Why wait for experts? Judge for yourself.

Oil is a finite resource. An increasing price is to be expected. Much of the supply is controlled by a cartel. We import an increasing proportion of what we use every year. We have had severe oil price shocks off and on since 1973. In spite of this, GM has neglected their small car program and never been ready for these. See my #121 rant on the Cobalt… the car didn’t have to have class-trailing fuel economy for the first 4 years it was on the market. This is typical of GM’s small car programs for decades.

GM vehicles include:
- Aztek
- SSR (thirsty coupe, roadster with poor handling, pickup truck that can’t haul anything, dragster that’s too slow to win: 4 bad cars for the price of two good ones)
- Sky/Solstice (GM loses $10K per unit – having no trunk doesn’t help sales)
- Malibu/Aura hybrid ($4K premium for almost no improvement in fuel economy)
- Tahoe/Yukon/Escalade hybrids – $15(?)K premium on a vehicle marketed to people who couldn’t possibly care less about fuel prices or the environment.
- The New Camaro. Sure, it looks dramatic but muscle cars are sooo 1967. And it’s two years too late… GM has let the Challenger take the lead and it’s a two-door introduced into a market where two-doors are most definitely on the decline (Cougar – gone; Monte Carlo – gone; Original Camaro – gone; Mustang sales declining for years; Challenger sales are indifferent). By the way, I drove a ‘67 home after getting my license and I loved the way that car looked. The New Camaro… ugly. Sorry but it’s proportions are cartoonish. In addition, all other plans for the platform have been abandoned.

GM has tried a number of material and component innovations in several critical areas on certain cars in the last two decades. They used a bad gasket material in a lot of the small V6 engines, which led to early failures and expensive repairs. They switched to plastic intake manifolds on a broad range of engines and they started leaking early and causing a lot of inconvenience and expense. They introduced DexCool in a certain range of engines which tended to sludge up and ruin engines. Within two years, three at the very outside, they had ample evidence that these were all bad decisions and the consequent problems would turn off and alienate customers. They continued to build engines with these “features” for 7 more years. The people involved moved up the ladder and continue to run GM, even to this day, or the people they trained and inculcated in “The GM Way” are running GM today.

GM tracks managers for success (a variation on the old boy’s network) and swaps them in and out of jobs on the way up but never keeps them in a single responsible position long enough to hold their feet to the fire for the decisions them make. This is part of “The GM Way.” Managers get to the top without anyone finding out whether or not they’re any good at all.

GM has a very top-down and autocratic development style.

GM has consistently agreed to deals with the UAW and then let the obligations go unfunded.

GM has been doing the cram-down on its suppliers for decades and driven them to the brink of bankrupcty.

GM’s spinoff of Delphi was a failure – GM is sitll on the hook for a lot of cash expense there.

GM set up the Jobs Bank so they could robotify their operations. The Jobs Bank exists (I hope it’s taking its dying breath) but where are the robots?

In other words, there’s plenty of evidence there for you to draw your own conclusions.

If you look carefully at the evidence, I don’t think you’ll go wrong.

Good point!

The problem I see is that, in this warped global trade environment, I cannot tell who is a loser and who is just unfortunate enough to be in a country that doesn’t actively promote it’s domestic industries. For all we know, if Toyota had been operating under the same conditions as GM for the last several decades (e.g., huge health care costs, strict environmental, labor, and intellectual property laws, no state subsidies, no domestic market protected from foreign competition, etc.), it would be in the same (or worse) shape than GM right now.

If experts with good credentials and experience in business (i.e., not me) were to form a consensus that GM would have been been a loser even if the playing field had been level for the last several decades, then I would reconsider my position and oppose government loans for GM.

I believe free-market capitalism can make the world better off by bringing the best goods and services to the people. But for capitalism to thrive, there must be competition, and for competition to exist, everyone must play by the same (or equivalent) rules. Setting and enforcing those rules is the role of government, and I believe the U.S. government has failed us miserably, so it now has the responsibility to fix the damage.

Yes.

“You assume that those that have been good in the past will always be good, those who have been bad will always be bad?”

No. Rather than interrupt your train of thought, I’ll come back to this, later.

“Madoff had a great reputation.”

He has a new one, now. And the old one was built on lies. It’s much harder to conceal the fact that a car is a steaming pile of turd, once it’s in the owner’s hands. The auto manufacturer’s reputation is more honestly earned.

“I would offer that Toyota is guilty of practicing ‘reputation management’. Focusing on manipulation of perception rather than on improvement of products. Perception: Toyotas are better on gas and a more green company. Reality: GM beats them head to head in almost every car and truck segment, EXCEPT the Prius. I would argue the Prius was a specific attempt at reputation management. This could be a looong post. I will stop here.

Well, I wish you had gone on. That looked like it was going to be absollutely fascinating.

And, in any case, I agree. Toyota has practiced “reputation management.” But, when the hard goods are in the customer’s hands, as I mentioned, the reputation is more honestly earned.

And, as far as “except for the Prius” goes, well, a win is a win. Toyota put an extra ace in their deck. Smart move.

