Because I would be absolutely terrified to buy a first-year truck from GM. With the shape they're in now can you imagine how many BUGS will be in a truck? I decided to get a GMC or Chevy(the GMC looks better IMO)because the Powerstroke in the F-250 is so loud I'd be afraid of damaging my hearing(only half joking)and I don't trust the Ram transmission.
"For all of its faults, the union doesn't design the products that don't meet consumer needs...."
First of all, GM makes plenty of vehicles to fill consumer NEEDS. They just don't make plenty to fill consumer DESIRES.
Second, you are correct, the UAW doesn't design the cars.
HOWEVER, all engineers/designers must operate under a set of constraints. One of the largest constraints is a budget for which a car can be built. If GM tries to build a car to match a Camry/Accord, they have a particular cost ceiling they must stay under. If their labor/legacy costs are HIGHER because of the UAW, that effect WILL show up in the design. You simply can't ignore the additional labor cost and it's effect on design.
I've seen various numbers kicked around about the cost disadvantage GM is under due to the UAW contracts. It seems to START at $1500/car and go up (drastically) from there. So what happens? GM would like to design a car to go head to head with the Camry/Accord, but they start off (a minimum) of $1500 in the hole. And keep in mind that Honda/Toyota has some VERY good engineers. So, GM must either try to sell a sedan for the same price as the Camcord and make up the labor cost delta in cheaper material OR use equivalent materials/design and try to sell for a higher price.
Neither approach works well. So they load up their vehicles with relatively inexpensive gizmos to pump up the feature content, slash the material quality, and try to undercut the competition on price.
But this isn't necessarily due to piss poor design; it's a function of the designers having to operate under cost constraints which are exacerbated by costs associated with UAW contracts.
What that analysis doesn't consider is that GM supports far more nameplates and channels than do leaner and meaner companies such as Toyota.
I've already pointed out that GM and Toyota spend about the same amounts on R&D. But GM spreads that amount offer a much larger number of product offerings. And in turn, those badges and nameplates require more dollars for marketing, promotion, channel management, etc.
And for what? At this stage in the game, the badges pretty well suck, and there is no need for Chevy, Pontiac, Buick, Saturn and Saab to each support full or near-full lineups of products...yet they continue to do so. These badges are weak, and their overwhelming similarity and lack of differentiation simply confuse customers -- I'm a car fan, and even I couldn't tell you exactly what these badges are supposed to represent, given how the cars don't often match the alleged intended message. If I can't sort it out, you can bet the average consumer certainly won't know.
I don't disagree that the costs are a burden. But if GM was well managed, it would be profitable, just not as profitable as its non-unionized rivals. The unions do not justify the poor products or poorer management. They surely depress profits, but they aren't creating the losses.
If you cut Wagoner's compensation by 50%, you'd still end up north of $2 million.
The 2004 pay consisted of $2.2 million in salary and $2.5 million in bonus. The company made $28xx million that year on operating basis, mostly from GMAC. The $2.5mil bonus was reduced to Zero for 2005, and Wagoner voluntarily cut his own pay, the remaining $2.2m in half. Now, if UAW worker's $65k wage could be structured as $30k base and $35 bonus, the problem would be all gone even without a valuntary pay reduction to $15k.
I know you love that $4billion, except that was before Wagoner was CEO. Furthermore, M&A activities and financials have earned GM several times that over. We have been through that so many times, I'm starting to wonder if wonder if the million vs. billion problem was the only counting skill lacking among some of us ;-)
I know you love that $4billion, except that was before Wagoner was CEO.
It was actually $4.4 billion, and he was president of the company. He negotiated the deal. He deserves much of the credit, being that he was the second highest ranking officer of the company.
Furthermore, M&A activities and financials have earned GM several times that over.
We'll see what ultimately happens with Daewoo, but its automotive M&A deals with Saab, Fiat, Isuzu and Subaru have all failed, and have cost the company billions of dollars, as I have already documented via Forbes. GM's best effort was in managing GMAC, which it is now selling off, so we can now expect GM to expect a net loss, and it's a fair guess that the cash raised from the sale won't likely be enough to sort out those future losses from automaking.
Beancounters don't do well in managing manufacturing operations, apparently, unless you consider losses and declining market share to be signs of success. They really seem to believe that volume can make up for losses, an exercise in cost accounting gone too far.
It was actually $4.4 billion, and he was president of the company. He negotiated the deal. He deserves much of the credit, being that he was the second highest ranking officer of the company.
M&A on that scale is primarily the purview of the CEO, not COO. From what I read, Wagoner's primary contribution to the deal is buying that put option, which probably saved GM tens of billions of dollars, considering how much BMW and Ford lost in dealing with much smaller acquisitions.
Beancounters don't do well in managing manufacturing operations,
Yet the manufacturing company, GM, would have long been dead if not for the $30+ billion profit made from various M&A activities by the bean counters. Even on operating basis, the bean counters had been making up for car manufacturing losses with GMAC profits for years.
I think Rickysweety CAN make major changes to GM. HE's the top dog and if he got together with the rest of those overpaid sacks of crap that run GM they can change ANYTHING they want.
Apparently not the case at all from previous experience in 1998. When Wagoner tried to play hard ball and improve productivity and quality at one particular production line, UAW organized a company-wide work stoppage that lasted for weeks, racking up $4 billion losses in short order. Wagoner had to back down. Union is like the squatter; boundaries of de jure and de facto property ownership get very murky in those cases
With platform sharing, having extra brands does not affect R&D much. In fact, having different brands probably help selling more cars on the same platform thereby saving overall R&D. E.g. ES/Camry, TL/Accord, RSX/Civic, DTS/Lucerne. The fact of the matter is, Toyota is doing better now with Lexus-Toyota-Scion than it was doing with only Lexus-Toyota, which was still better than it was doing with Toyota alone; whereas GM without Oldsmobile is doing even worse than GM did with Olds. These are facts.
Perhaps some day down the road, GM will need to trim brands, but for now a far more urgent issue is trimming cost and trimming over-production, both are results of inflexible UAW contracts. Talking about brand management while the management can't even fully control the production quality or quantity is like prescribing diet and exercise to a cancer patient when operation and chemotheorapy are required.
