Now, I have been following GM, Ford, Toyota, Honda, and just about any other automaker you can think of for years now. From what I have read on this thread so far has ranged from fairly well informed to totally absurd. Let me give my thoughts on how and why GM has got itself into the situation it is currently in.
Strap in boys and girls.

General Motors problems began during the first gas crunch. That situation was almost a vanguard for the looming problem that would come to a head in the coming decades.

Just about every auto maker was ill prepared for it, some did better than others, Toyota and Honda for two. Now before I go any further let me remind everyone that imports tend to be more efficient because their market demands them to be. Toyota did not build the Corolla solely for the American market back then. They just brought what they were already making over here and “tweaked” it a bit for US tastes and standards, much the same way they do now. Take the Camry for example, it started out smaller than a Cavalier, now its as large as a Malibu. This should have been more of an eye opener for GM, but sadly it wasn’t. Once the gas came back on everyone just went back to work as if nothing happened. Mistake number one.

Now don’t think GM just blew it off like it was nothing. They were going to operate in typical GM fashion and just BUY an import company, why not right? They were making a boatload of money and had a huge share of the market. And they were actually planning on picking up Toyota back in the 80’s, woops.

So they limped along after the crisis, hurt, but still huge. Then Roger Smith, the wiz, took over the company. THIS is where the problems really started to boil.

Smith was probably the worst thing that could have happened to GM. He thought that it wasn’t GM’s cars that were the problem, but that the marketing was bad… Yeah. GM still had that old boys mentality and the union was still a million strong beast. They still felt they had a handle on things and that people would buy whatever they made, regardless of quality. Smith was also the man who really started the whole “badge engineering” craze. Actually, there are too many mistakes to list here. But one of his largest was how he handled the union contracts. He set the contracts to assume that GM will be constantly growing, which one can assume to be right (GM nearly had 60% of the market at one point in their history). But, due to his great leadership GM entered a spiral that they never really pulled out of. Because of this the UAW now has free health care, 85% of their pay even when they are laid off, and over 50k a year with a high school diploma. I toured a plant with my boss a few years ago. We watched a line worker spit, literally spit, into a managers face and say “you aint gon do nothing about it”. They said he was “fired” but we saw him coming back into work the next day on our way into a meeting. Is it all like that? No. But this is the attitude that has grown in the UAW. Its less about protecting the worker and more about sticking it to the management and getting their own. Sad really.

GM is, and will always be in a very bad position, if they give too much to the worker then they are just bad businessmen. If they are skinflints then they don’t care about anything but their bonuses.

Let me sum it up:
1. GM is being bled dry by the UAW and an inflexible overhead cost structure. Pensions, PPE,and materials are breaking them
2. If GM goes, it will take at least 1 in 12 jobs with them. All their suppliers, will go with them. The current auto market will not pick up that slack. Even at its best I have my doubts if it could.
3. Roger Smith put the snowball in motion, and now Wagoner has to try and stop it. Good luck. He ran the company into the ground.
4. There is a HUGE, HUGE, perception gap regarding domestics and imports. Tell me the difference between a Chevy Prism and a Corolla. I will give you a hint. The badge. And their quality is equal to Toyota. Go look.
5. If you want to see where the country is going, look at GM. This is why I worry.

Do I get a bailout too?

Huh? The problem isn’t that they’re greedy capitalists, it’s that they’re not. They’re (a) not greedy enough to come up with a plan to turn a profit and (b) not capitalists since they’re after government money instead of profits made by providing a competitive product.

Oathkeeper216 on December 3, 2008 at 12:47 PM

So, you base your ideas on Ed’s ridiculous premise that GM, with it’s hundreds of financial analysts, doesn’t know how to write a business plan?

Stand up for GM, Ford and Chrysler. (That doesn’t mean we have to “bail them out”, though)

I am very skeptical of posters here that slam American companies.

OK folks. Ed, you are starting to be brainwashed by liberals. Your analysis above is pure jibberish.

Let’s leave our good capitalist system alone.

Any car company would have been caught with their pants down with the double whammy of $4 gas and a massive credit crunch.

Let’s not follow the greedy, capitalists are evil trail.

faraway on December 3, 2008 at 11:28 AM

Rubbish, they have been making crap cars for a long time and running on cheap finance backed up by dodgy derivatives.

GM and Co. simply cannot compete and they should either restructure or die.

Any car company would have been caught with their pants down with the double whammy of $4 gas and a massive credit crunch

NOT HERE AT HONDA…

only down 10%

http://www.sciencecartoonsplus.com/pages/gallery.php

Ford seems to be the only corporation to come to the table for a real plan for the future. I think they should be rewarded for that and receive the lionshare of federal funds.

