General Motors Death Watch 179: Black Tuesday

Robert Farago
by Robert Farago
general motors death watch 179 black tuesday

In July's Car and Driver, Csabe Csere takes the Secretary of Transportation to task for her ignorance about auto industry lead times. How can Mary E. Peters' department mandate a big increase in fuel economy standards for 2011 when Detroit’s already signed off on those products? Despite the obvious irony– the buff book’s hobbled by their two-month lead time– Csere makes a good point. The corollary: unless GM planned to switch from gas-guzzling light trucks to fuel-efficient cars in 2003, they’re insert F-bomb here. As May’s sales numbers indicate, indeed they are.

Last month, GM's light truck sales sank 22.1 percent. The GMT900 pickup trucks and SUVs touted as the Next Big Thing are No Big Thing. Chevrolet Tahoe sales are down 39.7 percent; the brand's pickups are off 42 percent. The next Next Big Thing after that, GM's Lambda-platformed crossovers, are also a damp squib. Sales of the GMC Acadia are down 27.6 percent. Saturn dealers sold 38.1 percent fewer of its twin under the skin, the Outlook. Add in ALL GM trucks, and May wiped 36.7 off the comparative sales ledger.

Like Richard Nixon before him, GM CEO Rick Wagoner takes all of the responsibility but none of the blame. At this morning’s shareholder meeting, GM’s 14.4 million dollar man had an opportunity to, as CNN mistakenly predicted, “step up.” Instead of [finally] outlining a specific plan for a return to profitability, Wagoner announced that GM is shuttering four truck plants and ramping-up car production. Why in three year’s time, cars will account for 60 percent of GM's North American production (up from about 50 percent)!

Wagoner’s “plan” to shut off GM’s light truck production spigot in the next three years is too little too late. At the end of April– BEFORE the May sales stats– GM had a 125-day supply of pickup trucks and most SUVs (e.g. Chevy Suburban and Tahoe). The truck glut will continue, and continue to drive down prices. GM’s life-sustaining profits will shrink further and their cash pile will burn even faster. Not to mention the fact that the plant closures could bankrupt struggling suppliers and cripple GM’s already fragile supply chain.

Meanwhile, Wagoner’s put the HUMMER brand on the auction block. Sure, Hummers sales are in the toilet; down by 60.2 percent this month. But from a wider perspective, the CEO’s increasingly familiar refrain of "all options are on the table” is proof (if proof were needed) that GM’s branding strategy is in tatters. Less than two months ago, the automaker created the HUMMER, Cadillac, Saab” division. Why the quick change of heart? Lest we forget, Hummer is GM’s strongest brand, boasting the company’s highest customer retention stats. At least it DID until Wagoner very publicly clouded HUMMER's future….

Don’t get me wrong. The General Motors Death Watch series started with the premise that GM should be broken-up and sold, with HUMMER as the idea’s poster child. But if radical, fundamental restructuring were the goal, as it bloody well should be, Wagoner should have swung an axe on an entire division, not just Hummer. Saturn was a more logical choice. It's a dead brand walking whose recently refreshed product line did sweet FA for sales (down XXXX). But with or without Hummer, it’s steady as she goes brandwise over at RenCen. Still.

Which means it’s only a matter of time before GM’s lobbyists head over to the White House and Capitol Hill with their billion-dollar begging bowl. Can GM hold out until after the presidential election? Perhaps. But the most amazing part of all this is that Rick Wagoner will probably be at the helm when GM’s slow-motion self-petard hoisting reaches its inevitable dénouement.

Truth be told, Wagoner’s “success” at GM has been the automaker’s greatest failure– at least in the last decade. Yes, it's Wagoner's tenth year at the helm (eighth years as CEO) of what was, before his tenure, the world’s largest automaker. Wagoner’s watched GM’s North American market share slide some ten percentage points. He’s seen the company shed tens of billions of dollars of stockholder value– and lose tens of billions of dollars. He’s sold everything that wasn't nailed down and pissed away the future of millions of American workers; all while lining his pockets and securing a bankruptcy-proof pension.

When the history of GM is written, Rick Wagoner will be easily identified as the architect of the automaker’s final, sad chapter. Wagoner will be condemned for his lack of vision, leadership and, above all else, timing.