Chrysler, the erstwhile domestic carmaker with the smallest economy of scale, goes through that those dramatic cycles every 10 years or so. Remember the early-to-mid 80's Iaccoca renainssance? early-to-mid-90's Viper/Prowler craze? IMHO, the 00's version has just about run its course with Crossfire piling up and 300 inventory soon to follow. That's usually what happens to car companies that sell on style and uniqueness. Alfred Sloan's answer to this quandary of economy of scale and buyer penchant for uniqueness is "same wine different bottles." It worked for GM for over half a century.
Unfortunately, I'm not sure GM has enough money to really make an offer that is equivalent to the above-market-pay-and-benefit that the UAW members are already enjoying. From what I read, the worker response to the current $140k deal is lukewarm. Both sides understand very well that the current excess pay-and-benefit is enormous.
That is simply an amzaing response, in light of the fact that GM's long-tired adventures in badge engineering (not to be confused with the platform sharing common to the business) is what helped to bring the company to its knees in the first place.
And Toyota obviously did a fine job of building its brands, which is more than what GM can say about what it has done to destroy its brands. You shouldn't even dare to compare the two in the same breath, when one obviously handled its efforts with competence while the other bungled it through sheer ineptitude.
Had you been in charge, I'm sure that the losses of today would be a walk in the park compared to what you would have generated. Fiscal management isn't everyone's strongsuit, I guess.
And I seem to remember reading about last year Ricky the Retard got a bonus of 14.5 million
Salary was $2.2 million, Bonus was 2.8 million and "other" of $3.5 million in stock incentive pay(which only does any good if the stock goes up) if I read this right for 2003.
For 2004 his total compensation was $4.8 million.
You must be prescient or an insider or a personal friend of his if you know his 2005 salary since it has not been announced yet. Annual report should be out soon though.
Okay, It's ALL the unions fault! GM's managment is so brilliant that they could turn GM around like Ghnosen did with Nissan. If those bloodsucking UAW workers would just go away then the truly BRILLIANT cars that we all know GM is capable of would be out there. And they would just blow Toyota and Honda away! Those darn unions won't let Rick and company do anything! It's a darn shame that the UAW is destroying such a fine organisation and keeping what could be the most brilliant managment team in history from producing the cars that everyone DESIRES! No disrespect to anyone but this excuse-making for mismanagment is getting embarrasing. My friend you are deluded if you think it's all the UAWs fault.It doesn't ultimately matter though. You can stick your head in the sand along with the rest while GM dies.Maybe the answer is to move all production to Mexico and China! Then the truly brilliant management of Ricky "Retardo" Waggy can come shining through and save the day!!
Perhaps he should be returning the bonus on the $4.4 billion that he helped to lose.
Honestly -- if someone in the rank-and-file personally lost $4.4 billion for GM, I'd bet that this person would be fired. Why does the CEO get a pass when lower-level people have surely been terminated for far less?
Okay, It's ALL the unions fault! GM's managment is so brilliant that they could turn GM around like Ghnosen did with Nissan.
I did not know that Nissan was union?
There is not just one thing that is hurting GM. It is not just the union, not just poor management, not just poor product, not just that GM is a 100 year old company and has all the past legacy costs from both all those people it used to employ, not just the exchange rates/trading issues, not just the old crap they used to make and not just the decisions made starting 35 (yes 35) years ago that caused the american public to turn there noses up at the Domestics, not just the health care, not just all those folks retired on GM. It is a combination of all those things and others. It is amazing with all these issues GM has been making any money. It is just too bad someone did not start really making differences 10 years ago on these issues.
Yes, the problems are multi-faceted, but the falling market share and severe discounting that are at the root of the problem are both a byproduct of poor brand management, inferior design, inconsistent reliability and a lack of customer focus, which are all management-based problems.
The presence of the union certainly increases the cost structure, but the cost structure is not the ultimate problem. The UAW obviously has no trouble building Mustangs and 300's, or assembling Ford's nicely designed modular V-8's, and Americans have had no trouble buying them, regardless of who builds them. Instead of shutting down its best plants, perhaps GM should use them to build cars that serve customer needs as have some of these Ford and Chrysler offerings.
Your math and mine must be different. 500 in the first cut primarily contract. 490 SALARIED GM in the Second. 100 Combined Salaried and Contract in the third. The fourth is still coming should be the size of the Second Cut.
As much as I love and admire Toyota, IMHO you are over-stating the case. You sound like a partisan political fighter. Even as you praise Toyota to high heavens, do you realize that Toyota is anti-union? It's more successful in that regard than GM, which is part of the reason behind its financial success.
Toyota engages in plenty badge engineering. The Lexus IS300 was very much a Toyota. In fact, the entire Lexus line until this past year was pure badge engineering: every single Lexus model was a Toyota model in Japanese home market. Even today, not a single Lexus SUV does not share platform with Toyota; at least one of the fastest selling Caddy trucks, the SRX, has its own platform not shared with any plebian brand. The best selling Lexus sedan is also shared with Toyota; whereas that of Caddy, the CTS, has its own platform.
Toyota is more successful than GM, of course, but not for the reason you mentioned, as usual.
Had you been in charge, I'm sure that the losses of today would be a walk in the park compared to what you would have generated.
How did you figure that out? So far I have not seriously suggested anything different from what GM management has done. You on the other hand has made quite a few stabs at this; let's see how you score:
(1) Refrain from big cars and trucks, instead focus on small cars . . . for a company that has not made a profit on small cars for decades, and made handsome profits on big vehicles in most of those same years. Talk about fool-hardiness;
(2) Don't make upscale versions of plebian vehicles, but instead of focus on hybrids. Sure, as if Toyota ever made any money on Highlander Hybrid; whereas in reality Toyota's biggest profit engine is the Lexus version of Highlander.
(3) Focus on carmaking, ignore M&A and financial operations. Whereas in reality, carmaking has been losing money for years . . . all this time, M&A and GMAC have been the ones paying the bills.
Fiscal management isn't everyone's strongsuit, I guess.
Speak of yourself. I'm not the one making the claim that I'm smarter than GM managers; you are, sir, all the while coming up with braindead strategies.
I'm following "accrued" method because bonus is a function of the performance of the immediate past. So, yes, Wagoner's pay lags performance by one fiscal year (or by six months, on average) is what it looks like. According to the link I provided earlier, the board already disclosed that he is not getting any bonus based on 2005 company performance, and he is cutting his own salary in half on top of that. I want to see which $65/hr UAW worker will share the pain and cut himself down to $15/hr. The shareholders are already being cut in half. Shareholders are the owners after-all, but obviously that does not matter in a squatter situation.
