Why can't you become the top carmaker in the world from your own garage? Is it because you are an incompetent manager? Of course not. People can only do what is possible/best under the given circumstances.
Why does GM sell cars to rental fleet? Because otherwise it would lose even more money due to fixed cost (thanks to union). Why do people not like GM products? Because GM brands has a poor quality image; Why? because GM did not adopt automation as quickly as Toyota did; Why? Because union objection to automation. Why didn't the management actually manage their company and toss out the union that objected to adopt automation and make cars that Americans actually want? Because they could not.
The "small potato" comment on Ford was in comparison to what most people today probably equating US auto industry of the 20's and 30's with Henry Ford. Ford was the 800 pound gorilla in the 1910's. The competitive market place rapidly reduced Ford to third place, with a fraction of GM's output in the late 1920's and 1930's. What happened at Ford did not decide American auto industry by then; what happened at GM did. That's the crucial point that I was pointing out regarding the GM Cleveland and Flint strikes that actually produced the results vs. Reuther's stunt at Ford that seared into standard union propaganda/folk-lore.
I agree with you very much that the post-1950's interaction between union and management were quite cooperative. I mentioned weeks ago that, the union work rules and benefit overhead were instrumental in keeping competition out . . . all at the expense of consumers. There was nothing "necessary" about unions. The collaboration had nothing to do with mistreatment of workers. It's all about ripping off consumers, together.
Why does GM sell cars to rental fleet? Because otherwise it would lose even more money due to fixed cost (thanks to union). Why do people not like GM products? Because GM brands has a poor quality image; Why? because GM did not adopt automation as quickly as Toyota did; Why? Because union objection to automation. Why didn't the management actually manage their company and toss out the union that objected to adopt automation and make cars that Americans actually want? Because they could not.
Thats it, that is the best point I have ever seen anyone ever make on this board.
Unions indeed are important, and workers indeed would loose many benefits if it were not for the unions, since there are too many people that could do that kind of work. Today, the problem is that the union bit off too much of the American pie, and left a gash just wide enough for Japan and Korea to come and fill.
There needs to be a balance between worker compensation and industrial competetiveness. This is a real problem, exacerbated by our governments lack of support for domesitc industires (such as tax breaks for buying foreign cars, any tax break associated with an automotive purchase should be limited to domestic purchases IMO, and the ease of which foreign companies can get into our distribution systems, and establish their own).
I am new to this forum and I have to agree that unions are indeed important. It was the strengthening of the unions that helped create the middle class as is the current decline of the unions the decay of the middle class today. But there is a mixture of problems at GM and other large US corporations that are putting GM where they are today. First the autoworker has become like a baseball or football player, they want a percentage of the profits. The CEO and other top managemtent want their percentage of the profit. In the meantime every investor wants to see as large of a return on investment as possible, (stock gains and dividends paid). This left some profit for Research and Development and not enough for Capital reinvestment. I used to work for International Harvestor and some of their plants and assembly processes like other automotive manufacturers were built in the early 1900's. The plants and facilities were very antiquated. Japan on the other hand was totally rebuilt after 1945 with American investment with state of the art facilities. The Japanese (Toyota and Honda in particular) have learned over time that style may bring the customer in but it is quality and reliability that will keep a customer. America needs to get back to what it does best, that is to be the best at what we do. Build the best.
Why do people not like GM products? Because GM brands has a poor quality image; Why? because GM did not adopt automation as quickly as Toyota did; Why? Because union objection to automation.
You may have some points. However, is it lack of automation that kept the Cavalier on the market for so many years? Is it lack of automation that the sedans of GM are so boring? Is it lack of automation that the interiors of GM cars are so poor? Is it lack of automation that the GM engines are loud and thrashy?
It's dishonest to say that automation is the entire reason that people don't like GM cars.
GM actually sank more money into automation than the entire Japanese auto industry. Automation didn't pay off for GM, because union work rules prevented worker participation. The union stewrds made sure that GM could not use automation to displace labor. Why did GM keep it dated line of small cars so long? (the Cavalier dates back o 1979) The reason is that they could not afford to develop a new line of small cars. What I don't understand: instead of the noisey, shaky, and poorly running 4-cylinder engines that GM brought out, why didn't they JUST copy a Toyota 4? Toyota makes very smooth running 4 bangers-GM could have bought a license and made the same damn engines. Instead, we get the bone shker 4s in a Cavalier. Dated technology, rough running, and they just don't age well-that GM small car look. GM should have stuck to trucks and large cars.
Why did GM keep it dated line of small cars so long? (the Cavalier dates back o 1979) The reason is that they could not afford to develop a new line of small cars
One word..... Corolla.
Intro'd in the late 60's and now pressing the Camry for No 1 vehicle in the US 40 yrs later. Hey, wait, GM is partner in the factory that builds the Corolla.
Funny how these old union-built cars were/are so appealing, but so many modern ones stink. One cannot debate that GM had far better designers and brand managers then than it does now. But of course, pointing a finger at anyone considered an exec or management is taboo...it's all those evil workers who cause the problems.
"There needs to be a balance between worker compensation and industrial competetiveness. "
Indeed...that's why unions were created and why they exist...a check and balance system (which has gone awry). To think that some wholly unregulated "free market" will somehow operate under ethics and justice is a pipe dream. Maybe if I memorize Mises, I'll change my mind.
I can't believe that the union's resistance to automation was the sole reason for GM's quality woes.
I enjoy reading old road tests of cars from 1960s car magazines (Car Life, Car & Driver, Motor Trend, etc.). Around 1964-65, testers start to mention poor workmanship and noticeable defects on test Chevrolets, particularly the Chevelle and Corvair. Prior to this, Chevrolets were usually praised for good workmanship. This is a recurring theme throughout the mid and late 1960s with various Chevrolet products.
Ford workmanship, on the other hand, actually seems pretty steady throughout the 1960s, at least based on these tests.
There was something more going on at that time than lack of automation.
Indeed...that's why unions were created and why they exist...a check and balance system (which has gone awry).
Of course... it may not have gone awry... bankruptcy and/or the large concessions that the unions will likely make next year are the checks and balances that are inevitable results of lack of competitiveness on GM's and Ford's parts.
Standards change over time. If the much acclaimed 1964 Mustang were brought out verbatim today, it would be considered a vibrating and flexing piece of junk instead of "muscle car," never mind emission and safety standards that would prevent it from being marketted at all. What was appealing once upon a time can not even hold a candle to even the stinking modern ones. I got a chance to ride in a restored Rolls Royce Silver Ghost a few years ago; let's just say that it was more bone shaking than a Cavaliar running on bad gas.
Change is constant. Competitive free market is best at keeping up with rapid changes. Regulations tend to create institutions that outlive their own relevance. Monopolies are especially bad at keeping up with changes. Monopolies are certainly not condusive to ethics or justice; it's usually a breeding ground for corruption and tyranny. It's a pipe dream to even think somehow there are universal standards for ethics or justice that everyone subscribes to; there would not be debate or arguments if there were. Free market competition is really the only fair way to resolve conflicting economic demands on limited resources; free market is simply a mechanism for letting more people have a say and be held accountable for that input.
Unions were not created to protect workers anymore than private car companies were run to provide consumers with transportation. Both institutions were run by adventurers who spent the time and effort in search of personal gains. That's why cars for the really poor do not exit . . . and almost all major unions were formed for the best paid workers at the time not the really down-trodden workers in agriculture and sweatshops where they really could use some protection. UAW was founded to get a slice of the monopolistic profits that the domestic carmakers once enjoyed. That's just how the world works. It's a pipe dream to even think that regulations can bring ethics and justice for all. Whose ethics standard, whose justice? Considering regulation-making is quite a monopolistic business, chances are that the resulting ethics or justice standards are not quite what you or I would want but the ethics and justice that buyers of law makers would want.
The domestics were enjoying their golden age in the 60's. Toyopets (Toyota) and Datsuns (Nissan) were considered pieces of junk or tincan back then . . . and indeed they were. This state of affair persisted into the early 70's, when Japanese cars started to sell better only because they consumed less gas. By the late 70's and 80's however, there was a sea change. Toyota, Honda and Nissan rapidly adopted automation, all the while GM and Ford were having those big battles with the unions over automation. Toyota, Honda and Nissan vehicle quality improved dramaticly as result of automation while the domestics' quality stagnated till the mid 90's. That's where the perception of quality gap came from, IMHO. Not necessarily because the domestics were getting worse, but the competition were getting better, much better, fast.
Before Japanese successfully adopted automation, their cars had even lower quality than domestics, both in workmanship and especially material. Toyopets of the 60's and early 70's were boring, had poor interior and had a loud and thrashy engine license-built from GM. Automation enabled Toyota, Honda and Nissan to deliver vehicles with high quality of assembly. Once that breakthrough was accomplished, the Japanese brands could afford to move up market and offer all the niceties that we take for granted from the Japanese makers nowadays as your list indicated. Quality is the key to move upmarket ever since the beginning of auto industry (most luxury brands had a high quality and reliability reputation when the brand became prominent), and the biggest event affecting quality ever happened to the auto industry over the past half century was automation.
I think you are putting too much emphasis on automation being a Japanese strength. I think the strength that Toyota has is its ability to a) detect changes in external environment at an early stage (some kind of six sigma variant); b) Ability to incrementally improve/innovate in thin slices. Because of this, Toyota does not have to be an auto company, it just needs to be in an industry where these two qualities would give it a competitive edge. Toyota (and most Japanese companies) are thus not very good at dealing with inflection points in a volatile industry. You maybe interested to note that the current CEO of Canon (almost at par with Toyota in terms of success) spent 26 yrs in the US, and the first thing he did after coming back to Japan was to REDUCE reliance on brute automation. He introduced the cell format for Canon factories which have a higher manual content (and thus a much higher level of flexibility).
The way out for GM is not going to be automation. It is going to be finding products that consumer wants. If they have higher legacy costs, there are financial engineering alternatives (e.g. a pre-packaged bankruptcy) that can eliminate them.
I thought 6-sigma is a term for quality control and production yield. For the auto industry, the crucial factor in reducing prduction vaiance (6-sigma) has been automation. Just look at MB and BMW vs. Toyota and Honda. Canon is in a very different industry. Canon is a technology company that also happens to also do manufacturing, like Intel; actually much less capital intensive than even Intel. Carmaking on the other hand is good old capital-intensive heavy manufacturing. Canon products sell on technological innovation; in terms of sheer quality and 6-sigma low production variance, it can not begin to compare to some of the companies that it buried years ago. It's a different industry. Also, Canon, a Japanese company, seems to be dealing with the inflection points, first in copier industry then photo equipment industry (both went digital over the past decade and half) really well . . . in fact, at the very forefront of both transitions. If one is inclined to use cliches about Japanese companies, Canon does not seem to be a good fit.
