PDA

View Full Version : The fall of an American giant



Nickdfresh
06-02-2009, 06:30 AM
NYT: The fall of an American giant
GM, once the symbol of U.S. innovation, is filing for bankruptcy
By Micheline Maynard
The New York Times
updated 8:38 a.m. ET, Mon., June 1, 2009

DETROIT - It is a company that helped lift hundreds of thousands of American workers into the middle class. It transformed Detroit into the Silicon Valley of its day, a symbol of America’s talent for innovation. It built celebrated cars, like Cadillacs, that became synonymous with luxury.

And now it is filing for bankruptcy, something that would have been unfathomable even a few years ago, much less decades ago, when it was a dominant force in the American economy.

Rarely has a company fallen so far and so fast as General Motors . And while its bankruptcy appeared increasingly likely in recent weeks, the arrival of the moment is still a staggering blow, particularly for anyone with ties to the company.

“I never ever could have believed that one day this thing would go that way,” said Jim Wangers, a retired G.M. executive who was part of the team that developed the Pontiac GTO , and the author of “Glory Days,” about Pontiac’s heyday in the muscle-car era of the 1960s. “We were so successful,” he added.

Founded in 1908, G.M. ruled the car industry for more than half a century, with a broad range of vehicles, reflecting the company’s promise to offer “a car for every purse and purpose.”

The expression “What’s good for General Motors is good for the country” entered the lexicon, even though it was a slight misquotation of Charles E. Wilson, G.M.’s president in the early 1950s.

But then G.M. began a long and slow process of undermining itself. Its strengths, like the rigid structure that provided discipline early on, became weaknesses, and it lost its feel for reading the American car market it helped create, as Japanese automakers lured away even its most loyal buyers.

Only eight months ago, Rick Wagoner , then its chief executive, stood before hundreds of G.M. employees to celebrate the company’s 100th anniversary. “We’re a company that’s ready to lead for 100 years to come,” Mr. Wagoner said.

Instead of leading, G.M. will instead be following other failed companies on a well-worn path into bankruptcy court.

The moment will reverberate beyond G.M.’s epicenter in Detroit, to factory towns in other parts of Michigan and in states like Indiana, Tennessee and Louisiana. It will even be felt on Fifth Avenue in New York, where it built its financial headquarters, and Epcot at Walt Disney World in Florida, where G.M. sponsors the Test Track Pavilion, a showcase of its latest cars.

G.M. factories churned out family cars, pickup trucks and memorable muscle cars with taut, sculptured body panels that were rolling displays of American DNA.

A G.M. plant was a ticket to prosperity for the communities lucky enough to land one. G.M. literally put Spring Hill, Tenn., on the map when it picked the town outside Nashville for its Saturn plant in 1985, prompting the hamlet to swell with new homes, motels and restaurants.

Now city officials around the country, including those in Spring Hill, nervously await phone calls on Monday to tell them if their plants will be among the 14 G.M. is expected to announce it will close in the latest round of cuts.

But even after its deep cuts, G.M. can still claim to be the country’s largest automaker.

For G.M., that simple fact — its sheer size — was long used as a trump card to end debates. If the critics were so right about all that was wrong with G.M., why did so many people buy its cars?

The company did have vast numbers of loyal buyers, but G.M. lost them through a series of strategic and cultural missteps starting in the 1960s.

It bungled efforts in the 1980s to cut costs by sharing the underpinnings of its cars across different brands, blurring their distinctiveness.

G.M. gave in to union demands in 1990 and created a program that paid workers even when plants were not running, forcing it to build cars and trucks it could not sell without big incentives.

Its finance staff argued with product developers and marketers who pushed for aggressive spending on new cars and trucks. But forced to feed so many brands, G.M. often resorted to a practice called “launch and leave” — spending billions upfront to bring vehicles to market, but then failing to keep supporting them with sustained advertising.

With its market share shrinking, G.M. could not give its multiple brands and car models the individual attention that helped Honda attract customers to the Accord and Toyota to its Camry.

It also lost interest in vehicles that needed time to find their audience, as happened when the company introduced the EV1 electric vehicle and then dropped it in 1999 after only three years.

Now G.M.’s brand lineup is being halved, with the company jettisoning divisions like Pontiac.

“Nobody gave any respect to this thing called image because it wasn’t in the business plan,” Mr. Wangers said. “It was all about, ‘When is this going to earn a profit?’ ”

Over the years, G.M. executives became practiced at the art of explaining their problems, attributing blame to everyone but themselves.

