General Motors... Huge News

[Sherlock]

I'm sure most have heard by now...

Huge cuts across North America for the whole General Motors enterprise. And I'm sure this will have effects over in Europe as well (Opel/Vauxhall).

We all saw this coming, there have been the rumours for awhile, now the gavel comes down very hard!

So are we seeing the end of a great empire? Back in the 1950's they were truly the leaders of the automotive industry, now...

Any G.M. employees out there? I believe Rovernut works for one of the plants in Ontario...

 

[Banjo]

I heard that, then a little later I was reading last weeks Autoweek mag article about ramping up production of the solstice, skye . Adding a 3rd shift, and starting to build Opels there too!
So what's the real story?
Having worked for Corning Inc. during the height , and fall of the Photonics bizz (fiber optic amplifiers, for the laymen) I know how drastic big industry can change from week to week, so I guess I'll go with this weeks report.
I guess both could be happening at the same time.

 

[sammyb]

In my humble opinion (as a guy who has followed the auto companies) this is not surprising news, and I think you all need to be expecting similar news from Ford, which might be even worse-off, but hiding it better.

I made the prediction a couple days ago (and I've made it before,) that GM will not last through 2015. I believe that both Ford and GM will fold and break-up under the increased pressure from Japanese, Korean and Chinese competition.

The bottom line is that GM and Ford were lazy, greedy and very self-absorbed. Instead of taking the profits from the F150, Explorer, Taurus, 1500 and Tahoe, and throwing into R+D for next-generation technology, the companies did their best to push consumers into vehicles that offered the largest margins (SUVs.)

Instead of investing in the production of world-class sedans, we get Malibus, Impalas, Zephyrs that are little more than fleet cars. Quality is horrible, and price-to-content doesn't come close to Toyota, Nissan and Honda.

Then there are those stupid acquisitions/joint ventures: FIAT, Saab, Jaguar, Land Rover...

I can honestly say: I won't be buying a GM car anytime soon -- the cars I own are crappy enough in terms of quality, and that was before the people building them had no money to throw at R+D and quality control.

If you don't believe that GM's situation is dire -- their stock price is lower now than it was in 1962!!!

In closing: we are close to the US version of the British Leyland implosion. The US car industry as we know it is in its final death throws...it will just take another 5-8 years for the final break-up to finish.

 

[Mickey Richaud]

/ubbthreads/images/graemlins/yesnod.gif

Sad to say, but I agree, Sammy - "This is not your father's [car company]"

And I think, in the immortal words, "We ain't seen nothin' yet!"

Mickey

 

[tony barnhill]

Don't get me started on unions & their negative effects on business!

 

[sammyb]

Certainly the short-sightedness of many modern unions!!! The union representing many of the Delphi workers is considering striking over the proposed near-50% pay reduction, and all I can think of is: 50% is better than 0%.

If there is indeed a strike at Delphi, I'd imagine that GM would blow through their $30billion in cash in a matter of six to eight months.

It's all just a big house of cards, and the wind just keeps picking up.

 

[Sherlock]

SammyB...

If your prediction is correct (and I have no particular reason to disagree), the financial consequences for North America will be huge!

I know that southern Ontario - here in Canada - relies heavily on the automotive industry as being one of its major economic drivers. And I know that the supply chain for the big three has lots of levels. The machine shop I used to work at in Ontario built (among other things) the rods used for the power seats in some Chrysler products. And I think we were probably at least three levels below Chrysler Corporation.

And I suspect that Michigan, Ohio, Indiana, et al, are in the same boat economically.

 

[Bruce Bowker]

Around 1980 I went to the Ford dealers convention. I listened to the excutives telling the audience that Ford will build big cars. In other words Ford will do what basically it wants to do. They were ignoring everything the public wanted. I had a great desire to stand up and say "Big mistake guys". It wasn't long after that they realized a mistake but it was too late even then.

The US car industry as a whole, ignored Japan and again the US car industry did what it wnated to do ignoring all the signs.

There is a super great book, sorry can't remember the name, about how the auto industry had to do an expensive catch up to how the Japaneese ran their industry. What an eye opener.
I don't think it ever recovered.

Bruce

 

[aeronca65t]

Amazingly, many of the import companies have been building cars in the US for years (with American labor, obviously). And most of those foreign manufacturing plants are unionized. Honda has been building in Ohio for ages (they even build some right-hand drive models there, that are re-exported to Japan).