In any case, I agree that both 6-sig quality control/yield rate and quick response to market change are important to the survival of a modern company; the exact ordering of the two is dependent on the the particular industry one is in. Fixed union systems do not seem to work well with either requirement; they breed irresponsibility among workers and management alike.
Because it can. It's big enough to meet the demand and cheap enough to be competitive. That does not however mean that it needs to supply those same dull cars to the rest of us.
Fleet cars usually are low milage (for rentals) or well maintained (by companies) and in neither case allow for a fair view of actual quality across the make. My company vehicle is a piece of crap but it's free and I don't complain about every little rattle or thing that does not work right. I would never keep this car for me personnaly but the statistics show this car as dependable (which it is) but does not tell the whole story.
Why does GM sell cars to rental fleet? Because otherwise it would lose even more money due to fixed cost (thanks to union)
In other words, GM has developed (not by conscious choice) into a car company that is in existance mainly to keep it's people employed. This concept would work well in a Socialist country. It is not competitive in a Capitalist country.
Excellent answer, exactly on point. I think that you have to recognize that some posters come to the thread with an ideological ax to grind against unions, which leads them to believe that anything that reduces the size of the payroll is necessarily a positive. There isn't much impetus on their part to see the real problem, which is largely rooted in demand.
Toyota et. al. have followed a typical path to success -- first begin in a low-margin low-cost segment that is largely ignored by entrenched competitors, use that unattractive segment to build a brand, and gain distribution and market share, and then expand to more attractive, better defended segments once that brand has been built.
The Big 3 of the seventies were absolutely uninterested in creating viable products that could compete directly with the new upstart imports of the day, they preferred the then-higher margins of their more costly, larger products. They had no idea that Toyota would use the original Corolla and Datsun use the 510 to one day create large, expensive cars that would compete directly in the American's exclusive territory. The Big 3 could and should have used their massive scale to squash these firms like bugs, but they instead allowed the Japanese firms to establish beachheads in the US market and create the foundation for the large markets that they have today.
GM does have legacy costs, but as has been pointed out here, the largest gap between it and Toyota is in per-unit vehicle revenue. First, they build too many units in an effort to gain margin (amortize their fixed costs across a high level of capacity utilization), but then lose all of that benefit in the distribution chain, because its customer base is dominated by discount buyers who buy based upon volume discounts, rather than quality.
A great business model that only an accountant could love. Incidentally, it might help to look at Chrysler to see how this plays out in real life: Chrysler was driven into the ground during the 60's and 70's by Lynn Townsend, an accountant by training, whereas it was resurrected by Lee Iacocca, who was ultimately a marketer and cheerleader who focused on core products to achieve a turnaround. The GM of today will have tougher competition to face off than did Iacocca in his day (I doubt that you could use a product as bad as was the K-car to lead yourself out of trouble these days), but the basic core strategy still makes sense.
And somehow, Iacocca did it without finding a need to villify the union at every turn. It's hard to get the workforce to help you if you focus your energies on ridiculing them.
Funny. Toyota and Datsun's approach almost sounds like that of American Motors of about 1958 thru 1964. Suddenly, AMC wanted to compete with the Big Three head on and got its butt handed to it. Maybe AMC was too hasty and should've stuck to building small dependable cars for at least another ten years. I often think of the Rambler Classic as the Toyota Camry of the early 60s. The American would be the Corolla counterpart.
Toyota and Datsun's approach almost sounds like that of American Motors of about 1958 thru 1964
It takes capital to stay in business in the early years. I'm guessing that if Toyota and Datsun didn't also have their Asian market they too may have indeed ended up like American Motors.
I think the Japanese consumer can thank the Americans for the quality of vehicle they now enjoy. Our lucrative (and free) market drove them to better products that they now enjoy at home. If not for that, they would have cars like the Russians (that used to look like 1960's American Motors products at least up until about 2 years ago)
Global economies are better for all of us. We just have to figure out how to play the game as well as the rest of the world. Perhaps that does mean some sort of tax break for goods made for export only?
But what is important is relative comparisons, not comparing antique cars to today. A Silver Ghost is a relic now, but it was like a spaceship compared to the Model T owned by Joe Schmoe as the middle class began to burgeon (lots of unions then hmmm). On the same note...a highline FI fintail would kill MB today with its harsh mechanical honesty, but at the time it was light years ahead of any sedan. Relative quality. And in the past, those cars built by such evil and incompetent unions had some quality themselves. Funny how one cannot debate that the people in charge then were also more skilled than those today. As has been said...demand is a big part of it, and the head haunchos will not win awards for creating demand.
There's an absolute void of evidence that a completely unregulated dog-eat-dog "free market" can even exist, not to mention that it will aid anyone but the elite. You don't want the ethics of bigmouthed politicos...I don't want the ethics of crony capitalists and robber barons. The real pipe dream is to think that this "free market" will come to fruition. That's how the world works...
I think there is way too much emphasis on demand and that a part of brightness04's comments more accurately reflect GM's failures. The Corolla and Camry are horrendously boring and lame cars that have absolutely no competitive advantage with regard to driving experience. Why does an American buy a Corolla over a Cobalt or a Camry over a Malibu? 1. Money (or more accurately, fear of losing too much money). The perception is that a Corolla or Camry won't break down (good quality writeups by CR and others) and because of that perception the consumer thinks that he/she won't get hosed on a tradein (value retention). 2. Culture. Massive immigration caused a cultural change in defining what is American and what isn't. It is now acceptable to buy any type of vehicle, whereas in past years, people tended to get beat up if they drove around in an imported car. I am told that Germany still has this perception in working class cities if you are a German and aren't driving a BMW, Mercedes or Volkswagen. Additionally, in past years, foreign vehicles represented a distorted way of an American displaying "individuality". 3. Laws, poltical events and the lack of mandates. Lawyers were constantly rewriting import quotas to allow more foreign cars into the market. This is now easily circumvented by building a plant on US soil (another law). Gasoline costs went up and the US government has not done anything to induce conservation or efficiency via incentives or mandates for 30+ years. 4. GM's inept management, outdated equipment, overpaid work force and lack of attention to customer service. GM's failure to understand that once 1-3 happen, you must compete like all other companies (that is, without a monopolistic competitive advantage). Their previous business structure (ie build a car and slowly fix design flaws over 9 years before a model change as the consumer pays for flaws) went out the window and they still haven't created a new one.
So in summary, it is nice to blame the union or management. However, in order of responsibility, it is really the consumer (1), the government (2 and 3), GM management (4) and the overpaid union (4). I think I've said and heard enough of this topic. I won't change any opinions and my opinions will not likely change either.
But, to take the other side of the argument this time, unions have never expressed an interest in improving the product, and have sought shelter from competition as avidly as any fat-cat industrialist.
The UAW has campaigned vigorously for protectionist measures since the early 1980s, when the Japanese first became a real threat. These measure may (temporarily) protect the jobs of union members, but they reduce selection and raise costs for customers.
The improvements we enjoy in today's autos regarding quality, reliability, performance and comfort came about because of brutal competition from the Japanese at the low end of the market, and the Germans at the high end of the market.
Competition is what has improved our vehicles, and the customer (the "little guy") has been the ultimate beneficiary, even as unions and management tried to squelch competition whenever possible.
I'll certainly agree that unions have caused plenty of problems...the constant union bashing from some people just gets silly after awhile. I'm no UAW defender...I can just see why the union exists, and why unions in general were popular. There needed to be someone keeping an eye out, blind faith in corporate benevolence is just too dangerous.
No business can make money without demand for its products. A mainstream provider such as Toyota, GM, Ford, etc. cannot make money without appealing to a wide swath of people. Obviously, some of these firms succeed at this, while others do not.
it is nice to blame the union or management. However, in order of responsibility, it is really the consumer
The customer is ALWAYS right, and demand is critical. No business can survive without giving customers reasons to spend their money on its products, which means that it is the customer who ultimately votes with his cash for whoever wins, and doesn't cast his votes for whoever loses.
Any strategy that fails to address the customer is going to fail. GM had a strategy that was rooted in not having competition, and fell to pieces when a few motivated rivals entered the market. It's no wonder that it has ended up where it is today.
But, to take the other side of the argument this time, unions have never expressed an interest in improving the product, and have sought shelter from competition as avidly as any fat-cat industrialist.
The UAW has campaigned vigorously for protectionist measures since the early 1980s, when the Japanese first became a real threat. These measure may (temporarily) protect the jobs of union members, but they reduce selection and raise costs for customers.
The improvements we enjoy in today's autos regarding quality, reliability, performance and comfort came about because of brutal competition from the Japanese at the low end of the market, and the Germans at the high end of the market.
Competition is what has improved our vehicles, and the customer (the "little guy") has been the ultimate beneficiary, even as unions and management tried to squelch competition whenever possible.
You are absolutely right. The leadership of both the companies and the unions have tried to deny the reality of a competitive marketplace, and to use legislation and "Buy American" rhetoric instead of excellent products that are well priced and effectively branded, as any truly competitive company would.
Neither of them has been particularly adept or insightful. The one caveat is that of the two groups, it is management that is most responsible for creating the company's strategic initiatives, not the union. The union can beat its chest all day long, but it is up to management to build the brands, design the cars, and assemble them properly.
You are correct. one big reason for the longevity of japanese engines and transmissions is the ability to build mechanical parts to tighter mechanical tolerances. When you build a 4 cylinder engine with 6-Sigma tolerances, you get a much more balanced, smoother running engine, that will last and not break down. If you do a "hack' job 9like GM0, and saw off four cylinders from an 8-cylinder engine, you wind up with an engine that will vibrate at 2, 4, and 8 times engine speed. Sloppy tolerance mean wearout at about 100K miles, and a 'ThrashY", vibration-prone power output. Just compare a Toyota 4 with a GM 4-the Toyota is smooth and silkey-the GM harsh. So its no surprise that John Q. public buys toyota-he has learned that he can expect a good product, and avoid costly repairs. Why the geniuses at GM can't figure this out is beyond me! as an aside, a bit of history: during WWII, the British aircraft engine builder (Rolls Royce) designed an excellent V-12 engine--the famous "merlin". This was the engine that powered the spitfire. Unfortunately, the british-build Merlins were noisy , vibrated, and leaked oil. Later, the engine was made in the USA (under license by Packard). Guess what? the packard engineers made over 150 improvements, and built to American standards, the Packard merlin was the best in the world? Why can't we do this today?
