You wake up tomorrow morning and find that the Board of Directors of General Motors has decided on a management change, and has appointed you as the new CEO of GM. (Actually they met with you the previous evening and, after a few drinks during the discussion, you signed the contract. “Resign” is not an option.)
What do you do?
Buy Toyota.
1. Fire the current design team, and hire a better one. One killer designer can rescue a brand – see Nissan.
2. Milk the sports/Corvette tradition, which is what they are doing. Get a major movie/show to adopt a corvette, or to be designed super car (see #3) – see James Bond/BMW/Aston, and Viper.
3. Design a super car, or buy a marquee supercar company. Saab doesn’t inspire awe. Hummer isn’t sport. Vector is a homegrown American supercar company that has been under marketed imo. GM should buy Vector, and badge the Vector as the showcase GM car.
http://www.vectorsupercars.com/
4. Leverage Nascar and sports more. They have Jeff Gordon. Run with it. I think GM has a serious marketing problem, so most of my solutions are marketing oriented.
Incognito’s on the right track. Also:
-Fire all the managers who think styling is a substitute for innovative engineering.
-Improve the quality-control process. This should be a priority.
1. Make “Today and Tomorrow” required reading for executives.
2. Announce a goal to have the lowest defects/car of any domestic automaker next year without increasing production cost… and the lowest worldwide in two years without increasing cost.
3. Announce that everyone in the company will get a 10% raise when we meet each of the item 2 goals. Also, have a cleanliness and maintenance push in the factories to help improve worker’s standards.
4. Hire new engineers from outside the usual places to get the brainpower to accomplish goals in item 2, and the productivity improvements to pay for the bonuses in item 3. Pay more money to get experienced engineers instead of just going down to University of Michigan campuses and getting EITs. Make sure some of the new blood comes from other industries.
5. Cancel any supercar or extreme luxury projects that are justified as improving “brand prestige” or some such crap. We will get brand prestige from people liking their own cars, not drooling over pictures of someone else’s.
6. Spend the resources (including reassigning experienced engineers from luxury and supercar development projects), to get the design and quality on entry level cars RIGHT. Young people who hate their piece of crap Chevy aren’t going to turn into old people who buy Caddies, they are going to turn into old people who buy from someone else.
7. Stop using QS9000 to beat suppliers into giving you a cost cut every year. They are doing it by lowering part quality. Start demanding higher quality instead, especially for handles, switches, knobs, etc. that the customer will have interaction with.
8. Buy a company fleet composed of a mix of competitor’s cars and GM’s entry level cars. Require senior engineers and upper level managers to drive these cars, and rotate who drives what every two months.
9. Bribe some movie studio into having the young, attractive hero in their blockbuster action movies drive a customized Cobalt instead of an import. Talk with Apple and other “hip” companies about collaboration and joint product promotion opportunities.
10. Form a set of cross-functional (but engineer heavy and marketing light) teams to re-examine how we do business top to bottom, and come up with new methods (or better yet, stealing existing methods) to drastically reduce costs, including administrative overhead as well as mfg. Their proposals need to be ready for implementation by us and select suppliers within 2 years, so that by the time our quality initiative is done and our customer satisfaction is ramping up we can shift focus to achieving similarly radical improvements in productivity.
11. Institute a policy that any new executive compensation packages including GM stock will only award the stock a minimum of five years after it is earned. Executives must focus on building the business, not micromanaging Wall Street perceptions.
Tell all divisions to prepare for divestiture.
Where the Hell is Ken? I think we need to hear about the antimatter-powered aircar here.
and more, based on a friends recommendation.
12. Stop avoiding recalls like the plague unless the feds shove a safety related one up our @$$. Instead, adopt “secret” recalls like the Japanese. Issue unpublicized recalls for quality related issues. When a car comes to the dealer for servicing its VIN is checked against the “secret” recall database. Any outstanding items are fixed and the customer is neither billed nor informed of the work. It will cost more, but go along way to improving the customer’s perception of our car’s quality.
My job would be to address the coming crisis:
1. Find out why Detroit cannot build an efficient, competitive car and has to resort to “badge-engineering” of imports.
2. Do something about it.
It may already be too late for GM; when oil hits $80/bbl, the market for the Hummers, Escalades, Avalanches and even Aztecs is likely to collapse. It will be the 1970’s all over again, where Detroit’s small-car offerings are justfiably recognized as lacking in all attributes compared to their foreign competition. And this time Toyota has plants in the USA, and not even a serious drop in the dollar can wipe out the cost advantage. GM is going to be in for a world of hurt, and Ford and DC too.
The engineering at GM is pretty solid. Granted it’s not THE best but it can hold its own against the global competitors. There’s something wrong with the brand management and/or designers.
I thought Lutz was in the process of shaking these groups up a while ago but I haven’t seen positive results hitting the streets yet.
So either Lutz is not being allowed to shake what needs to be shaken or he’s lost his touch. If the former, then the people who are holding him back would be gone or “re-assigned”. If the latter then, Lutz needs to be replaced with someone who can clean house properly.
The first thing I do is set up a round of golf with my main pitchman, Tiger Woods.
Have Buick join Oldsmobile into the ashcan of the company’s history.
GM’s problem is simple: Because it must pay it’s unionized workers whether they work or not, any efficiency gains simply result in increased capacity, which they already have too much of. They can’t close factories, they can’t lay off workers, nor are they able to make vehicles that enough people want to buy to justify their productive capacity. This fact requires GM to produce more vehicles than the market demands at the price it requires to make an acceptable return on capital. Then it pushes them onto its dealers and uses whatever incentives it can to get them off the lot. On a shareholder value added basis GM is probably the single biggest wealth destroyer in America.
GM’s factories must run at a higher level of production than the market demands in order to just break even on their fixed costs (which their unionized workforce is).
By the way, if you like the looks, performance and quality of GM cars then you are getting a hell of bargain by buying one, probably below cost, but certainly below any kind of mark-up. The quality of ALL mass produced autos are worlds ahead of 20 or 30 years ago to the point where it’s not really an issue any more for most people. I think GM has reached an “acceptable” level of quality for most people, though certainly not superior.
Styling, engineering and branding won’t fix this problem. Ford has said explicitly that it wants to get smaller as a company and I think GM should too. The days of GM owning 45% market share (and the Justice Department threatening to break them up if they went above that number) are long gone.
If I was CEO of GM I would try to find a way to deal with the fixed cost problem. After a few years I’d probably be fired (if I was unsuccessful) or hauled before Congress to explain why I was trying to destroy unionization in this country (if I succeeded).
Nobody has ever convinced me that anybody in the auto industry actually makes money (this includes Toyota, who claims they make money but the murkiness of Kiertsu accounting makes that very suspect). The global over-capacity has been estimated at about 40% which means several world auto companies need to go out of business for anybody to be able to make money. Stay tuned. This is not a problem that anybody can innovate, style or market their way out of. At this point they must survive long enough to still be around after the shake-out.
The one ray of hope is that China and India could demand enough vehicles in the future to justify the over-capacity in the industry. But that’s farther off than most people think.
Run the company into the ground and then ask for a multi-billion dollar bailout deal from the government.
Hey, it’s worked before!
DS,
If I get the job, I’ll offer you charimanship of one of the cross-fuctional cost reduction teams, if in return you’ll agree to offer me the chief engineer slots of one of the divisions if you get the job.
“It’s the pension plan stupid”
GM is a underperforming pension fund that happens to manufacture cars.
GM’s market cap is about 1/8 the size of Toyota’s.
The auto companies may have to go bankrupt to get out from under their union contracts. The alternatives are to disappear slowly, or to find some other business to get into. One possibility is to exploit their engine plants and start making small cogenerators.
“”It’s the pension plan stupid”
GM is a underperforming pension fund that happens to manufacture cars.”
Amen, brother.
Ditch the car division, get better fund managers.
Can a CEO legally shut down the whole company and sell off the assets? What happens to the stockholders – do they get the sale proceeds as final dividends? Do they have a way to stop it (I guess replacing the CEO would do it)?
I got an e-mail from Bill Wyatt, who tried to post a comment but was unable to for some reason. I tried to post it for him, but was also rejected. There’s nothing that should be imaginably objectionable to a filter in the comment…anyone have an idea what’s going on?
Sorry, it’s the comment blacklist. I add words to it promiscuously, because that seems to be the best way to keep comment spam from being a problem, but it comes at the cost of rejecting some legitimate comments.
The blacklist is supposed to indicate which phrase got your comment rejected, but I have not been able to get this feature to work correctly. If anyone can help me to fix it I would be much obliged.
BTW, I looked in the MT activity log for the source of your comment’s rejection. It could have been the term “-madness.” which I have now removed from the blacklist. If that’s not it, email your IP address to me and I’ll find out exactly which phrase caused the problem.
UP
OK, good…here’s Bill Wyatt’s comment again:
>
> I’d file for bankruptcy, and use it to dump GM’s
> legacy pension and
> benefit costs onto the PBGC, close inefficient
> plants and renegotiate
> labor contracts both to increase operational
> flexibility and to shift
> employees to strictly cash compensation (some of
> which could be used by
> the employee to contribute to a defined-contribution
> pension plan or to
> pay group health insurance premiums, but all future
> premium increases
> would be borne by the employee not the company).
>
> Emerging from Chapter 11 in a position to re-enter
> the capital markets,
> I would use the newly raised capital to implement
> the suggestions of
> incognito and C. Taylor, especially with respect to
> quality and
> engineering. Having eliminated the burden of legacy
> costs, those
> suggestions might actually succeed in turning GM
> around rather than
> merely allowing it to survive until its next crisis.
>
> Bill Wyatt
One problem with going bankrupt: the UAW may strike if the company tries to throw out the contract, regardless of how damaging it is.
A serious battle with labor could turn Chapter 11 reorganization into Chapter 7 liquidation. The UAW may very well be willing to fight to the death because they don’t think management will give up the company. Management probably won’t either, and it would be a breach of fiduciary duty to liquidate the company unless it provided the greatest shareholder value. They’d likely be tied up in court for years.
If GM liquidated, they’d have to find buyers for plants, IP, brands, etc. Who’s in a position to buy? Well, Toyota….
Basically, the first company to try this is likely to be committing corporate suicide to convince the UAW that it’s not fun and games any more. The major beneficiaries will be competitors, domestic and foreign. Nobody wants to be first. Nobody.
Kill the complete sedan lineup, except for the Cobalt, and replace them with the Australian Holden lineup (http://www.holden.com.au/www-holden/) All GM vehicles sold in USA to be made in USA, allow americans to be able to say it is american, not canadian or mexican as (where most components are made).
one thing you could do is reach out to the tuner lifestyle and offer something better than the “ion redline” like a roadster from the pontiac division that is inexpensive, potent, and has a good drivetrain like a rear wheel drive 6-speed 4 or 6 cylinderwith a good design appeal to the eye with plenty of performance options and aerodynamic options.
So I’m CEO. Whew. Don’t let anyone think this is going to be easy. Short of Chapter 11, I’d probably eliminate Pontiac or Buick (probably Pontiac, since luxury cars have better market potential). I’d continue the global Chevy effort, but take Corvette out as an independent marque. Make all Buicks and Cadillacs off the same rear-drive platforms with soft Buicks to go after Jaguar and hard Cadillacs to take on the Germans. And I’d search for one or two headline technological advances that I would bring to market before the Japanese – cam-less engines, magnaride for the masses, the Hy-wire chassis. Then, I’d make a political statement, to wit: Anyone who believes in ethnic diversity, gender equality, handicap access or environmental regulation, and sends their money oversees is an A-one hypocrite. And I’d say it over and over until the American affiliates of Japan and Korea start complaining to Washington.
We now need to go in the direction we should have gone years ago. Let’s get the Hy-wire going. We need as a nation to be providing our
own fuel, alcohol or hydrogen. GM seems to be
way ahead in the development process of it’s fuel cell. As a buyer I’m dismayed at watching fuel prices skyrocket and I have no plans to replace my gas burner with anything that burns the stuff. I’m really open to looking at something other than what is being produced today. I don’t consider the hybrid as anything but a stop gap measure. We really need to get going in another direction.