I disagree that quality of American cars is a lot poorer than imports. That was true in the 1970s and 80s, but nowadays there is not a significant difference. But everyone still thinks this is true. It's my opinion that Americian cars have a percieved quality problem. And American cars have been a bargain compared to many of the comporable imports.

I agree that American car companies have been building the wrong products (and failing to develop appropriate models). But it has become true that the import companies have been building "bigger and longer" too. And even Porsche builds an SUV today!

One real problem I have with imports from China (that I do not have with Japanese imports) is that fair working conditions and environmental rules are non-existent in China. If these guys built cars while following the same rules that we do, we would have a good chance of competing with them. I believe that we should have an "environmental tarrif" and maybe a fair-work tarrif as well. But that would never work in the US.....Wal-Mart would kill off that idea in a second.
And I believe that the Chinese are no more long-sighted than we are. If they could build SUVs right now and sell them in the US, they'd do it in a second.

 

[Bruce Bowker]

[ QUOTE ]
One real problem I have with imports from China (that I do not have with Japanese imports) is that fair working conditions and environmental rules are non-existent in China...

[/ QUOTE ]

Could not agree more.

Russia did not bury us but these guys might.

Bruce

 

[sammyb]

aeronca--

Statistically speaking, the Japanese manufacturers are far better than American producers in terms of quality.

According to JD Powers surveys of the number of reported problems in the first 90 days of ownership, as well their VDS report (three years, if memory serves,) the independent Japanese makers are far ahead of all but Buick, and most of the American and American-owned makes are average or below average.

What is very correct is that EUROPEAN manufacturers are behind the US in quality. Mercedes, Volvo, VW, Audi, Saab, Land Rover are all pretty dismal.

To give you an idea of the practical application, Consumer Reports rated vehicles in each class based upon problem reports and warranty service. CR's recent press release indicated "best" and "worst" rated in each class. Here is a quick summary:


Ford had two bests: Mazda Miata and Mercury Mariner. GM had one best: Monte Carlo. (One Subaru is rated best, but GM is selling its small share in Fuji/Subaru) Daimler Chrysler had NO best rated cars, trucks or SUVs in quality.(They are in the process of selling their share of Mitsubishi, which had one best.)

As for worst: GM: 14 Ford: 12 D/C: 7 Toyota had 14 bests and no worsts. Honda had no worsts

So, I'd argue that American quality still lags behind Japanese in terms of both perception and statistical reality. And I'd even be so bold to argue that GM's one bright spot statistically, Buick, gets its higher status due to a less critical and less aware (read: old)demographic/psychographic.

And I absolutely agree about the statement regarding the Chinese...although one might say that the Big Three have never been too concerned with the environment, working conditions, pay...which is why unions became so important.

You are also right that the Chinese will build whatever will sell, which is actually different than the US providers-- which want to sell whatever makes the most money.

Keep in mind that the fears about the Chinese are the same as the Japanese all those years ago. Pay, restrictions etc...

I think everyone will see a similar timetable for Chinese car manufacturing success as the Japanese and Korean concerns. Japanese companies started importing in large numbers into the US in around 1968. It really wasn't until 15 years later that they gained a very strong foothold on the mass market (specialty products like the 240Z were obviously popular before that.)

Hyundai came in during 1986, if memory serves...They (and Kia) are just gaining mass acceptance now as quality producers.

So it will be at least 15 years before the Chinese are big players, but that doesn't mean that they won't steal enough share in conjunction with Japanese and European to cause Ford and GM to fall

 

[aeronca65t]

Sammy:

I honestly agree with everything you've said. Even the part about JD Power reporting superior quality in Japanese autos.
But I have a problem with consumer surveys in general.
The "unknowable" part of the equation is the mindset of the responder. In my view, people who think their car is better will respond thusly. If they respond in the negative, they are essentially disagreeing with their own choice.
For example, a friend of mine is a service rep for Mercedes. He tends to agree with me that these cars are (mostly) overpriced and have poor assembly quality. But the customers are convinced that their cars are great (due to the MB reputation). He gets a lot of repeat customers on cars that would turn off a Ford or Chevy buyer in a second.
You can even see the results of this with the Buick survey that you've mentioned. There is no reason on God's Green Earth that a Buick should record better quality numbers than a Chevy or Pontiac........except perception .
I spent a fair amount of time doing corporate SPC and TQM training and I read a lot of stuff by Demming. Part of the results of that experience was that I became suspicious of consumer surveys.
I really hate to be a curmudgeon about all this but I've been a cynic about consumer surveys ever since "Dewey beat Truman". /ubbthreads/images/graemlins/laugh.gif