Perhaps he should be returning the bonus on the $4.4 billion that he helped to lose.
Honestly -- if someone in the rank-and-file personally lost $4.4 billion for GM, I'd bet that this person would be fired. Why does the CEO get a pass when lower-level people have surely been terminated for far less?
Not if he is making the company $16+ billion profit on other deals at the same time.
Even as you praise Toyota to high heavens, do you realize that Toyota is anti-union?
I am not pro-union, I am anti-incompetent management. On that score, Toyota (and for that matter, a whole host of other companies) beat GM hands down.
In fact, the entire Lexus line until this past year was pure badge engineering: every single Lexus model was a Toyota model in Japanese home market.
You obviously don't understand the concept of "badge engineering". The issue isn't one of platform sharing, but whether cars of differing badges are so similar to one another that consumers can't differentiate between them. Learn a bit about branding, and you'll see that the problem ultimately comes down to marketing, more so than engineering.
So far I have not seriously suggested anything different from what GM management has done.
That's hilarious. You actively embrace a strategy of failure, and you're proud of it. At least GM stockholders aren't squandering millions of dollars on you, they get enough Kool Aid from the current management team.
By the way, you obviously don't comprehend my strategic recommendations. My point has been that GM needs to meaningfully differentiate itself from Toyota, rather than mimic it in a half-hearted fashion, and that putting all of its eggs in the SUV-truck basket when gas prices are heading northward is not likely a very smart idea. As is true with any company involved in marketing technology products, the leaders have to lead and innovate if they are to maintain their market share and mystique.
Small cars are useful as a gateway to enhance the lifetime value of a customer, because small cars fit best into a young person's budget. GM needs a younger audience that will build and stay loyal to it, so that customer can produce potentially decades' worth of revenue. If you know a better way to reach a young audience in a positive fashion, let us know, because GM obviously has yet to figure it out, even though it wants the youth market along with every other mainstream automaker.
On the other hand, GM may be a bit late to the hybrid game, and might wish to find something a bit more innovative of its own so that it doesn't become another second-rate competitor to Toyota in that respect. Rather than imitate, GM should innovate and then create excitement about its innovation so that it is first to market, and builds a reputation based upon its being ahead of the curve.
And GM should be consolidating brands into good badges, rather than buying bad ones. If you're going to buy a company, it should at least have some value. They wouldn't need GMAC to hold the company together if they could build a decent car. If Toyota and Honda can build good product and increase market share, why shouldn't GM?
Which car under the toyota name shares the same platform as the IS? Didn't know a Toyota branded car had rwd with an inline 6. Now, the '06 IS 350 will be sharing it's motor with Toyota branded vehicles, but I don't see a platform being shared between these two.
The platforms I see being shared between lexus and Toyota branded vehicles are: RX330/highlander/camry, 4runner/GX470 Land Cruiser/Lx 470 and Camry/ES350. That's all I can think of right now. Don't know if the new FJ and Rav4 share anything with anything else.
"What that analysis doesn't consider is that GM supports far more nameplates and channels than do leaner and meaner companies such as Toyota."
You are absolutely correct.
However, I wasn't attempting to produce a definitive all-encompasing analysis of 'What's wrong with GM'. I was simply trying to counter your (apparent) stance that the role of the UAW is immaterial to GM's current problem in the market.
Has GM management made a lot of bonehead decisions in the past? Sure, I'm not saying they haven't. However, I'm simply trying to make the case that many of their 'bonehead' decisions were rooted in having to deal with the UAW.
Forget for a moment the whole multi-division issue: you've complained often that GM can't seem to field a GOOD high-quality small car to go head to head with the like's of the Civic/Corolla/Mazda3 type cars. Since these small cars are often 'gateways' to get consumers started on a (hopefully) lifelong attachment to a particular manufacturer, it makes sense that a manufacturer field a credible entry into this market. You've also noted, frequently, that the Cobalt in your opinion simply doesn't cut it against the competition in this segment.
Now, assume you are a designer/engineer trying to build a good car in this segment. You must take into account the fact that the designers/engineers working for the competition are no dummies. You must take into account that this is a price sensitive market. You must take into account that one can only save so much through judicious materials choices. And finally, you must take into account that you START at least $1500 in the hole due to higher labor/legacy costs.
Can't you see that these higher costs associated with UAW contracts is ONE of the primary reasons why GM has such a problem fielding a worthy competitor in this market? Is it any wonder that frequently, GM has resorted to IMPORTING (ie. using non-GM labor) the cars to be sold under their banner in this segment?
You must take into account the fact that the designers/engineers working for the competition are no dummies. You must take into account that this is a price sensitive market. You must take into account that one can only save so much through judicious materials choices
That would be a good argument if it dealt with the root of the problem, but it misses the essential point:
The most basic problem with GM is not its cost structure, but its inability to generate revenue at competitive levels. Take the Cobalt -- it is already well-priced (or at least it would be if the car was of comparable quality to its rivals), so the cost structure certainly isn't forcing GM to sell it for more than the market should bear. No, the problem is that the car isn't simply good enough to compete at the market price point, to the extent that it must be severely discounted in order to sell in volumes anywhere close to those of its main rivals.
For all of the talk of the alleged $1,500 "legacy costs", why no mention by Wagoner of the $5,000 discrepancy between GM's wholesale pricing and that of Toyota? I can tell you why -- because the latter problem points to the most pressing issues (product) and the most significant reason why that is the problem (the management team.)
There is no shortage of R&D money at GM, they are spending roughly what Toyota is spending. But what they are spending it on is an entirely different matter -- instead of creating some pace-leading technologies or interesting designs that they can use to differentiate GM from other automakers, they create lookalike products based on old technology. Is it any wonder that market share is falling, and the wholesale prices low?
Imagine what could have been had GM management simply taken the billions squandered on bad automotive R&D, and instead invested it into creating a manageable lineup of interesting and differentiated cars that would have redefined its presence in the market and in the minds of US consumers. Instead, GM ended up enriching FIAT (which incidentally is now turning the corner, thanks in part to GM's cash infusion), while ignoring its own consumers right here in North America.
