Can GM Survive?

Can General Motors survive? Not with its current leadership.

Friday morning, John McCain visited a GM factory and said if cars like the Volt, a plug-in gas/electric hybrid GM is developing, really do make it to market (still a question mark), "hundreds of thousands of jobs will be created."

He's wrong; if Volt and others like it do get built, there may be few new jobs, but hundreds of thousands of existing UAW jobs might be saved. (Robert Lutz introduced the Volt at the Detroit Auto Show)

Almost all the new jobs in the US auto industry the past 20 years have come courtesy of the "captive imports," foreign-owned car-makers with factories in the US, almost always in "greenfield" areas of the Southeast. Not one of these plants has been unionized, and not for lack of trying on the UAW's part. These greenfield jobs pay well and offer good benefits, but every one of those workers could be on the street tomorrow, with no one to plead their case to the public or, especially, the corporation (especially when the corporate headquarters are in Tokyo, Munich, Seoul, Stuttgart and on and on; they're certainly not in Detroit, or even Atlanta or even Tupelo, where Toyota is building a plant for the next-generation Prius due in 2010).

Earlier this week, Rick Wagoner, the amiable, bean-counting, 53-year old, Virginia-bred, Duke and Harvard Business School-educated president, CEO and chairman of the board of directors of GM (a rare corporate trifecta!), announced a plan to cut 20% of the corporation's white-collar employees,
eliminate salaried employee's health care after age 65 and attempt to save $15 billion by the end of 2009.

Robert Lutz, GM's 76-year old vice president for North American products, had his own announcement later during a conference call with reporters. It couldn't have been easy to follow Wagoner, and what Lutz said doesn't bode well for GM. (Lutz in his natural habitat, surrounded by members of the press)

GM recently announced that the new, small and efficient Cruze, slated as a replacement for Chevy's Cobalt, and the Beat, made in Korea by GM subsidiary Daewoo, would both be available soon in the US. Cruze would be sold here as a 2011 model, right after its world debut at this October's Paris Auto Show.

But Lutz said during the teleconference that neither car will be in the US soon, and refused to make any predictions when they might, or even say if one or both are still on GM's schedule

Chevrolet sells the Corvette and soon the all-new 2010 Camaro will come to market, two models which would kill any car-maker's CAFE ratings. The addition of Beat and Cruze, two small cars with mileage ratings around 40mpg is an absolute no-brainer. (The 2009 Corvette ZR1, code-named Blue Devil during its development, produces 638 supercharger-assisted horsepower and will sell for around $80,000. Just what America so desperately needs!)

Wagoner is the epitome of the Detroit bean-counter, with little if any experience in engineering, design, manufacture or sales of cars and trucks, but with a laudable background in economics. Who knows if he even has a driver's license?

Detroit doesn't know what works anymore, and putting non-car people in charge of car companies has become popular, for reasons I don't understand. You can see this in the recent hiring of Alan Mulally at Ford, an ex-Boeing chief, and Robert Nardelli, who was fired by his own board of directors this past January from his job as CEO of Home Depot and is now running privately-held Chrysler.

Ex-Marine pilot Lutz (he buys, restores and flies surplus fighter jets as a hobby) is Rick Wagoner's polar opposite. Where Wagoner is friendly, collegial, even professorial, Lutz is a brash, tough, charismatic throwback to the days when GM's divisional vice-presidents ran their own empires, each division a separate car company. Those heads of Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac had to fight for whatever they needed to keep their divisions successful. Being one of those divisional chiefs, especially of Chevrolet, the biggest division, was the last stop before entry to the top corporate-level director jobs.

Lutz is a guy at home with a prime rib lunch at Detroit's Rattlesnake Club, a Rob Roy with a sidecar to wash it all down and a huge heater fired-up after the meal. It's no mystery why his autobiography is called "Guts." (Pontiac's new G8 is a warmed-over Holden Commodore from GM's Australian division. Available with a V6 or V8, neither engine gets good mileage and this car is almost DOA)

He had some famous successes at Ford of Europe, BMW and Chrysler, but the Swiss-born Lutz's last two big GM projects have not fared well. First, he took a car from GM's Australian division, Holden, and sold it in the US as the 'new' Pontiac GTO. That car bombed, and Lutz's new Pontiac G8 with, like the GTO, a Corvette V8 engine, is yet another Holden product. This unoriginal thinking by Lutz, looking for a fast fix with a seeming ability to completely mis-read what consumers want and the country needs, means his G8 is headed down the same road as his GTO. The original Pontiac GTO, incidentally, sold almost one million units during its 1964 to 1974 run.

Lutz being the one chosen to break the bad news about the Cruze and Beat could mean he may finally be on his way out of GM. It's not a bad idea. (Lutz introduced the 2005 Pontiac GTO at a Detroit Auto Show).

