. The maintenance is expensive and then the resale value is generally low. People are careful about how to spend their money. And picking the brand isn't the only part to choosing a car. First of all it needs to meet one's needs, and be the type of vehicle you need in terms of versatility, utility and safety. I love station wagons and hatch-backs for their practicality, so the whole chunk of the auto market is simply not for me. I also love all-wheel-drive because it snows a lot where I am and I'm an adventurous type of person. So that leaves me with very few choices, almost none of them domestic. Then, it needs to be affordable (both up front and later in terms of maintenance). No car is an investment. And then it needs to be pleasant and attractive, because people spend lots of time in their cars today. (some may consider this #1) That's how I think people should approach their car searches. Appearance is a big part. In general I find American cars less attractive than the import ones. What can I do, I just don't like their bold styling. The Caliber and Jeep vs. the Outback or the Volvo for example. The latter two are much easier on the eyes. In the end I'll have to come up with a compromise of course, because no car is perfect. But I'm strongly leaning towards a Subaru, because I already have one and it's very good so far. Even if Dodge or Jeep come up with a similar product, what are the chances I will feel like taking the risk and switching to a different brand after my good experience with Subaru? Very slim, considering that Subaru is at the top of reliability list, and Jeep is at the bottom. Same with people who bought Camrys. They will probably try an Accord or a Sonata before they try a Detroit model. The reason I still have an open mind towards Ford (and American products in general) is thanks to my great experience with the 89 Probe. I love that car. Almost nothing at all broke in that car considering it's almost 20 years old, and it still drives today. I credit that largely to the fact that it was developed by Ford and Mazda together. It has a Mazda engine and many other parts, and that's what sets it apart. That's what I think makes the Fusion and the Escape so successful - the partnership with Mazda in the design. The new Taurus is made in partnership with Volvo, and than can be a very good thing. It also comes with AWD and has many features that sound great on paper. But it's too soon to tell what will it actually be like. People who bought an earlier Five Hundred seem to like it, but overall the model didn't sell very well. That's why they've renamed it back into Taurus. Am I willing to risk it and try it? Probably not, because I can't afford to loose this much money, and also because it's not the type of vehicle I want. If Ford (or GM) had a type of vehicle I want, I would give it fair consideration, but I can almost predict right now that I will not pick one of them, based on their current products. Most people probably don't do nearly as much research and comparison as I do. I'm not sure what drives their decisions. But I go by technical data and actual experience, not by what others might think of me if I drove this or that brand. Sorry for a very long post :)

  • Macca Macca on Dec 21, 2007

    Meanwhile, GM announces a recall of 275,936 vehicles, including the 2005-07 CTS, CTS-V, STS, STS-V, and SRX, as well as the 2006-07 Solstice and 2007 Sky. Apparently, the seal on the rear axle pinion can leak. I vaguely recall (pun intended) a discussion of how the rear diff issues reported by Soltice/Sky owners were overblown and a non-issue...for the life of me, I just can't remember who was touting that line.

  • UnoGeeks Thanks for the informative article. Unogeeks is the top Oracle Integration Cloud Training Institute, which provides the best Oracle Integration Cloud (OIC) Training
  • Varezhka And why exactly was it that Tesla decided not to coat their stainless steel bodies, again? My old steel capped Volant skis still looks clean without a rust in sight thanks to that metal vapor coating. It's not exactly a new technology.
  • GIJOOOE “Sounds” about as exciting as driving a golf cart, fake gear shifts or not. I truly hope that Dodge and the other big American car makers pull their heads out of the electric clouds and continue to offer performance cars with big horsepower internal combustion engines that require some form of multi gear transmissions and high octane fuel, even if they have to make them in relatively small quantities and market them specifically to gearheads like me. I will resist the ev future for as long as I have breath in my lungs and an excellent credit score/big bank account. People like me, who have loved fast cars for as long as I can remember, need a car that has an engine that sounds properly pissed off when I hit the gas pedal and accelerate through the gears.
  • Kcflyer libs have been subsidizing college for decades. The predictable result is soaring cost of college and dramatic increases in useless degrees. Their solution? More subsidies of course. EV policy will follow the same failed logic. Because it's not like it's their money. Not saying the republicans are any better, they talk a good game but spend like drunken sailors to buy votes just like the libs. The sole function of the U.S. government is to take money from people who earn it and give it away to people who didn't.
  • CecilSaxon Sounds about as smart as VW's "SoundAktor"
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