Now I guess we'll see whether the most recent "strategy" -- selling Chevy Daewoos at low prices -- sets the market afire. My bet is that at least in terms of North American sales, this initiative is going to meet the same tepid fate as all of the other cost-based initiatives. Most Americans want a good value, not a rock bottom price, and I'll bet that even a $10,000 Aveo isn't going to be terribly exciting to the average buyer. (As it stands now, the inventory numbers would make it appear that this failure is already in progress.)
The past cut numbers in (2006) are in numerous news articles across the country. The second large salaried cut is pure conjecture on my part. No INSIDE information ! If you take a look at the end goal by the end of this year it is apparent that a series of large salaried cuts are yet to come. The goal of 7.5% reduction in staff is I believe in addition to normal attrition in the salaried ranks.
Okay, you have got to be part of GM managment. C'mon admit it. Otherwise you sound like if you were a woman you'd want to have Rickys baby. And the SRX name should be changed to SUX. Every test I've read about it the vehicle broke down and had to be towed. EVERY one.I have a coworker with one and it's been nothing but problems from the start.And yes I'm sure you'll come up with some answer of how that isn't the godlike managments fault! :lemon:
A more important factor than branding in Sloan's success was actually the invention of GMAC: installment payments. Henry Ford hated installment payments.
I'm glad we finally agree that the primary motivation for Henry to raise wage was to reduce turn-over and retain workers. BTW, raising his company's start pay to more than double the industry's typical start pay is not the same thing as more than doubling the wage of his workers, but like I said before, it's only a relatively small detail, one way or another. Henry had an egotistic side that would like to project himself as the great humanitarian; he portrayed his move as a welfare program for his workers, obviously not wanting to admit that his plants were much more demanding than tranditional workshops and he was losing workers left and right when only paying a small wage premium over traditional workshops. Simple math shows that giving away money by one private company can not possibly bring on a level of prosperity that would result in more profit for the same company that is greater than the original amount given away. Otherwise, all CEO's would just be standing at street corners and giving away money to boost their financial results ;-) Workers of the company simply could not buy enough to have much an effect on the economy of scale . . . otherwise, in addition to selling to rental fleets, GM could just give cars to workers and everyone they know of . . . hmm, didn't you criticize GM sales to rental fleet as false economy of scale?
How is it that Ford and Mercedes/Chrysler are able to have effective products? Do they keep those evil union workers in a dungeon? The Focus and the Neon were and are successful(the neon mostly with young rednecks for some reason).Yea verily the unions will feel the wrath of the heavenly managment!
"How is it that Ford and Mercedes/Chrysler are able to have effective products?"
First of all, I think that GM's problems are with the UAW AND management. If I gave the impression that I thought their problems were entirely the unions fault, I apologize. IMHO, the UAW and management should share equal parts of the blame.
Second, are the UAW contracts all the same with the different manufacturers? Does Ford/DCX have the SAME labor/legacy cost per vehicle that GM has?
Third, were the Focus and Neon's built in UAW plants? I was under the impression that many of these were built in Mexico?
Fourth, yes these cars were all designed from different design philosophies which have nothing to do with UAW construction/labor costs. The Focus in particular is much more European (it should be since it was designed in Europe in the first place). All I'm trying to say is that the UAW influence on labor cost DOES HAVE AN EFFECT on the design of the car. Does it DICTATE the design? No. But it's influence is still there and shouldn't be ignored.
Interesting. If that is the case something is amiss. Normal attrition per year is 6%. If we are talking 7.5% projected TOTAL,that would mean an "actual" cut of only 1.5%. Oh well, we will see by the close of the year. You can be sure that if FoMoCo reduces their already thin salaried organization GM will follow the lead. It is far from over! I see salaried levels at GM hitting 28,000 by the close of contract negotiations with the UAW.
All I'm trying to say is that the UAW influence on labor cost DOES HAVE AN EFFECT on the design of the car.
I don't see any evidence of this. The R&D budgets for Toyota and GM are roughly the same, it was management's decision in each case to specifically allocate the funds as they did. The money that went into making a mediocre, unreliable Cobalt could have been invested into making it a more competitive car, instead. Quality not only doesn't cost money, but as Toyota illustrates, it actually saves money, because zero defects policies reduce QC costs and warranty repair expenses, while increasing customer loyalty.
If we are going to worry about the $1,500 in "legacy costs", why not worry about the fleet incentives that GM is paying in order to move these vehicles? Have a look at fleet-central.com, and you'll see that these fleet incentives usually at least equal or exceed that amount.
This all comes back to being largely a revenue problem, not so much of a cost problem. The costs certainly impact the level of potential profit, but the cost structure doesn't contribute to GM's decreasing ability to sell cars at retail.
We are already seeing the exec ranks at Ford going down. Ford has almost 3 times as many execs worlwide over GM.
So far from what I can tell the people being cut just happen to be in jobs that are not very value added. Brother was keeping track of costs or something like that in a lab that really did not offer much value.
I would think it was intuitively obvious. Maybe I was wrong.
Do you think that the anticipated cost of labor (union or non-union, American or Chinese) has any effect on the design of any car?
When a car is designed, the engineers/designers are under a set of constraints. One of the biggest constraints is the cost to build the car. That cost is composed of (amoung other things) the cost of labor and the cost of materials/supplies.
If the labor cost is higher (for whatever reason) the tendency in the design is to try and cut cost somewhere else. Like materials. You can see this in GM's practice of continually hammering on their parts suppliers to cut costs. You don't think that a higher cost of labor just MAY BE one reason why GM feels a need to hammer their suppliers to cut costs?
Now, you can argue that this is the wrong approach to take. That may or may not be the case. I'm simply saying that a higher cost of labor DOES have an impact on the design. HOW a particular manufacturer addresses this impact may vary and it may well be that the way GM counters a higher labor cost is all wrong. But I don't think one can simply completely discount the role of labor cost in vehicle design.
This argument of yours is based upon the perspective of a zero-sum game, i.e. a car must cost $X to produce, and what is spent on Item A (labor) would be reallocated to Item B (something other than labor) if the cost of Item A was reduced.
Sorry, but that's a flawed argument, because it misses how make/don't make decisions get made. A more accurate view would be to consider build/no build decisions from a revenue/profit perspective: Car Style A can be sold in the market for a price range between $X and $Y per unit. If the car can be produced at some reasonable margin below that, the car can be sold at a high enough profit to justify the sale.
