long Compost article about banality and stupidity of GM
archived forever. the sclerosis and stupidity of a corporation that has
lost its way and deserves to go under. washingtonpost.com Dull at Any Speed GM Never Learned to Shift Gears By Maryann N. Keller Post Sunday, June 12, 2005; B01 In a Detroit suburb in the late 1980s, General Motors established a large technical facility it called the Mona Lisa center, where its engineers disassembled Honda Accords and Toyota Camrys in a desperate search for the secret of their Japanese competitors' success. They analyzed the smallest pieces trying to figure out the best attributes to include in future GM models. The reasons for GM's decline could have been found there on the floor of the Mona Lisa center, but not among the parts. It was the whole approach. Taking apart existing cars is a backward-looking exercise; it doesn't tell you what's going to sell four or five years down the road. So while GM was staring in its rearview mirror, its competitors were zipping ahead. What ails GM today is much the same as what ailed it then -- and it's not just a matter of big pension plans, health care costs for workers or undervalued Asian currencies. The problem is that GM has forgotten how to make cars that people want to buy. That's why the 25,000 layoffs that GM announced on Tuesday were only part of the week's distressing news for the automaker. The company also said that it is hard at work at a concept car called the Buick Centieme, a seven-passenger "crossover" vehicle designed to compete with popular rivals from Honda, Ford and Chrysler. (Crossovers have SUV attributes, but are built on car, not truck, platforms.) GM's lack of a seven-seat crossover wagon to sell in 2005 is a problem now, but the new model car won't arrive until sometime between 2007 and 2009. Will it be substantially better than what I could buy today? GM has never behaved as if it understood that the competition is always moving forward. The car I can buy today is not something I want in four years. The company might as well still be stuck in the Mona Lisa center. It's hard to pinpoint when GM lost its touch. At the start of my career as an auto industry analyst in 1972, General Motors had a triple-A credit rating and a portfolio of distinctive and powerful brands that suited America's growing affluence and emerging suburban lifestyle. I myself had bought a new Pontiac Tempest just after college in 1966 and I loved it. But I've owned only one GM car since then. For the past 33 years, I have watched, analyzed and chronicled the decline of GM's market share and leadership among the world's automakers. In the 1970s, the company lost its creative edge, paying more attention to financial calculations than consumer tastes. Since the 1980s GM has been forced into more downsizings and restructuring than I care to document. Each time, it has touted multibillion dollar cost savings and a corporate revival based on new products in the pipeline. That's what happened, again, last week. At the company's annual shareholder meeting, chief executive G. Richard Wagoner Jr. delivered a statement essentially identical to what we've heard time and again. He announced yet another round of job cuts and factory closings while expressing confidence in the success of future models. GM stock surged, just as it has after every other cost-cutting scheme. But while Wagoner is trying to exude confidence, GM cars are languishing on dealers' lots. And history tells us that getting rid of people and factories is not going to close gaps in product development and production efficiency with competitors such as Toyota. It is simply aligning the company's assets to a new reality of a permanently lower market share. This would have been unimaginable to Alfred Sloan, the legendary GM chairman who rebuilt the company after an earlier brush with bankruptcy and who retired in 1956. He had left behind a heritage of engineering innovation and financial controls that supported smart decisions without stifling creativity. The company was so dominant, it could have run on cruise control -- at least for a while. Sloan's successors lost touch with consumers. People used to speak with awe about the executive offices on the 14th floor of GM headquarters. Visitors had to go through two sets of electronically locked glass doors and file past guards. Inside, it was like a sanctuary -- very, very quiet with beige carpeting and wood paneling. The executives had their own private dining rooms and secretaries sat watch over closed office doors, preventing any opportunity for casual conversation. Cocooned there, GM's executives became smug. By the 1970s, new forces -- rising gasoline prices and competition from Japan -- were beginning to assault the company and Sloan's world was passing. GM responded to cheap Japanese imports by cutting quality. One Chevy model