30.1 Billion dollars. Billion with a capital "B" because it's a huge frickin' number. And it will be wasted. Like the 9 billion before it. And more billions before that in subsidies, non-tarrif barriers to trade, loans, etc.
GM CEO Fritz Henderson says GM has made mistakes. That GM is now going to be a corporation focused on the customer. And with that statement, I know he doesn't "get it" any more than Rick Wagoner got it as he watched GM steadily lose market share while blaming everything except the root cause. He blamed Japanese policy as protectionist and undercutting US competitiveness. He blamed anti-union policies in southern factories. But what Fritz and Rick have never acknowledged is GM simply builds bad cars.
That's right. GM's cars suck. They are unreliable, shoddily built, made with cheap components, and problem prone. From the Cobalt to the Corvette. Any GM car that makes it past 150,000 miles - nothing for a Japanese-built car - is considered exceptional. And when the car breaks, GM frequently fails to stand behind its cars or its warranties. Five years ago, Hyundai built crap cars just like GM, but they stood behind their warranties, and steadily stole market share from GM. Now they build good cars, and are still stealing marketshare from GM.
Consider my own experience. Since I was a kid, the only car I ever wanted was a Corvette. I even remember the first Corvette I ever saw - a two-tone black and silver "C-3." So, when I had the money, I ordered and bought a 2001 C-5 Corvette, Navy blue with black interior. It was beautiful. When I sold it in 2006, it had less than 30,000 miles on the odometer. In that time, I had all four tire sensors replaced, both window motors replaced, the temperature regulator failed (clogged by the "100,000 mile coolant" that coagulates if a car is not driven daily), the seals around the roof tore and ceased to be waterproof (leaked in the rain), the leather on the drivers' seat wore through and 12 of 16 pushrods were found to be bent. The icing on the cake was the poor fit and finish - I could see wires through the dash...
The story behind the pushrod repair explains why GM finds itself in bankruptcy as of 9 AM this morning. Shortly after the dealer's mechanic told me the source of the noise I heard, I was called in to talk to the GM warranty claims agent. I don't remember her name, but I remember the conversation after I was told GM would not pay for the warranty repair. I asked why not. Here is the conversation:
Agent: "Well, we feel it is obvious you have repeatedly red-lined the engine."
Me: "Excuse me?"
Agent: "We have determined because you caused the problem, it is not our responsibility to cover the repair."
To understand the ridiculousness of this statement, consider this: The Corvette redlines at 7500 rpm. In 6th gear, the car would do 90 mph at 2400 rpm. The car would do 90 mph in 3rd gear at 4500-5000 rpm. To "repeatedly redline the engine" I would have had to "repeatedly" downshift from 6th gear to 3rd gear at something like 130 mph - something I never did.
Here's the rest of the conversation:
Me: "So you are accusing me of abusing my car?"
Agent: "We aren't accusing you of anything. We just feel you have exceeded the terms of your warranty." (huh?)
Me: "Amazing. You realize I am never going to buy another Chevrolet?"
Agent: "I am sorry you feel that way."
Me: "I'm sure you do." click.
What I should have said (I've had a little time to think about this since 2002...): "And you realize I am going to tell everyone I know about this and encourage them to not buy Chevrolets?"
And so I have. In 2002, I knew Chevrolet - and GM with it - was headed for the toilet. And why? Simple. They don't build good cars, and then they fail to stand behind their product.
This is the company that is going to "focus on their customers." Sure. I'll believe it when I see it. And I don't expect to see it. But good luck, Fritz. You'll need it. It's just a shame we will all have to pay for it.
Tuesday, June 2, 2009
Subscribe to:
Post Comments (Atom)
Posts
3 comments:
Reminds me of this: http://xkcd.com/558/
The intuition with
GM is to say "don't throw more money down the drain, screw those incompetent fuck-ups." Yet if GM dies in a messy way, apparently all of us will suffer b/c of wider macroeconomic effects. Much correct economic policy seems counterintuitive to me (always has, which is probably why I hated Macro in college); what works on an individual level does not work on the level of an entire nation. But I don't think the counterintuitiveness is the result merely of the complexity of macroeconomics.
I wonder if our intuitions about macroeconomics are so off because we each bear an ideological capitalistic myth of libertarian self-responsibility within a putative meritocracy, when in reality our economic social system is more like a family writ large, in which those with great wealth and power maintain and acquire it in ways that are strictly dependent on the social relations of classes and communities. Some philosophers argue for extreme levels of taxation on such bases. (ie Why should Daddy get to keep all the family's cash, when it's a family business?)
My conclusion is that our society's true underlying structure is apparently nothing like the libertarian meritocracy we believe it is - if it were, then we could let GM and other incompetent monsters die and not suffer serious macroeconomic consequences.
You make a very good point with respect to the difference between what we believe our system to be, and how it actually operates. Take the agricultural industry - an analogous industry to the auto industry, with the exception it is largely profitable. Like the auto industry, agriculture holds a disproportionate sway on our collective imaginations, because we associate the family farm with the fabric of the nation itself. And yet, very little of our national agricultural product comes from those family farms.
However, I have concluded that allowing GM to "fail" would not cause the great machinations we hear about on a daily basis. Rather, I suspect much of the company would be bought and continue producing cars. But they would just be Chevrolets, Saturns, Hummers, Opels, Cadillacs, etc. There would be no "GM." In the past 25 years, GM has continuously failed to efficiently apply the economies of scale they have always claimed to be their major advantage. Since I wrote the original post, GM has already found buyers for Hummer and Saturn. I do not believe it is a matter of life and death - there would be a housecleaning of the GM management ranks. The average worker would probably continue to build cars - just for a different company.
But the real question I have, is could that $30B be better used to promote or help the small businesses throughout America who are nowhere near the size of GM individually, but as a collective whole employ far more people throughout all segments of our economy than GM could ever hope to?
I've never bought a GM (or any Big 3) car and never will. The facts are the facts. Their cars are inferior in quality. If the facts ever change, my decision may change.
As for the American argument-- all of these large, multinational corporations are out to earn money for their shareholders, whoever they may be (the U.S. government, now, I suppose, in the case of GM). They don't give a crap about me, or you, or anyone else; they just want to earn money for their shareholders. So, I shed few tears for the collapse of an inefficient staggering colossus. When sentimentality is an organization's greatest asset, it's got a problem.
Good riddance-- about 20 years too late.
Post a Comment