In other words, there is a certain hurdle rate (profit margin) that must be achieved, which will determine whether Car A will be produced or not produced. There is not necessarily a mandate to require that the money not spent in one area will end up being spent in another -- if anything, any benefits from cost savings will probably be committed to increasing the product's profit margin, instead. (You might have noticed, for example, that GM products built in Mexico are neither sold at a steeper discount nor are substantially superior in design, materials, etc. just because they are built in Mexico at a lower wage rate. The cost reductions don't end up benefiting the consumer.)
It also misses the boat on why GM car sales are declining. It's not because of GM's overall spending, but because its product efforts are inconsistent and often don't meet retail needs. GM has opted for years to recycle many of the same technologies and to avoid creating competitive products in gateway segments, even when times were good and the cash was coming in the door. When GM has had resources, it invested them in places that lost it money, instead of committing it to making the next products more competitive or to building market share.
As a result, the basic problem is that GM cars earn far less revenue than their better positioned rivals, because the retail public doesn't want them as much, and wholesale buyers pay a lot less. In that range above between $X and $Y, GM is not only commanding prices at the lower end of that range, but adding additional incentives to move excess inventories of undesirable products out the door.
The way to end that downward spiral comes from building a product that provides the customer with a meaningful difference (or at least perceived as such) from its competition so that he is willing to buy it at retail. Again -- no company can be saved strictly through cost cutting, the only route to long-term profitability is to sell product and services that people are willing to pay for. Even if you eliminated the additional labor costs, GM would still be unprofitable, because its market share keeps falling and the gross margins are so tight. The company would still be in decline, it would just be declining more slowly than it is now.
I think you and I are just looking at this from two different perspectives. You are looking at it from the management's perspective and picking apart the decisions which GM management makes. Fair enough. And in your build/no build decision making process, management considers what it will COST to BUILD the car vs. what they can charge the market.
As an engineer, I am looking at it from the designer/engineer's perspective. From THAT perspective, I AM given a fairly hard budget number for what that car can cost the company to produce. How those budget numbers are arrived at are usually not in my purview. Perhaps this is part of the problem. But if a design team is given the task of designing a worthy competitor to the Civic, and told it can't cost more than $X dollars to build, as an engineer I do have to take into account the cost of the parts/materials as well as the cost of labor.
Comments
"So I was told" went into someones pocket instead of to help the less unfortunate.
I'm very upset. :mad:
Rocky
OTOH- The resale value since it's brand new will be at it's peak. Something you might want to take into consideration.
Rocky
First of all, GM makes plenty of vehicles to fill consumer NEEDS. They just don't make plenty to fill consumer DESIRES.
Second, you are correct, the UAW doesn't design the cars.
HOWEVER, all engineers/designers must operate under a set of constraints. One of the largest constraints is a budget for which a car can be built. If GM tries to build a car to match a Camry/Accord, they have a particular cost ceiling they must stay under. If their labor/legacy costs are HIGHER because of the UAW, that effect WILL show up in the design. You simply can't ignore the additional labor cost and it's effect on design.
I've seen various numbers kicked around about the cost disadvantage GM is under due to the UAW contracts. It seems to START at $1500/car and go up (drastically) from there. So what happens? GM would like to design a car to go head to head with the Camry/Accord, but they start off (a minimum) of $1500 in the hole. And keep in mind that Honda/Toyota has some VERY good engineers. So, GM must either try to sell a sedan for the same price as the Camcord and make up the labor cost delta in cheaper material OR use equivalent materials/design and try to sell for a higher price.
Neither approach works well. So they load up their vehicles with relatively inexpensive gizmos to pump up the feature content, slash the material quality, and try to undercut the competition on price.
But this isn't necessarily due to piss poor design; it's a function of the designers having to operate under cost constraints which are exacerbated by costs associated with UAW contracts.
I've already pointed out that GM and Toyota spend about the same amounts on R&D. But GM spreads that amount offer a much larger number of product offerings. And in turn, those badges and nameplates require more dollars for marketing, promotion, channel management, etc.
And for what? At this stage in the game, the badges pretty well suck, and there is no need for Chevy, Pontiac, Buick, Saturn and Saab to each support full or near-full lineups of products...yet they continue to do so. These badges are weak, and their overwhelming similarity and lack of differentiation simply confuse customers -- I'm a car fan, and even I couldn't tell you exactly what these badges are supposed to represent, given how the cars don't often match the alleged intended message. If I can't sort it out, you can bet the average consumer certainly won't know.
I don't disagree that the costs are a burden. But if GM was well managed, it would be profitable, just not as profitable as its non-unionized rivals. The unions do not justify the poor products or poorer management. They surely depress profits, but they aren't creating the losses.
The 2004 pay consisted of $2.2 million in salary and $2.5 million in bonus. The company made $28xx million that year on operating basis, mostly from GMAC. The $2.5mil bonus was reduced to Zero for 2005, and Wagoner voluntarily cut his own pay, the remaining $2.2m in half. Now, if UAW worker's $65k wage could be structured as $30k base and $35 bonus, the problem would be all gone even without a valuntary pay reduction to $15k.
I know you love that $4billion, except that was before Wagoner was CEO. Furthermore, M&A activities and financials have earned GM several times that over. We have been through that so many times, I'm starting to wonder if wonder if the million vs. billion problem was the only counting skill lacking among some of us ;-)
It was actually $4.4 billion, and he was president of the company. He negotiated the deal. He deserves much of the credit, being that he was the second highest ranking officer of the company.
Furthermore, M&A activities and financials have earned GM several times that over.
We'll see what ultimately happens with Daewoo, but its automotive M&A deals with Saab, Fiat, Isuzu and Subaru have all failed, and have cost the company billions of dollars, as I have already documented via Forbes. GM's best effort was in managing GMAC, which it is now selling off, so we can now expect GM to expect a net loss, and it's a fair guess that the cash raised from the sale won't likely be enough to sort out those future losses from automaking.
Beancounters don't do well in managing manufacturing operations, apparently, unless you consider losses and declining market share to be signs of success. They really seem to believe that volume can make up for losses, an exercise in cost accounting gone too far.
http://money.cnn.com/2006/02/07/news/companies/gm/index.htm
M&A on that scale is primarily the purview of the CEO, not COO. From what I read, Wagoner's primary contribution to the deal is buying that put option, which probably saved GM tens of billions of dollars, considering how much BMW and Ford lost in dealing with much smaller acquisitions.
