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GM: Government Motors, and what it's really about
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| The17sss |
I've been waiting for a week or so now for someone to get on this topic, regardless of political ideolgy, and I'm surprised nobody has yet. So, I'll begin. And stick with this till the end because it gets at something I believe is happening in the bigger picture.
"The government has no interest in controlling General Motors". That is what The One proclaimed. But he fired the CEO, and appointed one he approved of and that the president of the United Auto Workers likes wayyy more than the last guy. As said by one columnist:
| quote: | President Obama rightly says "sacrifices" must be made if GM is to emerge as a viable company. But there's one sacrifice he won't make: his re-election chances, by leaving the fate of the UAW truly up to a bankruptcy judge.
The GM bailout has become a political operation run out of the White House. It will stay that way. Talk of UAW layoffs already disguises the fact that UAW workers are actually offered generous buyouts and early retirement -- they aren't just sent away with a last paycheck. What about Chrysler? A few weeks ago, Fiat was saying it would consider a merger if a loan from Washington was guaranteed (essentially giving a foreign company $6 billion in U.S. taxpayer funds). Now Washington is saying a loan will be forthcoming as long as Fiat does a deal. That's not an ultimatum -- that's a nod and a wink. |
http://online.wsj.com/article/SB123...ss_opinion_main
So, $14 billion in taxpayer money was wasted before the faux bankruptcy decisions here. He goes on to say the real solution to make GM viable is ridding itself of the UAW's captivity, which I agree with. An act from 1935 that created that growing monster is not relevant today... just ask non-unionized BMW, Toyota, and others who actually make a profit from their plants in the southern states.
At any rate, now the administration is lining up a new board of directors for GM. 21 members on the new "auto task force" have zero automobile experience. They are forcing out the SUV's and larger trucks. GM makes 20 cars that show a profit... 11 of them are SUV's/Trucks, while the Volt and Toyota's Prius operate at a loss. What is this REALLY about? After you read George Will's column below, I'll tell you:
GOVERNMENT vs. THE AXELS OF EVIL
| quote: | The Constitution enumerates three requirements for those who would be president (they must be natural-born citizens, at least 35 and a resident within the country for 14 years) and now the government's thrashing about in the economy imposes a fourth: Presidents must be able to speak pluperfect nonsense with a straight face, lest the country understand what the government is doing. Obfuscation serves political salvation when what the government is doing includes promising that if Chrysler will sell itself to Fiat, U.S. taxpayers will lend that Italian firm $6 billion.
Barack Obama displayed reality-denying virtuosity last week when, announcing the cashiering of General Motors' CEO, and naming his replacement, and as the government was prompting selection of a new majority of GM's board of directors, and as the government announced the next deadline for GM to submit a more satisfactory viability plan than it submitted at the last faux deadline, and as the government kept the billions flowing to tide GM over until, well, whenever, the president said: "The United States government has no interest in running GM."
Actually, his administration prefers to do that rather than allow bankruptcy to infuriate the United Auto Workers union, which was preemptively grateful to Obama's administration with lavish contributions to candidate Obama. The president supposedly showed "toughness" in sacking a conspicuous member of a particularly unpopular little cohort, CEOs of big corporations. He will need more grit if, as his administration hints, this time it is serious, that its patience is wearing thin, that someday GM could face "controlled" or "prepackaged" or "surgical" bankruptcy. One suspects that those adjectives intimate that it will be faux bankruptcy, gentle in dealing with the UAW.
Last November, five months and $17.4 billion in auto bailouts ago, this column noted: "Some opponents of bankruptcy say: GM must not be allowed to fail before it perfects batteries for its electric-powered Volt, which supposedly is a key to the company's resurrection. This vehicle was concocted to serve GM's prolonged attempt to ingratiate itself with the few hundred environmentally obsessed automotive engineers in Congress. They have already voted tax credits of up to $7,500 for purchasers of such cars -- bribes that reveal doubts about consumer enthusiasm for them at a price that would reflect cost."
In December, GM, by then a mendicant groveling before its congressional masters, ran a full-page newspaper ad apologizing for having "disappointed" everyone, vowing to stop selling so many "pickups and SUVs" (which were 11 of GM's 20 most profitable products in 2008), and promising "revolutionary new products like the Chevrolet Volt." Another ad, which appeared before December and is still running, features a car attached to an electric cord, and says the Volt amounts to "reinventing the automobile."
