News was rife about GM producing its most competitive cars and trucks in decades, along with its upcoming 2011 Chevy Volt. However, all of that excitement was immediately tempered with GM’s filing for bankruptcy which has come as a shock to many. The post mortem on GM has exposed the troubles of GM as infinite. Since the 1960s, GM has been mired in a combination of bad policy making, bad decision making, bad design and engineering, and of course, a lack of foresight.
A fleet of defective cars was the prime factor in bringing GM down to its knees: Since the early 1970s, GM has foisted all the defective cars on the American public and refused to stand behind their unreliable and dull cars. They did not learn lessons from Fiat, Citroen, and Renault whose unreliable vehicles disappeared from the roads in the United States. There were fewer and fewer takers for Detroit while the likes of Nissan, Honda and Toyota started offering comparable vehicles that were more reliable and included the fact that their manufacturers were willing to stand behind their vehicles.
GM did not focus on refining their production techniques for reliable cars: As early as 1980, while Toyota and others were busy refining their production techniques and producing higher quality vehicles at much lower prices, GM was automating workers out of car factories. Customers left GM’s brands en masse and GM’s market share fell from over 50 percent to 23 percent in 2007. Despite the quality gap that has narrowed considerably in recent times, wooing those customers back has been an uphill process to say the least. GM’s crossover, the 2001 Aztec, didn’t help either.
Blame it on the bad policy making, bad decision making, bad design and engineering, and of course, a lack of foresight: While Toyota has improved all its models and created two new divisions in the United States in the last 15 years, GM could not create anything half as good as Toyota’s Lexus and Scion; Honda’s Acura; Nissan, and Infinity and the models from Mercedes, BMW and Audi. Hyundai arrived in the US much later than GM, but has earned the North American Car of the year for its elegantly designed and reliable, Genesis. And GM had nothing to boast of, except the mass produced unsafe, low-mileage, oversized inferior SUV’s people have come to loath. If GM had stopped squandering on lobbying against consumer safety and environmental issues and had allotted even 1/10th of its advertising fund for creating and improving the design of its vehicles, GM would have been in a position to produce at least one good vehicle model a year. Instead, while GM was producing some of the auto industry’s worst vehicles such as the Chevy Vega, a hundred miles away in Marysville, Ohio, Honda was busy producing world class automobiles and motorcycles. Nobody should blame the unions for this disparity. It’s the GM management that has to answer for its bad policy making, bad decision making, bad design and engineering, and of course, a lack of foresight.
GM’s vehicles are all over priced: GM’s vehicles are all over priced even with incentives. The interest rates are high too. And the vehicles all look like copy cat cars and trucks of another manufacturer but lack the elegance and reliability to tempt customers into buying them. Despite the knowledge that American cars are costly and unreliable, GM has not reformed its ways to build better vehicles to compete with the other manufacturers.
GM had nothing but bad design and low quality vehicles to offer the customer: The signs of bad manufacturing that would scare any prospective buyer are all present at GM. These include but are not limited to: Doors being misaligned with gaps at the bottom, B pillar narrowing to a skinny gap at the top, inferior brake pads, air leaks on seals around doors, bumpy rides, claustrophobic interiors, skinny seating, cramped leg room, low head room for the tall, tiny sounding doors and mis-fitting parts welded on the under carriage. Nobody in their right mind would bring themselves to purchasing these cars that broke down and are mere junk at 90,000 miles, while small Toyota and Honda vehicles would keep going with half the fuel offered tempting alternatives.
Energy Crunch and Demand Shift : GM had relied on SUVs and trucks for profits. A rise in energy prices had a major impact on GM’s profitability. Customers started opting for smaller, less expensive and fuel efficient cars. GM had to deal with a loss of revenue and the piled up trucks that guzzled fuel. Only two things kept GM afloat; the cheap imported oil and the artificially depressed interest rates.
Financial Meltdown: The auto industry and its customers rely on credit. When access to car loans or leases is limited, sales fall off a cliff. And many analysts believe the total for 2008 could be as low as 10 million, the lowest in more than a decade.
Legacy Costs: The costs of providing healthcare and pensions to scores of retired workers and their dependents, $2000 a car goes into the sticker price of any new GM car and truck. Honda, Toyota and others do not have these costs. GM’s per-hour labor rate for car assembly is about $75 per hour while it is $40 to $45 for other car companies.
Global Slowdown: GM operates in 41 countries and the financial malady has spread across the globe like a wild fire. Sales are down everywhere which has meant that GM has many wounds and it is bleeding from all of them. On the cost side, the market slowdown has closed many of its factories and has removed most of the industry’s overcapacity of cars and trucks.
Today, with nothing but a questionable $45,000 commuter car that may or may not even get onto the road; it is no surprise that GM has already set the stage for its exit. If by any remote chance, a new labor agreement kicks in, GM may be able to produce a less expensive car and can once again get stable with profits. But then, the million dollar question is ‘Will GM still be around?’ Will their lemon vehicles also be around?