>When you build a 4 cylinder engine with 6-Sigma tolerances, you get a much more balanced, smoother running engine, that will last and not break down. If you do a "hack' job 9like GM0, and saw off four cylinders from an 8-cylinder engine, you wind up with an engine that will vibrate at 2, 4, and 8 times engine speed.
Don't I recall problems with the 4-cyl Honda motors vibrating when air conditioning is running and even at other times? I recall some posters having to have a hydraulic motor mount replaced on Hondas, correct? I'll go look up some old bookmarks about those problems. Or did they just saw off 4-cylinders out of an 8-cylinder Honda motor?
Its sad that it has come to this, but the union wont listen to ford, and ford cannot afford to give what it does already. Who loses? The American people (that us folks).
Automation, Work Rules, Wages, Benefits, Retirenment. The Union wants everything and expects The Evil Corporations to pay. Well that method is running dry.
If I were a Union Boss, I would talk to the top ford guys and negotiate some serious pay cuts and give the automaker more control over its own facilities in exchange for guaranteed employment and future investment, reserving the right for disciplinary actions to be held with the union and certain non cash benefits to be offerred to workers that both the company could afford, and the worker could enjoy. I would push for modernization even if its at the expense of the worker, because long term this means the company will hire more workers and the other ones will keep there jobs. Also, the workers would have priority in case the position reopens. We should not have the scenario we do today, were some plants in the US are so old that its better to demolish them and make new ones in Mexico.
Thats the way to keep jobs here. Oh Yeah, and the feds just not caring about Jobs leaving with this NAFTA/CAFTA situation makes everything more difficult. It is an evil to stop another evil. Great.
Although I have to say, Made in Mexico is still better than Made in China.
BTW both corps and unions need to confront the medical industry with fire and brimstone. There is some serious manipluation going on, and its hurting the whole country.
Union and management CAN work together - Ford and the UAW did a pretty good job of it in the 1980s.
Of course, since Henry Ford II took over the company after World War II, he worked hard to undo the bad feelings created by his grandfather and Harry Bennett. Since that time, the UAW's relationship with Ford has generally been better than its relationship with GM and Chrysler.
Interestingly, if one looks at the statements of GM and Ford about their problems, the leadership of Ford is much less likely to either directly blame the union, or make statements that could be inferred as blaming the union.
I also find it interesting that under the Way Forward plan, Ford is supposedly considering the construction of a new plant in the south, near a transplant operation.
This will give Ford an all-new plant in a region that has been dominated by the transplants. At the same time, it gives the UAW a beachhead in a hostile region. If Ford goes through with this new plant (and it must have developed this plan either in concert with the union, or with an eye to how this would play with the union), this could be fascinating...
It is interesting how all of the foreign car companies seem to be able to make very good cars in this country without the UAW, but Ford must move its manufacturing to Mexico. Soon (if not already) Toyota, Honda, etc will be more American that Ford. Also, with this fine lead by Ford, who could criticize Toyota, Honda etc from moving their manufacturing outside the country. Buy American made, don't buy Fords.
When you build a 4 cylinder engine with 6-Sigma tolerances
My understanding of 6sigma is that it deals with defects not specific tolerances. Tolerances are a mechanical measurement, part of the design, part of good engineering. 6Sigma would deal with the production process of putting the engines together, or seeing how to eliminate defective parts or what ever is hurting the process. Granted 6sigma could determine that due to the process the tolerances are too tight.
An example would be a Colt 45 semiautomatic. A well built Kimber is a tight slick operating gun. Drop it in the sand and it will jam up. The government issus gun had a very loose fit and was considered sloppy, however it was difficult to jam. The Kimber has better tolerances but is not necessarily a better gum in combat.
A car that you don't want to maintain very well may be better if the engine is not built to closer tolerances. Back in the 80's a BMW engine is a tight unit that used to require a lot of expensive maintenance because of the close tolerances. Is that better???. The engine in the Vette was a more loose tolerance engine but none the less got the job done effectively and probably more reliabily (a 6sigma measurement). Neither engine had defects simply because the tolerances were different
Bottom line is that if you build a process with a 6Sigma process evaluation you will build a better engine.
If I were a Union Boss, I would talk to the top ford guys and negotiate some serious pay cuts and give the automaker more control over its own facilities
I believe I would work with them to build better cars and increase market share by keeping my people employed at high wages and with the expectation we (the union) would police itself and require productivity from union members.
Omce you cut costs the only way to health is to sell more vehicles at a profit.
The meaning of quality is very different in the two context. The gap tolerance in the highest quality swiss watch is several orders of magnitude more loose than cookie-cutter dies coming off automated chip production facility. That's why quartz watches long replaced mechincal watches for time keeping. Similarly, the finest quality fintail MB's of yore can not begin to compare to today's cars in terms of manufacturing accuracy. MB management are actually correct in claiming that they are making the most reliable MB ever . . . just not as reliable as some of today's competition. The key to such manufacturing accuracy is automation. Union was in the way of automation.
The last time auto industry had something as fundamental as automation probably dated back to Henry Ford's introduction of production line. Once again, the Model T rolling off "souless" production lines were far more reliable than hand crafted cars, including high price luxuries like the Silver Ghost (your imagination not withstanding). There was a time American auto industry turned out far more reliable vehicles than the rest of the world, as clearly evidenced in WWII . . . because European unions had severely cramped the adoption of production line method there.
"Free market" exists every time you and I drive an extra distance to shop at Walmart or Target or some grocery store instead of buying everything at the neighborhood grocer; "free market" exists every time either of us buy a car from someone other than the dealership whose home turf covers our home addresses. Free market is about giving people individual choices. I don't want the ethics of bigmouthed politicos or that of the crony capitalists and robber barons, either . . . who do you think have more influence on writing regulations, you and I, or some big mouthed politicos working on behalf of crony capitalists and robber barons?? Case in point, how many items have you inserted into the IRS code? vs. how many have been inserted for the benefit of men like Ross Perot?
you have to recognize that some posters come to the thread with an ideological ax to grind against unions
I take it "ideological ax to grind" is just a standard derogatory term for people disagreeing with yourself :-) We all have a position on unions, good or bad. The difference is that, the pro-union position requires a major leap of faith in blieving the existence of saintly union leaders who are devoted to taking care of down-trodden workers, followed by a cadre of equally saintly union shop bosses who can objectively evaluate every worker's worth, who in turn are followed by an army of saintly workers who will work hard even though they are paid the same regardless how hard they work or not work at all. That is some serious ideological pre-conception.
On the other hand, no ideological ax is required to take up the position that union as an institution is bad. All it takes is the realization that, like any other human being, union leaders and members all have their own narrow self-interest. Reality bears this view quite handily. Union bosses are most interested in their own income, prestige and political career. Major unions in this country were almost all formed in industries where pays were way beyond average, contrary to the ideological position mentioned earlier that would postulate unions were most needed in industries where workers were really under-paid.
I doubt very much there were some kind grand 30-yr take-over-the-world strategy being hatched in Toyota headquaters back 1970 when they were peddling Toyotpets with license-built GM engines in this country. You are giving the Japanese way too much credit. Toyota could have turned into just another Yugo or MG. Afterall, both Subaru and Yugo were brought into the US by the same entreprenuer. Toyota were selling cheap cars for the same reason why Yugo and Hyundai were doing a decade later: that's the only market opening available. It's not possible for domestics to close off all market segments to competition; Honda and BMW were mostly motorcycle peddlers in the US, and don't tell me there's a grand strategy there too . . . sure, Honda were planning to take over America throug the backyard lawnmowers :-)
The reason why domestics left the cheap car market open was summarized in one sentence: it's much slower to take production cost out of a car than to take value out of it. Cheap and small cars still involve almost just as many parts count as larger cars; that means the labor cost would be almost the same. That's why to market a cheap and small car successfully, one has to have low cost labor. Back in early 1970, a US Dollar bought 300 Yen, not the 115 today. Japanese labor was simply cheap; that's what enabled them to enter the US market.
It's self-contradictory to claim that the domestics made the mistake of focusing on profitable and large volume cars yet claiming they failed to offer consumers what they wanted. How can they not be wanted if the segment is profitable and sold in large volumes? So long as Japanese stuck to small and cheap cars, the Domestics were doing fine; they were fine through the 90's. What put the domestics on the defensive lately is the imports' assault on the large and highly profitable segment of the market, SUV's and luxury cars . . . cars that Americans indeed want (as opposed to being forced into buying for economic reasons). What enabled the Japanese to take on the SUV and luxury market so successfully? The stellar reputation they garnered in the 80's due to their early adoption of automation.
Iacocca's turn-around of Chrysler actually hinged on a not-so-subtle accounting trick: federal loan guaratee. If a private enterprise can get cheaper capital than all its competition, it's a forgone conclusion that it can win. After all, capitalistic competition ultimately comes down to who can arbitrarge organic growth vs. capital cost (loan interest rate). That's why it hardly mattered how bad the K-cars themselves were. Even today, GM cars can sell really well when heavy incentives are offered . . . if GM can on the other hand get money in turn subsidized by the government, it can go on forever . . . the downside of course is that we'd end up with a nationalized auto industry, turning out cars just as bad as the Russian Ladas were.
It's self-contradictory to claim that the domestics made the mistake of focusing on profitable and large volume cars yet claiming they failed to offer consumers what they wanted. How can they not be wanted if the segment is profitable and sold in large volumes?
This is the very accountant's mentality that has driven GM into the ground. No wonder you don't see the problem, you are chasing the very same faulty objectives that GM's management has been pursuing for the last few decades. (Fortunately for them, the company's sheer size was large enough to conceal how badly they were doing...but no more.)
In an oligopolistic industry like automaking, it is critical to maintain retail market share, as it's a form of marketing and a means of shutting out competitors. It isn't enough to sell products, an effort has to be made to keep rivals from gaining strength.
The small car market of the early seventies was the beachhead, the Normandy landing of the War of Automaking. What the Big 3 should have done was to fight them on the beaches and push them back into the sea. Giving them the beach (small cars) led to their eventual loss of the war (the rest of the market), because gaining a foothold allowed them to gain ground, continue to advance, and destroy the established power.
The beancounters focus on capacity utilization and mythical margins that they never actually achieve, while forgetting the need for desirable product and coherent branding. Just as Lynn Townsend the CPA drove Chrysler to the brink of death, so the successive team of GM managers have done the same by forgetting that you can't sell cars tomorrow if your customers leave you today for someone else.