Beancounters don't do well in managing manufacturing operations,
Yet the manufacturing company, GM, would have long been dead if not for the $30+ billion profit made from various M&A activities by the bean counters. Even on operating basis, the bean counters had been making up for car manufacturing losses with GMAC profits for years.
Apparently not the case at all from previous experience in 1998. When Wagoner tried to play hard ball and improve productivity and quality at one particular production line, UAW organized a company-wide work stoppage that lasted for weeks, racking up $4 billion losses in short order. Wagoner had to back down. Union is like the squatter; boundaries of de jure and de facto property ownership get very murky in those cases
Perhaps some day down the road, GM will need to trim brands, but for now a far more urgent issue is trimming cost and trimming over-production, both are results of inflexible UAW contracts. Talking about brand management while the management can't even fully control the production quality or quantity is like prescribing diet and exercise to a cancer patient when operation and chemotheorapy are required.
Rocky
And Toyota obviously did a fine job of building its brands, which is more than what GM can say about what it has done to destroy its brands. You shouldn't even dare to compare the two in the same breath, when one obviously handled its efforts with competence while the other bungled it through sheer ineptitude.
Had you been in charge, I'm sure that the losses of today would be a walk in the park compared to what you would have generated. Fiscal management isn't everyone's strongsuit, I guess.
http://www.montgomeryadvertiser.com/apps/pbcs.dll/article?AID=/20060328/BUSINESS- /603280333/1003/ARCHIVES
Salary was $2.2 million, Bonus was 2.8 million and "other" of $3.5 million in stock incentive pay(which only does any good if the stock goes up) if I read this right for 2003.
For 2004 his total compensation was $4.8 million.
You must be prescient or an insider or a personal friend of his if you know his 2005 salary since it has not been announced yet. Annual report should be out soon though.
http://www.detnews.com/2005/autosinsider/0510/19/gm-354620.htm
http://www.forbes.com/static/execpay2005/LIRSOX2.html?passListId=12&passYear=200- 5&passListType=Person&uniqueId=SOX2&datatype=Person
http://www.timesdispatch.com/servlet/Satellite?pagename=RTD%2FMGArticle%2FRTD_Ba- sicArticle&c=MGArticle&cid=1137835083589&path=!business&s=1045855934855
No disrespect to anyone but this excuse-making for mismanagment is getting embarrasing. My friend you are deluded if you think it's all the UAWs fault.It doesn't ultimately matter though. You can stick your head in the sand along with the rest while GM dies.Maybe the answer is to move all production to Mexico and China! Then the truly brilliant management of Ricky "Retardo" Waggy can come shining through and save the day!!
Honestly -- if someone in the rank-and-file personally lost $4.4 billion for GM, I'd bet that this person would be fired. Why does the CEO get a pass when lower-level people have surely been terminated for far less?
I did not know that Nissan was union?
There is not just one thing that is hurting GM. It is not just the union, not just poor management, not just poor product, not just that GM is a 100 year old company and has all the past legacy costs from both all those people it used to employ, not just the exchange rates/trading issues, not just the old crap they used to make and not just the decisions made starting 35 (yes 35) years ago that caused the american public to turn there noses up at the Domestics, not just the health care, not just all those folks retired on GM. It is a combination of all those things and others. It is amazing with all these issues GM has been making any money. It is just too bad someone did not start really making differences 10 years ago on these issues.
The presence of the union certainly increases the cost structure, but the cost structure is not the ultimate problem. The UAW obviously has no trouble building Mustangs and 300's, or assembling Ford's nicely designed modular V-8's, and Americans have had no trouble buying them, regardless of who builds them. Instead of shutting down its best plants, perhaps GM should use them to build cars that serve customer needs as have some of these Ford and Chrysler offerings.
My brother got hit yesterday.......
Toyota engages in plenty badge engineering. The Lexus IS300 was very much a Toyota. In fact, the entire Lexus line until this past year was pure badge engineering: every single Lexus model was a Toyota model in Japanese home market. Even today, not a single Lexus SUV does not share platform with Toyota; at least one of the fastest selling Caddy trucks, the SRX, has its own platform not shared with any plebian brand. The best selling Lexus sedan is also shared with Toyota; whereas that of Caddy, the CTS, has its own platform.
Toyota is more successful than GM, of course, but not for the reason you mentioned, as usual.
Had you been in charge, I'm sure that the losses of today would be a walk in the park compared to what you would have generated.
How did you figure that out? So far I have not seriously suggested anything different from what GM management has done. You on the other hand has made quite a few stabs at this; let's see how you score:
(1) Refrain from big cars and trucks, instead focus on small cars . . . for a company that has not made a profit on small cars for decades, and made handsome profits on big vehicles in most of those same years. Talk about fool-hardiness;
(2) Don't make upscale versions of plebian vehicles, but instead of focus on hybrids. Sure, as if Toyota ever made any money on Highlander Hybrid; whereas in reality Toyota's biggest profit engine is the Lexus version of Highlander.
(3) Focus on carmaking, ignore M&A and financial operations. Whereas in reality, carmaking has been losing money for years . . . all this time, M&A and GMAC have been the ones paying the bills.
Fiscal management isn't everyone's strongsuit, I guess.
Speak of yourself. I'm not the one making the claim that I'm smarter than GM managers; you are, sir, all the while coming up with braindead strategies.
Honestly -- if someone in the rank-and-file personally lost $4.4 billion for GM, I'd bet that this person would be fired. Why does the CEO get a pass when lower-level people have surely been terminated for far less?
Not if he is making the company $16+ billion profit on other deals at the same time.
I am not pro-union, I am anti-incompetent management. On that score, Toyota (and for that matter, a whole host of other companies) beat GM hands down.
In fact, the entire Lexus line until this past year was pure badge engineering: every single Lexus model was a Toyota model in Japanese home market.
You obviously don't understand the concept of "badge engineering". The issue isn't one of platform sharing, but whether cars of differing badges are so similar to one another that consumers can't differentiate between them. Learn a bit about branding, and you'll see that the problem ultimately comes down to marketing, more so than engineering.
So far I have not seriously suggested anything different from what GM management has done.
