Dear GM..Your Lease is Up.

Those who don't know history are doomed to repeat it and when it comes to these bail-outs it's important to take a long look at how it happened. It's funny, Cold Case Files and similar shows do bang up business, which points to a certain thirst for details in the viewership, but it seems like all the news chat shows continue to force the myth that Americans can't stand detail and have no interest in an idea that can't fit on a bumper sticker. Yet anyone who has ever gotten caught in an A&E hole knows that the devil is in the details and he is very interesting.

For the past 30 years the American auto-industry has been on a path that has led it inexorably to where it is today. Bloated, ineffective, making cars with technology that peaked in 1988, the "big" three have spent tons of money and wasted thousands of man-hours driving themselves out of business. I don't know anyone who hasn't seen or heard the revolving heads of these companies and their mostly republican allies in Congress arguing against innovation. These companies spent millions lobbying against increases in fuel and emission standards and suing to make sure the ones that did get through were never enforced!. Millions they DIDN'T spend on R&D. And all the while Toyota, Honda and BMW were eating their lunch. Plus these guys were selling biographies and books on management strategies and *cough* "leadership".

It's being reported that Rick Wagoner is being asked to step down by Obama as a precondition for GM getting more aid... What's amazing is that stock holders didn't ask for this a decade ago!

According to Bloomberg

Wagoner has repeatedly argued he knows the company better than most who could take his job. He joined GM in 1977, as U.S. automakers were fending off Japanese competitors who recognized the need a decade earlier to build fuel-efficient vehicles.

As CEO, the former Duke University freshman basketball player and Harvard University MBA bet early on against gasoline -- electric hybrid vehicles, focusing research on hydrogen technology. GM offered its first full-scale hybrids in 2007, a decade after Toyota introduced the Prius.

You could probably track the decline of GM directly to that day in '77 when Wagoner joined the company. Now, I seriously doubt that all the bad decisions that GM has made during his tenure could actually be blamed on Wagoner but more than likely points to a culture of arrogance and greed that has permeated the American manufacturing and financial sectors for the last 4 decades. But no question, he as CFO and current CEO was responsible for these bad choices. He even cops to it in a recent interview. Wagoner said his biggest regret was:

Axing the EV1 electric-car program and not putting the right resources into hybrids. It didn't affect profitability, but it did affect image.

It didn't effect PROFITABILITY? What? Wow! Hey why don't you tap into those profits and fix your company? Oh wait you can't because there are none. You needed a multi-billion dollar bailout!!?! And even to the end he views GM's total disregard for innovation as largely a PR problem. It's not that we sucked, it's that we didn't "pretend not to suck" enough. This is the same logic that brought us the "if we had found WMDs then people would support the war" type evasions.

If these guys -- and they are all guys -- had spent half the time running these companies as if they had a future instead of making and marketing the same POS as the New Improved GMC Shinola -- we would not even be discussing them. The 4 dollar gas trap we all walked into last year would not have sucked billions out of our economy (coincidentally) at an already tenuous financial stage. It's like the executives of GM were piloting the the titanic while raising a toast to the iceberg.

Personally I think the answer may be to guarantee loans to companies like Tesla Motors, ZENN and Fisker. Sure we can keep the big three on life support until the true innovators are able to begin producing real lines that represent the future of cars.

Someone needs to remind American CEOs that if you can't run a company that is innovative, financially sound and doesn't poison the rest of us, You can't run a company.

Good riddance.

Comments

[Rapid Ray]

Hi hal,

You mentioned auto tech peaking in 1988.

I gotta disagree. It was when Wagoner showed up on the scene that GM's innovations came to a virtual standstill.
In 1977, the muscle cars were turning into second generation versions. The Monte Carlo, Mustang and others, known for power, were getting more fuel efficiency than many of the cars the Big 3 later produced. Six and four cylinder Camaros ...the need for "muscle" was already starting to wane.
If anything, the cars produce around 1988 were worse. No increase in gas mileage, the bigger engines were returning and the the body styles were horrid. The once flowing lines and distinguishing traits between models became a blur as all the manufacturers were making "boxy" cars. The K-cars, and J-cars GM were producing in the 80's were poor sellers.

Real tech advances in GM cars didn't return until just a few years ago, most notably with the Impala. Sadly, it has been too little too late.

Car buffs were thrilled to see the return of the Camaros, Hemis and "retro" cars, but in taking years to go from concept to production, the need for more practical vehicles has again taken hold leaving GM and Chrysler (for the second time) making cars that just don't fit the market.

[FalconerHK]

Hey Hal,

If the economy was fine and GM, Chrysler and Ford were the only ones with double-digit sales losses I might agree with you.

But that's just not reality.

Credit dried up. Trillions of dollars in wealth vanishing. People are losing jobs, houses, pensions, 401k's, entire savings... those tend to have a negative effect on people's ability to drop $20+ large on a car.

So yeah, domestic makers are seeing 30-40% drops in sales volume. But so are the imports, including Toyota, Honda, etc. Japan is considering a bailout. Toyota is concerned about its remaining cash on hand.

You may or may not like American cars, but the recent round of products produced by the domestic manufacturers is extremely competitive, if not class-leading. The new Ford hybrid has been winning comparisons against Toyota and Honda.

Also, the US has a unique car market. Fuel is expensive in Japan, hence the focus on efficiency. Ford and GM build efficient cars for their European and Asian markets, but why bring that technology here when everyone wants Hummers and SUVs? Were they supposed to build vehicles no one wanted? A car is greenlighted for production three years before it hits the dealership floor, consequently they're still working through models designed for that period. Look at the number of unsold Toyota Tundras as an example.

Finally, this seems like an assault on organized labor. And you're willing to sacrifice hundreds of thousands of jobs to gamble on unproven startup companies?

[Phreejazz]

Yes, the imports are being hurt. But they weren't as sick as GM and the like to begin with. Yes, some of the new products coming out are *finally* competitive. Just taking GM as an example: I'll take the CTS over any comparably priced lux-sport model out there. The Malibu is the best passenger sedan Chevy's produced in 20+ years. The acadia/out­look/trave­rse is beautifully designed, in form and function. All are about 15 years too late, unfortunately. And even then, token nods to hybrid technology like the chevy mailbu's pathetic excuse for a hybrid don't look good.

"Ford and GM build efficient cars for their European and Asian markets, but why bring that technology here when everyone wants Hummers and SUVs? Were they supposed to build vehicles no one wanted?"

That's a myth. Hummer survived because of gov't help. When any manufacturer resorts to 0% financing and big incentives to move inventory, it's inventory that is not doing well. GM and the rest have been relying on incentive marketing for decades...­. compare that with Honda. They make a concentrated effort to NOT rely on incentive marketing (which is why you never see factory rebates or 0% financing from Honda), it forces a self-discipline that keeps the company sales-driven instead of production driven. That's a discipline American car companies lost a long time ago.

They were short-sighted, and even their dealers were making noises to that effect for years.