That list included the United Automobile Workers , for demanding health care coverage and pensions (even though G.M. agreed to provide them); government regulators, for imposing rules that G.M. said hampered its competitiveness; the Japanese government, for unfairly helping its own carmakers break into the United States market; and the news media, for failing to appreciate G.M. vehicles and the strides the company was making to improve them.

Asked in 1995 why he had not moved faster to reorganize the company, the late G.M. chief executive Roger Smith replied, “Wouldn’t it have been wonderful if we could have flipped a switch?”

Even last week, G.M.’s newly retired vice chairman, Robert A. Lutz , said the automaker had experienced a “world of hurt, much of it not of our own doing.”

Sloganeering was not backed up by execution. Executives wore lapel pins, for example, in 2002, with the number “29” — referring to the market share the company vowed to regain (most companies focus on profits). Through April of this year, its share was 19 percent, a steep drop from its peak of 54 percent in 1954.

Consumers started blaming G.M. for sub-par vehicles. They may have given them second and third chances, but many eventually started switching to other brands, which will make it that much harder for G.M. to win them back.

Mr. Wagoner was able to hold on to his job for longer than people expected, as G.M.’s stock fell steadily from about $70 when he took charge at the start of the decade. It closed at 75 cents a share on Friday.

Mr. Wagoner was pushed out by the Obama administration, which is now making the call to push the company into bankruptcy court.

A judge will then start the process of building a new, though much diminished, G.M. into a company that might have a shot at a second century. But the automaker that so dominated center stage in the American car market for so long will have to earn that place back.

Nick Bunkley contributed reporting from Detroit.

This story, "After many stumbles, the fall of an American giant," originally appeared in The New York Times.

Copyright © 2009 The New York Times

MSNBC (http://www.msnbc.msn.com/id/31038035/)

Rising Sun*
06-02-2009, 07:01 AM
You Yanks obviously have no idea how to run GM. ;) :D

Our GM subsidiary, run by a Yank who perhaps should have been kept in America, has the best selling car in Australia but still hasn't managed to make a profit for the past five years (:confused:), but it will survive the US parent company's collapse without going broke. (We don't have Chapter 11 bankruptcy here. Thank Christ, or the corporate crooks here would get away with even more than they already do.)

Just don't ask me how our GM survives, because I have no idea.


GM Holden says local jobs safe

The World Today - Tuesday, 2 June , 2009 12:14:00
Reporter: Sue Lannin

PETER CAVE: The boss of General Motors' local subsidiary says the Holden brand is quite safe.

The company here employs more than 6,000 people and chief executive Mark Reuss says there will be no job losses despite the bankruptcy of GM in USA.

The announcement has been welcomed by the Federal Government and the unions, who say that the $6.2-billion green car plan has helped maintain local operations.

More from our finance reporter Sue Lannin.

HOLDEN WORKER: It means I've got a job. Best news we've heard for a long time.

HOLDEN WORKER 2: Oh, fantastic. You know, we've got a job, it's good for the economy, good for Australia, good for General Motors.

HOLDEN WORKER 3: I think there will be restructuring anyway and obviously a few people are going to be told or asked to volunteer.

SUE LANNIN: Workers at the General Motors Holden plant in Port Melbourne on the news that GMH would not be closed or sold off because of the bankruptcy of its US parent.

GMH boss Mark Reuss was also relieved when he spoke to journalists this morning.

MARK REUSS: We have no plans for any job losses right now. And we've worked very creatively with a lot of integrity to retain our job basis, because we're viewing this as a very… this is the manifestation of the global financial crisis. You know, 50 per cent of our production is export. So I can't control what happens in the Middle East or the United States in Australia, but we are going to re-put and recoup our export losses because of the crisis with new programs.

SUE LANNIN: Mark Reuss says GMH is has no debt owed to the parent company.

Holden hasn't made a profit for the last five years but Mr Reuss says he believes the tide is turning.

MARK REUSS: We still have the best-selling car in Australia. People love it and we're going to keep making it, selling it and servicing it, just like we always have.

We are a viable, sustainable business in the long-term. We are cash flow positive, we are liquid, we're on the verge of turning a profit here this last month, even in a down business.

SUE LANNIN: The Federal Government launched the multi-billion dollar green car plan last year.

From that, GMH will get around $150-million to build a fuel efficient, four-cylinder car.

Federal Industry Minister Kim Carr says the government assistance has been vital.

KIM CARR: And what the company says internationally is that the relationship between General Motors Holden - with its suppliers, with its workers, with the Government - is a model for the rest of the GM world.

We're now in a situation which, as a result of the Government's new car plan, that we're able to move forward.

And we are to look to the future, providing high-skilled, high-wage jobs, building cars that people want to buy, exporting those cars and ensuring that General Motors Holden is very much part of the new GM worldwide.