Let me get this straight, you are saying that GM should have used its war chest to drive all potential competition out of existence? Then what? really jack up prices on the consumers to recoup the cost of "total war"?? Did you happen to work for Microsoft a decade ago or Standard Oil a century ago? I see, all this time talks about protecting the small guys really comes down to feudalistic world domination and shafting the little guys in the end.
Ever heard of anti-trust? Ever since the days of Alfred Sloan in the late 1920's, GM could no longer pursue an all-out annihilation strategy for fear of anti-trust concerns. Besides, in practicality, for every successful Toyota, there were dozens of VW, Fiat, Yugo etc. that never went anywhere in the US market. Should GM have followed Honda into motorcycle and lawnmower making too in order to annihilate Honda? How exactly do you suppose to cope with the 3x labor cost difference existed between Japanese and American workers back in the early 1970's?
As much as you'd like to belittle accountants, between your ideas so far over the past few weeks and what "bean counters" actually did, the company would be far worse off following your numerous dead-end alternatives. Wasting resources focusing on developing a "good" small economy car without tackling labor cost first would have drained the company rapidly with no return; following today's proposal of "total war" would have quickly found the company broken up by the feds just like Standard Oil was. BTW, accountants and financial engineering were what enabled GM to over-take Ford in the late 1910's and early 20's to begin with and held onto the lead worldwide for 70+ years, probably the longest uninterrupted industrial leadership by a single company ever.
No one is proposing blind faith in corporate benevolence. Henry Ford did not make the $5/day wage offer (some 70% higher than industry average, and nearly 5 times the national wage avearge at the time) because he was benevolent. He did it in order to keep his workers from going to competition.
Of course every market player should be checked and balanced. Free market does not equate to free-for-all (or anarchy). If you don't like the vernacular term "free market," we can use the more academic term "competitive market place." In a competitive market place, the government's role is minimized to enforcing contracts and preventing the rise of monopolies (or market concentration). Notice the symmetric nature of these roles . . . no one should be appointed to priviledged position of legal exceptions. The problem with making exception for unions (really union bosses) and let them be the watchers is that who will watch the watcher? Who'd be counter-balancing them? What if the watchers collude with the biggest among those being watched like UAW did with GM in the 50's and 60's to the detriment of smaller carmakers and consumers? The answer over the past half century is that nobody's watching the watcher. Unions (rather, union bosses) got what they wanted, regardless what it does to the competitiveness of the industry or long term economic feasibiity for its own members. So in the end, both the consumers and the union members get shafted; consumers early on, and union members in their golden age retirement. Fostering sustained competition so that one business check and balance each other in a symmetric system would have very much avoided the problem. Wages would have been kept in line with productivity and the value of the same work at a competing company. Yes, there would still be ups and downs and workers may have to switch from one company to another as the companies' fortunes ebb and flow, but not wholesale obliterations after retirement like they (and consequently tax payers) are facing now because of all those make-belief union contracts drawn up as laurels of the union bosses and justifications for their own salaries.
It's too late for discussion between the two. Both the detroiters and the various unions already know what is going to occur in the next 10+ years.
The unions won't ( can't ) admit that they know the result is a foregone conclusion but the people who are at the head of these unions aren't dummies. Out of courtesy they may already have been briefed by the companies. They just can't tell the membership that they know.
Auto production is essentially lost for the UAW and others except for Caddy's and 'vettes. The unions now need to somehow protect the union jobs at the truck plants.
TRUCKS!!??
Notice that Ford has not intro'd the new Ranger here, yet it has already built it in Thailand for the Asian market. If the new contract doesn't address significant benefits for the company the US-built Ranger is dead here. They will all be imported from Thailand.
That will leave only the big rigs being produced here because this is the only market for them.....but all the parts and assemblies don't have to be built here.
This IMO is the thrust of Ford's 'leaked' strategy.
Let me get this straight, you are saying that GM should have used its war chest to drive all potential competition out of existence?...Ever heard of anti-trust?
It's hard to discuss this with you when you always resort to hyperbole and extremes.
After all of this talk about product and branding, it should be obvious what I'm saying: the Big 3 should have responded to the competition by building an excellent small car. A car with great fuel economy, outstanding fit and finish, and superior driving dynamics to the 510 and Corolla of the day. Even if the margins may not have been as high as they were on the larger land yachts of the time. (Given the growth of the small car market of the day, they would have made it back in higher volumes, anyway.)
At the time, GM and Ford had very good brands (Chrysler-Plymouth less so), and of course they had much greater scale, wider distribution and much more popularity with the American public. It's actually quite shocking that their sheer mass and branding dominance didn't allow them to simply crush the then-much-smaller Toyota, but leave it to Detroit to snatch defeat from the jaws of victory -- Chevy sold the notorious Vega, while Ford created the equally dismal Pinto.
It's as if they actually went out of their way to hand business over the Japanese car makers, and to hurt their own reputations. It is their own damn faults that the Japanese automakers found it relatively easy to gain a foothold in the US market that would eventually be turned into a full-blown tidal wave.
Unfortunately for them, the Detroit automakers' large size and long history of minimal competition made them fat and complacent, and left them with poor managers who were inexperienced in building new markets and who had grown accustomed to success achieved with minimal effort. They inherited the whole thing, and like any second-rate rich kid living on inherited wealth, all they knew how to do was to squander it.
for Ford Motor Company may even include talk of moving big 'ole pick-em-up truck and big 'ole SUV production both to Mexico? This Ford announcement regarding building plants in Mexico and producing for their future there is huge, huge with a prounounced 'h'.
Not only that, it is a sign that Ford is alive and thinking about their corporate future. I am so used to this "global" trade thing that they even have me on board regarding moving production mainly to Mexico. If things are bad and your credit rating is bad, do you just sit still in Michigan and do very little, except sit around and hope that the Lions make the Super Bowl one day, some day? No, you plan for your future, your employees future, your union workers' futures.
Hey, Ford, watch your quality coming out of Mexico real close, though. Isn't Quality Job 1?
As far as GM goes, yeah, building a better small car beast may have hurt them in the production-cost coffers, but that would only be temporary, IMO. The potential of customers won would pay them back handsomely, if, and it is a large if, customers liked their small car product. A company that large could have devoted more resource to small cars. Too late now, for American production, but for the Asian route-in GM is flying high, because when they purchased Daewoo they made one of their brightest-bulb decisions of the new century. Remember, China is car-hungry and they will be for who knows how long. AAMOF-China's growth has no end in sight right now. It is a large victory for Daewoo workers and the little Chevy Aveo is basically a hit worldwide.
It is important that you realize that your Chevrolet Aveo is a Daewoo-built small car, though. Don't frolic yourself into thinking that Chevrolet somehow "made" things click for Daewoo and now we can buy a small Chevy that rocks. No, the Aveo has some flaws, yes it does. But they're relatively minor. The business reason that shines so brightly for GM is that they bought the plants and equipment and remaining product at fire-sale prices in South Korea. Now, they have taken the option of buying more of the plants and equipment and GM Daewoo Auto & Technology Co.(with GM, Shanghai Motors, Suzuki, et al, combining to make up this upstart GMDA&TCO)is producing small Asian rigs for markets all around the world. They're selling as Suzuki's and Chevy's and they're doing well. The company is building more and is growing. It's a success story. And GM saved Daewoo from floating off into the sea and sinking like the poor Japanese luxury yacht that was hit by that US submarine a few years ago. Yikes. Sorry for that grungy analogy. Hopefully you get my point, though.
GM is associated with success in the Asian market. That doesn't quite translate to a viewed-as success here in the U.S., though. The lack of automation was a factor in GM's decisions regarding small cars and so one could then blame unions and their views on automation as one of those striking factors, pardon the pun, that has helped plunder GM's chance of competing successfully even in it's home American market.
People not buying GM's but buying Honda's, Toyota's, Nissan's, Mazda's, Hyundai's, Kia's, even Suzuki's. Hey, don't those Asian carmakers build good small cars? Could there be a vibrant connection there? Kind of like sitting around at a party wishing you had a strong stereo system to turn on when you don't. Anyone know how to sing? Can you play drums on your pants for me while I play this fine air guitar? GM's down for the count along with Ford partly because of the UAW(a big 'ole part, yes)right here in their birthplace, the U.S.
You are still not getting it. Dismal small cars with poor value is what you end up producing if you try to compete in the small car segment against someone who has a labor cost that is 1/3 your own, without resorting to predatory pricing. It's just that much harder to hide high labor cost in a small car. The overwhelming majority buyers of small cars make that choice not because they want to but because of economic necessity. Echo was Toyota's answer to the Hyundai/Kia low cost labor cheap entries. Don't tell me Echo did not sell well because its fit and finish was poor.
In order for the big 3 to compete against Japanese tincans in the small car market back in the early 70's, it's either decontenting or selling at significant loss, in other words predatory pricing to drive the Japanese out for the sake of driving them out like you suggested. In real life, unlike a game of Empire on the computer, there is a thing called anti-trust. When you are the 800 gorilla in the market place, you have to behave responsibly; predatory pricing is simply not an option. Besides, even if the Japanese were driven out, so what, there would be Koreans, East European and Chinese waiting to fill that niche so long as labor cost is high in the US. Keep losing more money any time anyone shows up? Sounds like Standard Oil to me even if it were financially feasible :-)
Your argument about fighting on the beaches is really grasping. There is no well defined "beach." It's simply not possible for any player to dominate all markets . . . what's next, make lawnmowers to drive Honda out of business so that they could not potentially bankroll on a reliable riding lawnmower to a city car then to a real car sometime in the future? How realistic is that? Running a business has to be focused on core competence and on battles that can be won. That meant, the domestics should have embraced automation as quickly as the Japanese if not quicker when it became the critical difference in vehicle quality. The management was willing to do that, but the unions got in the way.
Dismal small cars with poor value is what you end up producing if you try to compete in the small car segment against someone who has a labor cost that is 1/3 your own, without resorting to predatory pricing.
Just more excusemaking. Nothing to see here.
Your argument about fighting on the beaches is really grasping. There is no well defined "beach."
Of course it's well defined, the auto market is heavily researched and well segmented. In this case, it's called "subcompact."
No excuse necessary, just some reality check for the misinformed. Tell me what a great car Toyota Echo is. Isn't the Toyota management like can do no wrong??
The "subcompact" EPA classification came in the 80's. Once again you have lost touch with historical reality. Even just by looking at the name itself, you should notice that it is a catch-all after-thought with no lower end boundaries. Some of the early Japanese entries were literally glorified four-wheel motorcycles with motorcycle engines.