Big Three Workers Give an Inch on Health Care, By DANNY HAKIM and JEREMY W. PETERS, Published: March 22, 2005
OK, Mr. Hypothetical CEO, I’m a victim of GM’s “morning sickness” problems with the rack-and-pinion steering in the 1980’s. The recall offered some compensation for owners with 50,000 miles or less. I had 53,000 miles when GM admitted the problem. GM management knew about it, but kept it quiet, while my car was under warranty.
I vowed never to give GM another dime as long as I live, having been screwed once and unwilling to be screwed twice (there is also a Japanese car company under the same personal embargo. Something about a tinfoil header, too thin to fix in the machine shop, curling into a toboggan shape when the cheezy temperature gauge quit). If you were the CEO of GM, how would you win me back? Good luck. Of course, that’s why corporate demigods make the big bucks.
Welcome to Popular Mechanics readers.
Here are some remarks by the head of GM North America:
Link
Neil Menzies: You mean something like plug-in hybrids?
I bought a diesel last year because I wanted the minimum fuel consumption and maximum ability to substitute, but if GM had been selling a plug-in hybrid I would have bought that instead.
Detroit being so far behind the curve, I expect Toyota to be first to market with one.
I worked for GM/Delco for a few years in the late 1990s. GM was proud of their “lean engineering” program. Lean engineering was a euphemism for no engineering. Every other car manufacturer (except Ford) has made a substantial investment in R&D. The effect cannot be ignored.
GM (and Ford) are in very serious trouble and it is self inflicted. Look at the engineering that Honda has developed. All their engnines use variable valve timing, technology they developed. Nearly all other manufacturers, except GM, only offer these efficient engines. GM’s prime marque — the Corvette and Ford’s Mustang — still use an overhead valve, pushrod V8, It’s embarrassing. Comparing the Corvette to any trus exoticar is pure nonsense. It is the same car that was built 40 years ago.
Roger Smith said build whatever we want, Americans will buy them. Though the leadrership has changed, the same apparent attitude prevails. Refusing to spend money on engineering is the road to disaster.
The only way for GM to stop bleeding red ink is to get concessions from all employees, and spend that money on true automotive engineering, not more cup holder ‘technology’.
The “plug-in” hybrid is an intriguing idea, but it represents an interesting marketing challenge. Apparently, the makers of *normal* hybrids have had a hard time getting across the idea that you don’t have to plug it in..now, with the plug-in, you would have the *option* of plugging it in, but you wouldn’t *have* to. It’ll take some creativity to get this idea across to large numbers of people quickly.
It could also be that customers understand very well what hybrid vehicle and pure-electric vehicles are about and don’t want them. Or were you making that point euphemistically?
No, actually, I wasn’t…there are certainly people who just don’t want them, but I’ve also seen articles claiming that people are genuinely confused…that the “electric” aspect of a hybrid makes people think it needs plugging in.
I think “hybrid” is a lousy name from a marketing perspective, anyhow…
I don’t know but I suspect the main problem is cost rather than consumers’ awareness. The article cited by Engineer-Poet says that “Every additional 10 miles of vehicle range in electric mode adds about $1,000 to the cost.” That’s an additional $6k in up-front cost for a vehicle whose daily range on batteries is only 60 miles. If you assume an extremely conservative average MPG value of 25 for such a vehicle, at 10k miles/year and $3/gallon for fuel it would take 5 years before total fuel expenditure equalled the premium in up-front cost. (Higher-mileage use of the vehicle would require either more batteries, increasing the up-front costs, or more operation on gasoline alone, which would increase average fuel consumption.) Unless I am missing something it seems unlikely that any operating-cost savings could be justified on economic grounds unless either gasoline became much more expensive or batteries much cheaper.
I would think the people who would buy such a vehicle would be those who have fairly long commutes (but not so long as to make the battery irrelevant)…say, 50 miles each way. With 200 workdays per year, that would translate into 20K miles per year. The numbers would be better, but still not all that great, given the battery costs you cite.
GM should listen to their CUSTOMERS!!! Let them tell you what they want and build it!
Why have 40 different flavors of trucks when they are all off the same assembly line?
Criticizing your competition does not mean you have a better product, you have to prove it.
There really isn’t anything wrong with GM. They’ve got some first class powertrains. Heck,I know,I used to sell the things. The problem is that you’re working against foreign car companies that can choose to have union labor. That’s almost a standard $2000 advantage they have over us in pricing. Imagine how far 2000 bucks would put GM ahead of everyone else PER CAR. You give workers a choice of labor or not and let them know this will make or break the company and you’d be surprised where loyalty really lies. This all is on top of putting out four minivans to four brands and spreading themselves too thin, that was more upsetting at my dealership than anything.
GM has made some seriously bad decisions. Working with Firestone & Chevron to muscle the mass transit systems in Los Angeles and Pittsburgh out of business was just one of them. buying Cadillac which had done a hostile takover of Ford in the 1920s was another. These antics do not endear people to them. They make serious enemies. From my perspective they may never overcome these blunders. But those decisions were made at least 40 years ago by executives which have long since passed the torch to others. The first thing GM needs to do is overcome the idea that people have that GM and it’s partners are bullies. Their partner the Union telling military reservists who drive foreign cars and who have George W. Bush stickers on their cars that they can no longer use their parking lot is a very recent example of how GM and it’s partners still bully people around.
I will not be bullied. And I will never buy a GM car as long as these antics continue.
Updating their technology would help also. Push rod motors became popular back in the 40s and 50s when the flat heads just couldn’t compete any more. The 350s and 454s are fine motors, but they can tack as many gadgets like oil viscocity sensors on them as they like, but the fact remains they are using old technology. The double overhead cam head they put on the vette in the early 80s was a good start but they only did it for a couple of years and discontinued it. Using timing belts on the Cadillac intead of chains was another mistake. Put timing chains on the Cadillac motors. Make them a little bit bigger and put these motors in some of their other cars, with 4 wheel disc brakes and suddenly you have a car that might compete on todays market.
Get rid of the UAW ! I mean how can GM compete if its being held hostage by a Union !!
Most of what I have read is pure ignorance. You communists wouldn’t look at an American made car (Ford or GM) unless they disguised it with Toyota or Honday emblams. You’d love the car and they’d say “Ha, it’s a GM or Ford!”. The problem is we have lost sight of the importance of “Buy American”. You are the same people that whine around election time about jobs and out sourcing and drive your InSight or Element around town. “But they’re built here in the USA”, but where do the profits go? Overseas. You need to take a step back and recognize the Ford & GM are putting out quality products and are proactive vs. reactive to the changing times. Someone mentioned Nissan design as bringing them back? What have you been reading? Look at these new cars and dollar for dollar (after rebates & discount, since as you know; imports have higher profit margins, no-rebate) tell me these aren’t a great car at a great price: Vibe (I know joint w/ Matrix but less expensive if you dare to compare), G6, Torrent/Equinox, Cobalt, LaCrosse, plus many more to be introduced over the next few years. Guaranteed, if the emblams alone were changed you Toyota & Honda fans opinion would be measurably higher. Maybe it’s there fault that it’s come to that, but when are we going to focus on supporting our American companies and our economy. I struggle to throw Daimler-Chrysler into the mix, I guess that’s a new topic of its own. So, to recap: “Buy American” should be on the forefront of our minde. Be objective, no, really be objective, you will be surprised. Don’t be mislead by perception of resale value being higher on Toyota and Honda, did you know that the resale is based on the MSRP of the vehicle? As I mentioned, GM spends more $ in incentives per retail unit than any other manufacturer. In addition, you pay more profit on a Toyota or Honda. So the resale (re- meaning again, sale-to sell) is not based on the initial sale price but the MSRP and it’s estimated that about 5% (excluding Saturn) pay MSRP for a vehicle. Due to the high rebates of GM and Ford, the “re-sale” values are artificially low. But if you do that research you’ll find that we’re all pretty even. I recently did a true to market comparison of 2005 Camry, Accord, Grand Ams actual average selling prices vs. the actual value of 2001 Camry, Accord, Grand Ams with the same mileage and it cost less to own the Grand Am (excluding the higher maintenance paid on imports). Your mission: Go drive a GM today or even a Ford, compare Comfort, Convenience, Safety features and true cost and true re-sale. If after all that you’re still convinced you want to support the Japs or someother foreign economy, go ahead and buy it and then maybe look at moving over there to get the rest of the benefits of their great country.
CFWalters
I do agree with the comment on the UAW. Those bloodsuckers.
CFWalters
“GM (and Ford) are in very serious trouble and it is self inflicted. Look at the engineering that Honda has developed. All their engnines use variable valve timing, technology they developed. Nearly all other manufacturers, except GM, only offer these efficient engines. GM’s prime marque — the Corvette and Ford’s Mustang — still use an overhead valve, pushrod V8, It’s embarrassing. Comparing the Corvette to any trus exoticar is pure nonsense. It is the same car that was built 40 years ago.” Do I need to comment on this? Figures this idiot doesn’t publish his e-mail address. Obviously the guy doesn’t drive anything that would compete with a Corvette, and I would bet that the guy has not driven a new Vette or a 40 year old Vette. GM is using VVT in many of its new vehicles: Vibe, LaCrosse, a couple more that just escaped me. To compare Honda with VVT to Corvette is the height of ignorance. A 6.0L V-8 with 400hp in a true American sportscar or even the 7.0L coming out compared to what the S2000? Come on man! Drive the Car. If you wanted to compare a 350Z to the Corvette you might get an audience, but do the research and compare the performance stats on the Corvette vs any real competitor then compare the prices and then try to tell me the Corvette NEEDS VVT! To discount an incredible car like that because it doesn’t have VVT is like saying the Viper sucks because it doesn’t have Air Conditioning, idiot.
Wow. Charles is laying it down.
He is saying two things. One, the American cars really are really good and we should all see that. Two, you are commies and other kinds of bad things if “Buy American” is not at the forefront of your mind. These two themes do not really fit well together. If the Detroit product is really all that good, why do we need to wave the flag about it? Looking at my parent’s experience and then my own, and my friends and people I know, collectively, over thirty years, we have had much, much better experiences with Jap cars over that period. The one exception being a ’66 Olds which was a great, great car. Bottom line, Charles is insulting people’s patriotism, which makes it seem like the product he is pitching is objectively not as good. Or, on the margin, people don’t want to risk repeating a rotten experience with something from Detroit, rather than a nice, reliable rice-burner.
I have a degree of belief in Buy American. It is this. If, on the margin, two products are equally good and comparably priced, I’ll buy the American one. But it is up to the American manufacturer to be competitive, especially on quality. I am not in the market for a car right now, but when I have been in the past, I did not think the GM or Ford product could meet that standard. Is this still true?
I think General Motors would be better off if they could make their products perform, last, operate, look (visual appeal), ride, handle and just simply be dependable as most import vehicles are……….But this is just one persons opinion based on the vehicles I have owned and the dependability and durability of each……Had a Honda once,5-speed(first import I ever owned) it had 90,000 on it when I purchased it, took it to 175,000 before I developed a transmission prob. Had a 92 Camaro which had to have three clutches before 112,000…..and rear differential work…..I got that car almost brand new….And it supposedly had this fancy borg wagner transmission………So I suppose how you could see experiences like this could sway a persons purchasing………….
UAW is destroying the auto industry in this country. The union was a great thing back when it started out, increased safety, overtime pay, health benifits & retirement packages, but over time they kept taking more & more. Now the union has overpriced itself, & is causing the people at the top to be put between a rock & a hard place. I say put the union execs in charge of GM.
Considering the UAW and how big of a hole previous execs have put GM into, I think they’re doing a pretty fine job on turning things around, except for the cheesy “sport vans” that were just released.
