“The company is scrambling to retool for small cars, and I’m sure we’ll hear a loud chorus of voices saying that GM did this to themselves by becoming so dependent on light trucks. Well, they did, but I’m not sure it’s fair to blame management. GM’s historical pension and healthcare obligations, and the vast difficulties they have in permanently laying off workers, mean that the company had to maximize cash flow as best they could. Indeed, I find it interesting that I spent so many years listening to europhile economists assure me that the Germans were going to kick our ass because their cooperative management style, with labor having a seat on the board, allowed them to engage in long-term planning. The industries in America where labor has the most power are the ones that have the hardest time making strategic choices to lower profits now in order to raise them in the future.” –Megan McArdle, blogging in The Atlantic on the current GM crisis
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To comment intelligently on this subject I really think one would need to be something of an expert on the automotive industry. Most of us don’t fall into that category. (I’m looking at you, Megan)
It still makes sense though.
If you are squeezed by unions, you don’t try to compete in areas that are highly competitive - you will lose. GM and Ford likely knew that the only area of the market that had little competition was the large trucks and SUV market. Toyota, Honda, and other powerful, well run, companies have not much touched that market. So GM and Ford chose to invest there.
In other words, even the lack of small cars and bad choices in automobiles GM and Ford made can atleast partially if not almost fully, be blamed squarely on the shoulders of the unions.
Why blame an issue on a single element (such as labor) when in reality it’s much more complex? Real issues are multi-variable, no? I think it’s silly to blame everything on a single issue that reinforces your agenda.
According to a John Stossel report on ABC News, GM spends more money on health insurance than it does on steel. So maybe Megan is on to something…
http://abcnews.go.com/2020/Stossel/story?id=3580676&page=1
Not everything msondo, just most.
Just think of the magnitude of what unions have done. It was barely 50 years ago that GM was so big, so vital to the American economy that some said, “What is good for GM, is good for America”…now, a mere 50 years later, unions have brought it on its knees.
At what point do you say unions are, in fact, destructive?
I’m not saying they are not part of the problem, I’m just saying it’s much more complex than just that. When was the last time GM made a car that people were actually crazy about and people actually bought? If their cars were selling like Civics, they were unable to keep up with demand like Toyota, and they were still failing this would be a different argument. No union is designing cars nobody wants to buy and misinterpreting the market.
Why worry about GM anyway? Wouldn’t a true capitalist just let the market decide its fate? If it isn’t competitive anymore then let it fail. Other companies will take its place.
msondo,
You write, When was the last time GM made a car that people were actually crazy about and people actually bought?
Did you read the quote above or the comment I posted to LaurenceB? This is precisely what we were addressing, and yes, this too can be mostly blamed on the unions.
To recap, I will cut and paste the important points above in case you missed them:
I also wrote,
In other words, it was because of union pressure and unions tying their hands that they were, in alot of ways, forced to enter corner markets and avoid the center.
This is just the icing on the cake…I’d be interested in your thoughts on this paper, detailing the many things GM and Ford could have done had there been no unions.
So again I ask, at what point do you concede that unions are in fact destructive?
GM must really be kicking itself considering they had the electric car technology up and running like 10 years ago. Labor didn’t do this, GM did this to themselves. They thought it was better to sell Hummers than cars that ran on electricity.
Wha?
Besides ultra-luxurious sedans and high-end sports cars, where does GM not compete against other car companies?
A quick glance at their website reveals that they currently make 91 vehicles ranging from the sub-compact Aveo to commercial vans, military Hummers, Corvettes, Caddys, etc. Honda and Toyota actually do very well in the truck and SUV market… Honda CRV, Ridgeline, Pilot, Element; Acura MDX, RDX; Lexus LX, RX, GX; Toyota FJ Cruiser, Land Crusier, 4Runner, Sequioa, RAV4, Highlander, Tundra, Tacoma…
Between these two brands (based on what I can name off the top of my head) that is 15 models… hardly an “untouched” market.
The point is, neither of us are experts on the car industry. The reasons why any business fails rarely is just a single element. Even less when neither of us work in the industry on a level where we understand these things. I could probably speak a bit about the online industry but even after working in it for a decade I couldn’t speak on the level of a professional industry analyst.
The electric car technology, even if it was solid, was not a money maker (especially at ~$1/gallon…where gas was back then) ten years ago.
Here is a bit of inside information on why GM abandoned the electric car:
It’s important to remember that even today, where electric technology is far more advanced, cheaper to produce and gas is near $5/gallon, electric cars are barely taking off and not the money makers people assume.
On second thought, what I bet GM is kicking itself for, is letting their workforce unionize. From the looks of it, it will eventually bankrupt them.
msondo,
I was referring more to the large, powerful truck area. Hummers, Ford F150’s F350’s, and such. By far its the American car manufacturers that dominate that area and … up until recently, that has been their main source of revenue.
Regarding your general point: sure, neither of us are experts, but that doesn’t mean we can’t speculate. Also, consider this…
1. All experts on this issue agree that the unions are a significant reason for GM’s and Ford’s problems. Some put higher blame than others but there is a general agreement that its significant.
(again, given the fact that it was barely 50 years ago that GM was so big, so vital to the American economy that some said, “What is good for GM, is good for America”…now, a mere 50 years later, it is on the brink of bankruptcy, I give it a higher significance).
2. What is occurring in the automotive sector with unions is not unique. It is something that is common to all, or atleast most, of the highly unionized sectors. Whether we are talking about automotive, public schools, airline, or grocery chains…the sectors with high unionization bring you low quality, high prices or are on the brink of bankruptcy. It’s a trend.
In short, speculation yes, but educated speculation that is based on solid data. Which is more than I could say of the defenders of unions.
The Titan and Ridgeline are direct competitors to the F150. Anything beyond F150 is considered a commercial truck, which is a totally different market. If you are looking for reasons why commercial trucks are not selling as much, consider that the construction sector has been hit the hardest by the economy. They have lost hundreds of thousands of jobs since the demand for housing fell. Even the civilian Hummer is comparable to stuff like the $70k Toyota Land Cruiser and $90k Lexus GX. Suburban mothers aside, I hit the trails almost every weekend and I rarely ever see a Hummer out there. It’s mostly Toyotas, Jeeps, and Subarus.
I can’t really comment on the other industries… except perhaps for the grocery industry. Local coops are big here in Seattle and I have seen mine grow substantially over the years. Coops, at least here, are heavily unionized but amazing quality.
Coops, at least here, are heavily unionized but amazing quality.
And probably pricey. Certainly more pricey than say Wal-Mart. Its like that with chains here in California, the only unionized grocery stores that can stay afloat are the ones that tend to stay out of the ghetto. Its the Wal-Marts and such that are dominant in the ghetto AND hire (significantly) more minorities (which is why rich white liberals hate Wal-Mart so much, its an abstraction to them … but I digress).
I’m curious, why do you think Corolla sells more than say its GM competitor? I’d say its because of the quality/price ratio…not the looks or the gas mileage, after all GM’s autos can get the same mileage.
And as this article shows, that ratio is directly related to labor costs…which unions have artificially raised. In other words, its the unions.