GM Dead Again?

I want to commend Louis Woodhill’s fine analysis at Forbes of the fix that GM is in to your attention:

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

He continues by analyzing the new Malibu, GM’s latest entry in the D-Segment of the auto market, noting that GM’s cost basis is such that the company needs to sell a lot more cars than its competitors to make a profit, and contrasting GM’s top management with VW’s.

Essentially, there is no place in today’s market for a company that makes mediocre products and needs to sell a lot of them to maintain its operations. Further, unlike VW GM does not appear to be preparing to make and sell the best cars in the world but to progressively reduce its operations until, presumably, there is nothing left but the smile.

When the federal government bailed out GM there were essentially two viable alternatives. The company could be allowed to resolve its problems in ordinary bankruptcy with the government’s attentions focused on bailing out GM’s employees or GM’s cost basis, most of which is labor costs for employees present and past, could be reduced and the company forced to modify its fundamental way of designing, manufacturing, and selling cars to do much, much more with much, much less, an enormously tall order.

The Obama Administration elected to do neither, choosing to remove top management (as Woodhill puts it “rearranging the deck chairs on the Titanic”), preserve GM’s labor cost problems, and double down on GM’s losing investment on EVs, assuming that the tremendous sales of an enormously popular vehicle which has proved itself anything but would right all wrongs. These were catastrophically bad assumptions. If there were vast demand for street legal golf carts in the United States, I suspect we’d already know about it.

GM now seems to be heading inexorably towards bankruptcy again. Will the federal government leap in at the nick of time to preserve it again? Stay tuned.

33 comments… add one
  • Jimbino Link

    Too bad our Constitution forbids the government to support the churches with public funds. They do that in Europe, with the result that the churches are dead or moribund, the cathedrals mere tourist attractions.

    Looks like we’ll be stuck with our churches long after GM is dead.

  • TastyBits Link

    I suspect that one problem is that the financing divisions were sold off, and the US auto makers were making a lot of money from financing cars. Another problem is the recession has probably hit their fleet sales, and these were a large part of their sales.

    Pure speculation, but this is what I would look at.

    Personally, I will never buy another vehicle from a US auto maker, and that is not speculation.

  • Another factor was that those insisting on reforms simply didn’t understand GM’s business. GM doesn’t sell cars to ordinary drivers like you and me. It sells cars to dealers who in turn sell to us.

    GM cut its dealer base sharply as part of its reorganization. That upset its own distribution channel. That it cut dealers without reference to whether the dealers were moving cars at a profit or not, which appears to have been the case, just made things that much worse.

    The successful dealers who were cut from the roster have now started selling other manufacturers’ cars.

  • Icepick Link

    If there were vast demand for street legal golf carts in the United States, I suspect we’d already know about it.

    Oddly enough, there are communities down here in Florida where golf carts are extremely popular modes of transportation, and they’re frequently don’t have golf courses in those communities. (E.g., Baldwin Park, areas of Clermont, Celebration, although that last may have a golf course.) Also odd is that some of the people that love using their golf carts around the neighborhood want to drive vehicles approximately the size of an M-1A1 Abrams tank whenever driving outside their neighborhoods. Some of these people I call … friend. (You want to get pissy with the wanna-be drug dealer neighbor with the pit bulls? Fine, the guy’s probably a coward anyway. But you don’t want to piss off the people that could crush your house with one tire from their vehicle.)

    I’m too tired to read the article now, but did it mention GM’s fiasco with Man U, and its decision to kill off the Opel brand in Europe to push the Chevy brand? Things are really effed all to HFIL with GM. Where’s Reynolds to tell us how wrong we are?

  • The Carolinas are full of golf cart communities, too, Icepick. And what a friend (who resides in one) calls “Q-tips” in the polls — older ladies with white hair who go to beauty shops and don’t like to get their dos wet. Bill does like his toddies.

