General Motors, Do They Deserve Failure?

[bofa]

I'm still torn on the GM bailout and letting them fail now if that's where this goes. While I agree that companies should survive on their own merit, the reality of today's world is that we as a country are in limp mode and cannot afford to keep losing large chunks of our workforce. Not only can we not afford it from a GDP perspective, we can't afford it from an unemployment and government subsidy perspective, not to mention the immediate burden it could unleash on Social Security and Medicare.

To those that say these people would just pick up at the next manufacturer, I would argue it's not that simple. This isn't Joe's Pizza and Bob's Pizza. This would be more like Toyota and Honda... you will lose large amounts of jobs due to the realization of new efficiencies, deduplication of job responsibilities, and as they would let supply trickle down to more closely meet (or possibly increase) demand. Plus you just assume these people can and will pick up and move to the other facility. It just doesn't happen like that.

Then you look at other bailouts like Fannie Mae and Freddie Mac that have fully repaid their capital, with interest, and, begrudgingly to shareholders, will continue paying the government through the nose for the foreseeable future. These returns will only get bigger as rates climb over the next decade. So while I was totally against it in the beginning, it has turned out to be an interesting investment.

A capitalist doesn't just look at the black and white in current state - they look at the risk/reward potential too.

 

[Swimmerboy2112]

This is a tricky question, I voted let them fail but i'm not sure i'm in complete agreement with that statement. Like anything else, it's not so simple.

As with you all, I am for better management and stricter regulations for GM.

Now the question I have is, why does GM, and other large corporations get to be bailed out while the small business man is forced to suffer and close his shop due to lack of business? I personally don't think we should give any of these big businesses any special treatment. I look at things in a survival-of-the-fittest kind of way, and in this case I view GM at the bottom of the food chain.

With that being said, despite all these reviews of how poorly GM is making their cars and all these deaths that are being caused as a result of cutting corners, there will always be people that are so hung up on the "Buy American" notion that they will completely disregard anything they see/read/are told.

And for what it's worth, the Toyota Tundra is the 2nd most American made vehicle, behind the F-150.

 

[Rubberdown]

I tried to write a thoughtful response to this, but there isn't one. Gross abuse by the company execs, and employees over a very long period of time have resulted in situations where unsafe conditions exist for consumers, and the company cannot fiscally survive. In a free market there is really only one answer for this. However Americans keep purchasing their products, and the government keeps bailing them out. This just shows the low level that our country has descended into. We can point the finger at lots of different folks, but realistically, our votes and our buying practice are ultimately what decide how our country is run, and clearly America as a whole is being irresponsible.

 

[LittleCaesar]

My brother's wife's family used to have a GM dealership until the early 1980s, then they switched to a little Japanese company called Honda, and haven't looked back since. Haven spoken to a couple of them more than once, I will just bullet per se what they take is on the problem:

1. They keep making models that aren't very profitable and kill those that are, re the Ponitiac Aztec and Chevy Volt for example while killing the Saturn line. Dealers were given quotas to sell for each model, and those that were terrible and didn't sell were often sold at cost.

2. Too many chiefs, including those on the board of directors, who knew nothing about cars. Some people actually questioned why the oil needed to be changed.

3. Too many guaranteed contracts to suppliers such as Delphi for substandard parts.

4. GM got too big. They had their hands in too many pies, controlled too many companies and lost all oversight on their products. You have to wonder if it wasn't for China just how far in the red GM would be (they are China's second largest auto supplier).

5. One family member told me over this past Xmas that GM's truck line, especially the high dollar ones, are their gravy at the moment. But as he pointed out their MSRP, even discounted, only allows X number of potential buyers to be able to purchase the truck. This X number has grown smaller every passing year. As he pointed out, these trucks, when they enter the used auto market, aren't being bought up due to the fact that the KBB value on the used is still too high for most people to own.

One must remember that a company must face the writing on the wall to survive. Be proactive, not reactive. Look at Kodak. They invented the digital camera but killed it before it came to market knowing their film business would be decimated. Where is Kodak today?

 

[larrylegend]

I think they should be forced to stand or fall on their own merit. What I don't agree with is upper management coming in and completely failing at their job, then walking away with a "golden parachute".

At the same time, the unions are living in a non-sustainable world and some, not all, but some of the employees are to blame as well. There was a news piece a while back that showed UAW employees on their lunch break going out and drinking beer and getting high. This had been going on for some time but they couldn't be fired due to the union. Not saying this is the case often or at many places but it does happen.

At some point reality is going to hit and people are going to be in bad shape. The company and those who work for it.