And GM’s powertrains are top notch. The person who dogged the company for using pushrods obviously has not driven a modern pushrod motor. The Malibu’s V6 engine, for instance, gets almost the same mileage as an Accord I4 with much more power. How they pulled this off, I’ll never know, but I don’t care HOW my engine is actuating its valves as long as it performs well, holds up, and burns fuel efficiently.
I don’t think I even need to mention the Corvette’s engine.
The biggest problem in todays economy is the fact that CEO’s and the upper management of large companies such as GM have forgotten the basics. They are now more concerned with keeping Wall Street happy than they are their customers.
Economics 101 says that in order for a business to be successful it must be able to attract new customers and keep them happy enough so that they will buy from you again. Somehow corporations now think that attracting new investors and keeping them happy is more important than happy customers.
A company cannot be managed from quarter to quarter, year after year. When customer satisfaction once again becomes more important than investor satisfaction GM will start to improve. In the short term the investors may not be happy, but in the long term all will win.
Lawrence Abraham
Can you apply anti-trust laws to a union?
“Can you apply anti-trust laws to a union?”
There are depression era laws that explicitly exempt unions from anti-trust laws.
“Economics 101 says that in order for a business to be successful it must be able to attract new customers and keep them happy enough so that they will buy from you again. Somehow corporations now think that attracting new investors and keeping them happy is more important than happy customers.”
I’ve seen no evidence that one has anything to do with the other.
Economics 101 ACTUALLY says that in the long run a company must make enough revenue to cover it variable and fixed costs or it will go bankrupt. GM still earns more revenue than any company on the planet, so you are focusing on the wrong side of the equation.
The problem is that GM doesn’t add any value to the investments that stockholders have made in the company. Adjusting for stock splits, inflation and such, GM’s stock price is the same as it was in 1965. To put it another way, $1000 invested in GM in 1965 would give you $1000 today. What would that $1000 be worth invested in the S&P500 for the same period? A lot.
GM stock holders have broken even over a period where the the Dow has increased 1,000 times. That’s wealth destruction resulting from not covering fixed and variable costs. Again, GM earns more revenue than any company on the planet. Earning even more revenue won’t help.
It’s their costs. It has always been the problem. It will be the problem for years to come.
VISION:
I think the most crucial item lacking in the GM leadership is VISION. When a leader has a Vision, even the average person on the street eventually sees and acklowledges that vision over time.
With the GM leadership, there has been no real vision and neither are they showing any sign of one.
TOYOTA for example is poised to overtake GM as the world’s largest AutoMaker. Not long ago, they were Third Largest with a Market Cap of $140 Billion, compared to GM at $22 Billion. Investors can see there is a lack of vision and a blurry future. While GM (Ford and Chrysler) would rather concern themselves making the same cars year after year, based on out dated technology… Toyota has a vision… and is set on introducing true auto inovation with it’s Hybrid Synergy Drive.
Toyota is currently cornering the future auto market all by itself. Gas prices can only go up -consider what the rest of the world has been paying, and consider that Demand is already outstripping supply, and supply can only go downwards from here on – people will only demand smarter, more inovative and efficient cars.
HYBRIDS?
The Hybrid Vision is right on point! Why?
1) There are Gas stations EVERYWHERE.
2) People always want to spend less on gas, but still have the convenience of a gas station on every block.
3) From an Engineering perspective, the average car loses/wastes so much of it’s energy, so why not have a Hybrid powertrain to recapture almost half of the cars energy?
3) Hybrid Powertrains are way more powerful than all-gas. Electric motors have the most torque at 0 RPM.
4) Hybrid Powertrains are quiet.
By the time we get there, Toyota and Honda will have very mature technologies to meet the Market needs. Nissan made a bold move by introducing the MURANO with a completely different, more effective and efficient CVT(continuously variable) tranmission. Honda just released the Accord Hybrid. Toyota just released the Lexus RX Hybrid SUV, and soon the GS Hybrid. These AutoMakers are constantly inovating, and it shows.
The Car Sales pitch of the not so distant future will be something like: “…why buy a CHEVY or DODGE truck or SUV, when you can get a TOYOTA hybrid truck for the same price, with twice the gas mileage and twice the horsepower??…”
The best part about the hybrid vision and technology is that it will only help the move to Hydrogen cars. Think, Hydrogen Hybrids (using less H2 gas), think fuel cell Hybrids, recapturing lost energy. This is where the Hybrid Synergy Technology will be soo crucial.
Let Face it. And realize. The internal combustion engine will no longer be good enough!
FACT:
There are an estimated 800 million cars on the world today. There will be an estimated 3.5 billion cars by the year 2050. There will neither be enough gas to run those cars, nor will there be any air clean enough to breathe if all those cars are internal combustion.
Any true leader can see this and realize we need to start executing on a plan.
GM is already late to the party. They are failing to deliver on any of the most omportant qualities of a car: Cost, Quality, Durability, Reliability, Technology inovation.
I remember reading in the paper about an assignment that University students were given, to market an american compact car (I forget which exactly, it may have been the Aveo). At the end of the assignment, one marketing student gave the opinion that “It’s hard for me to figure out how to sell something that I wouldn’t want to buy for myself”. I’m a Canadian engineering student so I have absolutely no idea how to improve the company from a fiscal management position, however it’s quite clear to me that American companies would benefit hugely from improving the overall quality of their products.
Granted there are some cars like the new C6 Corvette which manage to challenge the dominance of famous imports like the Porsche Carrera and prove that American engineering can still put out a world-class product (using “outdated tech” like pushrod engines no less). However there are other cars like the Saturn Ion Redline which are nothing short of an embarassment, I believe the design manager of GM actually described it as a disappointment.
The main problem when it actually comes to selling cars, is the perceived image. Cars which still garner respect like the Corvette (and Ford Mustang, which in its latest iteration uses an “old-tech” live-axle and is another incredible performer) are seen as the exception to the rule. If Americans want to sell more cars (profit appears to be another question considering what others have written above), they should improve the quality of their lower-end products which make up the bulk of any companies’ sales. Just take a look at what happened to Cadillac (which not too long ago was dead in the water) over the last few years and how they did it. They put out a quality product, improved their image through strategic marketing at the same time (i.e. product placements using NBA players and movies like the Matrix sequel and Bad Boys 2) and are now back in a position to challenge the dominance of european companies. Buyers will flock to buy a quality product, especially when they don’t have to convince everyone they see that they didn’t settle for a cheap, unreliable, gas-guzzling hunk of scrap.
As somebody who has engineered both Fuel Cell and Hybrid vehicles, the money to be made on these technologies will not be made by the automakers, it will be made by the suppliers of the electronic componentry and the fuel cell membranes. None of these things will be made by the automakers, they will simply pay for them. Hybrids and fuel cells will one day probably be satndard equipemnt (far in the future) but incorporating them will provide little or no competitive advantage to the automakers. Bythe time the economies of scale exist to make a hybrid profitable (which they aren’t now) the advantage will be gone.
Toyota is the best run auto company in the world (and I’m not convinced even they make money) becaus they are the most efficient, not the most technologically savy.
“Toyota is the best run auto company in the world (and I’m not convinced even they make money) becaus they are the most efficient, not the most technologically savy. ”
I agree. Don’t confuse hype or environut focus group results with real engineering. GM has a better hybrid concept than Toyota: put a big @$$ starter on the car. You have the car engine stop when the car stops. The starter is big enough to both restart the car and simultaneously start pulling it through the inersection while the engine gets going. Simple. Cheap. Reduces battery replacement/disposal problems. No new supply chain and mechanic retraining problems. It doesn’t get all the fuel savings a true hybrid would, but by eliminating idle it essentially gives highway milage in the city. Most of the savings at a fraction of the cost. They also pioneered variable displacement engines with their 8-6-4 Caddies. The project was dropped because the tech wasn’t mature enough yet. It is now. The problem isn’t that they don’t have good “visions”… these concepts are great. The question is, will they spend the resources to do the DETAIL engineering, quality assurance, and vendor management right? People expect a new car to work right, not have strange behaviors, and not have trim pieces fall off. The devil is in the details (particularly when the details are something the customer interacts with like switches and gauges), and GM hasn’t been taking care of them.
BTW, I presented this discussion quesion to a friend of mine. His response was:
“Can’t resign hmmm… What about suicide?”
Charles Walters posts:
“GM (and Ford) are in very serious trouble and it is self inflicted. Look at the engineering that Honda has developed. All their engnines use variable valve timing, technology they developed. Nearly all other manufacturers, except GM, only offer these efficient engines. GM’s prime marque — the Corvette and Ford’s Mustang — still use an overhead valve, pushrod V8, It’s embarrassing.”
Actually, Ford stopped using pushrod V8s in the mid-90s, replacing the 5.0 ohv V8 with the sohc 4.6 V8. A small point, yes, but if you’re going to rant on someone you’d better get your facts straight. Besides, the variable valve timing in those Japanese engines favor high-rpm horsepower and not low-end torque, neither of which is expected of larger displacement engines in cars like the Mustang and Corvette. Besides, griping about VVTi is missing the whole point of griping about GM as a whole.
Sorry Charles, I didn’t realize you were qutoing somebody else. Anyway, GM sucks, we can ALL agree on that.
VISION: Follow-up
Simply put, changes in automotive design and industry are inevitable. There is simply no way around it. Over the next 25 to 50yrs the automobile as we know it will have to change to meet and keep up with the ever changing needs.
The Automobile has been largely a big box of steel; a passive body, propelled by a hugely inefficient locomotive system AKA the Internal Combustion Engine/Powertrain. However over the last decade, an increasing amount of Electronics and supporting technology has been added and built around the same IC powertrain. Current Automotive technology has pretty much been TWEAK’ed to it’s maximum capacity. I believe the industry will soon reach a point where the plain Internal Combustion powertrain will no longer be able to keep up with the times, and meet the ever more demanding and stringent needs/requirements.
This is where Automakers must adjust their way of thinking. YES, they too will enter the business of making computers and electronics parts. Virtually every other industry has already made this move; from Manufacturing, to construction, to Millitary, to Aerospace, to Logistics, etc, etc… you get my drift. It is up to their leadership to ensure that they maintain a competitive edge in alternative technologies and relevant intellectual property. TOYOTA already owns crucial patents on well written Hybrid algorithms, and is already licensing the technology to Nissan for the next Hybrid Altima because it is cheaper for Nissan to license rather than design it’s own. This is a glimpse of the future of the Auto industry.
The reason true Hybrid Technology makes the most sense is that Gas Stations will be around for a long time to come. Hybrids are not just a passing-through technology… I believe they will be around for the next several decades… they will slowly phase in (driven by Major AutoMakers like TOYOTA, HONDA, Nissan etc)… and they will slowly Evolve into future powertrain technologies, setting even higher standards along the way the IC powertains will no longer be able to compete with.
YES, Hybrid and Fuel Cell Technology Parts may be more expensive now. But let me ask you: How much were Plasma Screens 2 years ago? How much are they today? Remember when FABs could not make LCD screens larger than 15″? Look at cellphones and Digital Camera technolody. It’s just a matter of time, before you go down to you local Parts Store to buy a new Fuel Cell Membrane. Nanotechnology is a reality. We already wear microfiber apparel. It’s just a matter of time till all these new technologies condense in the Auto Industry.
My point is, after all these years GM has failed to even just make a reliable, simple, quality product. How can we expect them to keep up with the Auto industry of the future??? Their leadership has consistently failed to ask the right questions and define any sort of vision.
At best, they may just end up being in the business of reselling TOYOTA and ISUZU powertrain/technology in their Auto bodies. Like they are already doing with the Pontiac Vibe (TOYOTA Matrix powertrain) and ENVOY/TRAILBLAZER (ISUZU)
We can blame Labor Unions, Fixed costs, etc, etc. But if there is no vision and real leadership behind GM, it will never catch-up. There needs to be constant inovation, a visible and appreciable improvement in their product. Chrome Rims are not enough. Old HEMI and CHEVY and Mustang technology (in the case of Chrysler and Ford) is nothing more than an imediate and short-sighted strategy that buys them only a few extra quarterly sales points.
