Saving the US Auto Industry

[classicman]

An interesting account of GM history


Who's to Blame for GM's Bankruptcy?
Just about everyone—from management and the UAW to government, consumers, the competition, and the media

First of all, management. For most of its existence, GM was not really a centrally unified company in the modern sense. Founder Billy Durant smashed together different companies—Chevrolet, Pontiac, Buick, Cadillac—and allowed them to compete with each other with only the thinnest level of oversight. Alfred P. Sloan, who took over the company in the 1920s, imposed a measure of discipline on these rival fiefdoms by creating more financial controls and a more rational positioning of each brand, with Chevrolet being the car for the masses and Cadillac being the car of the elite. But the company was still very decentralized.

Following World War II, this lumbering GM dominated the American automotive landscape, reaching 50.7% of the market in 1962. It didn't matter if GM was late to market with a feature or a design because "we had such enormous power that we could always steamroller everybody else," recalls Bob Lutz, the just retired product development chief who first joined GM in 1963.
Not Ready for Toyota

Then there was labor, and management's decision over the decades to grant the United Auto Workers higher wages, medical benefits, and pensions with each contract negotiation. This helped to elevate the standard of living for many blue-collar Americans, but health-care costs would emerge as a major burden on GM, as would a confrontational standoff between management and labor.

Then there was overseas competition. GM simply was not ready to respond to Toyota Motor (TM) and other Japanese manufacturers when they began to gain serious ground in the early 1980s. Toyota, in particular, had developed a lean manufacturing system that was completely different from the mass-assembly-line techniques GM was still using, many decades after Henry Ford perfected them. GM's fractured structure meant that each division had its own manufacturing processes, its own parts, its own engineering, and its own stamping plants.

Hungry for jobs, U.S. states began to encourage Japanese manufacturers to locate plants, or so-called transplants, in their states. The Big Three figured that would saddle the Japanese with the same labor costs and the same labor problems they had. But they were wrong. The Japanese located in mostly southern and border states that were solidly anti-union. They hired younger, less expensive workers, and they created an entirely new relationship between management and labor. This led to an entirely new auto industry. The net effect was to rachet up the competitive pressures on Detroit, not ease them.

The Bush Administration gave a Band-Aid to GM and Chrysler in the form of a bridge loan to get them through to the early days of the Obama Administration. But then came the final surprise. Industry observers widely assumed that Obama, a Democrat from Chicago, understood the manufacturing base of the Midwest and would help it. The fact that the UAW had helped deliver five states in the Midwest to Obama deepened that assumption.

But Obama turned to other members of his political alliance for answers. From New York, he brought in investment banker Steve Rattner, a major fundraiser, to head the government's automotive task force. Rattner arrived on the job with the assumption that Chapter 11 bankruptcy was the right course for GM, and promptly sacked Wagoner when he demonstrated signs of resistance. Wagoner's heir apparent, Fritz Henderson, was elevated into the CEO position. Meanwhile, Obama tilted toward the California environmentalists by pushing through new fuel-efficiency standards, which would add another layer of cost to production.

It's a good read and displays the "Too big to fail" mentality that was ingrained in them long ago in another world.

[Cyber Wolf]

Looks like the Hummer is going to be a Chinese brand...

http://money.cnn.com/2009/06/02/news...n=money_latest