Further, GM’s product mix, about a year ago, was 40/60 cars and trucks. Toyota’s was 60/40 cars and trucks. Big difference. GM got a lot of CAFE credit with “flex fuel” vehicles… a fantasy involving ethanol which seldom ends up in GM’s Stupid Useless Vehicles but which, nevertheless, makes them look really good on CAFE’s Rorhshach test.

Toyota not only makes the Prius, it also offers a couple differnt flavors of Yaris, which also whips the Cobalt (even the XFE) on fuel economy (see the real-world results section of the EPA site).

Have I never ranted on about the Cobalt XFE program? The XFE program is a sign of GM’s genius and idiocy… all in one convenient package.

Dial back a few years… The ‘04 ‘Balt hits the streets with a dull thud. It has mediocre gas mileage, to say the least. Since I knew I’d be buying a car, I took the opportunity on vacation to rent one and see how they’d stack up. The answer was, “poorly.” My Rav could do better. GM’s small car can’t match a small sport-ute. That’s pretty pitiful. I tested the Cobalt and then bought another used Rav (which has a nicer interior, anyway).

GM then lets the ‘Balt languish on the market for 4 years, earning a solid reputation for poor fuel economy.

Finally, in ‘08, and for peanuts, GM fixes the ‘Balt. Suddenly, the ‘Balt XFE gets 37mpg on the highway. This is actually quite good fuel economy. Had I driven a Cobalt back in ‘04 and gotten anywhere near that, I’d probably own one, today. And I’d probably be at the Chevy dealer every month to repair it but I digress…

Instead of doing their small car right, 4 years ago, at introduction, when it really counted, GM skipped a very low-cost program to put the Cobalt on the market with really good fuel economy numbers and kick the Corolla around a little bit. When gas hit $4, GM would have had some kind of mindshare out there. Instead of doing it right, GM said “good enough” to a mediocre effort and cost itself at least one sale and probably tens of thousands more (and at better transaction prices).

But… they didn’t.

And… reality intrudes. The XFE Cobalt is only the stick Cobalt. The automatics still get the usual mediocre fuel economy.

GM CAN go head-to-head and win… but mostly, they don’t. GM still needs an XFE automatic. And they don’t have it.

The Malibu whybrid is another good example of how GM stubbornly refuses to get it right. The new 6-speed auto offers better fuel economy. The whybrid continues with the 4-speed. The whybrid (which costs a fair old chunk more than the base Malibu) COULD get “take notice” fuel economy. But it doesn’t. And, of course, on the base Malibu, you also get a 4-speed, so the head-to-head on the base car comparisons still tilts towards Toyota. To get the class-leading fuel economy, GM requires you to pony up an extra $4K or $5K for the LTZ. Well, if you can readily pay that, why not just get a Toyota Camry SE-V6? The real-world fuel economy isn’t much worse than that Malibu LTZ 4-banger but it goes much, much faster (Toyota’s V6’s are shockingly powerful engines) and the SE has some nice frame and suspension treatment that makes it a really very good car. And, if you can afford to blow in an extra $4-5K on a trim level… you probably don’t care all that much about fuel economy, do you?

If you do… and you can afford the LTZ… you buy a Prius, get mind-blowing fuel economy, and keep $3K in change.

“BTW: your ‘perception’ of GM 2009 comes through loud and clear.”

I perceive their well-earned reputation.

Back to, “You assume that those that have been good in the past will always be good, those who have been bad will always be bad?”

As I said, no. BUT… A while back, you also wrote, “Any competent statistician, (I do my fair share in this field)…” If you are competent in manufacturing stats-based quality control, then you know that consistent results (as Toyota has) are the result of thorough and unrelenting application of good processes. Good cars aren’t developed by sprinkling on magic fairy dust and they roll off the line. They start with engineering to quality targets and thorough testing, monitoring and feedback.

Toyota has this… and has had it for years. They know how to make it work. Consult CR or TrueDelta.com… the Prius, in spite of its unique drivetrain, unique components and unusual complexity, is one of the most reliable cars on the road. GM… well… we’re still waiting to see if they have it and whether or not they can make it work. GM seems to be getting the “properly screwed together” aspects of this right with the Malibu. Will the car last? We’ll know in 10 years.

And these processes are put to the toughest test when the manufacturer leaps into uncharted territory. The Prius is rock-solid. The Volt is going to be a real crapshoot.

So, while reputations can be lost, they’re still important to have and very deserving of consideration.

Madoff had a great reputation.

I would offer that Toyota is guilty of practicing ‘reputation management’. Focusing on manipulation of perception rather than on improvement of products.

Perception: Toyotas are better on gas and a more green company. Reality: GM beats them head to head in almost every car and truck segment, EXCEPT the Prius. I would argue the Prius was a specific attempt at reputation management. This could be a looong post. I will stop here.

BTW: your ‘perception’ of GM 2009 comes through loud and clear.

And then you trotted out a list of “failures” and “successes”. So, you were implying nothing? What was your point?