IMHO – Bryan
Just for point of reference, GM spends about $100 million a year on its fuel cell development program, but it is now shying away from publicity because I think they are on to something. Their stated goal is not to sell the first fuel cell car but to sell the first million fuel cell cars, profitably.
They are much farther along than most people know because about 2 years ago they stopped using fuel cells as a way to get positive publicity (Toyota and Honda) and start developing something in secret that will go into production and gain a competitive advantage. By the same token you’ll know when Toyota and Honda have something real when they stop talking about.
Of course none of this will give GM the boost it hopes for (10 years from now) if they don’t get their costs in order. Back to the orinial question.
GM already sells more cars than anybody, they just don’t make a profit on them.
Get Homer Simpson to design a car.
Just Kidding! I’d just like to say that GM needs to focus on making quality and efficient cars, and somehow teach dealerships that customer service is the way to get repeat buyers. Quality to me is a big thing. I bought a GM a few years back and have had nothing but problems with the car since the beginning. What is sad is that all the problems have been easy to fix, but the local dealerships have been increadibly difficult to work with. They do everything from denying that there is a problem, to saying things like “that’s the way all those cars are”, to just flat out walking away from me in mid sentence and telling me to go to another dealership. That’s just wrong!!! GM must fix this first! Efficiency is not something that should only be synonymous with Japanese car makers. How can Toyota and Honda build cars that get 60 mpg and GM cant? It doesn’t make sense to about 90% of the American population? It doesn’t reflect well on GM’s engineering dept either. Where’s the innovation? Function over form is a rule with cars. Remember the air cooled VW beetle? It was a great car because it worked, got great mpg at the time and was practicle (and it was ugly, but people didn’t care). It was also easy to repair, but that’s another subject.
So in the end, GM has got a lot of work to do, and it saddens me to say that as an American I will probably never look at their products again. I think that Ford is on track to making good cars (at least my Ford doesn’t leave me stranded once a year). Dodge is, well…Dodge. Can’t say much about them.
c Taylor…I don’t understand how this hybrid technology can reduce battery replacement & disposal problems…please explain…
“I don’t understand how this hybrid technology can reduce battery replacement & disposal problems…please explain”
Quite simply, the big @$$ starter psuedohybrid concept doesn’t use as much electrical energy in one setting. It only pulls power from the batteries long enough to get the car rolling while the engine turns over, then the alternator can recharge the batteries again. Since it needs less stored electrical power, it needs less batteries. Fewer batteries in the car means fewer batteries to dispose of. Since the energy requirements are low, you can get away with using larger (or multiple) convenional lead-acid batteries that are easier to recycle than exotics. Also, there is already a manufacturing industry and support structure for lead-acids. If GM wanted they could just specify an existing battery… zero development costs. But, to give an example of what I am talking about the “devil” being in the details… GM probably won’t. They will probably spec a custom side-post battery that will be harder to get to the posts when you need to jump-start, will probably have a shorter lifespan, is a bigger pain to remove and replace, and not as commonly available. The latter two “features” most customers won’t experience directly, but they will indirectly through higher repair times and costs.
(getting on soapbox) Anyone wanting a technology to help with the energy “crunch” would be better served by looking for cheaper ways to pull oil from oil sands in places like Alberta. Anyone worrying about global warming would be better served doing basic research in understanding what’s really going on with the climate and/or how to sequester carbon in biomass, underground, etc. None of these are as “hip” as a green car you can use to show the girls at the office how sensitve you are, or the bending on a giant corp. like GM to your will to show how much power you wield. They are merely better ways to help more people for less cost, and not many activist groups are interested in stuff like that. If a truly “earth-friendly” vehicle would help GM like a handful of loud pr people claim, then the EV-1 would have practically flown out of the showrooms. (off soapbox)
“My point is, after all these years GM has failed to even just make a reliable, simple, quality product. How can we expect them to keep up with the Auto industry of the future??? Their leadership has consistently failed to ask the right questions and define any sort of vision… But if there is no vision and real leadership behind GM, it will never catch-up. There needs to be constant inovation, a visible and appreciable improvement in their product.”
I respectfully disagree. The ability to see a “vision” at a distance and the ability to do the detail work needed to get a reliable, user-friendly, quality product are not the same skill. GM does the vision thing well; look at things like the v8-6-4, the quad 4, the EV-1. Vison. But they screw up the details. The R&D guys are doing their job’s right. The industrial engineers and the MBA’s are the ones screwing up. It isn’t the PRODUCT that they need to improve, it is the PROCESS. That includes not just manufacturing, but vendor management, adminstration, dealerships, everything. GM isn’t a good business that can’t make cars… it is a bad business. Unfortunately, fixing the way GM operates, changing the culture, will be much harder than making one really cool, innovative, car of the future (with or without chrome rims) would be. http://www.cardesignnews.com/autoshows/2002/paris/preview/gm-hywire/
fire anyone who says “We CAN’T …” and start from there. Bring in the GE Electromotive Div. engineers and design a TRUCk (full size, no frills for WORKING guys) with the same diesel electric-drive as TRAINS. There is NO reason electric motors can’t move cars and a small diesel generator provides electric AND heat (when needed) … think OUTSIDE the box.
WE are tired of 10/12 MPG to earn a living.
John…an interesting idea to bring in people from Electromotive. However, they don’t have this business anymore…it was spun off as “non-core.”
Could still be done, but would have to be negotiated as an arms-length deal.
I suspect the spin-off is a very good thing for the people at Electromotive…they probably feel like they just got out of jail.
GE Transportation (the other manufacturer of locomotives) best watch out….
I would think much as the NHL owners. When the labor contract expires lock out until they see the light. During the lock out I would try to convince engineering to design a vehicle that didn’t sound like a tin can when the door closed.
I drive a 2002 full size gas guzzling four door, long wheel base V-8 Dodge pickup with all the bells and buttons. German ( maybe ) engineering and made in Mexico. So far 64,000 miles and no expense except routine oil change and a set of tires. Better power train warrenty than GM or Ford. Cost more but better ride and more cab room. Last Dodge pickup, a 1996, had over 200,000 when I traded. Still mechanically sound but needed paint job, front end work, and those little things that add up to make trading worth while. I generally drive them until the wheels fall off and then put them back on and drive some more. The Chevies wheels just fall off to quick and the Ford drives and rides like a damn tank!~
Pursue alternative energy sources! I would say more but, it would all be fluff.
Rescue chevy from the undersized,over plastisized, cheap looking and poor quality desgins of late.
restart the zeta rwd program and add an awd option to it.
stop pounding price cuts out of suppliers, because it only makes them cut corners.
demand better quality out of suppliers,(possibly with part price increases)
open a new fully automated or nearly fully automated production facility. althuogh this would eliminate low skill production labour, there would be a huge demand for skilled electricians,automation specialists,and engineers. these people would also greatly increase the tallent pool at with the company could draw upon for advancements throughout the company.
1. Discontinue Buick and inform Tiger Woods that he is no longer needed.
2. Change Cadillac’s theme song.
3. Discontinue Cadillac trucks and SUVs.
4. Bring back traditional names for Cadillac and GMC. For instance, Eldorado should be used in place of XLR. Suburban in place of Yukon XL
5. Restyle the Chevrolet SSR’s rear-end to be more like an early 50’s Chevrolet fastback coupe. Restyle the Corvette’s interior with retro C2 Sting Ray or C3 Stingray attributes. Consider building a 4×4 truck that uses a solid axle in front with the front-end styling of the SSR. Bring out the Chevrolet SS concept not as a Chevrolet, but as… see #6.
6. Bring back Oldsmobile as the innovation division once again with high performance in mind. Muscular good looks should be emphasized. Blend in just the right amount of luxury to bridge the gap between Pontiac and Cadillac. Small block V8s are standard in all models, with rear-wheel-drive and manual transmissions standard on most models. Reintroduce the rocket emblem for these cars just as Pontiac still uses it’s stylish arrowhead emblem. Make sure to get the marketing and advertising right and don’t get lazy about it. Set build quality high, but also still affordable like the Pontiac GTO. Focus on only three models;
88 – Midsize sedan and wagon that can be configured with many different options to appeal to a wide market. Look to Holden for these sedans and wagons, particularly their HSV division.
Cutlass – Like the GTO, based on the Holden Monaro. Could be marketed as the Cutlass 6-6-2 (6.0 liter, six speed, dual exhaust).
Toronado – Full size coupe based on the Chevrolet SS concept car, with LS7 425 ci V8 with AWD/6 speed automatic standard and RWD/six speed manual optional. Look to the original ‘66 Toronado for unique styling cues without changing the already beautiful SS exterior design too much. This car could be considered as GM’s design flagship, surpassing even the Cadillac V-series cars in style, innovation and performance. Or, optionally and more easily done, consider the Holden HSV Coupe 4 AWD for the basis of the Toronado. The Coupe 4 even has the fender bulges already. Still include a rear-drive, manual transmission option with the look of the AWD model.
7. Bring back the clean styling for the Chevy and GMC trucks. The current Chevrolet trucks need serious cosmetic surgery as do the mid size Canyon and Colorado. The latter also need heavier duty frames like the old ZR-2 models. Build GMC trucks more heavy duty than Chevrolet trucks as they were in the old days. All fullsize GMC trucks should come with more powerful engines and Allison automatic transmissions as standard with a 3/4 ton as the base model. Chevrolet trucks should use Hydramatic transmissions and be priced accordingly. Focus more on the ruggedness and utility of the trucks and less on luxury to divert people who need luxury cars from buying trucks they don’t need.
8. Rebadge the original Hummer as a GMC and only market this vehicle to the U.S. military. Rebadge and sell the H2 as a Chevrolet only to the military as well. Discontinue development of the H3. Consumers that want to own one of these vehicles can purchase them from government surplus auctions. Discontinue all other unnecessary and redundant SUVs. Only six SUVs are required for all consumer buyers of GM trucks;
Mid size – Chevrolet Trailblazer and GMC Jimmy (Slimjim).
Full size – Chevrolet Blazer and GMC Jimmy.
King size – Chevrolet Suburban and GMC Carryall (Suburban).
Give customers plenty of power train and drive train options. All mid size and full size SUVs should include two door models also.
9. Provide an inline-six or LS2 based V8 option for the Pontiac Solstice. Also make the Solstice coupe concept with an inline-six as standard and call it the Tempest. V8 equipped Solstice coupes should be badged Firebird. Saturn Sky should only get a 4 or 6 cylinder engine, but not a V8.
10. Invest heavily in hydrogen-burning engine research and development to satisfy internal combustion engine enthusiasts for generations to come. Do not allow the V8 exhaust note to die with the advent of alternative technologies. Continue to build and develop the excellent small block V8.
11. Discontinue the Northstar V8 simply because they are more complex, heavier and more expensive to build than the already superior LS series small block V8. Explain to stupid, ignorant people that don’t know the history of the internal combustion engine that dual overhead cams and 4 valves per cylinder is just as “old-fashioned” as single cam, pushrods and 2 overhead valves per cylinder. Then remind them how the 400 hp Corvette is able to avoid the “gas guzzler” tax, while still being able to scorch 0-60 in nearly 4.0 seconds flat! Besides this, pushrod engines benefit from cheaper and easier performance increases (only 1 cam to buy and install), are mechanically quieter, more reliable and physically smaller besides being lighter which is why the Corvette has that nice and low hood profile.