That's hilarious. You actively embrace a strategy of failure, and you're proud of it. At least GM stockholders aren't squandering millions of dollars on you, they get enough Kool Aid from the current management team.
By the way, you obviously don't comprehend my strategic recommendations. My point has been that GM needs to meaningfully differentiate itself from Toyota, rather than mimic it in a half-hearted fashion, and that putting all of its eggs in the SUV-truck basket when gas prices are heading northward is not likely a very smart idea. As is true with any company involved in marketing technology products, the leaders have to lead and innovate if they are to maintain their market share and mystique.
Small cars are useful as a gateway to enhance the lifetime value of a customer, because small cars fit best into a young person's budget. GM needs a younger audience that will build and stay loyal to it, so that customer can produce potentially decades' worth of revenue. If you know a better way to reach a young audience in a positive fashion, let us know, because GM obviously has yet to figure it out, even though it wants the youth market along with every other mainstream automaker.
On the other hand, GM may be a bit late to the hybrid game, and might wish to find something a bit more innovative of its own so that it doesn't become another second-rate competitor to Toyota in that respect. Rather than imitate, GM should innovate and then create excitement about its innovation so that it is first to market, and builds a reputation based upon its being ahead of the curve.
And GM should be consolidating brands into good badges, rather than buying bad ones. If you're going to buy a company, it should at least have some value. They wouldn't need GMAC to hold the company together if they could build a decent car. If Toyota and Honda can build good product and increase market share, why shouldn't GM?
Which car under the toyota name shares the same platform as the IS? Didn't know a Toyota branded car had rwd with an inline 6. Now, the '06 IS 350 will be sharing it's motor with Toyota branded vehicles, but I don't see a platform being shared between these two.
The platforms I see being shared between lexus and Toyota branded vehicles are: RX330/highlander/camry, 4runner/GX470 Land Cruiser/Lx 470 and Camry/ES350. That's all I can think of right now. Don't know if the new FJ and Rav4 share anything with anything else.
You are absolutely correct.
However, I wasn't attempting to produce a definitive all-encompasing analysis of 'What's wrong with GM'. I was simply trying to counter your (apparent) stance that the role of the UAW is immaterial to GM's current problem in the market.
Has GM management made a lot of bonehead decisions in the past? Sure, I'm not saying they haven't. However, I'm simply trying to make the case that many of their 'bonehead' decisions were rooted in having to deal with the UAW.
Forget for a moment the whole multi-division issue: you've complained often that GM can't seem to field a GOOD high-quality small car to go head to head with the like's of the Civic/Corolla/Mazda3 type cars. Since these small cars are often 'gateways' to get consumers started on a (hopefully) lifelong attachment to a particular manufacturer, it makes sense that a manufacturer field a credible entry into this market. You've also noted, frequently, that the Cobalt in your opinion simply doesn't cut it against the competition in this segment.
Now, assume you are a designer/engineer trying to build a good car in this segment. You must take into account the fact that the designers/engineers working for the competition are no dummies. You must take into account that this is a price sensitive market. You must take into account that one can only save so much through judicious materials choices. And finally, you must take into account that you START at least $1500 in the hole due to higher labor/legacy costs.
Can't you see that these higher costs associated with UAW contracts is ONE of the primary reasons why GM has such a problem fielding a worthy competitor in this market? Is it any wonder that frequently, GM has resorted to IMPORTING (ie. using non-GM labor) the cars to be sold under their banner in this segment?
I believe it is called the Toyota Altezza in Japan.
That would be a good argument if it dealt with the root of the problem, but it misses the essential point:
The most basic problem with GM is not its cost structure, but its inability to generate revenue at competitive levels. Take the Cobalt -- it is already well-priced (or at least it would be if the car was of comparable quality to its rivals), so the cost structure certainly isn't forcing GM to sell it for more than the market should bear. No, the problem is that the car isn't simply good enough to compete at the market price point, to the extent that it must be severely discounted in order to sell in volumes anywhere close to those of its main rivals.
For all of the talk of the alleged $1,500 "legacy costs", why no mention by Wagoner of the $5,000 discrepancy between GM's wholesale pricing and that of Toyota? I can tell you why -- because the latter problem points to the most pressing issues (product) and the most significant reason why that is the problem (the management team.)
There is no shortage of R&D money at GM, they are spending roughly what Toyota is spending. But what they are spending it on is an entirely different matter -- instead of creating some pace-leading technologies or interesting designs that they can use to differentiate GM from other automakers, they create lookalike products based on old technology. Is it any wonder that market share is falling, and the wholesale prices low?
Imagine what could have been had GM management simply taken the billions squandered on bad automotive R&D, and instead invested it into creating a manageable lineup of interesting and differentiated cars that would have redefined its presence in the market and in the minds of US consumers. Instead, GM ended up enriching FIAT (which incidentally is now turning the corner, thanks in part to GM's cash infusion), while ignoring its own consumers right here in North America.
Now I guess we'll see whether the most recent "strategy" -- selling Chevy Daewoos at low prices -- sets the market afire. My bet is that at least in terms of North American sales, this initiative is going to meet the same tepid fate as all of the other cost-based initiatives. Most Americans want a good value, not a rock bottom price, and I'll bet that even a $10,000 Aveo isn't going to be terribly exciting to the average buyer. (As it stands now, the inventory numbers would make it appear that this failure is already in progress.)
The second large salaried cut is pure conjecture on my part. No INSIDE information !
If you take a look at the end goal by the end of this year it is apparent that a series of large salaried cuts are yet to come. The goal of 7.5% reduction in staff is I believe in addition to normal attrition in the salaried ranks.
And the SRX name should be changed to SUX. Every test I've read about it the vehicle broke down and had to be towed. EVERY one.I have a coworker with one and it's been nothing but problems from the start.And yes I'm sure you'll come up with some answer of how that isn't the godlike managments fault! :lemon:
I'm glad we finally agree that the primary motivation for Henry to raise wage was to reduce turn-over and retain workers. BTW, raising his company's start pay to more than double the industry's typical start pay is not the same thing as more than doubling the wage of his workers, but like I said before, it's only a relatively small detail, one way or another. Henry had an egotistic side that would like to project himself as the great humanitarian; he portrayed his move as a welfare program for his workers, obviously not wanting to admit that his plants were much more demanding than tranditional workshops and he was losing workers left and right when only paying a small wage premium over traditional workshops. Simple math shows that giving away money by one private company can not possibly bring on a level of prosperity that would result in more profit for the same company that is greater than the original amount given away. Otherwise, all CEO's would just be standing at street corners and giving away money to boost their financial results ;-) Workers of the company simply could not buy enough to have much an effect on the economy of scale . . . otherwise, in addition to selling to rental fleets, GM could just give cars to workers and everyone they know of . . . hmm, didn't you criticize GM sales to rental fleet as false economy of scale?
