jawfish

General Motors Wake part one
john posted in politics & culture, rides, technologies on November 18th, 2008

First lets dispense the cliche’s:
Whats good for GM is good….
GM, which will lose global number one sales….
Perfect storm….
Too big to fail…

The Problem:
GM, Ford and Chrysler are spending more money than they take in. The burn rate is fast enough to leave GM penniless in a few months. No one, except possibly the taxpayer, will lend them money, figuring it would be good money after bad. The stock market is devaluing GM to the point than a billionaire could simply buy all the stock (which is really buying the debt).

GM falling stock price chart There is not much value left there….

A good article at Seeking Alpha

	Two truly stupid models.
Pontiac Aztec		Ford Excursion

The Money Situation:
The market seems to think privately-owned Chrysler is a goner. Ford has a little more money than GM, but is essentially in the same boat, even if it could take over GM’s domestic market share. Vast numbers of vendor and related jobs depend on the Big 3, 2-3 million has been quoted. Its easy to guess that a sudden loss of that many jobs would tip us into a depression. Worldwide, manufacturing and transportation businesses are in deep trouble, from Boeing and Airbus, to the world-wide shipping industry, to China itself.

The Political Situation:
It’s hard to see how any President, let alone a Democrat who just carried the Midwest, can suck it up and let GM die. And then there is that Depression looming. Nobody wants to be Herbert Hoover.

The Design Problem:
American companies have once again ( see 1970’s) failed to plan for rising gas prices, and are caught with aging designs that weigh too much, push too much air, and consume too much. They have not diversified with small vehicles, in spite of having successful off-shore small-car companies. They have not invested in in-house powertrain research, like hybrids and batteries. Their bit of fuel-cell research is pie-in-the-sky stuff, with no path to manufacture. The one bright spot is the Chevy Volt, not yet ready for manufacture, and never intended to be sold in large quantities.

The Culture Problem:
In four decades while the Japanese and Germans were optimizing their labor-hours-per-car, time-to-market, and reliability, Detroit was selling SUVs and trucks as commuter cars, with haphazard work on future manufacturing. With a few loss-leader exceptions like the Dodge Viper and Ford GT40 and long-running Chevrolet Corvette, Detroit made cars carelessly for people who are careless about cars, neglecting both the Apple Computer (cars as digital appliances) end of the market and the performance end (import tuners). They did great with the size-is-status market.

The Labor Problem:
The labor problem is partly the healthcare and pensioner problem. The Big 3 hourly employees are still dependent on the mother company for healthcare ( there’s an unfunded plan to transfer to UAW) and so are the pensioners, whose healthcare and pensions are not fully funded either. Further, the future is not with the UAW, so it may end up fighting the greater communal good in favor of its own survival.

The Rewards Problem:
The short-sightedness of Detroit has long been publicly discussed. Foreign manufacturers seem to be planning design changes in sync with changing market conditions with success, though all will be hurt by the sudden downturn in world-wide sales. Rewarding dismal failure just ain’t American somehow.

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