  • It’s still a pretty small niche market. The manufacturers are pretty cagey about citing precise numbers but the total number of golf carts in use seems to be something like 100,000. Compare that with the more than 100 million cars on the road.

    And that’s at a cost of between $8,000 and $20,000, significantly lower than the price of a Volt.

  • Icepick Link

    Oh, I’m not saying that the market is vast, just that it exists. If the automakers want to crack the electric vehicle market, they need to start with things that are more like golf carts and work up from there. They’d do better than trying to make an electric vehicle that is supposed to replace the standard ‘do everything’ vehicle. I wouldn’t even trade in my Civic for a Volt straight-up (if someone where to offer me such a deal) much less my Camry.

    Janis, I’m glad I clicked on your link. I’ve been meaning to listen to the Chambers Brothers for a couple of weeks but keep forgetting when I’m in a position to do so. Of course I forgot I had my iTunes set to shuffle, so now I’m listening to Schooly D doing the theme song for Aqua Teen Hunger Force (“Number 1 in the ‘hood, G!”) Oh great, and now it’s Weird Al….

  • Andy Link

    Lots of golf carts in my neighborhood too. If we were hear long-term we’d consider getting one, but the problem is that their confined to sidewalks outside of the neighborhood (not a huge deal since we’ve got good sidewalks), but there’s no place to park one at the local supermarket. And, for families with two working adults, they can’t be used for commuting. So they are mainly popular with retirees.

    As for GM, it’s not a surprise the bailout didn’t fix the things that were fundamentally wrong with the company. The thing is, I’m not sure if bankruptcy would have fixed things either.

  • Icepick Link

    Besides retirees, higher-income families like them, especially higher income ‘red neck’ types – sociable church-going types with someone in the family involved in construction and so forth. It feels a lot friendlier driving over to the neighbor’s house for an afternoon cookout around the lake in a nice open golf cart. (Especially in the 8 months of the year when it isn’t summer.)

    OTOH, you don’t see many golf carts here in the ‘hood. You don’t want to get caught in a drive-by in a golf cart! Even being in an ancient rusted out Ford Escort is a better fate, LOL!

  • Icepick, that was an earworm for several days. I finally had to consult Scott Chaffin, a homey in Texas, to tell me the artist’s name. That was a long time ago.

  • Icepick Link

    Back in the day (that’s the early 1980s for those of you not in my head) “Time has Come Today” used to get played on the local rock and roll station (WDIZ) – they’d play the LONG VERSION! In the middle of the day! It’s embedded in my psyche.

    BTW, the shuffle has taken me through Bach and Brahms and Kraftwerk and Yello and Black Sabbath (from the Dio years) and now we’re into Willie Nelson. A typically strange walk through the library!

  • Andy Link

    Ugh, they’re. I feel like an idiot when I don’t proofread my comments.

  • Andy Link


    Yeah, you’re right. We’re in an upper-middle class neighborhood and there are several rich “redneck” types who’ve lifted their carts and put on fat wheels, custom paint jobs, etc. Haven’t seen any with with bumper testicles yet, thank goodness.

  • Ah, Willie Nelson. I haven’t made it to “Redheaded Stranger” yet.

  • or Jerry Jeff Walker.

  • Icepick Link

    Redheaded Stranger was what I was listening to. I’m fairly new to the country & western genre though, so I can’t pretend to any kind of knowledge. I just know I always loved Willie’s voice, so last summer I utilized the public library to find out if I’d like more. I do!

  • Icepick Link

    Haven’t seen any with with bumper testicles yet, thank goodness.

    My wife worked with a lesbian that kept a pair on the hitch of her pick-up. I was never sure if I should laugh or wince at the sight, knowing the owner’s proclivities!

  • On topic, I own two Tahoes. The 15-year-old is wheezing along, but is perfectly good for in-town driving. Then there’s a 2005 which had the instrument panel problem (which was fixed for $100) and now a problem with the air conditioner. I haven’t bothered to take it in yet.

