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19.11.08

Do the US automakers deserve a bailout? 

Today at the Vista Group luncheon, we’ll be discussing the ’s desire for a government . My view: of course it’ll be great to protect US , since the situation is not of the plant workers’ doing. As mentioned in one of my papers, ‘Saving Detroit’, the troubles are self-made: mismanagement by the Germans when was part of DaimlerChrysler, which I have documented elsewhere; and internal politics within , which is the stuff of legend. isn’t totally in the clear but it has done more to attempt to integrate an unwieldy structure (just not quickly enough, with hindsight), coordinate automotive platforms, spread its risk with small cars than its other US rivals, and even engage with consumers via its blog. It’s also taking a useful innovative chance with the Chevrolet Volt, reversing the failures of the EV-1 electric car project.
    of any of these groups will only lead to repeating what happened in the UK when British Leyland began imploding after it was effectively nationalized in 1975. But a major of all car firms in the US is needed, whether they get taxpayer money or not. And if they do, then restructuring becomes all the more urgent because it’s the US taxpayers’ money they’re spending.
   Chrysler has a terrible product line other than minivans and Jeeps, for the most part—Daimler left it in such a state that it has a poor product line in passenger cars, and the 300 is becoming increasingly dated. Ford’s structure is so ingrained and so biased against its German and Australian outposts—which and make far better passenger cars than —that it keeps shooting itself in the foot by actually creating flops when they are sold Stateside. I wonder if Alan Mulally can change it. Lee Iacocca couldn’t. And GM has such a poor record of taking steps backwards over the last 20 years—but at least it accepts that it has around the world that can potentially create the cars that people want.
   As the firms run out of money, the options are not great. Renault failed to acquire Chrysler, so a with GM might be the only path to take—which means job losses anyway and the end of the Chrysler and marques. Ford should federalize some of its overseas models and stop sabotaging itself. General Motors itself probably needs to simplify its product ranges—it’s easier to understand Toyota and Honda’s ranges—and use Saturn as its Opel-importing arm, which is happening anyway (bring in the Brazilian Chevrolet Vectra, for example, for sedan-loving Americans, and the Opel Corsa D to beef up the supermini end of the range to fight Honda’s Fit). And all three need to trim the number of retail outlets if their support costs are too high.
   We’re also talking major changes that I can’t see Chrysler and Ford accepting that quickly, but strangely, Chrysler has a better chance: it was well integrated prior to Daimler-Benz buying it, and that was just over 10 years ago. There should be enough people around who can turn back the clock. GM has started and it needs to pick up the pace, and certainly it needs to define its individual .
   I say the US Government could provide some guarantees and certainty for the sake of jobs, but the conditions need to go well beyond salary caps and executive compensations. We are talking serious (and I mean the vision-, culture- and process-changing definition and not slapping on a new logo) here—something that large US corporations tend to have a problem understanding, executing and absorbing. Or, they get caught up in the rhetoric of thanks to the way some of the consultancies work.
   It’s through such a process that they can see the forest for the trees, understand their businesses at a global level, connect better to the future needs of their customers, and avoid this happening again. They even need to learn to listen to their own. It’s this failure to learn that is making the current crisis smell like the 1970s for the US car industry—except this time the problems have been worsened by the arrogance that has come with years of easy credit. And if you do search around the ’net, you’ll find that some of us saw this coming years ago—which begs the question, why were the car industry’s best and brightest within these firms shut up? They need to be heard.
   The will survive, but it will be a slimmer industry than what we have known for most of our lives. And the French and Japanese will continue to employ US workers to assemble Toyotas, Hondas, Nissans and other brands Stateside. It just won’t be the same as foreign companies will look after their own bottom line—which means profits heading to Paris or Tokyo.
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Comments:
The UAW needs a little tough love. It derailed the Cerberus deal at Delphi. Today GM suffers a loss of about $2,000 per vehicle sold. On the other hand Toyota whose employees are not part of the UAW earns a profit of about $1,200 per vehicle sold. If GM was able to operate with labor prices near Toyota’s it would have pocketed an additional $29,715,200,000.

http://nomedals.blogspot.com/2008/11/gm-bailout-makes-no-sense.html  
Good point, Jason. The Japanese do not have these legacy costs holding them back. But remember that the Europeans have unionized labour and still manage to do better than US automakers. GM, Ford and Chrysler are building the wrong cars for North America, when GM and Ford in fact have great cars for Europe and other markets. And the sooner they wake up to the fact that Americans would prefer Corsas and Zafiras to Yukons and Expeditions, the better.  
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Entries from 2006 to the end of 2009 were done on the Blogger service. As of January 1, 2010, this blog has shifted to a Wordpress installation, with the latest posts here.
   With Blogger ceasing to support FTP publishing on May 1, I have decided to turn these older pages in to an archive, so you will no longer be able to enter comments. However, you can comment on entries posted after January 1, 2010.


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