Newspapers have no idea because GM has not given exact numbers.
The 7.5% does include all people leaving due to all causes.
First of all, I think that GM's problems are with the UAW AND management. If I gave the impression that I thought their problems were entirely the unions fault, I apologize. IMHO, the UAW and management should share equal parts of the blame.
Second, are the UAW contracts all the same with the different manufacturers? Does Ford/DCX have the SAME labor/legacy cost per vehicle that GM has?
Third, were the Focus and Neon's built in UAW plants? I was under the impression that many of these were built in Mexico?
Fourth, yes these cars were all designed from different design philosophies which have nothing to do with UAW construction/labor costs. The Focus in particular is much more European (it should be since it was designed in Europe in the first place). All I'm trying to say is that the UAW influence on labor cost DOES HAVE AN EFFECT on the design of the car. Does it DICTATE the design? No. But it's influence is still there and shouldn't be ignored.
Oh well, we will see by the close of the year. You can be sure that if FoMoCo reduces their already thin salaried organization GM will follow the lead. It is far from over!
I see salaried levels at GM hitting 28,000 by the close of contract negotiations with the UAW.
I don't see any evidence of this. The R&D budgets for Toyota and GM are roughly the same, it was management's decision in each case to specifically allocate the funds as they did. The money that went into making a mediocre, unreliable Cobalt could have been invested into making it a more competitive car, instead. Quality not only doesn't cost money, but as Toyota illustrates, it actually saves money, because zero defects policies reduce QC costs and warranty repair expenses, while increasing customer loyalty.
If we are going to worry about the $1,500 in "legacy costs", why not worry about the fleet incentives that GM is paying in order to move these vehicles? Have a look at fleet-central.com, and you'll see that these fleet incentives usually at least equal or exceed that amount.
This all comes back to being largely a revenue problem, not so much of a cost problem. The costs certainly impact the level of potential profit, but the cost structure doesn't contribute to GM's decreasing ability to sell cars at retail.
So far from what I can tell the people being cut just happen to be in jobs that are not very value added. Brother was keeping track of costs or something like that in a lab that really did not offer much value.
???
I would think it was intuitively obvious. Maybe I was wrong.
Do you think that the anticipated cost of labor (union or non-union, American or Chinese) has any effect on the design of any car?
When a car is designed, the engineers/designers are under a set of constraints. One of the biggest constraints is the cost to build the car. That cost is composed of (amoung other things) the cost of labor and the cost of materials/supplies.
If the labor cost is higher (for whatever reason) the tendency in the design is to try and cut cost somewhere else. Like materials. You can see this in GM's practice of continually hammering on their parts suppliers to cut costs. You don't think that a higher cost of labor just MAY BE one reason why GM feels a need to hammer their suppliers to cut costs?
Now, you can argue that this is the wrong approach to take. That may or may not be the case. I'm simply saying that a higher cost of labor DOES have an impact on the design. HOW a particular manufacturer addresses this impact may vary and it may well be that the way GM counters a higher labor cost is all wrong. But I don't think one can simply completely discount the role of labor cost in vehicle design.
Sorry, but that's a flawed argument, because it misses how make/don't make decisions get made. A more accurate view would be to consider build/no build decisions from a revenue/profit perspective: Car Style A can be sold in the market for a price range between $X and $Y per unit. If the car can be produced at some reasonable margin below that, the car can be sold at a high enough profit to justify the sale.
In other words, there is a certain hurdle rate (profit margin) that must be achieved, which will determine whether Car A will be produced or not produced. There is not necessarily a mandate to require that the money not spent in one area will end up being spent in another -- if anything, any benefits from cost savings will probably be committed to increasing the product's profit margin, instead. (You might have noticed, for example, that GM products built in Mexico are neither sold at a steeper discount nor are substantially superior in design, materials, etc. just because they are built in Mexico at a lower wage rate. The cost reductions don't end up benefiting the consumer.)
It also misses the boat on why GM car sales are declining. It's not because of GM's overall spending, but because its product efforts are inconsistent and often don't meet retail needs. GM has opted for years to recycle many of the same technologies and to avoid creating competitive products in gateway segments, even when times were good and the cash was coming in the door. When GM has had resources, it invested them in places that lost it money, instead of committing it to making the next products more competitive or to building market share.
As a result, the basic problem is that GM cars earn far less revenue than their better positioned rivals, because the retail public doesn't want them as much, and wholesale buyers pay a lot less. In that range above between $X and $Y, GM is not only commanding prices at the lower end of that range, but adding additional incentives to move excess inventories of undesirable products out the door.
The way to end that downward spiral comes from building a product that provides the customer with a meaningful difference (or at least perceived as such) from its competition so that he is willing to buy it at retail. Again -- no company can be saved strictly through cost cutting, the only route to long-term profitability is to sell product and services that people are willing to pay for. Even if you eliminated the additional labor costs, GM would still be unprofitable, because its market share keeps falling and the gross margins are so tight. The company would still be in decline, it would just be declining more slowly than it is now.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060412/AUTO01/604120364/1148-
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BFBA05C4D%2DC8E8%2D4A40%- 2D9A11%2D9203B6BDD66A%7D&dist=newsfinder&siteid=google&keyword=
http://www.chicagotribune.com/business/chi-0604120175apr12,1,2099138.story?coll=- chi-business-hed&ctrack=1&cset=true
http://www.freep.com/apps/pbcs.dll/article?AID=/20060412/BUSINESS01/604120344/10- 14/BUSINESS
As an engineer, I am looking at it from the designer/engineer's perspective. From THAT perspective, I AM given a fairly hard budget number for what that car can cost the company to produce. How those budget numbers are arrived at are usually not in my purview. Perhaps this is part of the problem. But if a design team is given the task of designing a worthy competitor to the Civic, and told it can't cost more than $X dollars to build, as an engineer I do have to take into account the cost of the parts/materials as well as the cost of labor.