Thursday, December 04, 2008

Detroit CEOs explain the roadmap back to profitability


Jim Manzi on "GM's magical thinking"

However, if GM got the loans, and if we have a decent consumer auto purchase market for the next year or two (how'd you handicap that?), and if GM is able to improve its operations sufficiently, then they could squeak by. The point of this document [GM's bailout/restructuring plan] was supposed to be the presentation of the plan to achieve these operational improvements. But there's no there there. I guess somebody who's never read a real business plan might mistake this document for one, but it's a joke. It's basically a list of assertions of amazing improvements, entirely discontinuous with actual performance to date, that they will achieve. What's missing is any real indication of how they will go about accomplishing this.
Here's an interesting article about how Detroit got addicted to fat-profit trucks and SUVs:
One reason they might have dropped their guard was the irresistible profit margin in light trucks. "The trucks and SUVs had fat profit margins. Even if [the automakers] saw it coming, it would have been hard to shift resources to build more hybrids. The U.S. auto industry has been struggling with a lot of problems for a long time," MacDuffie notes. "They felt that they could not move away from the SUVs and pickups because they needed the profits from those products to cope with the other difficulties they were having. ... Labor and benefits costs were one of the largest problems."
Burned once before in the late 70s/early 80s, American automakers should have re-tooled for smaller, gas-efficient cars. But somewhere along the line, General Motors became the largest national provider of health care, and needed the cash they could only find in honkin' trucks.

Extra - Wizbang: "For one, there wasn't exactly a market for smaller, fuel-efficient cars in the US because, well, Americans wanted bigger ones."

More - Jennifer Rubin: "What are they driving at?"

Finally - McQ: "They don't seem to live in the same world as the rest of us do. And that's what stirs the anger - here we are contemplating, again, rewarding stupidity, mismanagement and failure."

6 comments:

Anonymous said...

The desire for union-busting burns brightly in the hearts of the same people who cheered the last 20 years of economic policies. Imagine our shock.

General Motors only built SUVs because the wolf was at the door, you see. They needed the cash to pay the vig to those greedy, greedy production line workers.

The U.S. consumer shares none of the blame, naturally. Because GM sold all of its cars to magical woodland fairies.

Anonymous said...

That's funny - I was going to embed that exact cartoon in the original post.

Best,
Jim Manzi

DBrooks17 said...

Anonymous--Polite individuals apologize when they fart in public.

Unknown said...

That being said....

Just read through GM's "Plan" and Manzi is right on, unfortunately. I've watched GM eat itself from the inside out for 30 years. Nothing has changed. I really don't believe they know how.

I would, however, like to arrest the Plan's author for comma abuse. Can I do that? Please?

Sheesh...
-- kd

Anonymous said...

Anonymous - That hilarious! It's all the consumers' fault! We should have been buying shitty compact Chevys instead of those darn reliable Honda and Toyotas (also made in the USA)! As punishment, we're giving all your tax-dollars to GM to continue pumping out crap nobody will buy.

Anonymous said...

What's the old saying about the man with the hammer seeing every problem as a nail? Union, bad!

Some conservatives want GM & Friends to declare bankruptcy, to open the legal doors for dumping all union agreements and looting pension plans. The time to act is now! Because after all, worker wages/benefits are an impossibly high 10% of GM's budget.