SUE LANNIN: GMH has already restructured and cut shifts at its plants in Australia.

Dave Oliver is the head of Australian Manufacturing Workers Union.

DAVE OLIVER: We are very confident that the announcement today will position Holden Australia into a very positive position going forward into not only local car manufacturing but opportunities for export. And as a result of that, we're very confident that jobs will be secured. In fact, we think that there'll be further opportunities for export, which could in fact see jobs increase.

SUE LANNIN: Like the rest of the world, car sales have also plunged locally, although Mark Reuss is confident about the future.

Car industry analyst Evan Stents says he believes GMH will survive the economic downturn.

EVAN STENTS: All car companies in Australia that manufacture locally built cars have been struggling somewhat, including Toyota for that matter; they build large cars in Australia. What Holden also is doing is it recently announced the production of the four-cylinder cruise motor vehicle, and that's going to pick up some of the excess capacity that's been created as a result of decline in demand for larger built cars.

But I don't think ultimately that Holden will close in Australia. It's still got healthy export markets in the Middle East.

SUE LANNIN: But motoring editor Clive Matthew-Wilson, who publishes the Dog & Lemon car buyers' guide, is sceptical.

CLIVE MATTHEW-WILSON: Holden is betting its future on a new small, four-cylinder car. This is in fact a Daewoo, and Daewoo is currently losing billions on building that same car in Korea. Would I put my own money into this venture? No I wouldn't. I mean basically, everybody's strategy - and that is Holden, the unions and the Government - is basically involves thinking happy thoughts. And I'm not sure that that's such a great survival strategy.

SUE LANNIN: Local brakes maker Pacifica says the GM bankruptcy is likely to negatively affect its earnings in the Asia-Pacific region.

It expects to make a loss in 2009, although the company says that's not because of GM. http://www.abc.net.au/worldtoday/content/2008/s2586990.htm

herman2
06-02-2009, 10:13 AM
GM has 6000 dealerships and Honda, or maybe its Toyota, has only 2000, in America, yet the later sells more cars than GM (with fewer dealerships)! ( so i heard on CNN last night. If Americans love their country so much than why don't they buy their own product first before they complain about the bailout. ya, the cars might not be so reliable, but at least they would support the American economy. I mean if OSAMA owned Honda, would we still be buying Honda cars? Where is our loyalty?!And another thing I was wondering. If GM is going to close 2000 dealerships then I imagine each dealership must have at least 30 people employed? including sales staff, managers etc? (maybe I'm off and its like 100 but for my comparison lets say 30) So, then 30 times 2000 = 60,000 people unemployed. Not to mention those laid off from trimming the fat in the plants, so were probably looking at over 100,000 unemployed Americans...all because we decide to buy Japanese cars.

doc_holliday
06-02-2009, 11:23 AM
It's really scary what's happening with the economy right now...not a good time to be looking for work.

Dixie Devil
06-04-2009, 09:35 AM
GM has 6000 dealerships and Honda, or maybe its Toyota, has only 2000, in America, yet the later sells more cars than GM (with fewer dealerships)! ( so i heard on CNN last night. If Americans love their country so much than why don't they buy their own product first before they complain about the bailout. ya, the cars might not be so reliable, but at least they would support the American economy. I mean if OSAMA owned Honda, would we still be buying Honda cars? Where is our loyalty?!And another thing I was wondering. If GM is going to close 2000 dealerships then I imagine each dealership must have at least 30 people employed? including sales staff, managers etc? (maybe I'm off and its like 100 but for my comparison lets say 30) So, then 30 times 2000 = 60,000 people unemployed. Not to mention those laid off from trimming the fat in the plants, so were probably looking at over 100,000 unemployed Americans...all because we decide to buy Japanese cars.

One thing to consider, most of the Japanese cars are made in the States while components for the American owned vehicles are made here but the vehicles themselves are built in Mexico and Canada. Even my Chevrolet that I drive now was built in Canada while my last truck (a Toyota) was built in the U.S. Rather odd when you think about it.

Nickdfresh
06-04-2009, 09:50 AM
GM has 6000 dealerships and Honda, or maybe its Toyota, has only 2000, in America, yet the later sells more cars than GM (with fewer dealerships)! ( so i heard on CNN last night. If Americans love their country so much than why don't they buy their own product first before they complain about the bailout. ya, the cars might not be so reliable, but at least they would support the American economy. I mean if OSAMA owned Honda, would we still be buying Honda cars? Where is our loyalty?!And another thing I was wondering. If GM is going to close 2000 dealerships then I imagine each dealership must have at least 30 people employed? including sales staff, managers etc? (maybe I'm off and its like 100 but for my comparison lets say 30) So, then 30 times 2000 = 60,000 people unemployed. Not to mention those laid off from trimming the fat in the plants, so were probably looking at over 100,000 unemployed Americans...all because we decide to buy Japanese cars.