 

[lastlaugh]

There is a reason Consumer Reports, (and any other honest reporting agency thats not in the Auto Union's pocket) consistently rate US cars as "unreliable". Hell the last time I checked, something like 18 of the 25 most unreliable vehicles of the last 25 years were domestic, and this is repeated pretty much every year. US manufacturers stopped giving a crap when the Unions stopped requiring them to do so. Its not just the Management. The Execs are always gonna look out for themselves all the way to the end. The common workers are just as much at fault. There have been several undercover investigative reports done on Union employees and the quality of their work. They don't care about the quality of the products they make because, well, they don't get paid to care. They get paid to show up, and do a designated job for 8 hours. The Union will take care of the rest. Chrysler and GM should have went under years ago, but, as someone said earlier, Americans still buy their products. I still have family with the "Only buy 'merican" attitude, even tho the evidence is right in front of them. Look at US auto sales and you will see what I mean. The Ford Exploder is usually the top selling SUV in america, and it is a piece of crap. Look at Jeep's sales. The word "reliable" and "Jeep" should never be used in the same sentence. Americans spend the same way they vote. They listen to whatever the talking heads on their television tell them, and follow it blindly like a heard of sheep. How many people do you know that actually research the vehicle they are buying before they buy? I would bet not many, or the sales figures would reflect it. I will say, even tho I'm not a fan of their vehicles, Ford pulled it's head out of it's ass and is doing great. They didn't take the bailout money (yes I know there is more to that statement), and instead brought some of their european models to the US, and have done great. Their new ecoboost line is a direct reflection of them putting their money into R&D that actually matters. Anyone who has been to Europe can tell you how much better cars they get. The crap that US companies sell here would rot on dealerships there and they know it. They market their crap vehicles here where they know Americans will blindly buy it. So, needless to say, I voted yes, let them crash and burn, and take Chrysler with them. I'm tired of seeing blinged-out 300s and the idiots driving them.

 

[slapdappy]

I'm still torn...

To those that say these people would just pick up at the next manufacturer, I would argue it's not that simple.... It just doesn't happen like that.

Then you look at other bailouts like Fannie Mae and Freddie Mac that have fully repaid their capital, with interest.... So while I was totally against it in the beginning, it has turned out to be an interesting investment.

A capitalist doesn't just look at the black and white in current state - they look at the risk/reward potential too.

I enjoyed reading your particular post. Thanks for taking the time to share your wisdom re context, perspective, and theoretical vs actual.

 

[02SE]

The crap that US companies sell here would rot on dealerships there and they know it. They market their crap vehicles here where they know Americans will blindly buy it. So, needless to say, I voted yes, let them crash and burn, and take Chrysler with them. I'm tired of seeing blinged-out 300s and the idiots driving them.

I just thought this might be an appropriate place to mention that Chrysler Group LLC, which sells Chrysler, Dodge, Jeep, and Ram brands, is a wholly owned subsidiary of Fiat S.p.A.

So it is in fact an Italian company.

It was mentioned that bailing out GM, was an investment. It should also be mentioned that taxpayers lost 10.5 billion in the process.

I think I'll wander down to the Chevy dealer tomorrow, and place my order for the new Z06, which I've already paid for through my tax contributions..

 

[BrianSD_42]

You guys might find this worth listening to:

NUMMI | This American Life

403: NUMMI

MAR 26, 2010

A car plant in Fremont California that might have saved the U.S. car industry. In 1984, General Motors and Toyota opened NUMMI as a joint venture. Toyota showed GM the secrets of its production system: How it made cars of much higher quality and much lower cost than GM achieved. Frank Langfitt explains why GM didn't learn the lessons—until it was too late.

It still remains one of the most popular episodes of This American Life.


:bat:

 

[TheArkMaster]

This is coming from an unexperienced teenager with little knowledge of the subject, purely based on what I see as logic, and what I know/think (slightly biased) about the government.

If I was a conspiracy theorist, I would say it's all part of some plan, but i'm not.

In reality, I doubt they will go down, however, I strongly feel they should. With combined opinions of what others have posted, I feel that if GM failed, Other companies would pick up their slack. After all, the other auto companies are just as well known, and most, more reliable. The sales would go here without the billions of taxpayer dollars. With more sales comes more opportunity for growth which increases the need for employees. And as somebody else said, I think employment should be a competition, and may the better man win.

However, even if GM fails, and other companies do pick up the slack, we are left with many many many more without jobs, thus bringing our tax dollars back into play.

This is one of the subjects that I feel even the most rational and logical people could get lost going in circles on. We all know what we want to happen, but realistically, is it going to happen? Will any action be taken? I doubt it. People do not change very often.

Like I said, I'm uneducated on the topic, but I wanted to put my $.02 in.

 

[BrianSD_42]

This is probably a huge reason why GM went out of business..

Episode 435: Why Buying A Car Is So Awful : Planet Money : NPR

Around the country car dealerships have positioned and lobbied to enact dealership protection laws which cause the following:
1) selling cars directly like Telsa is doing is against the law
2) you must buy from a dealer, there is no choice to buy directly like consumers buy from Apple
3) closing dealerships is against the law. Manufacturers are required to keep providing a set quota to dealers or they have to pay them a cash penalty.

It is 100% the opposite of a free market and adds on average $1800 to the cost of every car sold in the US.

 

[larrylegend]

You guys might find this worth listening to:

NUMMI | This American Life




It still remains one of the most popular episodes of This American Life.


