April 20, 2005
WORTH MORE DEAD THAN ALIVE:
Wall Street speculates on General Motors bankruptcy (SupplierBusiness.com, 18 April 2005)
The speculation on Wall Street last week was how long it would be before General Motors declared bankruptcy. [...][I]t is difficult to see a long-term turnaround path for the group. The problems of General Motors have been widely known and recognised for at least a decade, but the company seems incapable of taking effective action.
Almost no one outside the company expects GM to reverse its steady long-term secular decline in market share in North America.
The company's products are widely panned as uninspiring. The discounting and incentivisation of the last three years has flooded the market with nearly new GM products.
Fully a third of GM's new vehicle sales are to employees, their relatives or fleet rental buyers, while private new-car buyers are staying away from GM's profile in droves.
The company is suffering from the liabilities and attitudes that entrenched themselves decades ago when the company dominated the North American market. GM has studied Toyota but not taken any effective action to adapt its own culture to complete.
The company carries a heavy burden of health care costs and pension liabilities that represent a structural disadvantage on every car produced that the company seems powerless to address. The company persists in a confrontational approach to negotiations with suppliers that may have made sense when the company was the leader of an oligopoly and was seeking to extract monopoly rent from suppliers that had nowhere else to go, but which is perverse as a strategy when new domestic assemblers already represent a much more attractive prospect as a customer.
Advanced nations don't belong in the parts assembly business. Posted by Orrin Judd at April 20, 2005 11:34 PM
luxury cars are a good status product for a country to make, but not the drek gm/ford squeeze out of some ungodly creature's rear end. its time for lenny to go out back now...
Posted by: cjm at April 20, 2005 11:37 PMEven if GM were to disappear, there would be plenty of automobile assembly plants in the US. They just won't be UAW.
Honda has been building cars here in central Ohio for almost 30 years. By assetts and employees they are as much an american company as Japanese. just no UAW.
Posted by: Robert Schwartz at April 20, 2005 11:52 PMBetter it go bankrupt within the next year or so than to drag it out for the next few years, since if GM makes it to 2008 you'll see both it and the UAW supporting a full-scale scare campaign about the nation's "health crisis" in hopes that a new Democratic administration will dig Hillarycare out of the grave and allow GM and the union to dump their health care costs off on the American taxpayer.
Posted by: John at April 21, 2005 12:24 AMAdvanced nations belong in every business.
Posted by: Bret at April 21, 2005 12:38 AMGot any friends who want their kids to drop out of high school and go work in a plant?
Posted by: oj at April 21, 2005 12:43 AMAs automation increases, the manufacturing capacity of advanced nations such as the U.S. and Japan will grow impressively rapidly. I work in robotics and we are making amazing progress that will begin making it's way into manufacturing in 8-10 years. Unfortunately, high school dropouts need not apply to work at such plants - probably at least a two year college degree will be required.
Posted by: Bret at April 21, 2005 1:29 AMBy the way, do you not sleep? How do you post at 12:43 AM? I'm on the west coast so it's early for me.
Posted by: Bret at April 21, 2005 1:30 AMThe machines have to go to college?
Posted by: oj at April 21, 2005 7:58 AMThat's the Time Zone Rule in action, Bret. In oj's time zone it's always 9am on Sunday.
Posted by: joe shropshire at April 21, 2005 9:10 AMHe should always be on his way to church then.
Posted by: Dave W. at April 21, 2005 9:31 AMI work at a GM supplier and I can promise you that they still don't get it. The UAW situation is ugly but only one factor in their decline. Their internal management practices are light years behind Toyota, Honda etc. and their bureaucracy is intractable. Their only hope is to turn the company over to an outsider who will institute rapid, radical change. Don't expect it, the inherent inbreeding will never allow it.
Posted by: Jeff at April 21, 2005 9:51 AMI've been following or investing in Ch. 11 cases since the mid-90's. Every slipery slope to a mega-billion$ bankruptcy process starts with a simple phrase from its CEO, "We're not filing for bankruptcy." That Clock is already ticking.
Posted by: John Resnick at April 21, 2005 2:32 PM