BTW, speaking of extremism, these words:
"What the Big 3 should have done was to fight them on the beaches and push them back into the sea."
"It isn't enough to sell products, an effort has to be made to keep rivals from gaining strength. "
They are not mine, but your own, in post#2570. Sounds to me remarkably akin "DOS is not done until Lotus 1-2-3 doesn't run" ;-) GM, as the owner of over half of US market share, would quickly have found the Department of Justice Anti-Trust Division on its back if the management ever uttered these words.
It's actually quite shocking that their sheer mass and branding dominance didn't allow them to simply crush the then-much-smaller Toyota,
So tell me why hasn't Toyota crushed Hyundai by sheer mass back in the 90's?? Instead of turning out flops like Echo?? The fact of the matter is, in the low end of the market, price is king; mfrs with low labor cost has tremendous advantage.
Tell me what a great car Toyota Echo is. Isn't the Toyota management like can do no wrong??
Sure, TMC makes mistakes, too, and I have been critical of the Echo on threads on this website. (It failed to capture the youth market as intended. But hey, at least it's reliable.) Thankfully, even you can't blame the unions for that.
You obviously don't know what was wrong with the Vega. The problems were largely design-related -- they had badly designed cooling systems and poorly designed seals that caused the engines to leak and burn oil. They also had a tendency to rust.
The presence of the union had nothing to do with that. GM could have designed a good cooling system, but the white-collar engineers designed a bad one, instead. Seals are cheap, yet GM's didn't work properly. The car rusted because of materials and design, not because of the workers. Drill down to specifics about what was actually wrong about the car, and your argument makes no sense.
And of course, the automotive industry is heavily segmented, whether or not you recognize it as such. GM obviously understood that there was such a segment, which is why it built the Vega in the first place.
The problem wasn't recognizing that the market existed, but in doing such a poor job in serving it. More than 30 years later, this car still sullies the reputation of the company, and reminds import buyers of why they left the Big 3 fold for greener pastures.
Everything that is wrong with Echo is also design related, too small, too flimsy, too cheaply equipped and furnished, etc. etc. It's what happens when designers are asked to come up with a small car to compete with other manufacturers that have much much lower labor cost. Echo was supposed to be a Hyundai/Kia fighter. It just got no where fast (pun intended). That's why Toyota made the same decision as GM did a quarter century earlier, move up market to SUVs and luxury cars! Fit and Yaris are going to be built in China to tackle the labor cost issue.
Japanese cars of the 70's were known for rusting fast anyway. Preventing rust requires galvanized panels. Japanese could not afford the natural resources (zinc had to be purchased on the international market with dollar not yen) and Americans could not afford it either in this particular segment due to the need for low pricing despite 3x higher labor cost (a dollar bought 300 yen in the early 1970's). That high labor cost was the result of unions. All the corners had to be cut in the design and engineering process because of the high labor cost and having to compete in such a low price segment. That's why like I said, regardless how market analysis divides into segments, there is always room for an even lower class of vehicles to be made by the mfrs with the lower labor cost. Units of labor simply do not scale down as fast as car size and price tag shrink.
Vega's primary intended competition was the "original" VW Beetle. Regardless how little you think of the Vega, it beat the original Beetle handsdown, both in quality and sales. Vega actually sold nearly 400k units a year in the early 1970's, a much stronger seller than its competition. Lordstown, Ohio, labor strife certainly did not help the Vega either.
-The Echo was intended as a youth/ gateway car, not just as a low-cost car. TMC has been quite unhappy that the odd design meant to appeal to young people ended up attracting a much older demographic than intended or desired. Scion was created because of TMC's failure to reach the intended market with a nameplate, so it created a badge, instead. On the whole, the snafu has been one of marketing and positioning.
-TMC is moving upscale because the higher margins are attractive, and it works to dominate as many segments as possible. This is part of a 30+ year strategy to increase its breadth of product, brand building and conquering a segment or two at a time. A case study of how effective management with good long-term planning gets things done, in contrast to GM that has done the opposite.
Regardless how little you think of the Vega, it beat the original Beetle handsdown, both in quality and sales.
Again, the accountant's mentality that almost killed Chrysler and is killing GM. Let's see:
-The Beetle is an icon, with one of the best marketing campaigns ever seen in the US market. The reintroduction of the New Beetle helped VW to achieve a temporary turnaround, at a time when it was close to leaving the US market altogether. It's an outstanding brand with such great nostalgia to drive it that it helped VW to not only sell Beetles, but Passats, Golfs and (particularly) Jettas.
-The Vega is symbolic of the fall of Detroit. There are people who don't buy GM products in 2006 because of what their Vegas or their friends' Vegas did back in 1971. It has negative brand value for GM, because it represents everything that many consumers have come to associate with the company: poor reliability, and horrible build quality.
You can bet that GM will never again sell a car in North America with the Vega nameplate. That's how poisonous its branding is.
Your exercise in blaming the union for everything is betrayed by the fact that you obviously know nothing about the cars themselves, their design or their marketing. If you think that the legacy of the Vega is a positive one, then you need to enroll in a marketing course and learn what a toxic nameplate that is in the GM lexicon.
I'll bet you guys are glad no referees from Pittsburgh are reffing your Super Bowl here. Good points being made and lots of good information being shared here, so, host, don't jump in and call "unnecessary roughness" on either contestant, OK?
BTW-if Pittsburgh refs were reffing this, umm...discussion, who would they throw the game for? Would it be in favor of brightness04, because he blames the UAW for GM's troubles, therefore, the UAW hornswoggling GM into providing them with excessive health insurance coverage, etc., this thus helping them towards unnecessary bankruptcy?
Or would they feel that they would need to call imaginary penalties to favor socal, in order to give his view, the view that GM management is primarily to blame for GM's downfall? The view that management of GM could have tried to find a way to produce a quality small rig that American consumers would have liked to have bought, when there was still time. When the Vega was gone even. Still time to make it right in the consumer's eyes. Oh, to Saturday afternoon quarterback while wearing one's safety helmet.
I think that this Super Bowl would be refereed like last year's Super Bowl should have been, that is, by level-headed referees with good moral fiber to them. The 2006 Super Bowl should be re-played. It was and is a farce. It shows how bad thinking and a lack of morality can mess things up for honest-hearted people everywhere. Extends to many, many different fields of endeavor, yes it sure does.
This downfall of GM should have been halted by GM management, in collaboration with the UAW, about 25 years ago. Now it's looking like it may be a tad too late. :sick:
Ford's off to Mexico to try and keep their ship afloat.
Comments
Why does GM sell cars to rental fleet? Because otherwise it would lose even more money due to fixed cost (thanks to union). Why do people not like GM products? Because GM brands has a poor quality image; Why? because GM did not adopt automation as quickly as Toyota did; Why? Because union objection to automation. Why didn't the management actually manage their company and toss out the union that objected to adopt automation and make cars that Americans actually want? Because they could not.
I agree with you very much that the post-1950's interaction between union and management were quite cooperative. I mentioned weeks ago that, the union work rules and benefit overhead were instrumental in keeping competition out . . . all at the expense of consumers. There was nothing "necessary" about unions. The collaboration had nothing to do with mistreatment of workers. It's all about ripping off consumers, together.
Thats it, that is the best point I have ever seen anyone ever make on this board.
Unions indeed are important, and workers indeed would loose many benefits if it were not for the unions, since there are too many people that could do that kind of work. Today, the problem is that the union bit off too much of the American pie, and left a gash just wide enough for Japan and Korea to come and fill.
There needs to be a balance between worker compensation and industrial competetiveness. This is a real problem, exacerbated by our governments lack of support for domesitc industires (such as tax breaks for buying foreign cars, any tax break associated with an automotive purchase should be limited to domestic purchases IMO, and the ease of which foreign companies can get into our distribution systems, and establish their own).
Thanks again for letting me rant.
You may have some points. However, is it lack of automation that kept the Cavalier on the market for so many years? Is it lack of automation that the sedans of GM are so boring? Is it lack of automation that the interiors of GM cars are so poor? Is it lack of automation that the GM engines are loud and thrashy?
It's dishonest to say that automation is the entire reason that people don't like GM cars.
One word..... Corolla.
Intro'd in the late 60's and now pressing the Camry for No 1 vehicle in the US 40 yrs later. Hey, wait, GM is partner in the factory that builds the Corolla.
"There needs to be a balance between worker compensation and industrial competetiveness. "
Indeed...that's why unions were created and why they exist...a check and balance system (which has gone awry). To think that some wholly unregulated "free market" will somehow operate under ethics and justice is a pipe dream. Maybe if I memorize Mises, I'll change my mind.
I enjoy reading old road tests of cars from 1960s car magazines (Car Life, Car & Driver, Motor Trend, etc.). Around 1964-65, testers start to mention poor workmanship and noticeable defects on test Chevrolets, particularly the Chevelle and Corvair. Prior to this, Chevrolets were usually praised for good workmanship. This is a recurring theme throughout the mid and late 1960s with various Chevrolet products.
Ford workmanship, on the other hand, actually seems pretty steady throughout the 1960s, at least based on these tests.
There was something more going on at that time than lack of automation.
Of course... it may not have gone awry... bankruptcy and/or the large concessions that the unions will likely make next year are the checks and balances that are inevitable results of lack of competitiveness on GM's and Ford's parts.
We just haven't seen the end game yet.
Change is constant. Competitive free market is best at keeping up with rapid changes. Regulations tend to create institutions that outlive their own relevance. Monopolies are especially bad at keeping up with changes. Monopolies are certainly not condusive to ethics or justice; it's usually a breeding ground for corruption and tyranny. It's a pipe dream to even think somehow there are universal standards for ethics or justice that everyone subscribes to; there would not be debate or arguments if there were. Free market competition is really the only fair way to resolve conflicting economic demands on limited resources; free market is simply a mechanism for letting more people have a say and be held accountable for that input.
Unions were not created to protect workers anymore than private car companies were run to provide consumers with transportation. Both institutions were run by adventurers who spent the time and effort in search of personal gains. That's why cars for the really poor do not exit . . . and almost all major unions were formed for the best paid workers at the time not the really down-trodden workers in agriculture and sweatshops where they really could use some protection. UAW was founded to get a slice of the monopolistic profits that the domestic carmakers once enjoyed. That's just how the world works. It's a pipe dream to even think that regulations can bring ethics and justice for all. Whose ethics standard, whose justice? Considering regulation-making is quite a monopolistic business, chances are that the resulting ethics or justice standards are not quite what you or I would want but the ethics and justice that buyers of law makers would want.
