Memo To Washington: Let GM Fail

GM will not close up shop and the government isn’t going to bail them out like they did with Chrysler back in the 80’s. The future of the US auto industry is foretold by the Steel, Airline, and Auto Supplier Industries:

GM, Ford, and Chrysler will declare bankruptcy. By doing this they will break the unions and dump their pension and healthcare obligations. Unburdened by these obligations they will return to profitability as a much leaner organization.

My former employer Delphi Automotive is an excellent example. When Delphi entered bankruptcy they had 29 plants in the US. The average UAW assembly worker made $27.50 per hour, had a defined pension plan and paid nothing for excellent healthcare. In bankruptcy, Delphi negotiated a new deal with the UAW. Under the new contract, UAW workers start at $12 per hour and wages are capped at $18.50. The pension was frozen and replaced with a 401K plan. Workers had to start paying co-pays and premiums for healthcare. The UAW voted 68% to 32% to accept this new contract. Delphi sold or closed 21 of their 29 facilities in the US. They kept 4 plants and several technology centers. Note: Delphi’s international operations were profitable and were not part of the bankruptcy. These plants are located all over the world including western Europe so they are not all 3rd world countries. Why can Delphi make money paying union employees in France, Germany, and the UK? Healthcare and pensions are provided by the government.

 

Derek, I have to maybe agree with both you and your friend from Michigan. I think many on this forum would say that GM is making a lot of junk that nobody wants to buy and thus maybe it should be allowed to go away.

The tragic news for those in Michigan is more of the same. They have already seen their jobs go away slowly the last few decades. One by one, the plants have been closing and moving out of the USA all the while blaming cost problems on the government in Washington, the workers, the unions, or maybe claiming US laws on pollution being too strict etc.

My last GM car was a 1999 Suburban and built in Mexico. It was a real lemon too! I cannot blame just the line workers either as some on this forum might! The GMs made out of the USA by non-union line workers like my Mexican built Suburban may be only a little cheaper for GM execs to build but are no better if not worse in quality control. The two happiest days I owned that car were the day I bought it and the day I sold it. (I bought a Prius) The failure of Ford, GM, or Chrysler has nothing to do with the workers in my opinion be they union folks in Detroit or non union people in Mexico, Canada, or Asia. The CEO, senior execs, upper management types in these companies steer the respective companies, make ALL the important decisions like determine the R&D in the areas they want to, and allocate the $$ used to build their wants or desires. The workers, foreign or domestic make ZERO decisions, only assemble the car parts given them be it a well engineered vehicle liked by the public or junk nobody wants!

I think your friend in Michigan is correct. Based on the junk GM execs want to spend their R&D and quality control money on, I see maybe the Volt being the only GM car that offers any promise and that is all it is right now, a promise. I otherwise expect GM to slowly tank what remains for the few jobs left for the folks in Michigan.

I recently made a road trip to Michigan. While the folks in Washington are deciding if the USA is in a recession or not, as if we didn't know, I would say we are not only well into recession but for the economy in Michigan, the question is how close are they getting to a full blown depression! I sincerely hope the best to you folks in Michigan.

 

Large American corporations are mature entities--way past the growth part of their life cycle. That means their management style has changed. No longer bold and creative, but conservative and defensive. Their leadership are the survivors in the pyramid, not the bright risk takers who used to get to the top when the companies were growing. That means they are no longer leaders in the marketplace, but responders. And responding to market change is difficult.

GM's problem has been bad management. Too complacent and conservative. They have lost a lot of their domestic car market to the Japanese because they ignored Demmings' quality principals in the 70s which the Japanese adopted. Plus they have never been on board with gas mileage because of complicity with the oil companies.
The Japanese have had no such constraints.

They will survive, but they will be downsized.

 

When a person ages, every part of their body ages. Likewise, every component of a big organization ages. For this reason, I do not see a real "recovery" for GM. Bad planning, bad execution, bad customer service, poor quality..... No real company strength to build upon, except possibly a good propaganda department.

What is really unknown to me is if GM will be selling brands, and/or overseas operations as a way of staying afloat. (Like AT&T sold entire businesses to stay in existence.)

 

For a second there, I thought you were describing the government of the United States. Some might say the same thing about us as a nation, i.e. survivors of the pyramid, not bright risk-takers and no longer leaders in the world...

 

If GM's problems are due solely to poor management why are they not only profitable internationally but growing in emerging markets? GM and Ford's problems are US specific problems not company wide problems.

 

If my heart starts to fail, then the rest of my body being fine has little effect on the upcoming death. GM failure in the US will very quickly take down the rest of the corporation.

 

Too big to fail

Thats the latest punch line by the idiots in Washington. Like Bear Stearns and Fannie/Freddie GM will get bailed out too. They do not have the money to do these things, they just create it out of thin air. That is why the Euro went from $0.98 to $1.59 USD. That is why gasoline has gone up here more than in Europe and much of the world. Our currency is being devalued. Because the government with the Federal Reserve can create money out of thin air we can fund wars, have hundreds of bases overseas, pay for social programs and basically piss everyone else off. Thats why I bought a Prius, gas cans, and gold