Follow up to earlier comments:
Pushrod engines did not become “popular” in the 40’s and 50’s. Flathead engines also used pushrods. OHV, OHC, DOHC and L-head engines were all developed and sold early in the century. Even front-wheel-drive was around during the turn of the century. People that are “gee-whizzed” with technology they think is radical coming from Japan are blinded by their own stupidity… most automotive technoologies have come and still do come from American auto companies, especially from General Motors! By the way, GM stopped making the “350” when the LS1(346) came out in the late 90’s. The 454 was replaced by the 496. And the Mustang has a SOHC V8, not a pushrod engine. The DOHC/32 valve ZR1 Corvette came out in the late eighties, not the early eighties. The C5 Corvette with the LS1 smokes the ZR1 Corvette and it costs less. The C6 Corvette is even better! The LS1 and now the LS2 is one of the most advanced engines in the world! I’ll take one of these over a DOHC/32 valve or even 40 valve (Audi) V8 anyday! They are simply more reliable, smaller and cheaper to build… they are mechanically quieter too. The new 427 smallblock LS7 in the Z06 is hand built, has titanium connecting rods and revs to 7,500 RPM. Makes 500 HP and 475 lb. ft. torque without a supercharger or turbocharger, all the while weighing less than the Northstar V8. They’re on the right track with this engine!
EMD (Electro-Motive-Division) has nothing to do with General Electric. GE makes their own locomotives. GM has since sold EMD. But the technology that has made and will continue to make EMD locomotives superior was developed by GM over the last 70+ years of locomotive design and development. The Trailblazer and Envoy are GM designed. Isuzu is the one that gets a rebadged version. And I thought I might mention that GM was probably the biggest factor (besides our honorable soldiers) in winning World War II. GM helped put man on the moon… and also allowed him to “buggy” around a bit when he was up there. GM helped build this country into what it is today. The idea here is not to bash GM, but to give your idea of suggestions that might help GM steer itself out of some of the ruts it has gotten into recently if you were made CEO. If you have a hateful attitude toward the company then you would certainly fail in this objective.
And for you people complaining about variable valve timing… you haven’t been paying attention to what GM has available right now… or how variable valve timing is in the works for the “old tech” pushrod small block V8…
The new Pontiac Solstice looks pretty impressive.
This guy doesn’t like the Solstice.
80 miles per gallon.
Detroit’s problems started years ago. It was the exploding Ford Pinto and the aluminum block Chevy
Vega that DROVE customers to Toyota, Nissan, Etc.
We laughed and made jokes when we looked at our
first “Shoping Cart” Honda.
Who’s Laughing Now ?
Granted, we have made some Serious quality improvements, but we are still lagging.
As always, we did it to ourselves.
We live in a society that is based on a free market system. If the domestic makers can’t compete, then they deserve to go out of business.
P.S. – if any of you “Buy American” proponents want to put your money where your mouths are,
I have a line on a 1971 Aluminum Block Chevy Vega. Runs great – only burns 1 quart of oil every 500 miles.
Skunk Works
1) Fire half the design and marketing staff and relocate the rest to California.
2) enshrine above every cubicle and conference room entryway Bob Lutz’s remark about the virtue of building cars that 70% of the target audience hates and 30% says, “Wow, that’s for me!”
3) feed the winners, starve the losers. Slim down to no more than four product lines
4) when you replace the Cadillac theme song, be sure it’s with music that
a) is less than 30 years old, and
b) does not recall blue-collar, Detroit anthems from the worst decade in recent US history
5) slash all newspaper advertising and replace it with integrated online marketing campaigns using targeted market research and feedback conducted primarily through blogs
Move quickly to 42 volts.
And all electric auxiliarys.
The plug-in hybrid.
The auto as emergency power generator.
GM should hire Nissan designers & go to school on Nissan’s rebirth. They overcame serious issues.
Also,the UAW needs a reality check in terms of free medical coverage. No one else has it! No more COLA on UAW pensions too.
The UAW is a huge burden on our domestic auto industry….no one else pays janitors $24/hour plus free medical coverage! They’re on a path of self destruction. Get real!!!
Oh boy, in charge of a dinosaur on the way to rolling over in the muck. After a few million years it’ll be fuel for a Honda.
OK so what to do?
1. Let’s make Chevy the daily communter brand, cars / vans only and make them bullet-proof like a Toyota. 2. Make GMC the SUV/truck brand; no other trucks in any other line anywhere. 3. Saturn the “green” brand (think Subaru. OK, they can have their SUV). 4. Pontiac the performance sedan brand and sportscar brand. 5. Leave Corvette alone. 6. Buick goes after the entry level (think Lexus 330) market. Cadillac divided into a performance segment and a floaty boulevard cruiser segment. Saab: sell to yuppies, or what’s left of them. How about a Scion type car from Saab to get the GenX market? Hummer: Dump. Right now GM’s cars are targeted at a market whose customers are between the ages of 55 and dead. (Look at who is driving all those Malibus around.)
OR….Close all of the divisions, and open up shop under a new company. Sounds lethal, huh? Well that’s what SBC is doing switching all its companies around trying to reduce its legacy costs. It’s what US Steel did. Actually, there has to be some way to honor the retirees and the promise made to them. As one said: It’s an underfunded pension plan that is trying to sell cars. Yes, GM lost its grip the day the first retired “ball cap” traded his Chevy for a Camry. Must have been a reason. The sooner they recognize that, the sooner they may come to grips with reality.
The spurious comparisons to Toyota in earlier posts are uninformed. Toyota was supported for years by Ministry of Finance price-fixing between toyota and its bulk materials and compenent suppliers. (like Denso) Second, the MoF spent billions in the currency markets buying dollars and selling yen, enforcing a weak yen policy that assisted Japanese exports for 2 decades.
So GM is not, and can never be, like toyota.
Fact: The quality gap that plagued GM from 1978-1995 has largely been closed.
Fact: GM has remarkable scale advantages, where new product development costs can be shared across multiple platforms
GM’s brands are damaged, and require at least 5 years of world class product output before a decision can be made about whether a brand should be eliminated. (Remember, Cadillac is only in year 2 of its revival)
Any GM chairman must control fixed legacy costs with either a gov’t bailout or union concessions. Lutz also must be empowered to create hot cars now. The Chrysler 300 is an object lesson here.
“Most of what I have read is pure ignorance. You communists wouldn’t look at an American made car (Ford or GM) unless….” blah blah blah
Way to convince people that you (think) you’re right, by calling them names and accusing everyone besides you of being ignorant.
Nothing you said addresses the real issue anyway. Even if half of what you stated is true regarding your study, what does it matter? Are you saying that most people are too stupid to know what’s good for them? The American people vote with their dollars as well as their feet, and if more people are buying Japanese vehicles than GM you can’t honestly chalk it all up to “everyone is stupid besides me”, for God’s sake give most ordinary Americans some credit will you?
“6. Spend the resources (including reassigning experienced engineers from luxury and supercar development projects), to get the design and quality on entry level cars RIGHT. Young people who hate their piece of crap Chevy aren’t going to turn into old people who buy Caddies, they are going to turn into old people who buy from someone else.”
C. Taylor you’re onto something here.
A cheap car doesn’t have to remind you that it’s a cheap car every time you get in it (Crapalier, Neon, etc.). You generally tend to find the same level of quality in imports from their cheapest car all the way to their most expensive. The level of fit and finish in most of the domestic entry level cars is astoundingly bad, save for the Ford Focus.
My brother-on-law worked for GM and kept saying that the Japanese changed the way cars were made. From my perspective, the major problem Detroit has is the insistance on remaking a car every 7 years, instead of upgrading a car every 4.
This is necessary because of the cost of changing job flows due to the UAW contract.
A result of this is the cost of creating a “bad” car lasts 7 years, not 4. Many of us remember those “bad” cars in the late 70’s and early 80’s. We will not revive GM, they lost us then. The problem is today’s youth is feeding on our expectations.
I ask my kids about the Pontiac G6. A nice car that looks good. Their response is, “but it is a Pontiac”. Their response is predicable given the perceived quality of the Pontiac Grand Am and Grand Prix.
Good will not get them back, only great will. Create a GREAT Pontiac!! Add luxury and call it a Buick. Add dependability and call it a Chevy.
Meantime, dump all the healthcare and pension costs to the Federal Government through Medicare and Social Security “reform”.
And save your cash for a real long UAW strike when you let the rest of the country know what their benefits are compared to theirs.
GM’s problem is very simple. All one has to do is test drive any GM car and then go drive a comparable product from the Japanese Big 3(Honda,Toyota, Nissan). The Japaneses Big 3 produce passenger cars that are far superior to GM’s. You can talk all you want about styling, pension plans, unions,etc. Those issues would be solved if GM was producing passenger cars that were of the same quality as the Japanese. The problem is they are not and anyone who claims that the quality gap has closed is insane. Go drive a Honda Accord and then go drive a new Ford 500. Not even close. It’s all about the qaulity of the product. GM is capable of producing appealing designs. However, they burden their products with engine designs that are 30 years old and they then expect to compete the Honda’s of the world and their technologically advanced V-TEC engines. The Honda Accord and Toyota Camry are boring looking cars yet their driving dynamics are almost flawless and their reliability is great. Business is not a difficult topic to understand. Make great products that consumers want and you will succeed. Make subpar products and flounder. This is what is wrong with GM. Nothing more, nothing less. And now the Japanese Big 3 are perfecting the SUV and Pickup truck market. It’s only going to get worse for GM and Ford.
GM’s problems have to do with perception more than reality, more of a problem with attitude than anything else.
Political Problems
—-
Push the Government for universal health care. American companies will always be disadvantaged so long as they have to pay for health care. Push the government to buy out old pension plans.
Customer Service
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GM needs to do silent recalls, as suggested previously.
The GMAC web site should take car payments on line without having to set up automatic car payments.
Cars
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Continue with the Lutz strategy of platform sharing to build lots of different cars with different looks. Continue to upgrade IT systems so that eventually GM will be a provider of practically on demand custom cars.
Discontinue Crappy Cars
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If the car is junk, don’t sell it.
Completely realign the divisions
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GMC: For the professional. Prosumer stuff.
Cadillac: For success. Sports Sedan / Luxury. Emphasis on performance and luxury.
Buick: Cars that last. Emphasis on quality and workmanship. Performance, other features can suffer. Offer 150,000 mile warranties.
Saturn: Cars for the Earth. Emphasis on gas mileage, safety. Girl cars. Get rid of the Saturn SUV and crappy cars and go straight to high mileage 4 cylinders, hybrids and fuel cell stuff.
Pontiac / Chevy: There is a great deal of overlap between Pontiac and Chevy, but you would never get someone that likes a Pontiac to like a Chevy, and vice versa. But the marketing of Pontiac is certainly confused. What kind of car does Pontiac make? What kind of truck? Who knows. Define some personality here.
Came across this today. The AAA rated cars for this year. Here are their best picks based upon reliability, resale, style and value. Guess who’s not at the party?
Top Cars
Under $15,000 Mazda3 (Ford owned)
$15,000–$20,000 Honda Accord
$20,000–$25,000 Chrysler 300 (Daimler)
$25,000–$30,000 Infiniti G35 (Nissan)
$30,000–$35,000 Volvo S80 (Ford owned)
$35,000–$40,000 Lexus GS300 (Toyota)
$40,000–$50,000 Acura RL (Honda)
More than $50,000 Jaguar XJ Long Wheel Base (Ford owned)
Sport Utility Vehicles
Less than $30,000 Ford Escape Hybrid
More than $30,000 Volvo XC90 (Ford Owned)
Minivan
Honda Odyssey
Truck
Honda Ridgeline
Cool Car
Ford Mustang GT
Tally: Ford 6; Honda 4; Nissan 1; Toyota 1; Daimler 1.
DS sez:
“As somebody who has engineered both Fuel Cell and Hybrid vehicles, the money to be made on these technologies will not be made by the automakers, it will be made by the suppliers of the electronic componentry and the fuel cell membranes. None of these things will be made by the automakers, they will simply pay for them. ”
Actually, Toyota does make their own power electronics, in their very own in-house fab.
One thing GM is doing right is research into hybrids and fuel cell vehicles. I get the impression they’re about #3, behind Toyota and Honda. That’s really not such a bad place to be.
BTW – the idea of a “plug in” hybrid is uneconomic because a hybrid really isn’t an electric vehicle that runs on stored power. It’s more like the world’s fanciest automatic transmission. It’s purpose is first of all to make sure the engine is always running in its most efficient operating condition, and secondarily to reuse kinetic energy from braking. But the energy to run the car still comes from liquid fuel, which is still far and away the most weight-efficient way of storing energy.
