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Obits of GM are a dime a dozen. Who killed GM??
Many commentators parrot the old GM lie that their big problems were "rightsizing"
to meet lower demand, and the "high cost of
union labor".
Both legends are beancounter-babble run awry.
In reality, GM's glory days were when it produced good solid value, good cars that were reliable, in massive numbers,
such that the cost per unit was vanishingly LOW. Henry Ford himself was reduced to being a "GM watcher"
by its superior economics: high volume, fat gross-margins and low cost per vehicle.
The idea of downsizing to meet the "sweet spot" of proper production completely runs contrary to GM's
business model. In fact, it is self-destructive, as even the naive pointed out many times on GM message boards. Well,
now, the self-destruction has come to pass.
There's no one to blame but GM itself, and that means the GM
Board and GM management.
GM needed to EXPAND production and HIRE production workers, raising SALES by making the kind of cars that people
want to buy, and cut useless white-collar overhead. Shrinking output, for GM, means death.
The fact is, Lutz is a failure so far as being a "car
guy"; he didn't make the kind of difference that
GM needed. The last 10 years of GM cars are just plain B-O-R-I-N-G, from Hummer to Solstice and from world-platforms
like the unmarketable Aveo and Opel to the redesigned GMT900 pickup trucks.
Let's face it, "SUVs" and "crossovers" are just an ugly makeover of an old-time "station
wagon", no matter how you rebrand them. There's no "wow" factor, the ingedient that GM needed to
sell product.
If GM had delivered a simple serial hybrid like the VOLT, for example, ten years ago, or even two years ago, or
if they had resumed production of the EV1, they might have increased production enough to survive.
The VOLT could run quite well for 40 miles in all-electric mode on lead-acid batteries; but really, 20 or even
just 10 miles, would have been enough just to get them out on the road and into people's garages. And the sales
into GM's ledger.
Instead, decisions were made to invest in expanding Chinese, Korean, Brazilian, European and Russian operations;
none of that money could be repatriated, in GM's time of dire financial need. It turned out to be doubly foolish
when the dollar tanked, and the Won, Euro, Rnm, etc., rose, making foreign cars prohibitively expensive to import.
So much for the "world platform made with slave labor" idea.
That's why Saturn's emergence as rebranded Opel-monger was doomed: too darned expensive with the high Euro.
The lifeblood of General Motors was drained to build plant-capacity
on foreign shores, a betrayal of those who invested in
GM products and put up with GM for so long: and a losing strategy, to boot.
GM needed the threat of bankruptcy to realize that dealers selling only 40 cars per year are not viable!
Toyota cuts dealers who don't sell 30 per month.
Obviously, therefore, Toyota dealers have lower costs per square foot of showroom, per foot-traffic, per employee,
per car sold, per car financed on the lot, and per overhead and back-office personnel. Furthermore, Toyota salaries
for overhead personnel are much lower; the top salaries are an order of magnitude lower than GM.
ALL of the top management salaries are OVERHEAD, paid for by productive line workers. What part of "overhead"
don't GM managers understand? GM's PR department is all overhead, so are the dealer real estate, all the TV ads,
etc., overhead that can only be justified by increased revenue. No revenue, no value.
Why pay Wagoner millions, when he failed?? Perhaps a blindfolded gerbil could have done as well, or better. The
overhead expense of top management can only be justified by PROFIT; GM's failure means all overhead management's
work was futile, in vain, and a complete and utter loss.
GM doesn't realize that every manager is overhead?? After all these years of conferences and seminars. One wonders.
GM costs were too high, from dealers who needed a huge profit per car, all the way to bloated, inefficient management,
overpaid white-collar managers and hangers-on, underutilized real estate, and excessive ad budget.
Now as to GM's claim that their problems were
due to "high union wages", that's just not true.
GM base wages are from $700 to $1200 per week; claims of more are based on forced overtime, which resulted from GM's union-hating
managers refusing to hire more union workers, so piling more overtime on the shrinking pool of existing workers.
That, once again, is a management decision -- and a management failure.
Even the so-called "jobs bank" tells us that GM was unable to find work for some of its workers, meaning,
that they were idled by low sales -- meaning, by badly designed products. Why blame the union workers for management's
failure to put them to work? If GM had kept its sales up, none of these workers would have been idled.
