GM RIP?

This may be slightly off-topic, but in light of its "historical" impact...maybe not.

Am I alone in my thinking that GM should be allowed to quickly slip under the waves? Up until this morning I had grudgingly believed that all three US manufacturers needed to be saved...if for no other reason than the horrible, downstream ripple effects it would create if they were allowed to go under. However, this morning's news reported that GM posted a $9.6 billion(!) loss in the fourth quarter of last year alone and a total loss of $30.9 billion on the year!!!

Just to put this into perspective, the government has already wrestled with, and ultimately given them a bailout of $13.4 billion, but essentially that was burned up just to cover the Q4 debt...poof! It's done nothing to get them on the road to recovery, it's just prolonged the misery. At what point does one say that this is just too big and out of control to salvage. It could easily take $100 billion to get the GM ship merely bouyant, nevertheless righted.

I know this won't be a popular viewpoint (I don't even like it!), but maybe the best course of action is to excise the cancer now to save the patient. Ford seems like it is viable and going to pull through, maybe with out government intervention. Chrysler is in trouble, but it's planned lash-up with FIAT at least shows promise for the future and may provide some level of a helping hand, if worse comes to worse. This may be heresy, but maybe we don't need a "Big Three." Rather than sinking $100 billion into a bloated beast that produces products out of step with demand, maybe the $1 billion could be earmarked to provide focused support and retraining for those who would be displaced by GM's closure. Additionally, maybe a separate loan fund could be created to help displaced GM engineers, management and staff to break away and create new start-ups devoted to alternative energy vehicles, or at least smaller, nimbler car companies?

Sadly, I fear GM is like a supertanker maneuvering on the ocean, it has taken several decades on this particular course to get to the point it is on now, and due to its size and sheer inertia, there is not going to be a speedy change in course. Maybe we'd all be better off, in the end, if we just threw a really nice wake, remembered her for what she was, and then moved on with our lives.

I'm now open for your hate mail!

All the best,
Casey Annis, Editor

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Replies to This Discussion

Permalink Reply by Allen Brown on February 26, 2009 at 12:40pm

What we need at the moment is a manufacturer committed to the production of energy-efficient vehicles and the US has a great chance to take the lead in this as it has a major manufacturer by the balls. Creating a new manufacturer from scratch would cost considerably more than shouldering GM's losses and you have to take into account the cost of the job losses across the whole sector if it's allowed to go under. I know the US doesn't actually pay unemployment benefits as we think of them in Europe but the economy would still suffer considerably through the reduction in economic activity and the increase in imports to plug the gap. And who do you think will pick up the healthcare and pension costs?

And don't think that foreign-owned manufacturers can simply fill the employment and economic gap. Look to the UK to see what happens when foreign-owned vehicle manufacturers are in trouble - they go to the UK government for a bail out as they will save plants at home before worrying about foreign workers. We thought we had won by having Toyota, GAV et al own our car sector. Turns out all the liabilities are still ours - just the profits go overseas.

Allen

Permalink Reply by Cape Coventry on February 26, 2009 at 1:09pm

Dear Casey:

You have now realized what our present administration should have realized weeks ago: namely that spending money to cover a company's losses is a futile gesture. Now we hear that the Obama administration has appointed a car czar to advise the government and Detroit how to fix this morass. Really? Isn't this a pointed deviation from free enterprise and a movement to a nationalized car industry? Why don't we ask the British how that has worked for them. The only way that these companies can survive is to learn for themselves how to produce a quality car that people will buy for a profit. You can lead a horse to water but you cannot make it drink ...

Permalink Reply by Richard Truesdell on February 26, 2009 at 3:04pm

Casey,

While one point you raise, that the previous infusion of funds is just covering GM's 4th quarter losses, is certainly true, the catastrophic consequences of liquidating GM are just too frightening to contemplate. All auto manufacturers are reporting unprecedented losses, even Toyota and Honda.

If GM was manufacturing vehicles people didn't want to buy, like full-sized SUVs when they were popular, then they would have failed long ago. Unfortunately tastes change on a dime, powered by the artificially manufactured rise in the price of gas last summer and the current credit crisis, but big manufacturing entities with long product development cycles, can't.