    I like them, and they’ve given relatively few problems. Before you get on my case, understand that I share roads with jacked-up hunting trucks with mud tires and duallies that haul horse trailers.

    When I drove the Escort wagon I spent a lot of time studying hubcaps.

  • Icepick Link

    Janis, while I prefer sedans myself I definitely get the idea of wanting something larger, just to be able to see objects before you’re right on top of them (or them on top of you). In fact we will probably move up to a mini-van or even an SUV in a couple of years, finances permitting. But the Civic definitely isn’t family friendly!

  • I loved that little wagon, but my son took it after his little Lincoln was confiscated (don’t ask), then it was stolen by a crack addict and run into the ground. I sold it for scrap this spring for $275.

  • The wagon was a ’97, too.

  • Icepick Link

    don’t ask

    Wouldn’t dream of it. 😉

  • steve Link

    If we move into town after I retire, I am skipping the golf cart and going for a Segway. Lots more fun.


  • Icepick Link

    Ever ridden a Segway? I can’t decide if riding one would be fun or weird. Incidentally, EPCOT used to offer Segway tours of the park, in the morning before it opened to the general public. Kind of wish I had taken advantage of that when I could.

  • Before you get on my case

    Wouldn’t dream of it. We have two cars, an eight year old Ford Explorer and a new Toyota RAV4. We get 16 MPG with the Explorer, which I drive, perhaps, 50 miles in a typical month. We get 26 MPG with the RAV4. We need vehicles that we can safely transport dogs in.

  • Andy Link

    We have a 7 year old Honda Odyssey, and 10 year old Corolla and a 41 year old Chevy Blazer. With three kids we needed a people mover and actually, I really like the van.

    Beside the old Detroit Steel truck, the last GM product my family owned was a baby blue 1976 Oldsmobile Cutlass. That thing was a POS, but I had fun trashing it as a teenager.

  • PD Shaw Link

    “street legal golf carts”

    I believe we have identified a cultural divide between Yankieland and the South. Golf carts aren’t legal to drive in most cities in the North. My city relaxed its street regulations a few years ago, to allow a 70s electric car, sort of a golf cart/Yugo hybrid, to operate on city streets, but many of the main streets are under state jurisdiction, so its of limited utility.

  • I do believe every teenager had an Oldsmobile Cutlass to trash, Andy. Or a Buick.

  • PD Shaw Link

    Chevy Equinox here.

    I thought skimming bankruptcy was not going to work out for G.M. and it would be back in bankruptcy in time, but a real bankruptcy would probably make a smaller G.M. reasonably competitive. Its still get high legacy costs and a disadvantage on labor costs with the foreign-owned U.S. auto plants. The dealership contracts could probably be improved through bankruptcy on a performance-basis like Dave suggested.

    I am wondering if the flaw in my thinking are the CAFE standards, which I believe were enacted to protect the U.S. auto industry, but now make a more specialized line-up problematic. (I’m thinking if you pick out the several models that G.M. is doing well with and built on them, you’d run into a problem with fuel efficiency standards measured across fleet) Perhaps relaxing CAFE in exchange for a tax on the manufacturer for above average fuel economy might help them, or just a tax on gas instead.

  • Don’t get me started on the CAFE standards. I’ll just give you the buzz word version. SUVs. Light trucks. Engines built in Japan and South Korea.

  • Geee…a company gets bailed out of being stupid and they learn nothing….wow! Who’d have seen that one coming.

    Incentives people….its the fucking incentives.

    BTW, macroeconomists…you know how much work they do on incentives in their work? Nada. Not even Ben’s boys think about incentives…not one little bit.

  • Icepick Link

    Who’d have seen that one coming.

    I was completely blind-sided.

    Seriously, though, has anyone ever ridden a Segway?

  • steve Link

    @Icepick- Yes. Daughter took me for a Segway tour this year. I thought it was a blast. Takes 5-10 minutes to acclimate.


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