GM's advertising budget was 70% of its cash UAW wages. If
the UAW had come to work for 25 cents instead of $25 per hour, GM would still have been losing money all these
years and would still be in bankruptcy.
In reality, all the auto makers have reduced cash wages to a tiny cost item. The final cost of the car dwarfs
the labor to put it together, it's just a tiny percentage. It's an insult to blame the UAW line workers for Lutz'
design failures. It's not the line workers fault when
the cars just aren't selling in quantities needed to support overhead cost
items (such as Rick Wagoner).
Let's calculate together.
It takes 11 to 22 hours of actual labor to assemble an auto in a modern factory. That's total line labor hours
divided by units out the door.
At $28/hour (that's the salary GM is lowering to $14/hour) or $22/hour (that's what Toyota pays, plus bonus at
the end of the year) the cost of assembly labor is as little as $200 and as much as $650 per car.
You don't need a calculator to figure that's at most only 3.25%
of the cost of a typical $20,000 car.
Sure, benefits are an additional cost; but the big problem with that cost item is that GM managers foolishly handed
out unfunded "early retirement packages" to
get rid of union workers.
Did they think they would replace them with cheaper offshore workers?? Or something. Sometimes the lack of planning
doesn't hurt; this time, it was devastating.
To induce workers to accept early retirement, GM actually paid them up to $140,000 in cash, and allowed them to
add enough points to retire at full benefits long before they had earned enough to fund those benefits. Many of
those workers reputedly took GM's gelt right across the street to local gambling halls, which are not in the habit
of handing out money, contrary to the belief of most of their customers. So, really, to get rid of union workers,
GM was funding local (non-value-added) gambling with a
generous infusion of borrowed cash, a debt which is now being assumed by the Taxpayer.
This was a mistake made by GM management.
By shrinking production, their ratio of active workers to retirees ballooned to an unsustainable and alarming 1:4. Prudent
companies survive if it's 4:1, just the opposite of GM's ratio. How come GM's overpaid management failed to understand
this simple fact??
A company burdened with using the production from one active worker to support four "retirees" is at
a disadvantage to a company, such as Toyota, which uses part of the production of four active workers to support
one "retiree".
This is just plain arithmetic, nothing fancy.
So cutting production was the WRONG thing for GM to do, if it wanted to survive. It needed to put those retirees
back to work, if anything, instead of decimating the ranks of active workers to load up the corps of "retirees".
GM should have been HIRING, and building better cars; and shouldn't have done stupid thinks like hand $2 Billion
to Fiat or sold control of the NiMH batteries (yes, GM once owned the battery Toyota needed for the Prius!!) to
Chevron Oil.
GM's management, controlled by the Board of Directors,
made a dazzling series of diastrous choices that seemed to put the wealth of Big Oil above the health of GM or
the wealth of its shareholders.
We call that "failure to perform fiduciary
duty".
OYEZ, GM also shouldn't have arrested its own customers, who were trying to buy GM cars for cash.
Not a good idea to turn away cash customers, let alone
have them hassled or even arrested.
Here's a case of customers who put to shame the old ad "rather fight than switch", these would-be GM
customers would have rather get arrested than buy from someone else!
And
GM "managers" missed that point, too.
GM probably should not have denigrated their customers, nor damaged
their credit, charged them for scratches on the cars GM crushed, refused to sell them cars, disappointed the GM
EV1 fan club, and spent money fighting, suing and lobbying against them, filing suit against the State of California
to keep our air dirty.
GM turned a profit-center into a cost-item. From lemonaide, they made lemons. Astounding trick, but not very useful.
While Toyota was selling Electric cars to the public, GM claimed it was "afraid" to sell to the public due to "the
lawyers".
GM then sabotaged the Toyota EV by helping Chevron sue
Toyota, which stopped their production of a plug-in EV.
So now, no Auto Alliance member makes a plug-in car, thanks to
GM and Chevron. So much for innovation, or exciting
cars that people just can't wait to buy.
Remember, would-be EV1 buyers waited in the rain
for weeks just for the bare hope of being allowed to hand GM cash money.
Generally, you don't survive in business if you disappoint and/or arrest your own customers, eh? Guess even Lutz
can figure that out??
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