Last week, in an unenthralled summary of GM's "viability" plan, Obama's administration said: "GM earns a large share of its profits from high-margin trucks and SUVs, which are vulnerable to a continuing shift in consumer preference to smaller vehicles. Additionally, while the Chevy Volt holds promise, it will likely be too expensive to be commercially successful in the short term."
The stunning shift in consumer preferences that should make the White House's freshly minted auto experts feel vulnerable has been reported under headlines such as "Like a Rock: Hybrid Car Sales Plummet" (Wall Street Journal, Dec. 9) and "Hybrid Car Sales Go From 60 to 0 at Breakneck Speed" (Los Angeles Times, March 17). Absent $4 gasoline, customers, those nuisances with their insufferable preferences, do not want the vehicles the politicians want them to want, even with manufacturers now offering large rebates and other incentives.
The two best-selling vehicles in America this year are large pickup trucks (Ford F-Series and Chevy Silverado). In February, Toyota sold 13,600 Tundra and Tacoma pickups and 7,232 Priuses. It sells the Prius at a loss, which it can afford to do because it makes pots of money selling pickups. Has the Car Designer in Chief, a.k.a. the president, considered the possibility that what he calls "the cars of tomorrow" will forever be that?
His administration cannot be faulted for failing to do well what cannot be done well -- industrial policy, wherein the political class, with negligible experience in commerce, flounders. The administration can, however, be faulted for trying. The government's wallow in the automobile industry, under this and the previous administration, merits a hockey coach's evaluation of his team: "Every day you guys look worse and worse. And today you played like tomorrow." |
So... 11 of GM's 20 profitable vehicles are SUVs/trucks. The administration is desperate for us to shun them. The only way, really, to force Americans to drive the boxes they don't want to drive is for the gasoline prices to rise. We learned last summer that $4.00 was the tipping point to where consumers actually started cutting way back and/or buying smaller cars and hybrids. Obama himself said that he didn't mind that gas prices went that high, he just didn't like that it happened so quickly.
What's my point? I think there is little coincidence in this story that came out the other day in Investors Business Daily: "Lost In An Energy Wilderness", which says the following:
| quote: | Last Wednesday, the House of Representatives passed the Omnibus Public Land Management Act of 2009 (S.22). S.22 is a smorgasbord of 160 bills totaling more than 1,300 pages. A stimulus bill it is not, for it locks up an additional 2 million acres to the 107 million acres of federally owned wilderness areas. That total is more than the area of Montana and Wyoming combined, says Investor's Business Daily (IBD).
Speaking of Wyoming:
-Some 1.1 million of these newly restricted acres are in that state.
-This bill takes about 8.8 trillion cubic feet of natural gas and 300 million barrels of oil out of production in that state, according to the Bureau of Land Management (BLM).
-The energy resources walled off by this bill would nearly match the annual production levels of our two natural gas production states -- Texas and Alaska.
As Sen. Tom Coburn (R-Okla.) points out: "We are not suffering from a lack of wilderness areas in the United States. According to the Census Bureau, we have 106 million acres of developed land and 107 million acres of (officially declared) wilderness land."
Earlier this year, Interior Secretary Ken Salazar canceled 77 Utah oil and gas leases that had gone through seven years of studies, negotiations and land-use planning. They were rejected because temporary drilling operations might be "visible" from several national parks more than a mile away:
-Some of these parcels are in or near the Green River Formation, an oil-rich region in Colorado, Utah and Wyoming that's been called the "Persia of the West."
-This formation has the largest known oil shale deposits in the world, holding from 1.5 trillion to 1.8 trillion barrels of crude.
-The Energy Department's Argonne National Laboratory indicates 800 billion of these barrels are recoverable with current technology.
Paul Spitler of the Wilderness Society told CNSNews this is just dandy. "There are some landscapes that are simply more important for their scenic, natural, recreational and ecological values than they are for oil and gas development," he said.
You can see the sun setting on America's energy and economic future over these landscape. |
http://www.ncpa.org/sub/dpd/index.php?Article_ID=17803
We also know the democrats are opposed to new offshore drilling. Won't that plus the realization of all this energy rich land being stealthly locked up make us MORE dependant on foreign oil? The price of oil/gas will go way up again soon, and.... wait for it.... BAM! The market for these smaller cars the administration wants to force us to drive, that American's obviously don't want to drive, will now exist.
| quote: | Now that Obama's going to be running the car companies, energy policy just got a lot clearer.
