The reason that GM didn’t live up to its legal responsibilities and recall millions of vehicles years ago isn’t because of the CAFE standards, as suggested by its new CEO, Mary Barra:
Federal regulations essentially prevented Detroit from building the small cars more cheaply offshore. That’s because the auto makers still had to meet stringent fuel-efficiency averages for all the cars they produced domestically. So in order to keep building the big vehicles they could make profitably, they had to churn out lots of fuel-efficient vehicles and somehow make them cheap enough to compete with cars produced by non-union workers.
Is this why GM didn’t make much earlier what seems like a relatively inexpensive fix? Ms. Barra suggested as much this week. “In the past,” she said, “we had more of a cost culture, and now we have a customer culture that focuses on safety and quality.”
I find that excuse, as the WSJ concurs, to be pretty threadbare. There are all sorts of ways that GM could cut costs. For example, they could cut executive pay. CEO pay now stands at roughly $14 million. It is obvious, except possibly to GM executives, that there’s room for cost-cutting there. The pay of top management pulls up the pay of the next layer of managers which pulls up the next layer and so on. And there are so many layers. You’d think that GM’s near-death experience would have impelled cultural change but, sadly, not enough:
Keep in mind that GM’s culture would have been turned upside down and might no longer exist if the government hadn’t preserved it. In the throes of the financial panic and recession, Chrysler and GM could no longer be sustained without help from Washington. In December 2008 they began receiving money from the Troubled Asset Relief Program. More aid came in 2009 when the feds engineered bankruptcies.
There’s plenty of room for flattening GM’s organizational structure. Why haven’t they done it?
GM’s cover-up of its defective switches persisted during the federal government’s oversight of GM. Either that oversight was quite superficial with the single-minded objective of preserving the labor unions or the federal government was complicit in the cover-up.
The 12-step programs say that the first step on the road to recovery is acknowledging that you have a problem. GM doesn’t seem to have taken that first step yet and the federal government has abetted the company’s failure to adapt.
Last month GM sold about 1,500 Volts. I guess that makes it worth it.