With regard to the CR ratings, those are more solid, but I wonder about the true significance. Modern cars are much more reliable than their predecessors so that reported problems tend to be more nit-pickey and hardly ever price-considerate. If my $17,300 Ford Freestar has a problem with with the ashtray and my bother's $40,000+ Toyota Sienna has a great ashtray, should I switch to Toyota next time around?
See I agree that the differences may be still there, but those differences are so minor that they are not that significant.

So I agree that the statistics imply that the Japanese cars have better numbers........I'm just not buying the statistics.

I fear that you are very correct in your assessment of the Chinese auto industry and its affect on US companies.....my view is that if the US loses much more of it's manuafacturing base, it will have a negative affect on our standard of living and our importance in world markets.

 

[sammyb]

Very, very true...and as a marketing guy (long before I was a writer,) I know that if it's garbage-in, it's garbage-out...and fundamentally, I can take any set of numbers and make them fit either side. Geez, I could go into politics!!! (Oh yeah, that was where I got my start! /ubbthreads/images/graemlins/wink.gif )

Alas, the surveys are much more detailed than they used to be, and they generally don't go much on perceptions, rather plainly the number of times a car goes in for service during the period. Declarations are made regarding the nature of the problems, so if it's something like an ashtray, that's not enough to get a worse rating.

The old concept of Chevys and Fords never break down simply isn't true anymore, and the stats show it. (And my own experiences with both reflect this...Heck, my 2002 Corvette with 17K miles has left me stranded twice.)

There is the JDP Satisfaction survey, and that is for perceptions post-purchase.

As for Mercedes, it's very interesting -- despite scoring tops in Germany for domestically available cars in "prestige," they scored third to last in "quality" among the same...so basically, Germans think they are prestigious, but maintenance queens.

There are tons of stats out there now, and while every survey and analysis has flaws, together they are all painting very similar pictures.

 

[PC]

[ QUOTE ]
There is no reason on God's Green Earth that a Buick should record better quality numbers than a Chevy or Pontiac........except perception

[/ QUOTE ]I would disagree. Each product line will have some performance, application and design differences, even those as homogenous as GM's. Every plant can have its own "personality" derived from the local practices and local history. Each sister division of companies I've work for has had wildly differing practices in in both design and manufacturing operations.

[ QUOTE ]
I spent a fair amount of time doing corporate SPC and TQM training and I read a lot of stuff by Demming. Part of the results of that experience was that I became suspicious of consumer surveys.

[/ QUOTE ]Now that you mention the alphabet soup of quality I'll chime with my opinion that these provide some of the best examples of why American auto makers (and many other American businesses) are doing so poorly.

SPC, TQM, JIT, Six-Sigma, Lean Production and all the other programs that corporate managers love to blather endlessly on about are all powerful tools and can be used to do great things if they're implemented effectively and used well.

The more I see such things in action in real companies the more I'm convinced 99% of corporate managers don't have a clue what any of it means. They sure as heck don't at the companies I've been around.

At their best manufacturing quality programs provide product consistency but have nothing to do with product performance or suitability for customer use and often have very little to do with product reliability.

These are the core issues for customers' perception of quality and are driven by product design, which should be based and understanding of the customer. They only intersect with manufacturing practices when a manufacturer fails to build the product to its design potential. A poorly designed product, no matter how perfectly you build it, will be a failure with the customer.

America's big car companies (and many other manufacturers) miss this point entirely and continue to build products they want to sell rather than products customers want to buy.

So they continue to trumpet proudly of their "quality" and back it up with all kinds of numbers and catch phrases while customers quietly flock elsewhere.

[ QUOTE ]
If my $17,300 Ford Freestar has a problem with with the ashtray and my bother's $40,000+ Toyota Sienna has a great ashtray, should I switch to Toyota next time around?

[/ QUOTE ]Well, my friends' $40,000+ Toyota Sienna does have a great ashtray. And my other friend has a $17,300 American made minivan with an ashtray that works just as well. Too bad his transmission continually pukes. Makes is hard to move that perfectly useable ashtray around.