actually left out the back seat to cut costs. Brand definition, Sloan's genius, was blurred. In the 1980s, Roger Smith, whose long tenure as CEO was marked by GM's greatest failures, took the company through a disastrous reorganization and then proceeded to spend more than $15 billion on robots and factory automation, none of which helped product quality or cut costs. Smith also acquired Electronic Data Systems, which Ross Perot had founded, to shake up the company's culture and Hughes Aircraft to introduce space age technology into the car. Money that should have been devoted to designing better automobile engines and restoring the luster of, say, Cadillac (which had degenerated into a tarted-up Chevrolet) was spent on diversions. Smith also added Saab to the roster of money-losing ventures. A multi-billion-dollar investment in Saturn was supposed to spur a cultural revolution by getting management, labor and dealers to work together. But in the 1990s, GM's next CEO, Jack Smith, and his team starved that division, which had enjoyed modest retail success at the outset because of a strong and dedicated dealer body. Today Saturn has been relegated to just another undistinguished GM brand that has cost the company more than $10 billion. During the 1990s, GM focused on productivity and quality with some success. Profits soared for a while. But once again dollars that should have been invested in cars were diverted into stock buybacks at prices considerably above the current level, vehicle production in China and elsewhere in Asia, Internet startups and lastly into Fiat, the Italian automaker. That Rick Wagoner can argue, as he has, that the $4 billion to $5 billion it cost to get in and out of Fiat (about half to buy a stake and half to get out of an obligation to buy the rest) was money well spent is beyond belief. It is baffling that GM -- a company supposedly run by "bean counters" demanding forecasts of double-digit returns before approving investments -- wasted so much. Jack Smith, who got the top job in 1992, brushed aside concerns about the slide in the company's U.S. market share by saying that GM's global share mattered more because of faster market growth abroad. No one at the company seemed to understand that the United States has been, is and will be the source of virtually all of the profits earned by world automakers. How could GM think that it could save itself in Asia when the Japanese and Korean auto companies have been intent on increasing sales here because this is where the profits are? Jack Smith also blamed GM's U.S. problems on poor marketing rather than poor vehicles. In an effort to establish unique brand identities in the increasingly crowded American market, the company expanded the influence of market researchers even as it reduced the ranks of engineers. GM convinced itself that by using "psychographics," a hocus pocus term that means a combination of psychology and demographics, it could profile the U.S. population and create niche products. Car designers surrounded themselves with photos of their intended customers .. I remember being taken through these studios with then-executive vice president for marketing Ron Zarella. On the wall of one studio hung large photographs of vital young men and women doing the things that GM associated with Pontiac. One photo showed a Spandex-clad young woman rock-climbing, the supposed inspiration for the prototype of what would become the Aztek. The car, by comparison, was anything but agile and sleek. GM managed to create a vehicle that everyone hated. One has to wonder why it has been so hard for GM to figure out what car buyers want and then give it to them. The company has not been able to leap ahead of the competition since the early 1980s when it led the way into front-wheel drive. Its failures are numerous. Chrysler launched the first minivan in 1984. It took more than a decade, but the Japanese established themselves in the sector while GM failed to come up with a desirable model. Today, GM's minivans still lack the seating configurations that have become the norm, forcing the company to lure consumers by offering thousands of dollars in "incentive" discounts, ultimately a self-defeating exercise that gives the impression (correctly) that the company is having trouble selling its cars. GM has all but given up trying to come up with a competitor to the Toyota Camry and Honda Accord that its Mona Lisa center took apart. But Toyota added a hit SUV, the RX 300 in its Lexus line. When Toyota realized that the Lexus brand was attracting only older buyers, it created Scion and matched unique style with unconventional marketing to appeal to the young generation. When GM faced the same problem of appealing only to seniors with Oldsmobile, it ended up killing off the brand and sacrificing more market share. GM's product planning has also ignored