:bat:

I'm sure you are familiar with W.E. Deming. He showed the Japanese how quality control is essential to manufacturing. He attempted to show the big three that first but they refused to listen. Since that time the big three have gone downhill and foreign auto makers (mainly Asian) have taken over. Simple principle, your competitors make a better quality vehicle for less money than you do. You either change your business model and quality of product or go out of business. The only thing that kept the big three alive this long was the "buy American" attitude and the family history of buying certain brands.

I will say that Ford has seemed to realize this and make big changes to their lineup and quality. However, they must still deal with the UAW when it comes to the work force.

Also, it is funny that foreign auto makers can open factories here and make vehicles with no problem and turn a profit. The biggest factor in that is those plants are anti union.

 

[slapdappy]

You guys might find this worth listening to:

NUMMI | This American Life




It still remains one of the most popular episodes of This American Life.


:bat:

substantive, excellent reportage.

 

[ddnww]

How do you think Chevy getting car and truck of the year plays
Into all this?

 

[IanB]

Having owned a '95 Beretta SS and a '01 Sunfire GT as my 1st and 2nd cars, I am not in the GM business going forward. They are building better cars than they ever have before, and they are not even on my radar. I've made up my mind about GM as a company and they have done nothing to change that opinion. If they fail as a company, they have earned it.

 

[nevada]

Having owned a '95 Beretta SS and a '01 Sunfire GT as my 1st and 2nd cars, I am not in the GM business going forward. They are building better cars than they ever have before, and they are not even on my radar. I've made up my mind about GM as a company and they have done nothing to change that opinion. If they fail as a company, they have earned it.

agreed. and in a free market, they need to be ALLOWED to succeed, or fail on their own.

 

[ChildrenOfBodom]

How do you think Chevy getting car and truck of the year plays
Into all this?

It's easier to pay people off than make a good product that earns good ratings... especially when your competition is only the rest of North American cars.

 

[Lester Lugnut]

Let them sink and make another chapter in the history books.

Did you by chance push the wrong button when voting?

 

[1engineer]

This is coming from an unexperienced teenager with little knowledge of the subject, purely based on what I see as logic, and what I know/think (slightly biased) about the government.

If I was a conspiracy theorist, I would say it's all part of some plan, but i'm not.

In reality, I doubt they will go down, however, I strongly feel they should. With combined opinions of what others have posted, I feel that if GM failed, Other companies would pick up their slack. After all, the other auto companies are just as well known, and most, more reliable. The sales would go here without the billions of taxpayer dollars. With more sales comes more opportunity for growth which increases the need for employees. And as somebody else said, I think employment should be a competition, and may the better man win.

However, even if GM fails, and other companies do pick up the slack, we are left with many many many more without jobs, thus bringing our tax dollars back into play.

This is one of the subjects that I feel even the most rational and logical people could get lost going in circles on. We all know what we want to happen, but realistically, is it going to happen? Will any action be taken? I doubt it. People do not change very often.

Like I said, I'm uneducated on the topic, but I wanted to put my $.02 in.

That's very good! On the point of tax dollars though: Where did the money come from to bail them out? Taxes. What about the loss we still have of over 10B? Taxes. How much would it cost to cover unemployment for the employees that could not find a job if they failed? Still taxes but less of them. The truth is that part of the country would close up shop if we let them fail because they are a big piece of the puzzle. I voted for to let them sink or swim but when we did bail them out I understood the reasoning and the politics of both sides.

 

[Antman]

You guys might find this worth listening to:

NUMMI | This American Life




It still remains one of the most popular episodes of This American Life.


:bat:

[MENTION=65101]BrianSD_42[/MENTION]

Thank you for posting that. Probably the best hour I've spent on the computer in years! The report really struck a chord with me.

I grew up in a GM family. My Grandfather retired from the Baltimore Assembly Plant, along with 3 Uncles. My Father also retired from the plant right before it closed. Not so ironically, most of my family drove Ford vehicles because of what they lived daily on the assembly line at GM. I also worked on the assembly line during the 80's over three summers while I was in college. I can personally attest to the horrible attendance, Friday night drunks, and union mentality.

Quick story - I recall being taken to a worker that installed the heater cores. The Foreman informed the worker that he was to show me his job (which was relatively easy) so that he could be moved across the line to another job that he knew. The worker just looked at me and his boss and shrugged. After the Foreman left, the worker took his box cutter and literally sliced his thumb open right in front of me. He looked at me and said "Now let's see that A-Hole make me do something else..." I was shocked and just stood there while he walked down to Medical. It was crazy there.

I remember my Father telling me about the NUMMI plant in the 80's and he was really excited about it. Some of the lessons trickled down to the Baltimore Plant, and in 1987 my Dad purchased his first GM vehicle- an Astro Van that he built right at work. Trouble free for it's entire life, an anomaly.

It's a real shame. My family relied on GM to support us all, and we grew up never wanting anything. I appreciate that. I tried to support GM- A Chevy Beretta, 2 S10's, a GMC Envoy, and a Buick Enclave. Every one let me down. Every one.

Anyway- thanks again for posting that. Jeff