All interesting. What happens to the individually owned dealerships–thousands of them–if GM’s new CEO decides to cut the brand list ?
I can see many legal difficulties.
First of all I would evaluate the entire executive staff and board of directors. Then anyone at that level that needed it would be termed without balloon but a severence package no different than any other laid off employee.
2. Get on board an start looking at improving quality and real R & D into getting away from gas engines. Remember not long ago it was GM that said all alternatives to gas engines was 10 years away. And once again like the 70’s to much focus on immediate profits and no thinking towards the long term. Remember natural resources are finite not infinite.
3. Stock options go not only to the execs for meeting goals but the employees get them as well. No executive get more than 40% of stock than the lowest paid employees.
I could go on, but i have to get back to work.
1. Move Corvette from Chevy to Pontiac, and establish Pontiac as the lead Sports Car brand.
2. Combine Buick and Cadillac into a Luxury Car brand
3. Combine Chevy Truck and GMC Truck brands.
4. Provide each vehicle with a hybrid engine option. For each hybrid engine vehicle, a front only, rear only, or 4 wheel drive option should be provided. Expecially for truck brands, the hybrid engines would serve as an on site generator.
5. For economy and sport cars (Chevy and Pontiac) dump the center consol, put the front seats closer together, and reduce the vehicle cross section, cut drag, improve speed and gas economy.
6. Adopt Saturn sales techniques, that is fix prices, fix margins, and provide no hassle sales.
7. Provide low margin fleet sales rate for performance and luxury cars, so every rental car buyer has a good chance to try a Pontiac or Buick-Cadillac.
I disagree, a hybrid is not just an electric transmission, it trades a smaller engine for the complexity of engine+generator at one end and drive motor at the other. The battery power is mostly used for high torque starts when the smaller engine doesnt put out enough electricity to feed the drive motors.
Simply put, GM needs to emphasise that they build strong products. They are beginning to do this with the successful GT class campaign with the Caddys, these cars are really doing well in this series, as are the Vettes. The Caddys look great too.
I don’t see a whole lot of product tie-ins with racing however. It should be trumpeted over and over again. Their engineering is excellent.
It comes down to schizophrenic marketing killing them. Lutz appears to be having some effect on the product lines. It takes so long to change things in huge corps though.
1. File for bankruptcy and reorg ala Robert R’s post.
a. The new company should not have more than 7 layers of personnel from shop floor worker to CEO.
b. Exec pay should be based on a matrix of quality, revenue, and innovation awards.
c. Require every employee to choose one: the Union, or building the best cars in the world.
d. Hire good designers and allow them to design a car free from union and marketing interference.
e. Hire good engineers and allow them to implement the designs free from union and marketing interference.
2. Fire anyone who utters any of these phrases, “We’re closing the gap.”
“Our problems have to do with perception more than reality.”
“We could just ask for a bailout deal from the government.”
” “Buy American” should be on the forefront of our customers’ minds.
(It would be better to fling them down a flight of stairs first, but, you know, laws and all…)
3. Kill redundant brands and vehicles. Set up core models ala Todd Bandrowsky’s post.
4. Do not offer incentives. Ever.
1. Declare bankruptcy.
2. Do the “United trick” to reduce pensions and medical for retirees. This move sucks, but it is likely a question of screw retirees by saving the company or screw retirees by letting the company die and having (reduced) pensions managed by the Feds.
3. Turn all existing pensions for non-retirees into 401Ks.
4. Emerge from bankruptcy with lower ongoing liabilities.
5. Quit and hide in South America somewhere as the most hated CEO in America, and hope history treats me kindly.
My point is all the car and branding stuff is moot if GM has a $1500+ per car deadweight that many other car companies (esp. non-US) don’t have. This deadweight restricts the types of cars/trucks that GM can sell and impairs it in numerous other ways.
Build better cars. It’s that simple. Honda and Toyota make far superior passenger cars. And in 5 years time they will be making far superior trucks as well. As with any business, it all boils down to the quality of the product. Offer highly competitive product, company does well (Toyota). Offer obviously inferior product(GM), company does poorly. Business 101. Most Americans looking for family sedans don’t even look at GM products any more.
Charles Walters wrote:
“GM is using VVT in many of its new vehicles: Vibe, LaCrosse, a couple more that just escaped me.”
Uh, the Pontiac Vibe is actually built by Toyota – it’s a rebadged Toyota Matrix.
“To compare Honda with VVT to Corvette is the height of ignorance. A 6.0L V-8 with 400hp in a true American sportscar or even the 7.0L coming out compared to what the S2000?”
Wrong comparision. V6s should be compared to V6s. How about the Honda / Acura NSX or Toyota Supra instead of the S2000? The Honda HSC is supposed to come out at the end of 2006 to replace the NSX. It’s numbers are comparable to the C-6. And right now, Toyota is debating whether or not to build the new Supra. That one will kick the C-6’s ass.
Using antiquated pushrod V-8 is just one of GM’s problems. They have a lot of others.
First, get rid or revamp their dealerships. Everything I walk in one of these dealership, I feel like I’m about to be ripped off. GM could make the greatest cars in the world but if the dealership experieince sucks, it’ll be a cold day in hell before anybody will go back to get ripped off again. The Staurn division is a good start but they still have to make great cars.
Secondly, design better cars. It’s not that the American workers can’t make cars. Japanese plants in America proved otherwise. It’s the design and engineering. Cadillac’s a start but it’s incomplete (they put the parking brake by the foot pedals instead of next to the driver’s side. If you try to shift and miss the clutch and hit the parking brake instead…What were they thinking?).
Thidrly, break the unions. UAW is in no position to oppose GM. Not that they will rollover. But they can’t sustain a fight for long if GM is facing death. Plus, where are they going to turn to? They can’t even unionize the foreign plants down South. For GM to survive, they have to break the UAW.
Chances are, the dealerships will fight GM harder than the union…and the unions will fight hard.
Has anyone addressed the fact that GM builds up to 6 or 7 versions of the same car and brands them all differently? Its not as if most of their brands (Pontiac, Buick, etc.) have that much value, and I assume that it has to add to the costs.
Breakup the company by selling each division. I would keep Cadlac and Chevy but bring new managers to breakup the club.
Compare GM’s pushrod V-6 which is decades old with Honda’s VTEC V-6 which is cutting edge technology. GM puts out product that is so utterly inferior and wonders what the problem is?
1. Shut down at least one division, Buick, Pontiac, GMC, or perhaps even Chevrolet.
2. Consolidate final assembly plants and eliminate overcapacity.
3. Open up the UAW contract, and renegotiate terms, particularly regarding health benefits and plant closings as outlined in 1 and 2.
4. Set clear performance targets for top managers, in line with 1 through 3 above. If short term goals are not met within 6 months, fire them, and replace with people who will execute.
5. Inform everybody of your goals and strategies outlined above: stockholders, investor community, the public, everybody.
Take a bold step.
Go Diesel. Then bio-diesel.
The pertinent job here is not CEO of GM (roughly the equivalent of Prince Charles in the UK), it is head of the UAW cartel that runs GM, Ford, and a good chunk of DC. Give me that job and then we can talk.
Being an hourly employee of Gm for 26 years, I may have a better grip on reality than our current MR. Wagner. Simply put, look and the recent layoffs from salary . 28%. Almost one in three they were hiding all this time until bad press and stock price plunging brought this long overdue reduction. (Yet here they took out the vending machine lights to save money..!!) On an almost daily basis I see the waste and mismanagement of the corporation. Spend a million to save a dime. Nothing is more expensive than Poor Management. Everyone looks at the hourly expense. Sure the retirement costs are huge, but in active workers, their pay, health care, and retirement costs at our facility, come out to only 2% of the sticker price. Your read it right TWO percent. Where than does the rest of the 40,000 dollars go.THAT is where I would start. Hire an outside accounting company and find out what is happening with all the money…
I’d sell much of the standard car business to the employees putting much of the implicit money raised (stock in lieu of)into paying for the underfunded liabilities.
I’d carve out key assets such as onstar and gmac into a spin out with its own stock. I’d use GMAC to finance/buy electrical generation businesses in leading markets such as California, Washington DC, Phoenix, Atlanta, Orlando…mostly highly educated/high income areas.
Appx 1/2 of all generation capacity goes unused (nighttime) representing a shameful waste of capital stock and an incredible arbitrage opportunity.
I would contract Lotus, Shelby and Porche to individually compete to design a legal knockoff of the Prius plug-in with 40 mile range with 55mph speed on electric only…making explicit alliances with many PR worthy orgs/institutions to show that the tide is turning. The contest/competition will generate enormous PR and buzz and will have the public rooting for their favorite design – we’ll own the trade pubs and with a definite 16 month finish line, everyone would know how long the contest will be. If you’re late, you lose. Drama – reality shows – spy scandals.
– The winner gets a 5 year contract to produce the cars up to a ceiling number mutually agreed to.
I’d only lease the cars, and do everything humanly possible to offer them at a price that would be within 10% of a standard car.
I’d encourage another 15% tax CREDIT to be enacted for US assembled plug-in cars with nn% domestic content. Thus making the effective cost less than a standard car – meanwhile, the dollar will have continued to be devalued relative to the yen – and I’ll produce the vehicles in countries such as India who have notoriously unreliable power systems and “fix it for the right price” – owning as much generation and transmission infrastructure as I can.
I’d make most of my money on financing the leases and by selling electricity at night to this new but growing cadre of viable/practical plug in hybrids.
Cars would become the blades and my electrical utilities would become the razor.
Parked plug in hybrids would then feed back power to shave peaks off my generation costs when all the air conditioners went on…and this parasitic generation would be paid back to the owner as a modest but still profitable to me reduction in the periodic lease payment.
I’d buy water rights throughout the US. This is the largest store of energy there is.
1. Get new part suppliers. You know the routine—alternators(that go out at about 60,000mi), starters(that only last 70,000 or so) knobs, switches, window motors(won’t last 75,000). Sound familiar? The parts suppliers are killing GM and if they can’t build reliable parts in house, then buy them from Toyota.
2. Demand reliability upgrades so that the company earns a different reputation. Now it’s “Possibly may outlast the warranty, but don’t bet it’ll outlast the payments.”
I have owned six or seven GM’s and none of them have been reliable. I laughed at one of the previous posts about the Pontiac 6000 on a relative’s car lot. It must have been written for me. I paid dearly for an 86 Pontiac 6000 that repeatedly blew headgaskets(defective headbolts) and cracked the head, all undoubtedly due to piss poor engineering and quality control. Starters, alternators, knobs, switches, window motors constantly going out. I will never buy another GM at any price, because if a car isn’t reliable it’s worth nothing.
Rather than trying to have all brands attractive to 18-49 year olds, it should orient brands to particular demographic segments. Older people like Buicks for features that make younger people dislike them. Trying to capture the Nissan buyer will alienate the current Buick buyer. Buick buyers are responsible for much of the profit at GM. So killing another brand is simply the next step in shrinking GM down to nothing. Now that also does mean cutting back on some of the model redundancy among brands. I think this is driven by the fact that all dealers want to appeal to a broad segment. My suggestion would be to allow GM dealers to offer multibrands. Then Buick can focus on providing nice large dependable sedans, Pontiac can provide sporty coupes, Chevy family cars and Cadillac the BMW/MB/Lexus killers. No need for a Buick SUV or a small car from Cadillac. No large sedans or SUVs for Pontiac and no luxury Chevys.
Each brand can focus on its segment of the market and share platforms and components where appropriate.
I don’t think we (or at least I) have the knowledge to comment on internal issues such as health care costs and wages, however I can comment from the perspective of the products GM offers.
I believe there are several issues often cited as problems at GM that are not ‘significantly’ impacting sales negatively. While GM reliability can’t be used as a selling point like some other manufacturers it isn’t so bad that I believe large numbers of consumers shun the vehicles for that reason. Vehicle styling is also an issue that I don’t believe is turning consumers away in large numbers. Think about it, is the Honda Accord or the Toyota Camry your idea of exciting styling? For most of us the answer is no, yet they have generated enormous sales for their manufacturers.