So this is what has become of government. One failing company had the sense to at least write up a decent business plan so they should be saved?

I haven’t seen anything related to how the union factors into any of these plans and how they are going to assist in bringing down the cost per car they inflict on these companies.

Any GOP Senator or Representative that votes for this should be removed from office at the next possible opportunity.

Romney: bankruptcy is the only answer.

RedSoxNation on December 3, 2008 at 11:21 AM

Obama, Pelosi, Reid: we need to protect the union mobsters.

There it is.

Question, how many thought the big three retirement plans were sustainable by private enterprise companies?

tarpon on December 3, 2008 at 11:36 AM

These companies have been operating with two, bloated executive bureaucracies at the same time – the manufacturer, and the union. For all of the union schmucks who whine about the screwing that they are about to get (and yes, they are going to get slaughtered), they need to go back and look at the money that the employees have spent over the past 30 years on the union.

Remember, you socialist jerks – Honda, Toyota, Hyundai, Nissan, none of them spent a penny on these gangsters. Think that makes a difference in their cost basis?

The unions have killed the golden goose – let them die now.

Outstanding analysis!
I started working in the assembly plant for Chrysler in 1973 and got laid off in 1979. Even though I could have taken a year off at 95% of my pay (idiot?) I did not want that uncertanty hanging over my head so I started my own business.
I would have retired from Chrysler in 2003 with 30 years in but where would my pension be now?

The only thing I’ve found concerning GM/Toyota being the same car, was the Prizm and the Corolla using the same drive train (from the early 1990’s)

Only one I’m presently aware of is the Toyota Matrix/Pontiac Vibe. Any others? Obviously there are Ford/Mazda siblings like the Escape/Tribute, too.

I love the look and the quality of the new Malibu (the hybrid is a cruel joke, though). I drove a rental Impala LTZ recently and thought fit and finish were on par with e.g. a Toyota Avalon.

All considered, I’ll still stick with my Civic.

GMs biggest problem is that it runs its different brands as sseperate companies… what it needs to do is consolidate into less Brands, less business units, and less models.

Or, in other words, they need to stop competing with THEMSELVES.

Romeo13 on December 3, 2008 at 11:17 AM

GM set up their business that way decades ago, when they held such a huge market share that they had no real competition so they really did have to create their own. The world has changed an incredible amount since then. But GM doesn’t want to change to meet the current reality.

Of course that’s always easier to SAY than to DO. Corporate inertia is a very real thing, and it’s difficult to overcome under the best of circumstances.

And right now, corporations have no reason on earth to even consider such painful decisions. All the big companies have basically dropped everything to work on positioning themselves like baby birds waiting for the government to regurgitate their dinner. And all the small companies are trying to merge together so they can do what all the big companies are doing.

In other words, all the old rules of business are now being overwritten by the rules of Socialism: The choice is to either tap into the supply of tax money, or get tapped to support the business who do.

OK folks. Ed, you are starting to be brainwashed by liberals. Your analysis above is pure jibberish.

Let’s leave our good capitalist system alone.

Any car company would have been caught with their pants down with the double whammy of $4 gas and a massive credit crunch.

Let’s not follow the greedy, capitalists are evil trail.

faraway on December 3, 2008 at 11:28 AM

Huh? The problem isn’t that they’re greedy capitalists, it’s that they’re not. They’re (a) not greedy enough to come up with a plan to turn a profit and (b) not capitalists since they’re after government money instead of profits made by providing a competitive product.

In this environment, it seems strange that GM is actually increasing its market share assumptions. And car business is all about volumes.

Not really; market share is only a measure of competitive advantage. Car companies can (and have) been profitable with a fraction of GM’s market current share.

What all business depends on is PROFIT. If you have a large enough volume, it’s possible to get by on a low marginal profit. (I.e., profit per car sold.) Unfortunately, it has never been and it never will be possible for a company to survive if it has a NEGATIVE marginal profit.

As I understand it, GM is losing over a thousand dollars on each new car sold. It’s perfectly understandable why their business model would leave out details like that. When your production expenses are too high, increasing your volume just means increasing your losses.

faraway on December 3, 2008 at 11:28 AM

Let me guess…you were excited about passing the bailout in October, weren’t you?

Sounds like Ed isn’t the one being brainwashed.

My expectation is that it will be good enough for them, and they’ll be more than happy to write a big check for the big three.

It’s no wonder that these losers can only survive by seeking lifelong political careers. They would never make it in the private sector.

Doesn’t anyone in Washington see what this will do to our childrens’ futures?