There's going to be a lot of consolidation in the industry, so the numbers of unemployment are a bit exaggerated. There are a couple of the nation's bigger GM dealerships here in town that are actually buying up land and expanding....

As for the dealerships going under, well, it's sad. But don't think it wouldn't happen anyway. There are a lot of dealerships holding on by their fingernails as it is that don't really sell enough cars to justify their existence...

Rising Sun*
06-04-2009, 09:54 AM
One thing to consider, most of the Japanese cars are made in the States while components for the American owned vehicles are made here but the vehicles themselves are built in Mexico and Canada. Even my Chevrolet that I drive now was built in Canada while my last truck (a Toyota) was built in the U.S. Rather odd when you think about it.

It's all about where it's most profitable to build.

Not necessarily the cheapest labour, but the cheapest way to get the product to its market and exploit market advantages as is the history of Ford in Windsor, Canada from early in the 20th century.

Nickdfresh
06-04-2009, 10:07 AM
I personally don't consider a car produced in Canada by UAW workers as at all foreign. What actually pisses me off a little are things like Ford deciding to build their neat small car based on the Mazda2, the Fiesta, in Mexico rather than in the States. But that's not a huge issue to me, as they did decide to build the next generation Ford Focus in Detroit at their old truck plant...

tankgeezer
06-04-2009, 11:01 AM
With a some exceptions, cars of any maker are pretty equal in quality, and longevity these days. Toyota's reputation is due mostly to perception rather than substance. In earlier times, they were better due largely to the use of technology, and very responsive, and responsible management/dealer attitudes. In the present day, the field is level, everyone uses the same machines to do the same things. But G.M. has steadfastly refused to make any real change in their management style. Its still highly centralized, and overburdened with middle management. It lacks the ability to make a timely response to changes in market conditions.
Foreign makers do manufacture parts, and do final assembly in the U.S. this is mostly due to pressure from Unions, and legislators, as well as a groundswell of public concern for U.S. jobs. Domestic content laws were being drafted, and the buzz was not promising for off shore companies share for the U.S. auto market. So, under this particular sword of Damocles, Japan,and some others opted to build facilities here, though proclaiming genuine concern for the American workers as their motivation.
As to U.S. makers having parts or assembly done in Canada, or Mexico, Thats nothing new, though oddly, a car built in Canada is (at least to UAW people,) not a foreign car, but one from Mexico is, and would be looked down upon. VW produced some vehicles in Mexico, the "thing" for one, maybe some of the bugs too. (most of the Bug mechanics locally are Mexican). Today, lots of automotive work is done in Mexico, even Toyota has their engine controllers built there. (by Delphi auto systems)

Dixie Devil
06-04-2009, 01:08 PM
I personally don't consider a car produced in Canada by UAW workers as at all foreign. What actually pisses me off a little are things like Ford deciding to build their neat small car based on the Mazda2, the Fiesta, in Mexico rather than in the States. But that's not a huge issue to me, as they did decide to build the next generation Ford Focus in Detroit at their old truck plant...

Well Canuck built trucks don't bother me either but the a few people were saying Americans should be loyal and buy domestic cars that are built in other countries instead of foreign cars that are actually built in this country. Just speaking of overall job numbers it probably is about equal in job opportunities no matter if people buy 'foreign' or 'domestic.'

herman2
06-04-2009, 02:52 PM
Well Canuck built trucks don't bother me either but the a few people were saying Americans should be loyal and buy domestic cars that are built in other countries instead of foreign cars that are actually built in this country. Just speaking of overall job numbers it probably is about equal in job opportunities no matter if people buy 'foreign' or 'domestic.'

YA. Us Canucks are like Family! We are like Pea and Pod. We are like ketchup and french fries, we are like sister and brother:) God Bless America for letting us build some of their cars in our country!

Dixie Devil
06-04-2009, 03:23 PM
YA. Us Canucks are like Family! We are like Pea and Pod. We are like ketchup and french fries, we are like sister and brother:) God Bless America for letting us build some of their cars in our country!

:lol: Well we have to give y'all something to do up there. I imagine hockey and seal bashing gets old if it is all you have to do :lol:

Gutkowski
06-11-2009, 09:43 PM
I was told that the average Union produced car in the states taxed on on average 3k to the final cost of manufacture for that unit built .