Once more, GM is caught with their pants down, its executives (and those at Chrysler and Ford) yet again missing the mark, and in a huge way. Today, the entry fee in the auto business is a small, proven safe, high-mileage, low-cost, and dare I say 'sensible' car. Only a year ago it was a huge, black SUV with 23" spinner rims and a 12-mpg engine.

Why Cruze and Beat aren't already in the US is a mystery, because versions of them have been made and sold successfully in other countries. Just more of that corporate lack of foresight problem which the US auto industry was first hit with about 1974 and still hasn't overcome. In too many ways, with all our futures now hanging in the balance, Detroit still doesn't "get it."

So, what do you think? Can GM survive? Can all of the Detroit Three? How?

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Comments

[BGAuto]

A fundamental change in our driving habits is now required.

The Automobile Industry is going to be in the same position as the Airline Industry in the next few months. Unless we get away from gas combustion vehicles, including Hybrids, the automobile industry (as we know it) will die.We need to make drastic moves. America needs to move to ELECTRIC. The vehicles are not as fast, not always as fun to drive, but the move will save Americans money (Billions) and help bring change to our automotive companies. Let's "Be Green"!!!!!!!!!!!! BG Automotive Group Ltd. has a car that will travel 80-100 miles per charge for $15,995. Finally a car that most Americans can afford. Did you know that 80% of all drivers, drive less than 50 miles per day? This new car will cost an equivalent of $0.20-0.25 cents/gallon (depending on electricity rates in your area). Why send $700 Billion per year to OPEC (now buying up U.S. companies) when we can use this money for our schools, health care, social security for all Americans, etc, etc, etc. We can make the difference if WE change.

[PADDYWHACK]

GM nd Ford make great cars in Europe,which get great mileage,but before they could get them on sale here they'll be broke.However those workers can take some comfort from the fact that we can wave our military willy all over the Middle East.We are in crisis,and the loss of our auto industry was facilitated by the government which relaxed CAFE standards.

[DRaymond]

I fthey can get good small cars to the market like the Blast and Cruze then they can survive. If not, then they don't deserve to survive.

Sure they people at the 'greenfield' plants don't have anybody to protect thei jobs, other than the fact that they are building popular cars. And if GM can't make popular cars the UAW is going to save them how?

If anything is going to save US auto industry jobs it is that higher fuel prices add to the price of shipping foreign cars to the US.

If somebody really wanted to shake up the auto industry they would change the business model about how cars are sold in the US. Currently dealers are expected to carry huge and expensive inventories on huge and expensive car lots. If you cut out all of that inventory cost and went to a build-to-suit model you could save considerably on the cost of a car.

[BBackSoon]

As a child of the 70"s and a Teenager in the 80"s I grew up on Big V8 American Steel. This was made possible by $1 gas for most of my life. But in these days of $4 gas and higher bills all around I have opted to not buy new cars for quite some time. I drive used cars because I do not want another payment and also I can spin wrenches when I need to.

That being said I have also learned that I can buy a 10 year old US made car and have to worry about the motor or tranny, (Neither is usually worth the trouble to fix or replace) and the US car will nickel and dime me with sensors and switches and power window motors. Or I can buy the same vintage Japanese car and put a little money into it right at the beginning and drive them for 150k to 250k miles with virtually no repair work. And I will get better gas mileage all the while.

I hate to think that I am not buying and American car but in my humble opinion they are not worth the hassle. That sucks but I cannot afford to by crap. Then again the parts I buy for either car are made overseas anyway.

[Novista]

Umm, DJ ... "maximizing profits" ???!!

Last I saw, GM produced family sedans at a loss? Some corporate architecture! Premium profit on SUVs past the time when no one wanted them.

And the Big Three had already missed the boat in the post-ww2 era. Too many people who'd had exposure beyond America had seen the alternatives. Sheesh, I even remember Preston Tucker. And the VW revolution. 1946 to 1959 to deliver 'mid-sized' cars? Vs. 'yank tanks'???

I even remember the 1976 Chrysler 'too big to fail' fiasco.

Then, I know of a time of true innovation, when America had 200 auto manufacturers.

And now, I drive a Toyota Echo. Economical, great handling And if I want to push it past 140K, I can. Yahoo!

[BlackbirdHighway]

Chrysler won't survive, GM will survive but will be only a fraction if it's present size. It won't start to recover until they get rid of Wagoner and that won't happen for several years.

[Paul]

Tax gas until it is $8/gal.

At least Ford and GM will know what they have to do: build 50 mpg cars and make money selling them.

[DavidJames]

Steve,

It is not possible. The big three have corporate architectures for maximizing profits on production. They all have the wrong corporate architectures for innovation and now they need to innovate. You pointed out the tip of the problem at GM, they are led by the bean counter Rick Wagoner.

The big three will labor mightily and produce another Pinto.