You maybe interested to note that the current CEO of Canon (almost at par with Toyota in terms of success) spent 26 yrs in the US, and the first thing he did after coming back to Japan was to REDUCE reliance on brute automation. He introduced the cell format for Canon factories which have a higher manual content (and thus a much higher level of flexibility).
The way out for GM is not going to be automation. It is going to be finding products that consumer wants. If they have higher legacy costs, there are financial engineering alternatives (e.g. a pre-packaged bankruptcy) that can eliminate them.
In any case, I agree that both 6-sig quality control/yield rate and quick response to market change are important to the survival of a modern company; the exact ordering of the two is dependent on the the particular industry one is in. Fixed union systems do not seem to work well with either requirement; they breed irresponsibility among workers and management alike.
Because it can. It's big enough to meet the demand and cheap enough to be competitive. That does not however mean that it needs to supply those same dull cars to the rest of us.
Fleet cars usually are low milage (for rentals) or well maintained (by companies) and in neither case allow for a fair view of actual quality across the make. My company vehicle is a piece of crap but it's free and I don't complain about every little rattle or thing that does not work right. I would never keep this car for me personnaly but the statistics show this car as dependable (which it is) but does not tell the whole story.
In other words, GM has developed (not by conscious choice) into a car company that is in existance mainly to keep it's people employed. This concept would work well in a Socialist country. It is not competitive in a Capitalist country.
Toyota et. al. have followed a typical path to success -- first begin in a low-margin low-cost segment that is largely ignored by entrenched competitors, use that unattractive segment to build a brand, and gain distribution and market share, and then expand to more attractive, better defended segments once that brand has been built.
The Big 3 of the seventies were absolutely uninterested in creating viable products that could compete directly with the new upstart imports of the day, they preferred the then-higher margins of their more costly, larger products. They had no idea that Toyota would use the original Corolla and Datsun use the 510 to one day create large, expensive cars that would compete directly in the American's exclusive territory. The Big 3 could and should have used their massive scale to squash these firms like bugs, but they instead allowed the Japanese firms to establish beachheads in the US market and create the foundation for the large markets that they have today.
GM does have legacy costs, but as has been pointed out here, the largest gap between it and Toyota is in per-unit vehicle revenue. First, they build too many units in an effort to gain margin (amortize their fixed costs across a high level of capacity utilization), but then lose all of that benefit in the distribution chain, because its customer base is dominated by discount buyers who buy based upon volume discounts, rather than quality.
A great business model that only an accountant could love. Incidentally, it might help to look at Chrysler to see how this plays out in real life: Chrysler was driven into the ground during the 60's and 70's by Lynn Townsend, an accountant by training, whereas it was resurrected by Lee Iacocca, who was ultimately a marketer and cheerleader who focused on core products to achieve a turnaround. The GM of today will have tougher competition to face off than did Iacocca in his day (I doubt that you could use a product as bad as was the K-car to lead yourself out of trouble these days), but the basic core strategy still makes sense.
And somehow, Iacocca did it without finding a need to villify the union at every turn. It's hard to get the workforce to help you if you focus your energies on ridiculing them.
It takes capital to stay in business in the early years. I'm guessing that if Toyota and Datsun didn't also have their Asian market they too may have indeed ended up like American Motors.
I think the Japanese consumer can thank the Americans for the quality of vehicle they now enjoy. Our lucrative (and free) market drove them to better products that they now enjoy at home. If not for that, they would have cars like the Russians (that used to look like 1960's American Motors products at least up until about 2 years ago)
Global economies are better for all of us. We just have to figure out how to play the game as well as the rest of the world. Perhaps that does mean some sort of tax break for goods made for export only?
There's an absolute void of evidence that a completely unregulated dog-eat-dog "free market" can even exist, not to mention that it will aid anyone but the elite. You don't want the ethics of bigmouthed politicos...I don't want the ethics of crony capitalists and robber barons. The real pipe dream is to think that this "free market" will come to fruition. That's how the world works...
1. Money (or more accurately, fear of losing too much money). The perception is that a Corolla or Camry won't break down (good quality writeups by CR and others) and because of that perception the consumer thinks that he/she won't get hosed on a tradein (value retention).
2. Culture. Massive immigration caused a cultural change in defining what is American and what isn't. It is now acceptable to buy any type of vehicle, whereas in past years, people tended to get beat up if they drove around in an imported car. I am told that Germany still has this perception in working class cities if you are a German and aren't driving a BMW, Mercedes or Volkswagen. Additionally, in past years, foreign vehicles represented a distorted way of an American displaying "individuality".
3. Laws, poltical events and the lack of mandates. Lawyers were constantly rewriting import quotas to allow more foreign cars into the market. This is now easily circumvented by building a plant on US soil (another law). Gasoline costs went up and the US government has not done anything to induce conservation or efficiency via incentives or mandates for 30+ years.
4. GM's inept management, outdated equipment, overpaid work force and lack of attention to customer service. GM's failure to understand that once 1-3 happen, you must compete like all other companies (that is, without a monopolistic competitive advantage). Their previous business structure (ie build a car and slowly fix design flaws over 9 years before a model change as the consumer pays for flaws) went out the window and they still haven't created a new one.
So in summary, it is nice to blame the union or management. However, in order of responsibility, it is really the consumer (1), the government (2 and 3), GM management (4) and the overpaid union (4). I think I've said and heard enough of this topic. I won't change any opinions and my opinions will not likely change either.
The UAW has campaigned vigorously for protectionist measures since the early 1980s, when the Japanese first became a real threat. These measure may (temporarily) protect the jobs of union members, but they reduce selection and raise costs for customers.
The improvements we enjoy in today's autos regarding quality, reliability, performance and comfort came about because of brutal competition from the Japanese at the low end of the market, and the Germans at the high end of the market.
Competition is what has improved our vehicles, and the customer (the "little guy") has been the ultimate beneficiary, even as unions and management tried to squelch competition whenever possible.
No business can make money without demand for its products. A mainstream provider such as Toyota, GM, Ford, etc. cannot make money without appealing to a wide swath of people. Obviously, some of these firms succeed at this, while others do not.
it is nice to blame the union or management. However, in order of responsibility, it is really the consumer
The customer is ALWAYS right, and demand is critical. No business can survive without giving customers reasons to spend their money on its products, which means that it is the customer who ultimately votes with his cash for whoever wins, and doesn't cast his votes for whoever loses.
Any strategy that fails to address the customer is going to fail. GM had a strategy that was rooted in not having competition, and fell to pieces when a few motivated rivals entered the market. It's no wonder that it has ended up where it is today.
The UAW has campaigned vigorously for protectionist measures since the early 1980s, when the Japanese first became a real threat. These measure may (temporarily) protect the jobs of union members, but they reduce selection and raise costs for customers.
The improvements we enjoy in today's autos regarding quality, reliability, performance and comfort came about because of brutal competition from the Japanese at the low end of the market, and the Germans at the high end of the market.
Competition is what has improved our vehicles, and the customer (the "little guy") has been the ultimate beneficiary, even as unions and management tried to squelch competition whenever possible.
You are absolutely right. The leadership of both the companies and the unions have tried to deny the reality of a competitive marketplace, and to use legislation and "Buy American" rhetoric instead of excellent products that are well priced and effectively branded, as any truly competitive company would.
Neither of them has been particularly adept or insightful. The one caveat is that of the two groups, it is management that is most responsible for creating the company's strategic initiatives, not the union. The union can beat its chest all day long, but it is up to management to build the brands, design the cars, and assemble them properly.
as an aside, a bit of history: during WWII, the British aircraft engine builder (Rolls Royce) designed an excellent V-12 engine--the famous "merlin". This was the engine that powered the spitfire. Unfortunately, the british-build Merlins were noisy , vibrated, and leaked oil. Later, the engine was made in the USA (under license by Packard). Guess what? the packard engineers made over 150 improvements, and built to American standards, the Packard merlin was the best in the world?
Why can't we do this today?
Don't I recall problems with the 4-cyl Honda motors vibrating when air conditioning is running and even at other times? I recall some posters having to have a hydraulic motor mount replaced on Hondas, correct? I'll go look up some old bookmarks about those problems. Or did they just saw off 4-cylinders out of an 8-cylinder Honda motor?
2014 Malibu 2LT, 2015 Cruze 2LT,
Automation, Work Rules, Wages, Benefits, Retirenment. The Union wants everything and expects The Evil Corporations to pay. Well that method is running dry.
If I were a Union Boss, I would talk to the top ford guys and negotiate some serious pay cuts and give the automaker more control over its own facilities in exchange for guaranteed employment and future investment, reserving the right for disciplinary actions to be held with the union and certain non cash benefits to be offerred to workers that both the company could afford, and the worker could enjoy. I would push for modernization even if its at the expense of the worker, because long term this means the company will hire more workers and the other ones will keep there jobs. Also, the workers would have priority in case the position reopens. We should not have the scenario we do today, were some plants in the US are so old that its better to demolish them and make new ones in Mexico.
Thats the way to keep jobs here. Oh Yeah, and the feds just not caring about Jobs leaving with this NAFTA/CAFTA situation makes everything more difficult. It is an evil to stop another evil. Great.
Although I have to say, Made in Mexico is still better than Made in China.
BTW both corps and unions need to confront the medical industry with fire and brimstone. There is some serious manipluation going on, and its hurting the whole country.
Of course, since Henry Ford II took over the company after World War II, he worked hard to undo the bad feelings created by his grandfather and Harry Bennett. Since that time, the UAW's relationship with Ford has generally been better than its relationship with GM and Chrysler.
Interestingly, if one looks at the statements of GM and Ford about their problems, the leadership of Ford is much less likely to either directly blame the union, or make statements that could be inferred as blaming the union.
I also find it interesting that under the Way Forward plan, Ford is supposedly considering the construction of a new plant in the south, near a transplant operation.
This will give Ford an all-new plant in a region that has been dominated by the transplants. At the same time, it gives the UAW a beachhead in a hostile region. If Ford goes through with this new plant (and it must have developed this plan either in concert with the union, or with an eye to how this would play with the union), this could be fascinating...
http://news.yahoo.com/s/afp/20060615/ts_afp/usmexicoautoford_060615002803
It is interesting how all of the foreign car companies seem to be able to make very good cars in this country without the UAW, but Ford must move its manufacturing to Mexico.
Soon (if not already) Toyota, Honda, etc will be more American that Ford.
Also, with this fine lead by Ford, who could criticize Toyota, Honda etc from moving their manufacturing outside the country.