the possibility that fuel economy might again become a priority for consumers. When I was a member of a National Academy of Sciences panel studying the Corporate Average Fuel Economy (CAFE) standards for the auto industry in 2001, GM argued against raising them. At the same time that it was forecasting bigger auto sales in China, it was denying the impact that would have on oil markets. And it is virtually alone in arguing that aging models explain its falling SUV sales while every other vehicle manufacturer points to fuel prices as the reason. The SUV boom of the 1990s is over and with it the huge profits that these titans generated. GM's management tells us to wait until the new GMT 900 series of SUVs and pickups hit the showrooms next year. These will be followed by more new models, including the new entrants into the surging crossover category. But GM's Asian competitors are introducing new models and refreshing existing ones at a faster pace, so that GM is always reacting rather than forcing its rivals to respond. And there are just too many examples of the company's failure to match the competition, let alone innovate, leaving us to wonder why we should believe that what's in the pipeline will be any better. It's true, as management argues, that health care costs are a huge burden for GM. But management agreed to the health care provisions in past contracts based on faulty assumptions of rising production. It seems unfair to ask hourly workers to sacrifice wages without equal sacrifice among executives or the shareholders who still get a $2-a-share dividend from the company's large but rapidly dwindling cash horde. What is so tragic about the GM story is that the company has always attracted highly talented and dedicated people who want to do the right thing. No one at GM wants to close factories or bribe customers with rebates or employee pricing. GM invests more money and time in the creation of a new model than Toyota. So why does GM get it wrong so often? Why was Lee Iacocca able to save Chrysler? How is it that Carlos Ghosn was able to turn Nissan around in a few years and GM hasn't been able to stabilize itself in three decades? It's hard to change a corporation's culture, especially when the corporation is as large as GM. The age-old refrain about GM is that its executive ranks are dominated by treasurer's office graduates while car guys are nowhere to be found. Yet Jack Smith moved the company away from Roger Smith's imperial style to consensus management. Rick Wagoner, admitting a lack of product expertise, brought in Bob Lutz and gave him the freedom to revive GM styling. But a stifling corporate culture plagued by slow decision-making and a lack of accountability is hard to change. Perhaps Ghosn's and Iacocca's secret weapon was a willingness to admit to a crisis. So far, GM has only told us to wait for the new models while it leans on the United Auto Workers for concessions. Back in the Sloan era, GM was so dominant that it was worried that government trustbusters would order a breakup of the company. Those days are long gone. And while the company still has substantial resources, unless it can come up with some more appealing vehicles, no amount of UAW concessions or layoffs will be enough. Maryann Keller, of the consulting firm Maryann Keller & Associates, is the author of "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors" (William Morrow) and "Collision: GM, Toyota, Volkswagen and the Race to Own the 21st Century" (Doubleday). |
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"MC Pee Pants" > wrote in
: > The 1970's, when all US automakers lost their touch. When the > government basically crippled the cars by adopting safety and emission > standards that were beyond the technology available at a reasonable > price at the time. Thus you had heavy cars with anemic 400+ cubic inch > engines that put out <200 horsepower, and got 10 MPG if you were > lucky. The technology was there, others were doing it. The VW rabbit, the Nissan Z cars, and others were quite good for the day. -- Republican Health Plan: Don't Get Sick Guantanamo: The Gulag of Our Time |
On Mon, 13 Jun 2005, MC Pee Pants wrote:
> The 1970's, when all US automakers lost their touch. When the > government basically crippled the cars by adopting safety and emission > standards that were beyond the technology available at a reasonable > price at the time. Thus you had heavy cars with anemic 400+ cubic inch > engines that put out <200 horsepower, and got 10 MPG if you were lucky. Pfft. The technology was there. It wasn't as polished as it is now, but it most certainly was there. When strict emission control laws took effect nationwide in '72-'73, foreign automakers equipped their cars with fuel injected engines rather than carbureted ones. When even stricter laws took effect in the late '70s and early '80s, foreign makers added feedback control to their fuel injection systems. Meanwhile, Detroit was still farting around with idiotically complex, ultra-lean carburetors and highly restrictive intake and exhaust systems (GM pellet-type catalytic converters, anyone?) that caused cars to run like poo and get garbageful gas mileage. > > Chevy model actually left out the back seat to cut costs. > > Cite? Yeah, I'm really curious about this one, too, since it's made up. > What Caddy was "only" a Chevy? The only Cadillac that I can think of > that was a Chevy clone was the J-body Cimmaron Y'sure about that? The B-body Cadillac was nothing but a gussied-up Caprice Classic after '81. Don't know GM FWD body nomenclature, but most Cadillacs of the '80s were nothing more than facelifted Oldsmobuicks. > Cadillac has their own engines that are not available in any other GM > make. Sure they do, now, and now they're decent-to-good. But it hasn't always been so on either count. Those J-body cars used the pukeworthy 2.8 V6. And the B-bodies in their final twelve years used nothin' but Chevrolet 305s. > You tell me one full-sized Japanese truck that outsells F-150s, Silverados, > and Rams. The Honda Ridgeline, by about 20 months from now. Mark my words. |
On Mon, 13 Jun 2005, Dave Lister wrote:
> > The 1970's, when all US automakers lost their touch. When the > > government basically crippled the cars by adopting safety and emission > > standards that were beyond the technology available at a reasonable > > price at the time. Thus you had heavy cars with anemic 400+ cubic inch > > engines that put out <200 horsepower, and got 10 MPG if you were > > lucky. > > The technology was there, others were doing it. The VW rabbit, the > Nissan Z cars, and others were quite good for the day. ....everything Volvo sold in North America... |
MC Pee Pants wrote:
> TV's wrote: > >> What ails GM today is much the same as what ailed it then -- and it's >> not just a matter of big pension plans, health care costs for workers >> or undervalued Asian currencies. The problem is that GM has forgotten >> how to make cars that people want to buy. > > > What an exaggeration. They manage to sell over 8 million cars a year. > How many of those are fleet sales and car rental sales? >> It's hard to pinpoint when GM lost its touch. <snip> > >> > GM "led the way" into FWD in 1966, with the Oldsmobile Toronado. Ford > and Chrysler both sold FWD cars in the late 70's (Ford Fiesta, Plymouth > Horizon.) IIRC the first FWD car was a Cord, in the 40's! <snip> |
MC Pee Pants wrote:
>> By the 1970s, new forces -- rising gasoline prices and competition >> from Japan -- were beginning to assault the company and Sloan's >> world was passing. GM responded to cheap Japanese imports by cutting >> quality. One Chevy model actually left out the back seat to cut >> costs. > > Cite? Chevette Scooter |
"Daniel J. Stern" > wrote in message .umich.edu... > On Mon, 13 Jun 2005, MC Pee Pants wrote: > > You tell me one full-sized Japanese truck that outsells F-150s, Silverados, > > and Rams. > > The Honda Ridgeline, by about 20 months from now. Mark my words. Sooner if the Honda Pilot is any indication. And that rave review in the current Consumer Reports should give them quite a launch. |
"Daniel J. Stern" > wrote in message .umich.edu... > On Mon, 13 Jun 2005, MC Pee Pants wrote: > To paraphrase someone (don't remember who) - "it's about the cars, stupid!" (No, not you, Daniel). Build cars people want and they will buy them. If I may point to a GM division which has been overlooked in this discussion - Holden? Top selling car in Australia is the Holden Commodore, by a long chalk. Large, rear wheel drive, goes, stops, handles etc. (Oddly enough the second biggest selling car is the Ford Falcon - for description, look under Holden Commodore above). It's been interesting to see the comments about the Pontiac GTO (Holden Monaro). Biggest complaint is it doesnt look like a GTO. But I havent seen a critical review yet about build quality, handling, performance, etc. And remember the Monaro is just a 2-door Commodore, with a very small market locally. How many largish, rwd cars are made and sold in the US by GM - Cadillac excepted - may one ask? And the blistering attacks on GM's unionised workforce! GMAFB! Holdens workforce is even more unionised, and they recently received a pay rise, based on - wait for it - productivity by the company. They were rewarded for performance. Gee, how unusual. Methinks the buck stops with management. You know what worries me? That Holdens new(ish) CEO, Denny Mooney is a product of Detroit philosophy and breeding. Holdens last two CEOs were - chronologically - Australian and German. From outside the square. So, look for all the reasons you want to discover the failing of GM. I'm thinking I can see why... Steve Magee |
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