Chicago Fed on Why GM's Dead
The Federal Reserve Bank is spending your (and your great-grandkids’) money in lots of creative ways these days. But some minuscule portions of it go to boring humdrum stating-the obvious analyses like this report, “ From tailfins to hybrids: “How Detroit lost its dominance in the U.S. auto market.” Well, boring, perhaps to the well-informed B&B here at TTAC, if they’ve kept up on their assigned reading. If not, and a very thorough (but not overly long-winded) analysis is your cup of tea, read away. If you want the Cliff-Notes version, make the jump here:
Thomas H. Klier, Senior Economist at the Fed, breaks down Detroit’s break-down(s) into three periods: the mid fifties to 1980: Imports and oil prices challenge Detroit; 1980 to 1996: Detroit stages a comeback (purely in profits from trucks/SUV’s despite massive market share losses); and 1996 to 2008: Detroit on the defensive again (how’s that for an understatement?).
The first section gives a pretty accurate picture of the first import wave of the fifties, and Detroit’s first compact response. And the repeat of that scenario, on a larger scale, in the late sixties, and Detroit’s mostly failed second wave small cars (Vega, Pinto). Where it fails is in its lack of candor in just how horrible most of these cars from Detroit were. Objectively speaking, too.
That goes for the whole report, except for a few references to “the perceived higher quality of import brands.” Minor detail, eh? Instead it’s “the presence of foreign automakers.” Like just showing up was good enough to kill Detroit. Tell that to Fiat, Simca, Peugeot, Alfa Romeo, Renault, Daihatsu, et al. Lots of good graphs and charts. Your money well spent.
More by Paul Niedermeyer
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A very narrow perspective. Sorry, but it's not simply a matter of offering decent small cars.
Poor management, union avarice, and misbegot politics ruined General Motors, Ford, and Chrysler. Union pattern bargaining, monopolistic and unlawful for corporations, extorted extravagant wages and featherbed work rules. Instead of producing competitive cars in right to work jurisdictions the Detroit-3 fulfilled their politically imposed obligation to build inferior products in union plants. Outdated platforms, ancient power trains, model proliferation and superficial redesigns eroded market shares. Planned obsolescence, engineered reliability and durability deficits to generate early replacement, devastated their image for quality and integrity. Outsourcing to cheap labor countries and the truck SUV fad temporarily sustained earnings. In time consumers revolted, refusing to pay profitable prices for junk when nimble competitors produce desirable, high quality, good performing cars.
Interesting read, but I don't believe the report effectively captured the effects of the changes in dealer networks nor the Japanese reaction to the VRA. In the first, you have an example where the US industry was effectively asleep at the switch and, abetted by State franchise laws, watched their dealer networks get taken over by foreign competitors, while in the second, the Japanese reacted to the new realities of the VRA by moving up market and creating a domestic manufacturing capability. In both cases, you have a good sense of the relative performance of the boards and executive management teams.
Now that www.gm-restructuring.com has been registered by General Motors the bankruptcy is almost a forgone conclusion. http://www.whois.net/whois/gm-restructuring.com