Buy American made, don't buy Fords.
My understanding of 6sigma is that it deals with defects not specific tolerances. Tolerances are a mechanical measurement, part of the design, part of good engineering. 6Sigma would deal with the production process of putting the engines together, or seeing how to eliminate defective parts or what ever is hurting the process. Granted 6sigma could determine that due to the process the tolerances are too tight.
An example would be a Colt 45 semiautomatic. A well built Kimber is a tight slick operating gun. Drop it in the sand and it will jam up. The government issus gun had a very loose fit and was considered sloppy, however it was difficult to jam. The Kimber has better tolerances but is not necessarily a better gum in combat.
A car that you don't want to maintain very well may be better if the engine is not built to closer tolerances. Back in the 80's a BMW engine is a tight unit that used to require a lot of expensive maintenance because of the close tolerances. Is that better???. The engine in the Vette was a more loose tolerance engine but none the less got the job done effectively and probably more reliabily (a 6sigma measurement). Neither engine had defects simply because the tolerances were different
Bottom line is that if you build a process with a 6Sigma process evaluation you will build a better engine.
I believe I would work with them to build better cars and increase market share by keeping my people employed at high wages and with the expectation we (the union) would police itself and require productivity from union members.
Omce you cut costs the only way to health is to sell more vehicles at a profit.
The last time auto industry had something as fundamental as automation probably dated back to Henry Ford's introduction of production line. Once again, the Model T rolling off "souless" production lines were far more reliable than hand crafted cars, including high price luxuries like the Silver Ghost (your imagination not withstanding). There was a time American auto industry turned out far more reliable vehicles than the rest of the world, as clearly evidenced in WWII . . . because European unions had severely cramped the adoption of production line method there.
"Free market" exists every time you and I drive an extra distance to shop at Walmart or Target or some grocery store instead of buying everything at the neighborhood grocer; "free market" exists every time either of us buy a car from someone other than the dealership whose home turf covers our home addresses. Free market is about giving people individual choices. I don't want the ethics of bigmouthed politicos or that of the crony capitalists and robber barons, either . . . who do you think have more influence on writing regulations, you and I, or some big mouthed politicos working on behalf of crony capitalists and robber barons?? Case in point, how many items have you inserted into the IRS code? vs. how many have been inserted for the benefit of men like Ross Perot?
I take it "ideological ax to grind" is just a standard derogatory term for people disagreeing with yourself :-) We all have a position on unions, good or bad. The difference is that, the pro-union position requires a major leap of faith in blieving the existence of saintly union leaders who are devoted to taking care of down-trodden workers, followed by a cadre of equally saintly union shop bosses who can objectively evaluate every worker's worth, who in turn are followed by an army of saintly workers who will work hard even though they are paid the same regardless how hard they work or not work at all. That is some serious ideological pre-conception.
On the other hand, no ideological ax is required to take up the position that union as an institution is bad. All it takes is the realization that, like any other human being, union leaders and members all have their own narrow self-interest. Reality bears this view quite handily. Union bosses are most interested in their own income, prestige and political career. Major unions in this country were almost all formed in industries where pays were way beyond average, contrary to the ideological position mentioned earlier that would postulate unions were most needed in industries where workers were really under-paid.
I doubt very much there were some kind grand 30-yr take-over-the-world strategy being hatched in Toyota headquaters back 1970 when they were peddling Toyotpets with license-built GM engines in this country. You are giving the Japanese way too much credit. Toyota could have turned into just another Yugo or MG. Afterall, both Subaru and Yugo were brought into the US by the same entreprenuer. Toyota were selling cheap cars for the same reason why Yugo and Hyundai were doing a decade later: that's the only market opening available. It's not possible for domestics to close off all market segments to competition; Honda and BMW were mostly motorcycle peddlers in the US, and don't tell me there's a grand strategy there too . . . sure, Honda were planning to take over America throug the backyard lawnmowers :-)
The reason why domestics left the cheap car market open was summarized in one sentence: it's much slower to take production cost out of a car than to take value out of it. Cheap and small cars still involve almost just as many parts count as larger cars; that means the labor cost would be almost the same. That's why to market a cheap and small car successfully, one has to have low cost labor. Back in early 1970, a US Dollar bought 300 Yen, not the 115 today. Japanese labor was simply cheap; that's what enabled them to enter the US market.
It's self-contradictory to claim that the domestics made the mistake of focusing on profitable and large volume cars yet claiming they failed to offer consumers what they wanted. How can they not be wanted if the segment is profitable and sold in large volumes? So long as Japanese stuck to small and cheap cars, the Domestics were doing fine; they were fine through the 90's. What put the domestics on the defensive lately is the imports' assault on the large and highly profitable segment of the market, SUV's and luxury cars . . . cars that Americans indeed want (as opposed to being forced into buying for economic reasons). What enabled the Japanese to take on the SUV and luxury market so successfully? The stellar reputation they garnered in the 80's due to their early adoption of automation.
Iacocca's turn-around of Chrysler actually hinged on a not-so-subtle accounting trick: federal loan guaratee. If a private enterprise can get cheaper capital than all its competition, it's a forgone conclusion that it can win. After all, capitalistic competition ultimately comes down to who can arbitrarge organic growth vs. capital cost (loan interest rate). That's why it hardly mattered how bad the K-cars themselves were. Even today, GM cars can sell really well when heavy incentives are offered . . . if GM can on the other hand get money in turn subsidized by the government, it can go on forever . . . the downside of course is that we'd end up with a nationalized auto industry, turning out cars just as bad as the Russian Ladas were.
This is the very accountant's mentality that has driven GM into the ground. No wonder you don't see the problem, you are chasing the very same faulty objectives that GM's management has been pursuing for the last few decades. (Fortunately for them, the company's sheer size was large enough to conceal how badly they were doing...but no more.)
In an oligopolistic industry like automaking, it is critical to maintain retail market share, as it's a form of marketing and a means of shutting out competitors. It isn't enough to sell products, an effort has to be made to keep rivals from gaining strength.
The small car market of the early seventies was the beachhead, the Normandy landing of the War of Automaking. What the Big 3 should have done was to fight them on the beaches and push them back into the sea. Giving them the beach (small cars) led to their eventual loss of the war (the rest of the market), because gaining a foothold allowed them to gain ground, continue to advance, and destroy the established power.
The beancounters focus on capacity utilization and mythical margins that they never actually achieve, while forgetting the need for desirable product and coherent branding. Just as Lynn Townsend the CPA drove Chrysler to the brink of death, so the successive team of GM managers have done the same by forgetting that you can't sell cars tomorrow if your customers leave you today for someone else.
Ever heard of anti-trust? Ever since the days of Alfred Sloan in the late 1920's, GM could no longer pursue an all-out annihilation strategy for fear of anti-trust concerns. Besides, in practicality, for every successful Toyota, there were dozens of VW, Fiat, Yugo etc. that never went anywhere in the US market. Should GM have followed Honda into motorcycle and lawnmower making too in order to annihilate Honda? How exactly do you suppose to cope with the 3x labor cost difference existed between Japanese and American workers back in the early 1970's?
As much as you'd like to belittle accountants, between your ideas so far over the past few weeks and what "bean counters" actually did, the company would be far worse off following your numerous dead-end alternatives. Wasting resources focusing on developing a "good" small economy car without tackling labor cost first would have drained the company rapidly with no return; following today's proposal of "total war" would have quickly found the company broken up by the feds just like Standard Oil was. BTW, accountants and financial engineering were what enabled GM to over-take Ford in the late 1910's and early 20's to begin with and held onto the lead worldwide for 70+ years, probably the longest uninterrupted industrial leadership by a single company ever.
Of course every market player should be checked and balanced. Free market does not equate to free-for-all (or anarchy). If you don't like the vernacular term "free market," we can use the more academic term "competitive market place." In a competitive market place, the government's role is minimized to enforcing contracts and preventing the rise of monopolies (or market concentration). Notice the symmetric nature of these roles . . . no one should be appointed to priviledged position of legal exceptions. The problem with making exception for unions (really union bosses) and let them be the watchers is that who will watch the watcher? Who'd be counter-balancing them? What if the watchers collude with the biggest among those being watched like UAW did with GM in the 50's and 60's to the detriment of smaller carmakers and consumers? The answer over the past half century is that nobody's watching the watcher. Unions (rather, union bosses) got what they wanted, regardless what it does to the competitiveness of the industry or long term economic feasibiity for its own members. So in the end, both the consumers and the union members get shafted; consumers early on, and union members in their golden age retirement. Fostering sustained competition so that one business check and balance each other in a symmetric system would have very much avoided the problem. Wages would have been kept in line with productivity and the value of the same work at a competing company. Yes, there would still be ups and downs and workers may have to switch from one company to another as the companies' fortunes ebb and flow, but not wholesale obliterations after retirement like they (and consequently tax payers) are facing now because of all those make-belief union contracts drawn up as laurels of the union bosses and justifications for their own salaries.
The unions won't ( can't ) admit that they know the result is a foregone conclusion but the people who are at the head of these unions aren't dummies. Out of courtesy they may already have been briefed by the companies. They just can't tell the membership that they know.
Auto production is essentially lost for the UAW and others except for Caddy's and 'vettes. The unions now need to somehow protect the union jobs at the truck plants.
TRUCKS!!??
Notice that Ford has not intro'd the new Ranger here, yet it has already built it in Thailand for the Asian market. If the new contract doesn't address significant benefits for the company the US-built Ranger is dead here. They will all be imported from Thailand.
That will leave only the big rigs being produced here because this is the only market for them.....but all the parts and assemblies don't have to be built here.
This IMO is the thrust of Ford's
It's hard to discuss this with you when you always resort to hyperbole and extremes.
After all of this talk about product and branding, it should be obvious what I'm saying: the Big 3 should have responded to the competition by building an excellent small car. A car with great fuel economy, outstanding fit and finish, and superior driving dynamics to the 510 and Corolla of the day. Even if the margins may not have been as high as they were on the larger land yachts of the time. (Given the growth of the small car market of the day, they would have made it back in higher volumes, anyway.)
At the time, GM and Ford had very good brands (Chrysler-Plymouth less so), and of course they had much greater scale, wider distribution and much more popularity with the American public. It's actually quite shocking that their sheer mass and branding dominance didn't allow them to simply crush the then-much-smaller Toyota, but leave it to Detroit to snatch defeat from the jaws of victory -- Chevy sold the notorious Vega, while Ford created the equally dismal Pinto.