I don't think America's auto companies will shrivel up and disappear. I do believe that the corporate types who let it all slip away in the first place will have a very difficult time figuring out what they're doing wrong and an even tougher time changing for the better. Maybe nothing will change until/unless large numbers of them get booted. As such there's likely to be a lot more pain before things gets better.


PC.

 

[Banjo]

Working as a Toyota Tec. heres my short take.
We get a fair amount of complaints about squeaks and rattles. Usually so faint I'm riding with the customer as they say "did you hear that?" and I'm thinking "No"
The last new GM I rode in, All I could think was "I'd be a week trying to quiet this thing down."
We have a few problems, but it seems the vast majority are things domestic car owners would accept as "normal"
Fords latest Ad campaign "innovation is our mission"
makes me laugh.
Thier "first hybrid SUV" uses a purchased first generation Toyota Synergy Drive system. Exactly as is in the 01-03 Prius. By the way, Toyota's on gen 2 now, with the 04-06 Prius and Highlander Hybrids (You'de swear the highlander has a big honkin V8 the way it takes off)
Starting next year Toyota will be competing in nascar.Toyota had to develop a pushrod engine to run, as they haven't used one in production cars in a loooong time.
Also Toyota has several plants in the US, including California, Kentucky, and Tenesee.
So, Yea I agree Sammy. Domestic carmakers need to wake up!

 

[jayhawk]

So what's the strategy? As I understand it, Ford makes SUV's/trucks that people buy like crazy and they get good profit from it. They also build a focus that sells like crazy and (after several years to get it right) it works well, competes/excels in at least performance categories with the imports but Ford doesn't make money on it. I also keep hearing that health care costs as well as labor costs here are still an issue for GM and Ford but as you guys point out, Honda's are built in the US as well. Did they (the Hondas of the US) get a lesson from US car companies and negotiate less costly health care/labor/overhead costs early in their US beginnings? Or do they compensate by things like having base operations/parts sources elsewhere?
My sense is that either by chance or design GM/Ford can make a good car (the new Malibu is doing well, the solstice is selling well and the Ford Fusion is above sales expectations)

 

[racing girl]

[ QUOTE ]
So, Yea I agree Sammy. Domestic carmakers need to wake up!

[/ QUOTE ]

I've said it for years, as has my husband. I think the writing has been on the wall for many a year too, and has all but been ignored. It's not a good situation, in fact, it's a very sad situation, with thousands of people who are going to be directly affected. We stand to be very hard hit here in Motown.

Like Banjo, I also work for Toyota, and all I can stress is that it's a complete top down philosophy. Everyone is upbeat, everyone works hard, everyone has fun, the employee turnover rate is staggeringly low and the growth rate is moderate and well paced - but growing every month of every year. Every week at our department meeting we have a small presentation on some part of the Toyota Production System (TPS) and how we can implement the theory behind it in our working day... nemawashi (The Art & Science of Consensus Building), jidoka (Built-In Quality), andon (Visual Control), hansei (Critical Self Reflection).. and others, I could go on all day. The point here is that I'm learning TPS and trying to practice it... and I'm not an engineer, I'm not in design, or production, I'm not a supervisor or manager and in no way do I have any direct impact on the product that comes out of the door. I'm in IT. So why is it important to upper management that we know and implement all of this? Because it's Toyota's philosophy, or Toyota Way as it's known. Because Toyota believes that everybody has the potential to make a difference, and they want you to believe that too. I feel privilaged to work here, and I never felt like that at previous auto companies I've worked at (non Japanese).

RG /ubbthreads/images/graemlins/england.gif

 

[racing girl]

Just came across these articles today....

Detroit Free Press article
Autoblog article

The comments after the article in teh second link are interesting - seems to be a theme developing!

RG /ubbthreads/images/graemlins/england.gif

 

[Steve]

I heard on the radio that Toyota are planning on ramping up production in the USA by 100,000 units next year. I Hope that GM execs are taking notes, but somehow the words Nero, Rome burning, and something about a fiddle are coming to mind.

 

[AltaKnight]

I think the day of the mega size car builders is over and agree that Ford and GM will likely fail. I also think that out of the ashes will come several manufacturers that will listen and build the right kind of vehicles.
Of course all this assumes that management and ownership of these new companies will have the longsightedness to look past the next quarters earnings report and invest in R&D and that governments will put corporate tax incentives in place to encourage that.
Sure hope they don't all go the way of the British industry, but you do have to embrace change not avoid it.