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long Compost article about banality and stupidity of GM



 
 
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  #1  
Old June 13th 05, 06:37 PM
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Default 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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  #3  
Old June 14th 05, 12:17 AM
MC Pee Pants
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Default

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.

> It's hard to pinpoint when GM lost its touch.


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.

> 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?

> 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)


What Caddy was "only" a Chevy? The only Cadillac that I can think of that
was a Chevy clone was the J-body Cimmaron, which had disappointing sales.
Cadillac has their own engines that are not available in any other GM make.

> 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.


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.)

> 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.


You tell me one full-sized Japanese truck that outsells F-150s, Silverados,
and Rams. Wait, there are none. They're more successful with smaller
trucks.

--

Beliefs are dangerous. Beliefs allow the mind to stop functioning.
A non-functioning mind is clinically dead. Believe in nothing.
- Maynard James Keenan

  #4  
Old June 14th 05, 12:20 AM
Dave Lister
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Default

"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

  #5  
Old June 14th 05, 03:32 AM
Daniel J. Stern
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Default

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.

  #6  
Old June 14th 05, 03:33 AM
Daniel J. Stern
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Posts: n/a
Default

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...
  #8  
Old June 14th 05, 05:58 AM
nooobody
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Default

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


  #9  
Old June 14th 05, 06:14 AM
Sancho Panza
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Default


"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.




  #10  
Old June 14th 05, 06:54 AM
Steve Magee
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Default


"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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