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  • WalterRohrl WalterRohrl on Jun 05, 2008
    geeber : I agree that the Civic is a much better car than the Cobalt, but the ones I’ve seen are not cheaper than a Cobalt. Every Civic sedan I see on the lot stickers for at least $19,000. Most are in the $20-21,000 range. Given last month’s blazing-hot sales for the Civic, I doubt that you will be able to wrangle a substantial discount on one. Geeber, I am one of those 50,000 or so people that bought a new Civic last month. No problem getting a deal. I paid less than sticker even after factoring in all fees and the 8.25% sales Tax here in CA. So yes, they are dealing - I contacted 10 local dealers and got offered great pricing from all of them. I was ready to pay cash and had already gotten a written quote that I was OK with when they offered to finance at 1.9% over 3 years with NO money down. Took the cash and stuck it in the bank, I'd rather have the liquidity and pay a total of under $600 for interest over 3 years. So far I am thrilled with the car, it is all I really need. And I consider myself a car guy - overall driving is a lot less fun when I think about gas at $4.50/gal around here.
  • Menno Menno on Jun 07, 2008

    I can give you three short stories as to why GM is toast. First, let's compare a 1991 Camry to a 1991 Grand Prix. Wow, Grand Prix - flash! Wow, STS version has a modern Dual Overhead Cam V6 with 240 hp! I'm goin' with the flash and the power - plus GM gave me a deal! Fast forward 17 years. The Grand Prix is parked in the field, unwanted, by it's second owner. It'd broken down too much, cost too much, didn't last 100,000 miles. My buddy buys it for $450 to fix up for his 15 year old when said teen starts driving next year. He's a mechanic, he can fix it. After all, it started and ran, they drove it for two weeks, the teen even practiced parallel parking in the back yard (a big country yard). Wrong. Mystery problem after mystery problem. Now the car won't even go. Can't find the problem. Hire in an expert, finally. He comes - wow I haven't worked on these for 10 years. They didn't last. They only built this engine for 4 years. Oh, once we get it running, you'd better put cam belts on it. It's an interference motor and when (not if) the cam belt goes bang every 30,000 miles, it'll collide the valves into the pistons and there goes the engine. Finally, after dragging half of his portable diagnostic electronic equipment, he can only "surmise" that it probably is the crank position sensor. $50 for the part, but it is an absolute bitch to fix. Oh yeah, to change the back 3 spark plugs (they surely need it), you virtually have to 1/2 remove the drivetrain and jack it up/forward. After visiting with my buddy while the mechanic was there, I went shopping, bumped into the ex-owner of a bookstore. Visiting. She expressed sorrow at losing her biz, hates working at the little neighborhood store because it doesn't exercise her mind (for her, the glass is always 1/2 empty - she should be thankful she even has a job!) Why not apply at Borders in town? Oh, my car isn't reliable enough to go far (15 miles?!). Oh yeah, I think; it's an OLDSMOBILE, only about 10 years old. Maybe 8. Looks like 15. Third story. Go back to 3 years ago to my own son. First car, a "flash" Pontiac Grand Prix. $400. I knew it would not last too long, but hopefully would "do" for car #1 - the car which gets all the abuse and minor bangs and scrapes of a brand-new driver. Naw, it constantly broke. I mean CONSTANTLY broke. My son, working part time at a grocery while in High School, spent more on minor engine and other necessary mechanical repairs than the car cost, in a matter of 4 months. So, exasperated, he went and bought an equally old, equally delapidated (actually, looked worse) car which had already been in the (abusive) hands of at least two college students before him. A Toyota Corolla All-Trac station wagon. That little car not only hummed along for over a year, with minor and normal replacement part needs and the occasional minor repair from sheer age and prior abuse - but didn't let he or our eldest son down, on their "big trek" from Michigan to California (to help build Habitat for Humanity houses - as a part-excuse to have a ROAD TRIP while they still can) and the car conducted itself like it was new for the entire trip. THAT is the reason why GM (and Chrysler) are going down. After a few decades, and looking at the lowest cost, most used up cars out there and figuring that all else being equal, you can actually depend upon a Toyota, a Honda, a Subaru - while GM and Chrysler products particularly constantly nickle-and-dime (or more to the point, $100 and $500) their last owners near to death. So when said people move up to "better" cars, after experiencing GM and Chrysler "reliability" in old cars, do you think they're going to buy new GM or new Chrysler? Me neither.

  • Tassos BTW I thought this silly thing was always called the "Wienermobile".
  • Tassos I have a first cousin with same first and last name as my own, 17 years my junior even tho he is the son of my father's older brother, who has a summer home in the same country I do, and has bought a local A3 5-door hatch kinds thing, quite old by now.Last year he told me the thing broke down and he had to do major major repairs, replace the whole engine and other stuff, and had to rent a car for two weeks in a touristy location, and amazingly he paid more for the rental ( Euro1,500, or $1,650-$1,700) than for all the repairs, which of course were not done at the dealer (I doubt there was a dealer there anyway)
  • Tassos VW's EV program losses have already been horrific, and with (guess, Caveman!) the Berlin-Brandenburg Gigafactory growing by leaps and bounds, the future was already quite grim for VW and the VW Group.THis shutdown will not be so temporary.The German Government may have to reach in its deep pockets, no matter how much it hates to spend $, and bail it out."too big to fail"?
  • Billccm I had a 1980 TC3 Horizon and that car was as reliable as the sun. Underappreciated for sure.
  • Inside Looking Out I did not notice, did they mention climate change? How they are going to fight climate change, racism and gender discrimination. I mean collective Big 3.