These things work hand in hand, taking over automobiles, denigrating trucks and SUVs, demanding new clean energy, setting natural energy resources off-limits raises the price of energy, the price of energy forces the American people to make cheaper alternatives, that means smaller cars, yada yada yada.
So we're going to have higher gasoline prices, and it isn't going to be long, lock in your bet on that. And what will it mean? Big Oil is going to get the blame. More anger and hatred directed at the oil companies because nobody's going to know about this omnibus land grab bill that came out of the House and Senate last week. Because the media is derelict in telling people what's going on in their own government. |
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| Q5echo |
| been telling all my Obama-friendly buddies wait till gas prices shoot back thru the roof and this administration has done all about it. this is what yall voted for, dips. |
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| jerZ07002 |
| How do you reconcile the claim that obama inserted a new CEO at GM to pander to the auto workers when his administration declined GM's restructuring proposal for, among other reasons, the lack of concessions by the workers union, which increasingly looks as though it may force GM into bankruptcy (which will result in a loss of more jobs and pensions than if GM averts bankruptcy)? |
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| Groundhog Boy |
| quote: | Originally posted by jerZ07002
How do you reconcile the claim that obama inserted a new CEO at GM to pander to the auto workers when his administration declined GM's restructuring proposal for, among other reasons, the lack of concessions by the workers union, which increasingly looks as though it may force GM into bankruptcy (which will result in a loss of more jobs and pensions than if GM averts bankruptcy)? |
I was wondering the same thing. That said, Wagoner was somewhat of a scapegoat. From accounts that I've read, he had made decent progress in getting concessions from the UAW and had pushed through many of these new more energy efficient vehicles. Just not fast enough. |
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| ziptnf |
| quote: | Originally posted by Q5echo
been telling all my Obama-friendly buddies wait till gas prices shoot back thru the roof and this administration has done all about it. this is what yall voted for, dips. |
Gas prices are going to rise again regardless of who we voted for. Neither party could control that, there are bigger issues on the line, such as, I don't know, America's entire auto market going bankrupt? Not to mention the Middle East still doesn't exactly like us, which is also good for our oil supply :rolleyes: |
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| jerZ07002 |
| quote: | Originally posted by Groundhog Boy
I was wondering the same thing. That said, Wagoner was somewhat of a scapegoat. From accounts that I've read, he had made decent progress in getting concessions from the UAW and had pushed through many of these new more energy efficient vehicles. Just not fast enough. |
during his watch GM also lost more money than it earned. GM also focused more on being a financing company than an automobile manufacturer. People weren't buying GM's because they necessarily liked the vehicles, rather, many people purchased GM's because the deal was too good to turn down. The model management of GM devised was to make cars just good enough so people would buy them (not caring about making a profit on the sale) so that GM could finance the purcahase of those cars and really make the money on the financing. That's not a successful model for a car manufaturing company; credit should be a complimentary service, not the primary product. The blame for that model falls squrely on top management, including Wagoner. |
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| Groundhog Boy |
| quote: | Originally posted by jerZ07002
during his watch GM also lost more money than it earned. GM also focused more on being a financing company than an automobile manufacturer. People weren't buying GM's because they necessarily liked the vehicles, rather, many people purchased GM's because the deal was too good to turn down. The model management of GM devised was to make cars just good enough so people would buy them (not caring about making a profit on the sale) so that GM could finance the purcahase of those cars and really make the money on the financing. That's not a successful model for a car manufaturing company; credit should be a complimentary service, not the primary product. The blame for that model falls squrely on top management, including Wagoner. |
I also think that a huge chunk of those losses stem from brand degradation that started long before Wagoner was at the helm. My parents still refuse to buy GM products because of the ty Jeep Cherokee that we owned in the 80s. The last American car that they for themselves bought was in 1988, which got handed down to me when I started to drive. Since then, they've had all Subarus, Mitsubishis, and now Nissans. The problem is that after 1 or 2 pieces of that are that expensive and that get that poor of mileage, you never got back and we have the 80s to thank for that. |
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| Kapedano |
The biggest problem with GM that many people do not realize is branding. Most of their brands stand for nothing. I highly doubt top executives at GM or even any government officials realize that.
I would hope that Obama might realize the problem since he knows a bit or two about branding.