MetrologyFirst, “I have always said that todays cars are about equal, and that buying should be based on personal preference, not derived from biased opinion masquerading as scientific data. If you like how the generic Honda or Toyota sedans look, by all means, buy it. Just don’t tell me you bought it because it is has higher quality than the Malibu. Thats B.S. in 2009. I have always said that Detroit based companies have had problems in the past. I also feel these problems are corrected. All you have to do is open your eyes and look. Perception! Is their problem now. And you know it as well. You work to continue the perceptions of the past, why, I don’t know or care for that matter.”

Nope. Perception is not their problem. Their REPUTATION is their problem. And they earned it. There’s no evidence to support your assertion that the cars are equal in anything but initial quality… a measure which is valueless after 90 days (and even that parity is doubtful). I suppose we should congratulate GM for finally figuring out how to screw a car together properly. But praise for the routine accomplishment is what we give the dull child. Is that GM?

In 2003, Lutz asserted that GM’s quality was absolutely on par with everybody else’s. He was wrong. All such assertions since are like the boy who cried wolf. Perhaps it is, perhaps it isn’t but there’s no reason to believe the assertion.

GM can get a reputation for a high quality, highlly reliable, solid value auto in only one way… they must EARN it. Just like they earned the reputation they now have.

Anyway, I’m making your dream come true… I’m buying based on personal preference. I personally prefer to buy a car from a manufacturer with a good reputation. GM’s big problem is that I’m not alone.

Now, the focus of the site is on the Volt… why would I believe that GM can suddenly build a leading-edge vehicle and get it right? When I look at GM’s BAS and two-mode hybrid programs, why would I think GM is going to get this next phase right?

GM is driven by big egos and a lot of yes-men. Lutz threw out some numbers without a real appreciation of what they took to achieve and created an unstoppable train. Where I work, top-down product development always ends badly.

Do they prop up the losers?

Seriously. GM, with its current management team, has been on the skids for a decade. GM’s products have been earning a repuration for poor value and reliability for far longer than that.

GM needs flexible manufacturing, respectable small cars, a different cost and debt structure and a way of overcoming the sins of the past 50 years.

Shovelling cash into GM, as it is currently organized and led, is like shovelling cash into a furnace. Yeah, it’s one way to heat your house but it’s probably not the best way to heat your house.

WTF?! Japan still has huge trade surpluses with the USA, even though their production costs have risen. Engineers go unemployed in the USA while companies get cheaper talent from India.

It baffles me that there are still people who cannot see the facts in front of them. The most economically promising countries in the world have figured out that a strong economy requires strong industry. They protect and subsidize their industry. Meanwhile, we tell our politicians to pass high-minded laws to protect our labor and environment, but then we refuse to pay the higher costs of the goods that we produce under those laws.

If we are to survive as anything more than a third-world consumer economy, we need to compete on the same terms as our trading partners in Europe and Asia. To think that we can continue to have our markets free and open while those of our competitors are subsidized and protected is naive and arrogant.

Airbus is a good example. They are in the business of providing family-wage jobs for European workers. Development money for new aircraft is provided by the taxpayers, and only needs to be paid back if the company makes a profit. In times of low demand, they make “white tails” (airplanes with no buyer), because subsidizing production is cheaper than the costs of unemployment.

In contrast, Boeing is in the business of making profit by selling airplanes. Development money for new aircraft is raised on the private capital markets, where investors expect a reasonable rate of return and full repayment on schedule, no matter how much profit or loss Boeing makes.

Boeing has tried for years to go through international diplomatic and legal channels to stop Airbus’ subsidies, but has gotten nowhere.

In order to have a chance of competing in this warped business environment, Boeing has made some difficult decisions for their new 787. Their decisions on where to locate domestic manufacturing occurred largely based on the size of the tax incentives provided by the state governments. And major sections of the airplane were outsourced to foreign companies who could get subsidies (and offset sales) from their home countries – mainly in Europe and Japan. A big example is the wings: Outsourcing a fuselage section to Mitsubishi wasn’t enough “significant technology” to get Japanese MITI/METI subsidies. But the structural and aerodynamic technology of the wings did the trick.

This story plays out time and time again across different businesses. It is pretty obvious that the winners here are the people who protect their industry and the losers are those who give it away (us). We may not like it, but it is the reality.

We must help our remaining industry survive if we hope to have economic strength as a nation.

Also, I wonder if they flew coach back to Washington…

I was up the the Toyota dealer the othre day and there’s plenty of North American content and assembly in the bulk of what they sell. Chevrolet, on the other hand, will proudly sell me a Daewoo, which is completely engineered, sourced and built in Korea. What’s American about that?

You can’t even determine nationality by asking, “Where do the profits go,” as the Detroit-headquartered manufacturers don’t have any profits and the profitable car companies’ stock can be (and is) owned by people all over the world, including the US. For a time, Chrysler was owned by a German corporation. Did that make Chrysler German?

The profits from some corporations “go” to INVESTMENT, which is often enough in the US. The profitable transplants build factories and supply chains here, this is a capital flow into the US. Why not support that?