I lifted this from an e-mail I got today:
GREAT ARTICLE !!!!
The article was in scrippsnews.com .
By Richard Williamson
Nov. 20, 2008
General Motors is on the verge of bankruptcy because it "builds cars that nobody
wants to buy."
If you haven't heard that line in the bailout debate, you haven't been
listening.
"They're a dinosaur in a sense," Sen. Richard Shelby, R-Ala., said on NBC's Meet
the Press. "I hate to see this because I would like to see them become lean and
hungry and innovative. And if they did and put out the right products they could
survive."
Such facile rhetoric has been in vogue since at least 1978 and is as obsolete as
a Chevy Vega.
In 2007, more than 9.3 million "nobodies" bought GM cars and trucks, keeping the
brand in a dead heat with Toyota as the world's largest automaker. It was the
second-best sales year in GM's 100-year history.
Were buyers just being charitable? Does "nobody" want a Corvette? Do the more
than 600,000 potential buyers lining up for the new 2010 Camaro not really want
one? Clearly, no one wants to buy the Cadillac CTS, Motor Trend magazine's Car
of the Year.
And what about the fact that Chevrolet dealers were screaming for more Malibus
this year to satisfy demand? Was that just public relations? What about Malibu
's selection as 2008 North American Car of the Year by the fussy Detroit auto
show press and the remodeled model's ranking as best mid-size car in initial
quality by J.D. Power and Associates?
Chevrolet sales grew more than 4 percent in 2007 to 4.5 million vehicles, with a
nearly 34 percent increase in Europe and a 22 percent rise in Asia . There must
be a lot of "nobodies" in China , because GM ranks as the best-selling import
brand there.
And apologies all around for those nasty old trucks that boosted market share
for the Detroit Three in the 1990s. GM sold 3.8 million globally in 2007, an
increase of 33,000 or 1 percent.
As someone who has been reviewing cars for nearly two decades, I can think of
few GM products I didn't want to buy, though some of the early Luminas and the
misbegotten Pontiac Aztek were quite resistible. The problem isn't that "nobody
wants" a GM product, it's the fact that in a hyper-competitive world, a company
that once dominated is going to see its market share inevitably slip. Thus,
every action appears defensive.
The fact is, GM, Ford and Chrysler are still paying for the sins of the '70s and
'80s long beyond their expiation(cq) date. Korean car maker Hyundai, meanwhile,
is wreathed in laurels for reversing its quality fiascos of the 1980s and is
devouring market share from the Detroit Three as well as Japan, Inc.
When I say the domestics are "paying for their sins," I mean that literally. GM
products bear consistently lower sticker prices than their Asian and European
competitors, despite the fact that they typically offer a richer menu of
standard equipment and better power options.
Take the Cadillac CTS, for example, which retails for $38,980 and comes with a
navigation system and OnStar Service as standard equipment. If you turned to
import competitors, you might pay $50,625 for a BMW 5-Series or $45,675 for a
Lexus GS350 without the nav system.
But the Detroit Three are not just paying for their past sins, they're also
paying for their past successes. The thousands upon thousands of retirees GM
still supports were working on the line when factories were running overtime to
keep up with demand. The plants they have closed were built for less competitive
times.
In 2004, health care cost GM $1,525 per vehicle, compared to Toyota 's $201,
according to the management consulting firm A.T. Kearney. And health care costs
increase with age. Toyota had only 250 retirees in North America in 2004. GM
covered about 340,000, including spouses. And those contract provisions were
painstakingly negotiated in many a midnight mediation over the decades.
It was inevitable that GM, Ford and Chrysler would lose the commanding market
share they enjoyed after World War II. Asia and Europe crawled out of the
postwar rubble and hit their stride when American industry was growing fat and
lazy.
Since then, the import brands have expanded their fleets to compete in every
market segment, complete with U.S. factories. The Detroit Three lost their
virtual monopoly in full-size trucks when Toyota got serious about the Tundra,
and Nissan rolled out the Titan, both built in Southern U.S. states hostile to
unions and offering extravagant economic incentives.
GM has 7,000 dealerships, many of which are protected from closure by antiquated
state laws. Toyota has 1,500.
While anyone who covers the industry can come up with any number of blunders by
the Detroit Three, building unwanted products is not one of the biggies. Not
anymore. That was a completely different era.
In fact, part of their recent trouble came from the fact that they built
vehicles that people did want. Until a year ago, they had a hard time supplying
enough Yukons and Silverados for a market flush with cash and credit. Toyota and
Nissan were fighting hard for a piece of the action. When pump prices spiked,
all of the makers were caught with fleets of gas guzzlers that few buyers could
afford, even if they wanted them.
But were the automakers to blame for high fuel prices? There's a good argument
to be made that the U.S. invasion of Iraq - a government action - and related
world instability contributed to the soaring fuel prices that endangered not
only the auto industry but the world economy.
That's not to say that GM didn't have plenty of high-quality, fuel-efficient
cars. With 20 models that get 30 miles per gallon or more, GM offers more than
any other maker. They also offer the most hybrid vehicles, ranging from the
Malibu Hybrid to Cadillac Escalade And if you want conventional frugality,
there's the dutiful little Chevy Aveo, which, at $12,120 costs about $2,000 less
than a Toyota Yaris.
If it survives, GM will produce plug-in hybrids within a couple of years that
should allow most commuters to go to work and back without running their
internal combustion engines at all.
GM still catches a lot of grief for scrapping the electric EV1 in 1999, but the
two-seater was believed to have cost GM $80,000 per unit and could only be
leased, not sold. It was a costly boondoggle briefly mandated by one state --
California . Nonetheless, GM soldiers on with development of the Volt, a hybrid
designed to run primarily on battery power that might enjoy better success but
certainly won't save the company.
GM is also playing a key role in the development of so-called "Intelligent
Transportation Systems" that will make driving safer and more efficient. In
fact, cars that drive themselves are not that far off. Eleven years ago, GM
linked eight Buick LeSabres electronically in a system called "platooning."
Drivers at the event known as Demo 97 did not have to touch the accelerator,
brake pedal or steering wheel.
GM's sophisticated OnStar communications system is also seen as a bargain basis
for future communication between vehicles. The system would also provide
360-degree visibility and would cost much less than the government's proposed $3
billion to $10 network.
GM could be the beneficiary or the victim of government action, but the
government has been deeply involved in the automotive business for most of its
existence, from catalytic converters to air bags, which, by the way, GM
pioneered.
Should the U.S. government lend taxpayer dollars to the Big Three? We're talking
about a loan, here, not an outright gift like the hundreds of billions of
dollars we have poured into Iraq , including $9 billion in cash that simply
disappeared.
Some respected economists argue that bankruptcy may be the only way for GM to
hack the Gordian knot of contracts, laws, regulations and debts dating back to
an era of black-and-white TV. But GM questions whether the world's largest
automaker could survive bankruptcy. Who would trust a warranty or parts supplies
for a company that might not be around next year?
If you're occupying an ivory tower or a talk-show microphone, you have the
luxury of debating economic theory. If you are among the one out of 10 workers
who depend on the auto industry for your daily bread, the question is a little
more immediate.
At the end of the day, GM may go under, taking much of the world's economy with
it. To think that they survived the Great Depression but perished in their 100th
year would be a bitter pill to swallow. But let's hope that historians don't
blame the demise of the brand on cars that "nobody wanted."