You raise a valid point but if we out-source all of our manufacturing base after allowing an open market to all while not pressuring reciprocity on the part of our trading partners, then we are finished as the country that we have all grown up in, one with a vibrant middle class and whose innovation is the envy of the world.

I could write so much more, and I have over on automotivetraveler.com like this http://automotivetraveler.com/jump/129 but for now this will have to suffice.

Richard Truesdell
Editorial Director, Automotive Traveler

Permalink Reply by Norm Sippel on February 27, 2009 at 9:57am

Casey:

I agree with you. And, here is what I base my opinion on - 2 years living in the Detroit area (Troy) after growing up in New Jersey and always wondering why American cars had lost their appeal after the '60s.

I was the Associate Auto Editor for a national chain of newspapers and had a weekly column. I drove a different car each week for the two years I lived in Michigan. I also got to know the executives of the various divisions of the major manufacturers.

My first "Eureka" moment came when I understood why American cars had soft suspensions & couldn't corner unless you modified them. The streets in Michigan were laid out by surveyors -- due east-west or north-south. Only turns were at intersections or into a driveway. In addition, the roads are segmented concrete. So, why build anything that can corner on roads as they have in Europe, or New England? Roads in Michigan were NOT built on old Indian or deer trails. And the only way to insulate people from the thumping of pavement segments was with soft compliant suspensions. Ugh!

Then as I became more involved in the auto business, I had more "Eureka" moments. One was at the press intro of the Chevy Citation. I had a VW Dasher at the time and the Citation (on paper) looked like a better car. After the press conference, I jumped into a Citation for the ride-and-drive. Turns out I was the first car in line to head out on our drive. The Vice President of Chevy at the time jumped into the passenger seat to head up the convoy with me driving. As I was groping around trying to find the lever to release the seat back into a more reclined position, he asked me what I was doing. I told him & he said, "We don't have a seatback reclining feature because we don't want drivers sleeping while driving." I explained to him that I have long arms & short legs and even my 8-year old VW could recline the seatback. I asked him, "What would it cost - 25-cents a car?" He said, "No. Just about 5-cents." Got the understanding of their thought process?

Another time, I wrote about a problem I saw in another GM car. The engineers were going ballistic about it. Why? Because I wasn't an engineer. The guys in PR essentially agreed with me. But, couldn't admit it. I was right.

A few years later I was at the annual International Motor Press Association annual test day at Lime Rock Park. One of the cars I tested was a GM import with tiny tires. Nice car. But, awful handling because of the tires. On my return to the paddock, I got into a discussion with one of the GM engineers about how they needed to put bigger & better tires on the car. His opinion was that "commuters" didn't need better tires. After a few minutes of our discussion, it was announced that the track was closed for an emergency. We stopped our conversation (debate) to learn that the car I had just been condemning because of the inadequate tires had just rolled on the entrance to the main straight. The look on the engineers face told me - he admitted I was right, and their cost-containment planning was wrong.

In the years since returning to the Eastcoast from Detroit, my wife and I have really wanted to buy American when we bought cars. But every time, except once, we ended up with European cars - Audi, Saab & now BMW. (Tried a new Toyota Camry once. Worst car we ever owned. The old MGB I owned at the time was more reliable.)

I keep looking at American cars as the lease on one of our BMW's is up in a year. I really don't see much from GM, nothing from Chrysler & little from Ford that we would consider unless we were 20 years older. But, by that age we shouldn't be driving. Only exception might be a Vette. But, personally, I'd rather spend the money a new Vette would cost on an old one that appreciated and I could vintage race. Yup. It's that's sickness again.

Bottom line - GM & Chrysler, and Ford to some extent have been living on borrowed time. While failure of any of them would cause a catastrophe in the regions where they have plants, the companies deserve to feel pain. They have been out of touch with the needs and desires of the public for too many years. The business is incestuous, their ideas are lame, and they refuse to look forward unless backed into a corner.

If the government can light a fire under their butts by bailing them out with oversight and demands, I'll be as happy as a clam. But, frankly, I don't think that will happen.

I do wish them luck.

Norm Sippel
(Nomex is on)