The biggest ‘hit’ I’ve seen in the automotive press regarding GM products is initial build quality. A consumer interested in a small SUV is going to turn away from the Saturn Vue when they read reviews complaining about large gaps in the body panels and CVT transmissions that regularly have problems. This isn’t an isolated incident. Many GM vehicles suffer this malady and others like it such as: one touch windows that only open with one touch but need to be held to close the window, body molding that doesn’t stay attached and significant amounts of road, engine and wind noise.
Another issue is the quality of materials used. Hard plastic may keep prices down but if it gets mentioned in the automotive press consumers will consider it when making purchase decisions. If you have to use fake wood trim go the extra mile to find something the press will at least say ‘looks good for fake wood’, not ‘fake trim that was meant to look like wood’. Also, things that are meant to move should move smoothly, like sunroof covers, doors and door handles. They do in Hondas.
The final issue I think is a problem for GM is the drivability of their cars. Why does a Honda Accord handle well but feel comfortable, while GM’s competitors to the Accord either ride harshly or have the ‘bouncy’ feeling so well associated with Buicks. GM can, should and needs to get drivability (including steering, steering feel, etc.) correct in every car.
To address these issues is simple. Use the press. Those guys (and gals) love nothing more than to say such-and-such ‘manufacturer listened to me’. So, I would put together an auditing team to identify issues the press has with products then 1) attempt to fix those issues, and 2) retrain or replace the people who allowed them to happen in the first place.
Finally, GM needs to rework their Union contracts to ensure they can immediately fire any person who drinks anything during working hours – to include lunch breaks.
Good looking sheetmetal will always sell thats a fact, quality is second. Gm’s styling stinks always has.
Maybe Toyota should buy GM, but them why should they tarnish their BRAND.
Oh someone said Toyota doesn’t make money on cars and trucks, if so how would did they put almost 12 Billion $$ on their books in 2004?? AND their dealer body are the riches dealers in the US.
I’ve seen some good thoughts here, and I agree with those that think the problem is related to marketing. From the consumer point of view, it’s this… American auto makers create cars for rednecks and people over 60. It’s that simple. I’m in my 30s, and I just don’t know anybody who drives an American car except one friend of mine… who works for GM (and they “suggested” he buy from the company – he owned a foreign car at the time of his hire).
Hey, GM management, listen to your potential customers for once: When you make cars that guys with mullets named Earl and Roscoe think are cool, you should drop those cars immediately and go for guys named Michael and Will. Earl and Roscoe drink Jim Beam mixed in koolaid. Michael and Will drink mocha lattes, and they’re buying from the competition.
What would I do? Day one: Go to the HQ in Michigan, sit down with the top management, and instantly fire anybody who (a) has a mustache, (b) has a gut, (c) thinks any current model looks great, and (4) any of the above.
How’zat?
Simple statement of fact: GM products are garbage. They can make them look neat but they can’t build them to stay that way. They use the cheapest versions of componants they can get, their engineering is lousy and their materials are shody along wih the workmanship and design.
Its is not the fault of the American worker either as most “Japanese” cars sold in the U.S. are made here by American labor. The worker problems they do have are completely caused by labor mismangement and by the corruption of the communist labor unions. They started to go down a decent road when they first started Saturn but they have since destroyed that. The only hope for the brand is for it to collapse and be bought out by someone else.
Look at Chrysler since it has been taken over by Mercedes. They are starting to receive accolades for thier quality and their designs are spectacular. Ford is coming along too although more slowly. GM is toast. There is no hope for them so long as they continue to operate like this.
The worst part is they are betting theeir hopes (and cash reserves on trying to manipulate the government into taking over their health care and pension plans so that they can remain afloat. Let them die. The worthwhile parts of the company and workers will be absorbed by other companies and the unions will be broken. Its all good.
If I were selected to run GM for awhile, I would slow the hemmoraging of cash by mandating every employee purchase the bonds GM sells on the open market from investors whom are about to dump them when they get downgraded to “junk” where shortly. Seniority from the CEO on down to the line worker would be , no longer in terms of years on the job, but rather how much they personally had a stake in the companys future. I think the rate should be index to the fed funds rate, and sold to the employee’s like “War Bonds” were years ago.
I usually don’t pay too much attention to the news, or pundits, who like priests, lawyers and politicians make their living with words. However, this one caught my eye.
I made the agonizing decision to accept a “Career Transition” Package from GM in March. I’d been with the company 15 years. I’m an engineer, and I’ve done a many different things at GM, from design and test on aircraft engines (Allison Turbine, now owned by Rolls Royce), to assembly plant launches in Mexico, Missouri and Texas (with what was then known as North American Truck Platforms, then GM Truck Group). I did quite a few process machine installations, and set up processes so you could have a whole case of beer at lunch, and the product would be impervious to your input. …as there were a couple very sober engineers putting incredible effort into designing a method to build vehicles that didn’t matter if you’re having a bad day. Machines don’t sleep, eat, take breaks or go on strike.
I went over to the “dark side” and went into vehicle development. My first assignment was tire integration. GM does this better than ANYBODY. Full Stop. GM does quite a few thing better than ANYBODY. Unfortunately, there are many things GM does that would be better done by an undergraduate with a blunt No. 2 pencil. Did someone say design?
About four years ago, I found myself in “Quality”. I don’t know how this happened, and I surely didn’t ask for it. My supervisor (in Vehicle Dynamics) explained to me that he was forced to give up one of his guys to a new quality group, and since I was the only one on his staff that had ever used the “tools” (a database) he picked me. I was to suffer one of the longest misguided periods of my career as I worked on “Warranty Issues”. I will tell you, the majority of what is wrong with GM cars falls into two categories: 1) Warren doesn’t know what Milford is doing (Warren being “engineering” and Milford being “integration”) and 2) GM is trying to cut costs so much they generally will run almost any supplier into to bankruptcy on the grounds of one small mistake. Woe be the automotive supplier that doesn’t diversify.
So Michael Moore may have looked at the assembly plants in Flint in his youth (and he really should have stopped with “Pets or Meat” – in my humble opinion, the highpoint of his career) and a few of the other folks that have written may have actually owned a home in Flint (and you have my utmost sympathy – I live about 40 miles from Flint, and THAT is close enough). But my observations from inside those facilities, don’t necessary dovetail particularly well with their observations of the sign in the yard.
First of all, healthcare. I was a salaried employee of GM. I elected an HMO and I had co pays and contributions like most other professionals. This is a good thing, it sort of helps you not waste money, and give some of the responsibility to you. The United Auto Workers has done a fine job of protecting the benefits they won in generations past. My father in law is a pipe-fitter in Flint (he doesn’t actually live their either, but I’d say he’s with in 25 miles). As a skilled tradesman, he is represented by the UAW. You can look from outside, and say “Oh, well, look at the benefits the ‘line rats’ have. No wonder the company is going broke.'” but this is simply a management issue as well. There is a process called “bargaining” that occurs in the auto industry every three years. The UAW attempts to secure the best possible benefits and working conditions for their members as possible. Unfortunately, many folks working at GM often feel they’re working for the UAW and not GM. Their benefits are eroding too. I’ve not been a part of the bargaining process, but its a good process and get the hourly workers as much out of the company as the can afford. And YES, GM must be applauded for taking care of their workforce better than their stockholders. A company exist to make a profit, but there has not ever existed one stock broker that ever actually produced anything of real value. This I know, I’ve held enough GM stock (some of which I paid over $80/share for) and that piece of paper is a nice thing, but there must be laws to prevent me from putting it in my scanner and making a very good copy, that in effect will function just the same.
Still, there is no fundamental reason GM can not afford these contracts. They as a corporation should have weighed their business perspectives to see if shutting down the operations to squeezed the “membership” a bit was in the long run the low cost way to do things. Unfortunately we, as a society aren’t interested in what will happen in two years, we only look at the quarterly reports. To look at this lesson, we must only cross the Pacific and look at what China is doing.
China has over four times our population and they’re industrializing at a breakneck speed. Wonder why a behemoth like GM can’t afford their pensions and healthcare? Look across the Pacific. Sick and tired of $2.00+ unleaded self serve gasoline? Look across the Pacific. Wonder what your children will do for a living? Look across the Pacific. They’ll be taking returns on the goods that were built in China, at the local Wal-Mart and perhaps arguing with a fellow in India or Jamaica about their tax return (data after all being incredibly portable). The Chinese have a wonderful ability to plan much further into the future than the third quarter. They’ve done a fine job of obtaining current know how and equipment for virtually no investment. Any multi-national company doing business in China must be “partnered” with a local company which must own at least 51% of the joint venture. Go anywhere an attempt to purchase something. If you set the goods down that have the “made in China” identification on it like I do, you’ll find you’re quite often a frustrated shopper; and you end up buying the shoes, television, car or video camera anyway, because your covetousness outweighs your principles.
Yes, children are sober in India. …and they’re coming to eat your lunch. Yes, you Mr. Weatherman, and you, Ms. Stockbroker, and yes, you, Mr. Tax Accountant and oh, by the way you too Ms. Medical Biller. Oh, and madam Physician, you’ll get to know your replacement, as Asian culture allows for growing an individual and he or she doesn’t have to start paying for her student loans and buying Chinese goods as soon as she manages to finish her associate’s degree.
GM is merely a barometer of the equalization of pressure in standards of living around the world. It is a wonderful place, this brave new world (sorry Mr. Huxley) and you and I get to compete with Ping and Vijay for our incomes, and for goods and services. But, we, as Americans (and to certain extent Canadians) have gotten fat and greedy, and we blame our politicians because it certainly can’t be “Our FAULT”.
Well it is. We are short sighted, and envious. We’ve enjoyed our wealth for so long, it is unbelievable we should see the aforementioned “Ping” and “Vijay” living what we so arrogantly call “The AMERICAN Dream”.
We must compete. GM isn’t in a position to do that. Its too big, and too unmanageable. Remember the Soviet Union? Centralized societies can not survive an open culture. There is no one individual that is bright enough, or educated enough to run such an enterprise in the world of today. Too many of us peons actually talk to each other.
Should GM be allowed to fail? Certainly. The US loan guarantees for Chrysler simply made an attractive cash cow for a German company a few years later, and a few executives fabulously wealthy.
GM will not recover unless they’re forced to. “That which does not kill us makes us stronger” is more true in business than in biology.
What would I do as CEO?
Well, were I the CEO I wouldn’t not have to send Mr. Wagner back to Brazil (as this would have already been done for me).
Mr. Lutz? The next time you go to Australia buy yourself a t-shirt or a ball cap and leave all twenty five year old chasses with rather unremarkable bodywork in a protected market, will you (for the uninitiated, the GTO is an embarrassment rivaled ONLY by the Pontiac Aztek)? Thank you for your assistance, and your rather bumbling addresses to the press, but please go enjoy your retirement, and the next time you decide to fly your MiG, please put some ammo in the cannon and strafe Mr. Queen’s house.
Mr. Queen, here is a nice boat. I’m sure you survived Mr. Lutz’s strafing, as he couldn’t find a target on scotch soaked cocktail napkin. Please make sure it doesn’t sink on your watch, and learn that here in Michigan we play euchre. Being “short suited” is a good thing (Yes, I actually cringed in all those meetings I was forced to attend when you kept saying we were short-suited, but not as much as when it started turning up in other executives list of catch phrases). You are right though, GM’s cars have pitiful interiors. I accepted the offer to evaluate a Buick LaCrosse. Yes, the seat was very comfortable, but the car is almost as ugly as a 1999 Ford Taurus, and that, friends and neighbors is Ugly (with a capital U).
Mr. Brian Nesbit. You’re a pretty nice guy, and I remember you from church (we met briefly). But you’re a one hit wonder (and Chrysler sells that one). Please come home from Europe (Opel is screwed up enough already). Go to California and do some surfing, eat some weird food, survive an earthquake or two and send me your portfolio when you’ve got something with Style (with the capital S).