The problem isn't management, unions, gas millage or whatever...the problem is that they can't brand. Changing CEOs or negotiating union deals is not going to achieve anything if they do not fix that very simple problem. Quite frankly that's the problem with a lot of the automobile and airline industry in America. |
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| The17sss |
| quote: | Originally posted by jerZ07002
during his watch GM also lost more money than it earned. GM also focused more on being a financing company than an automobile manufacturer. People weren't buying GM's because they necessarily liked the vehicles, rather, many people purchased GM's because the deal was too good to turn down. The model management of GM devised was to make cars just good enough so people would buy them (not caring about making a profit on the sale) so that GM could finance the purcahase of those cars and really make the money on the financing. That's not a successful model for a car manufaturing company; credit should be a complimentary service, not the primary product. The blame for that model falls squrely on top management, including Wagoner. |
The CEO thing is just a small piece of the issue, which I believe, if you read the whole post, is about more government control over private industry and squeezing our energy resources to create a market for the cars people refuse to buy.
I never said the new CEO was inserted for the purpose of pandering to the UAW... however, it's not a coincidence that the UAW chief gets along a lot better with the new CEO, who by the way certainly won't have the freedom to do what he wants to do because ultimately, he'll be answering to the person who appointed him to that post... much the same as we are seeing of the CEO's who accepted TARP money.
It's about a line being crossed from government into private industry that has never been crossed before. The people in charge at GM had very little freedom to operate as they felt was best as business men who actually know business because of garbage like the CAFE standards and all kinds of other government regulations put in place by people who don't know anything about cars, plus catering to the special interest environmentalists, combined with the unions.
Wagner was responsible for the push to large SUV's and trucks, which made up the bulk of the profitibility... we can't forget that. He was basically forced into making vehilces via government regulations at a cost, not a profit, which didn't help his cause. |
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| The17sss |
| quote: | Originally posted by Kapedano
Quite frankly that's the problem with a lot of the automobile and airline industry in America. |
I agree with this to a point... same with the airlines: if you mention United, or Delta, or US Air, or Northwest, I think "meh... what's the difference?" The only domestic airline who stands for something is Southwest, who has a stellar reputation of being on time and is usually the only airline that makes a profit. |
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| Kapedano |
| quote: | Originally posted by The17sss
I agree with this to a point... same with the airlines: if you mention United, or Delta, or US Air, or Northwest, I think "meh... what's the difference?" The only domestic airline who stands for something is Southwest, who has a stellar reputation of being on time and is usually the only airline that makes a profit. |
Right and that's because Southwest had a great business plan from the start and they executed it. They gave it time to grow. They stood for something. Once the competitors realized what Southwest was doing, they were too late.
The same applies to the auto industry. If you look at the Saturn brand as an example, you will notice that they originally started making cars targeting the younger generation. Once they became successful, they said, why don't we use our name and make other models like SUVs for example? It would only be logical right since their brand was booming? Well, once this younger generation grows, they do not want to drive Saturn's anymore.
Same goes for the Chevy models, etc.
So I honestly do not think that the problem is gas mileage or whatever people use as an excuse. It's simple branding.
GM has failed and they should pay for it. It has been their mistakes from the beginning.
What will Obama do next? Take over the airline industry?
Let them fail. They have failed in the most simple business strategies and they should pay for it. |
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| jerZ07002 |
| quote: | Originally posted by Kapedano
The biggest problem with GM that many people do not realize is branding. Most of their brands stand for nothing. I highly doubt top executives at GM or even any government officials realize that.
I would hope that Obama might realize the problem since he knows a bit or two about branding.
The problem isn't management, unions, gas millage or whatever...the problem is that they can't brand. Changing CEOs or negotiating union deals is not going to achieve anything if they do not fix that very simple problem. Quite frankly that's the problem with a lot of the automobile and airline industry in America. |
You honestly think that issue slipped by top managament at GM, most of whom have mbas from harvard and other ivy league business schools, and also slipped by their management consultants from mckinsey, most of whom also happen to have mbas from ivy league schools. Not likely - bradning is in the required curriculum of even the worst mba programs! The more likely scenario is that management thought the very profitable business of financing vehicle purchases was going to stay strong enough to keep stock price high until their stock options vested. They didn't anticipate the oil price spike this summer and the economic meltdown of the past few months. Prior to those events, they were making cars just reliable enough that people would purchase them with huge discounts. Those discounts were recovered over 3-6 years in the form of interest on loans, and interest and recovery value on leases.
The government and GM know, and have known, for a while that there is a branding issue. The branding issue, however, was not so detrimental when credit was flowing and GM could unload vehicles at steep discounts. |
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