GM Betrayed Consumers? Or Vice Versa?

December 9, 2008

http://www.reuters.com/article/newsOne/idUSTRE4B738W20081208

Hoping that some humble pie might grease the skids for the auto rescue plan in congress, GM has purchased full-page ads in which it basically throws itself at the mercy of voters, hoping to blunt some of the criticism of the deal. 

General Motors Corp on Monday unveiled an unusually frank advertisement acknowledging it had “disappointed” and sometimes even “betrayed” American consumers as it lobbies to clinch the federal aid it needs to stay afloat into next month.

“While we’re still the U.S. sales leader, we acknowledge we have disappointed you,” the ad said. “At times we violated your trust by letting our quality fall below industry standards and our designs became lackluster.”

The unsigned open letter, entitled “GM’s Commitment to the American People” ran in the trade journal Automotive News, which is widely read by industry executives, lobbyists and other insiders.

“We have proliferated our brands and dealer network to the point where we lost adequate focus on the core U.S. market,” the ad said. “We also biased our product mix toward pick-up trucks and SUVs.”

Frankly, this makes me sick.  Has GM made some mistakes?  Of course.  Every company does.  So do the foreign automakers.  But let’s look at the facts.  Did GM’s quality fall behind?  Yes, back in the ’70s, they produced some pretty poor vehicles.  The Vega and Chevette come to mind.  But people forget that, at the same time, the offerings coming out of Japan were little better.  Now GM’s quality is world class.  The Buick brand is at the top of the heap.  Yet, the “poor quality” image remains.  Meanwhile, Mercedes is still perceived as a top quality brand in spite of its quality ratings sinking to rock bottom.

Back in ’75, wanting something cheap and fuel efficient, I eschewed the Vega and Pinto offerings and bought a new Toyota Corolla.  It ran great and got great gas mileage.  But it required a complete tune-up every 15,000 miles and, in spite of being professionally rust-proofed when it was brand new, it literally rusted out from beneath me by the time it was six years old.  I swore I’d never buy another.  More recently, Toyota had a terrible problem with engines burning up early due to undersized oil passages.  Yet there was barely a whisper of  it in the press and Toyota’s “quality” image was left untarnished. 

Have GM’s designs become “lack-luster?”  Yes, you could say that about some models.  But no one would call a Corvette or any Cadillac “lackluster.”  And Corvette outperforms virtually any other sports car on the market at half the price of many of them.  I don’t think anyone would call the Pontiac G6, the Pontiac Solstice, the Saturn Sky, the Saturn Aura or  the Chevy Malibu “lackluster.”  And the quality of these cars is the equal of anything coming out of Japan.

Did they “proliferate” their dealer network?  Sure, back when they had the majority of the domestic market, at a time when customer service was considered paramount and even people in small towns wanted the convenience of having a dealer nearby. 

Did they “bias their product mix toward pickups and SUVs?”  Sure, as more and more foreign competitors gobbled up share in the small car market, they were forced to retreat into the market segment where they could still make a profit.  And while they are criticized for building gas-guzzlers, there is little acknowledgement of the fact that this is exactly what many American consumers wanted and still want to this day, now that gas prices are falling again.  In the meantime, where is the criticism of Toyota, Nissan, Mercedes and BMW for building their own gas-guzzling SUVs?  Where is the criticism of Porsche for building the ridiculous Cayenne SUV?  Where is the criticism of Kia and Hyundai for jumping on the bandwagon? 

Did GM “proliferate” the number of brands?  No.  It had a lot of brands, but they were all acquired back in the first half of the 20th century.  Oldsmobile is gone.  GM did introduce the Saturn brand in an attempt to re-establish itself in the small car market while setting up a lower cost wage structure.  What good has it done them?  They don’t get a bit of credit for this enormous effort to build smaller, more fuel efficient cars with lower labor cost.