Anyone I’ve forgotten? Oh Yes, Mr. Sears. Good job. I’ve got a new one for you. I’ve decided I’m going to get rid of all the me-too vanilla products we build. All your manufacturing facilities are going to be different, because we’ll be building different products for different needs, wants and desires. Find about 40 good people who can manage a facility that builds something different than anyone else, please. I’ll want your report and proposal Monday. There’ll be no need to call a meeting.
Attention all other executive vice presidents. You’re fired.
Attention ALL Vehicle Line Executives. Go sell crackers and cookies somewhere else. Your services are no longer required. We’ll no longer be selling commodities here.
Attention ALL Vehicle Chief Engineers. Please submit to me your what your market segments needs, and how you must achieve positioning GM’s offerings and a plan to do so. Check books will be open, and not only your bonus, but your salary will now reflect the effectiveness of your decisions.
Attention JD Powers and Company. I have not canned all of my attorneys… yet. I have one little task left for them. I will own you. You’ve published garbage and called it statistics long enough.
Oh, all corporate policies are hereby NEGOTIABLE. They’re guidelines, not absolutes. Something stupid, or doesn’t make sense? Only one thing will get you fired in my regime (yes, I’m a dictator, but a malevolent one); the phrase (or variations of it) “That’s the way we’ve always done it, and its corporate policy”.
To all members of the GM family. I’m sorry to tell you this, but many of you will no longer be required. If you go to more than one meeting a day, please pack your desk, as you’re obviously not accomplishing anything.
There will be some very lean times ahead of us. I will not seek bankruptcy protection, although in effect we are bankrupt, financially, spiritually and creatively. You’re challenged to form into your own business units. Those of you occupied working on the following products, should immediately seek other alliances:
Buick LaCrosse – there are lots of Ford Tauruses out there.
Buick Terraza – Just what the hell was who thinking?????
Cadillac STS – if you touched this car’s styling run for your life, because I’m sending Lutz in his MiG after you. How stupid can you be to make a $60,000 car look so much like a $30,000 car you have to look at the tires to figure out which is which????
Cadillac XLR I like this one. I have jobs for you.
Chevrolet Aveo Mr. Wagner, if you’d like to continue working here, this will be your company car. Consider it punishment.
Chevrolet Endloader (or what ever that ugly minivan thing is called) – let DCX make some money, and we’ll get a lambda out here.
Chevrolet Equinox Theta sucks.
Chevrolet Malibu You were right, it’s STILL the car you KNEW America could build. Good car, uglier than the chick that did commercials for K-Mart… what was her name?
Chevrolet Impala I’m not sure if I’m going to can this one or not. Pretty sure, but cops gotta have something to cruise around in… Wait, where what that Holden thing with four doors. Now that’s a cruiser. Canned.
Chevrolet SSR This will be the replacement for the Canyon. I like this one, but we need an extended cab, and a Sedan Delivery version.
Chevrolet Cobalt Why does this car look like a ’92 Cadavaleer? This is suppose to get people in our cars. Has anyone seen a Toyota Echo? A Honda Civic? A Hyundai for goodness sakes? Get out of here.
Chevrolet Canyon What a piece of garbage. Enough said.
Chevrolet Silverado >7200 GVWR will get a new front suspension. See me. …uh, and could I get a stylist in here????
Chevrolet Suburban / Tahoe New suspensions, all around. See me.
GMC Colorado uh, would someone try this again????
GMC Sierra See Silverado
GMC Yukon See Suburban / Tahoe
Hummer H2 Done. So five minutes ago. What are the rappers buying now?
Hummer H3 I like it, that Japanese/Brazilian fiasco of a chassis, but it might work here.
Oldsmobile? Are any of you guys still around? The Aurora and Intrigue had style and character. Of course GM would can them instead of giving the marketing guys a few more drinks. Stupid make, great names, and the best looking cars to come out of GM in 25 years. Could you do it again?
Pontiac G6 Swing and a miss. You’re out of there.
Pontiac… What else they got? That might be a problem You’d think I might remember. Oh well, who wants a car named after an Indian Chief?
SAAB 9-2 SOMEBODY HIDE THE STYROFOAM!
Saturn Hey, I have an engineering degree and EVEN I know Saturn mean “slow”. Did anyone ever look this up? How are you going to sell small cars that are tagged with the monicker “Slow”. No matter, I like the logo. Let’s call it “Mecury”… no wait, that one’s taken and on a bunch of slow forgettable Fords. “Uranus”? Ugly (fits the brand image) but… we might get sued. We’ll stick with Saturn. Get me some poets in here. …and get me a theme for a name. Somthing inspiring. How about Callisto?
Saturn VUE Stupid name, lousy chassis, ugly. No redeeming values? GONE, GONE, GONE
That doesn’t leave much, does it. Good thing. Yeah, we’ll bleed red ink for a while. We might survive. GMAC will keep us afloat… Ever wonder why they do so well? Perhaps Ford will recover and buy us out. No matter, What does not kill us will make us stronger!
Oh yes… who does Toyota’s advertising? Buy them please! They’re just NOT that good… I’ve driven them.
If I was CEO, I would be avoiding bankruptcy as much as possible. That’s my job. So while I think the Union, many established engineers/management, and other overcapacity problems are dragging GM down, the only solution to that is bankruptcy (i.e. you can’t get rid of the union, getting rid of people with pensions doesn’t help you anyways because you’re going to pay for their retirement, shutting down plants doesn’t actually help because you still pay all these salaries, and take a loss on the money left in the plant).
What would I be looking to fix? Not quality, but perceived quality. Take a look at JDPower’s initial quality report. It’s not a very large gap. GM is ~20 behind Toyota, and Nissan is ~30 behind GM. Look at VW. Toyota has 11 cars/trucks in the top three in their classes, GM has 13. The same for the JDPower’s dependability report It’s perceived quality that is the problem. So here’s my list:
1. Design
2. Materials
3. Marketing
In that order. Nissan has great design. Their cars look cool. Plain and simple, that’s what gets people into their showrooms. So I would stop watering down GM cars and trucks. The Cobalt looks too similar to the Cavalier. The G6 looks too similar to the Grand Am (or every other Pontiac for that matter). The list can go on. I would be pushing for designs similar to their concepts cars. Turnover rate would be every 4 years, tops.
Materials: The interiors of GM cars look cheap. Why? First, they are replicated along complete production lines. All Chevy’s have the same radio. Standardize the components behind the dash, but the part that comes into physical contact with the driver must be unique. It must be higher quality material. This would cost money, and I don’t know how much. But I think this is imperative, and I would personally spend an extra grand on an interior I thought was better.
Marketing: I don’t know how these guys are still doing this. Typical GM commercial: hmmm…here’s a car. GO BUY ONE! It doesn’t work. They seem to finally be changing this. But it definitely isn’t happening fast enough. A successful advertising campaign can do wonders for sales. Look at VW a couple of years ago.
I don’t know if anyone will read this since it’s at the bottom of a really long thread. But it made me feel better anyway.
Build better looking cars (design is EVERYTHING) which get better gas mileage and use http://www.SelfWellSystems.com personal health management program for all GM Employees and their families. That will reduce the healthcare costs that are killing a tremendous company.
Pull a Willie G, and go check out some car shows. Scope out what is in with the new generation of car buyers. Talk to people. Get feedback from those that you want to sell a product to. Also, do something really innovative quick. I mean something so radical that it will shake the world. This something doesn’t have to be anything crazy, but perhaps introduce a technology now instead of 20 years from now. What the hell, build a fuel cell full size pick-up truck. Something like that. Or a 100 mpg family car. Or a gas turbine powered sedan. The point is to get off our rear ends and start producing the cars of tomorrow today.
GM already tried turbine powered car technology… back in the 50’s. Research and development was started by GM in the 1930’s!
Take a look at the Firebird I, II and III of the 1950’s. The Firebird III didn’t even have foot pedals or a steering wheel. It was all controlled by a single joystick in the middle of the cockpit. You could drive sitting on the right or left side. They were even thinking of an automated driving system for this car. The Firebird III is still operational today and GM takes it out once in a while for a fun cruise. Their research found that turbine power is not practical for passenger cars.
There are so many technologies and technological “firsts” that have been developed by GM, I don’t even want to try to list them all here. GM is the 20th century leader by far in automotive technology development.
Well, this is how I’d break it down:
*Engineering- When given a task to engineer something well, cheap and fast, you’ll always get the answer that you can have any two, not all. For years, Detroit did it cheap and fast. First assess what engineered parts work flawlessly, and keep them. For all else, they need to invest in R&D. Hyundai’s top guy decided a massive investment was needed into engineering and r&d to overcome their mediocre past products, and all that investment launched them right past the American cars in quality, right next to Honda & Toyota. Not cheap, but definitely needed. Keep at least current with competitors (ex.-GM’s 4spd auto is 2 spds behind the comp.)
*Marketing & Brand Mgt.- You can’t have the same product with a different grills and make 5 divisions out of it. Nissan has successfully taken several chasses and made 2 totally different brands out of it(Nissan & Infiniti). The secret is just using the chassis, not the same body panels. Utilize the best chassis you can, and build differently from there. If you can not do this for 5 different brands, then you have too many. Marketing should be easier once you have true differences between divisions. Also, each division should have a “Mission Statement” that they stick to. (Ex. Pontiac doesn’t need a minivan-it doesn’t agree with their “Excitement” motto)
*Costs- Ah, the unions and healthcare. Ugh. I’d first see how much production could be sent to Mexican & Canadian plants, then renegotiate the US contracts. Let them strike- you can build in Mexico and Canada. Yes, you’ll take a big hit, but it’s a better bet than having the unions drain you of capital. I’d get rid of that 95% pay for idled workers for x #of years. Much more worker co-pay for insurance. I don’t know the rest of the details. Once the American contracts have been renegotiated, then switch production to US factories and challenge the other country’s workers. Utilize automation whenever possible-computers and robots don’t need health care.
*Feedback, feedback, feedback. Stick a postcard in each car, or have a mechanism to contact GM regarding what’s good, what’s not. Perhaps an owner’s club that aggregates things for each division, and reports to GM mgt.? Use this feedback for regular updates to cars, so they don’t go stale 1 year after introduction.
That’s what I’d do if I were King of GM. Also, I want the reserved parking space and the 20 year old secretary with the big caboose.
Overall strategy is to leverege on the quality
of your engine designers and use that power to
fix the problem areas:
marketing, quality of assembly, and public relations.
That will internally will require fixing how
you do business. your employees must be
rewarded by ‘merit’ not by ‘how long they stayed’.
1) Disband the unions,
2) Institute statistical quality process
for assembly line, and judge assembly line
managers by how close they are to the requirement
3) Institute performance quality process
for the designers which is: Torque per MPG
(the higher the number the better)
4) Keep Cadillac, Corvette and GM(C) brand,
and loose the rest (buick, pontiac and
chevy)
5) Make sure that you have $9K car that
does 40mpg, $13K car that does 30-35 mpg
but is a bit larger and performance oriented
then $18K family car that does 30-35mpg
that has styling not embarasing to a young couple
with kidds. Cars after $30K range should be
cadillac or corvette brands unless it is a truck
(I also do not think
there is anything wrong with extending the corvette brand to more than one performance car style, as long as it is not a van, truck or SUV)
6) Introduce rotary engine into lineup
as well as a couple of excellent diesels
(that burn clean diesel), I personally do not think that hybrids have a big future. Their
mileadge is not great, and they are expensive
and will stay expensive.
I think it will be a combination of diesel cars,
may be with some kind of fast spinning rotary,
and pure electric cars who get charged from future nuclear power stations (but that will take another 20 or so years)
I know exactly what would bring GM back to the top and I’m sure would sell a tremendous amount of cars! If anybody from GM is interested in what my idea is then they can contact me through my email that I listed in the email address box prior to this box which is the comments box!
Darren Logan