It's as if they actually went out of their way to hand business over the Japanese car makers, and to hurt their own reputations. It is their own damn faults that the Japanese automakers found it relatively easy to gain a foothold in the US market that would eventually be turned into a full-blown tidal wave.
Unfortunately for them, the Detroit automakers' large size and long history of minimal competition made them fat and complacent, and left them with poor managers who were inexperienced in building new markets and who had grown accustomed to success achieved with minimal effort. They inherited the whole thing, and like any second-rate rich kid living on inherited wealth, all they knew how to do was to squander it.
Not only that, it is a sign that Ford is alive and thinking about their corporate future. I am so used to this "global" trade thing that they even have me on board regarding moving production mainly to Mexico. If things are bad and your credit rating is bad, do you just sit still in Michigan and do very little, except sit around and hope that the Lions make the Super Bowl one day, some day? No, you plan for your future, your employees future, your union workers' futures.
Hey, Ford, watch your quality coming out of Mexico real close, though. Isn't Quality Job 1?
As far as GM goes, yeah, building a better small car beast may have hurt them in the production-cost coffers, but that would only be temporary, IMO. The potential of customers won would pay them back handsomely, if, and it is a large if, customers liked their small car product. A company that large could have devoted more resource to small cars. Too late now, for American production, but for the Asian route-in GM is flying high, because when they purchased Daewoo they made one of their brightest-bulb decisions of the new century. Remember, China is car-hungry and they will be for who knows how long. AAMOF-China's growth has no end in sight right now. It is a large victory for Daewoo workers and the little Chevy Aveo is basically a hit worldwide.
It is important that you realize that your Chevrolet Aveo is a Daewoo-built small car, though. Don't frolic yourself into thinking that Chevrolet somehow "made" things click for Daewoo and now we can buy a small Chevy that rocks. No, the Aveo has some flaws, yes it does. But they're relatively minor. The business reason that shines so brightly for GM is that they bought the plants and equipment and remaining product at fire-sale prices in South Korea. Now, they have taken the option of buying more of the plants and equipment and GM Daewoo Auto & Technology Co.(with GM, Shanghai Motors, Suzuki, et al, combining to make up this upstart GMDA&TCO)is producing small Asian rigs for markets all around the world. They're selling as Suzuki's and Chevy's and they're doing well. The company is building more and is growing. It's a success story. And GM saved Daewoo from floating off into the sea and sinking like the poor Japanese luxury yacht that was hit by that US submarine a few years ago. Yikes. Sorry for that grungy analogy. Hopefully you get my point, though.
GM is associated with success in the Asian market. That doesn't quite translate to a viewed-as success here in the U.S., though. The lack of automation was a factor in GM's decisions regarding small cars and so one could then blame unions and their views on automation as one of those striking factors, pardon the pun, that has helped plunder GM's chance of competing successfully even in it's home American market.
People not buying GM's but buying Honda's, Toyota's, Nissan's, Mazda's, Hyundai's, Kia's, even Suzuki's. Hey, don't those Asian carmakers build good small cars? Could there be a vibrant connection there? Kind of like sitting around at a party wishing you had a strong stereo system to turn on when you don't. Anyone know how to sing? Can you play drums on your pants for me while I play this fine air guitar? GM's down for the count along with Ford partly because of the UAW(a big 'ole part, yes)right here in their birthplace, the U.S.
Eeek.
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In order for the big 3 to compete against Japanese tincans in the small car market back in the early 70's, it's either decontenting or selling at significant loss, in other words predatory pricing to drive the Japanese out for the sake of driving them out like you suggested. In real life, unlike a game of Empire on the computer, there is a thing called anti-trust. When you are the 800 gorilla in the market place, you have to behave responsibly; predatory pricing is simply not an option. Besides, even if the Japanese were driven out, so what, there would be Koreans, East European and Chinese waiting to fill that niche so long as labor cost is high in the US. Keep losing more money any time anyone shows up? Sounds like Standard Oil to me even if it were financially feasible :-)
Your argument about fighting on the beaches is really grasping. There is no well defined "beach." It's simply not possible for any player to dominate all markets . . . what's next, make lawnmowers to drive Honda out of business so that they could not potentially bankroll on a reliable riding lawnmower to a city car then to a real car sometime in the future? How realistic is that? Running a business has to be focused on core competence and on battles that can be won. That meant, the domestics should have embraced automation as quickly as the Japanese if not quicker when it became the critical difference in vehicle quality. The management was willing to do that, but the unions got in the way.
Just more excusemaking. Nothing to see here.
Your argument about fighting on the beaches is really grasping. There is no well defined "beach."
Of course it's well defined, the auto market is heavily researched and well segmented. In this case, it's called "subcompact."
The "subcompact" EPA classification came in the 80's. Once again you have lost touch with historical reality. Even just by looking at the name itself, you should notice that it is a catch-all after-thought with no lower end boundaries. Some of the early Japanese entries were literally glorified four-wheel motorcycles with motorcycle engines.
BTW, speaking of extremism, these words:
"What the Big 3 should have done was to fight them on the beaches and push them back into the sea."
"It isn't enough to sell products, an effort has to be made to keep rivals from gaining strength. "
They are not mine, but your own, in post#2570. Sounds to me remarkably akin "DOS is not done until Lotus 1-2-3 doesn't run" ;-) GM, as the owner of over half of US market share, would quickly have found the Department of Justice Anti-Trust Division on its back if the management ever uttered these words.
It's actually quite shocking that their sheer mass and branding dominance didn't allow them to simply crush the then-much-smaller Toyota,
So tell me why hasn't Toyota crushed Hyundai by sheer mass back in the 90's?? Instead of turning out flops like Echo?? The fact of the matter is, in the low end of the market, price is king; mfrs with low labor cost has tremendous advantage.
Sure, TMC makes mistakes, too, and I have been critical of the Echo on threads on this website. (It failed to capture the youth market as intended. But hey, at least it's reliable.) Thankfully, even you can't blame the unions for that.
You obviously don't know what was wrong with the Vega. The problems were largely design-related -- they had badly designed cooling systems and poorly designed seals that caused the engines to leak and burn oil. They also had a tendency to rust.
The presence of the union had nothing to do with that. GM could have designed a good cooling system, but the white-collar engineers designed a bad one, instead. Seals are cheap, yet GM's didn't work properly. The car rusted because of materials and design, not because of the workers. Drill down to specifics about what was actually wrong about the car, and your argument makes no sense.
And of course, the automotive industry is heavily segmented, whether or not you recognize it as such. GM obviously understood that there was such a segment, which is why it built the Vega in the first place.
The problem wasn't recognizing that the market existed, but in doing such a poor job in serving it. More than 30 years later, this car still sullies the reputation of the company, and reminds import buyers of why they left the Big 3 fold for greener pastures.
Japanese cars of the 70's were known for rusting fast anyway. Preventing rust requires galvanized panels. Japanese could not afford the natural resources (zinc had to be purchased on the international market with dollar not yen) and Americans could not afford it either in this particular segment due to the need for low pricing despite 3x higher labor cost (a dollar bought 300 yen in the early 1970's). That high labor cost was the result of unions. All the corners had to be cut in the design and engineering process because of the high labor cost and having to compete in such a low price segment. That's why like I said, regardless how market analysis divides into segments, there is always room for an even lower class of vehicles to be made by the mfrs with the lower labor cost. Units of labor simply do not scale down as fast as car size and price tag shrink.
Vega's primary intended competition was the "original" VW Beetle. Regardless how little you think of the Vega, it beat the original Beetle handsdown, both in quality and sales. Vega actually sold nearly 400k units a year in the early 1970's, a much stronger seller than its competition. Lordstown, Ohio, labor strife certainly did not help the Vega either.
-The Echo was intended as a youth/ gateway car, not just as a low-cost car. TMC has been quite unhappy that the odd design meant to appeal to young people ended up attracting a much older demographic than intended or desired. Scion was created because of TMC's failure to reach the intended market with a nameplate, so it created a badge, instead. On the whole, the snafu has been one of marketing and positioning.
-TMC is moving upscale because the higher margins are attractive, and it works to dominate as many segments as possible. This is part of a 30+ year strategy to increase its breadth of product, brand building and conquering a segment or two at a time. A case study of how effective management with good long-term planning gets things done, in contrast to GM that has done the opposite.
Regardless how little you think of the Vega, it beat the original Beetle handsdown, both in quality and sales.
Again, the accountant's mentality that almost killed Chrysler and is killing GM. Let's see:
-The Beetle is an icon, with one of the best marketing campaigns ever seen in the US market. The reintroduction of the New Beetle helped VW to achieve a temporary turnaround, at a time when it was close to leaving the US market altogether. It's an outstanding brand with such great nostalgia to drive it that it helped VW to not only sell Beetles, but Passats, Golfs and (particularly) Jettas.
-The Vega is symbolic of the fall of Detroit. There are people who don't buy GM products in 2006 because of what their Vegas or their friends' Vegas did back in 1971. It has negative brand value for GM, because it represents everything that many consumers have come to associate with the company: poor reliability, and horrible build quality.
You can bet that GM will never again sell a car in North America with the Vega nameplate. That's how poisonous its branding is.
Your exercise in blaming the union for everything is betrayed by the fact that you obviously know nothing about the cars themselves, their design or their marketing. If you think that the legacy of the Vega is a positive one, then you need to enroll in a marketing course and learn what a toxic nameplate that is in the GM lexicon.
BTW-if Pittsburgh refs were reffing this, umm...discussion, who would they throw the game for? Would it be in favor of brightness04, because he blames the UAW for GM's troubles, therefore, the UAW hornswoggling GM into providing them with excessive health insurance coverage, etc., this thus helping them towards unnecessary bankruptcy?
Or would they feel that they would need to call imaginary penalties to favor socal, in order to give his view, the view that GM management is primarily to blame for GM's downfall? The view that management of GM could have tried to find a way to produce a quality small rig that American consumers would have liked to have bought, when there was still time. When the Vega was gone even. Still time to make it right in the consumer's eyes. Oh, to Saturday afternoon quarterback while wearing one's safety helmet.
I think that this Super Bowl would be refereed like last year's Super Bowl should have been, that is, by level-headed referees with good moral fiber to them. The 2006 Super Bowl should be re-played. It was and is a farce. It shows how bad thinking and a lack of morality can mess things up for honest-hearted people everywhere. Extends to many, many different fields of endeavor, yes it sure does.
This downfall of GM should have been halted by GM management, in collaboration with the UAW, about 25 years ago. Now it's looking like it may be a tad too late. :sick:
Ford's off to Mexico to try and keep their ship afloat.
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