Regarding the issue of fuel efficiency, GM is criticized for not getting ahead of the curve by introducing more fuel efficent vehicles.  It’s not as though they haven’t tried.  But fuel efficient cars are disproportionately bought by younger buyers and, among this demographic, it’s not “hip” to buy American.  (It’s probably not “hip” to use the word “hip” either, but that’s about as “hip” as I can get!)  The Chevy Cobalt gets 37 mpg, better than the Honda Fit (and a nicer car as well) but does anyone buy them?  Nope.  They don’t show up in “tuner” magazines.  Much cooler to drive a Fit.  My son drives a Pontiac Sunfire that he bought new in 2004 for $11,000 and gets 37 mpg on the highway, but Pontiac finally killed the Sunfire when sales fell flat.  My 2001 Buick Regal, with a 240 hp supercharged V6 gets over 30 mpg on the highway.  But are any young people buying these cars?  Are you kidding me?  A “gas-gazzling American car?”  Eewww!  Not cool! 

Granted, Toyota hit a home run with its Prius hybrid, leap-frogging all others in fuel efficiency.  But in 2010, Chevy will introduce the Volt, a hybrid that can run for forty miles without burning a drop of gas.  GM didn’t embark on this enormous development project because they were forced into it.  They did it on their own.  They take heat for dropping the EV-1 prototype vehicle because market research showed that they couldn’t sell it at the price needed to recover the cost.  But where is Toyota’s electric vehicle?  Where is Nissan’s?  Where’s Mercedes’?  Is anyone criticizing them for being slow to go electric? 

Sure GM has made mistakes, its biggest being its opposition to increasing CAFE mileage standards.  But come on.  That’s not why they’re struggling.  First of all, they’re not the ones who destroyed the economy with the sub-prime mortgage mess.  Secondly,  GM, Ford and Chrysler are all struggling to hold onto market share because the domestic market has been watered down by dozens of foreign brands.  Spread that market evenly across all those brands and it’s a miracle that the domestics have done as well as they have.  Finally, they’re battling an image problem that may have been well-deserved at one time but is now as about as archaic as some of the knowledge of the auto industry on display at the senate hearings. 

Maybe now, with our economy on the brink of complete collapse, it’s time to drop our double standards and our anti-American car bias and give the Big Three a second look.  There are a lot of Americans with the attitude that “I’d never buy an American car under any circumstances.”  If those folks are looking for someone to blame for the domestic auto industry’s ills, maybe  a mirror would be a good place to start.


Government Accuses Auto Industry of “Mismanagement?!?!”

November 19, 2008

As I watched the leaders of the domestic auto industry take their beating from the Senate Banking Committee on Tuesday, I couldn’t help being struck by the absurdity of these senators accusing the Big Three of mismanagement. These senators who chided the Detroit execs for making bad decisions are the same people who voted for the Iraq war. These very same senators who accuse the CEOs of mismanaging shareholder funds are the very ones whose policies have ruined America’s economy. These same senators who charge the Big Three with caving in too easily to the demands of the UAW are the same ones who rolled over like submissive puppies when the financial industry came looking for $700 billion and AIG needed $150 billion. They who complain that Detroit doesn’t build cars that people want are the same people who showed callous disregard for the people of New Orleans as they wallowed in muck for months on end following Katrina. These same senators who deride executive compensation packages are themselves lavished with lobbyist gifts and favors while they shrug off single-digit approval ratings. Never has such a level of hypocrisy been on such public display. I wonder how fast these same Senators would be on their knees before China, begging for money were it not for their ability to crank out new money on their own printing press to cover up their screw-ups.

Certainly, the Big Three are not without their faults. But considering that the American car market is sliced and diced into ever-tinier pieces and passed out to every foreign car-maker who comes along, for nothing in return, it’s really quite remarkable that they haven’t lost even more market share and that they’ve survived for as long as they have. If Congress insists on continuing to pursue such destructive, idiotic trade policy, then the least they can do is give the domestic car makers a helping hand.

Frankly, when you look at the performance of the Detroit automakers vs. the performance of Congress, we all may be much better off if we placed the operation of the federal government under the management of the Big Three.