GM Squanders What Tax Payers Gave It
Let me say at the outset that the GM bailout was far, far better handled than the bankster bailouts. And as a Michigan resident whose family still has ties to the auto business, I am tremendously grateful for that bailout.
That said, this is why I have not declared mission accomplished, in spite of the successful IPO last year.
You see, no one will be able to weigh the success or failure of the GM bailout for another year or so–until such time as the cars developed entirely under the leadership team picked by a bunch of people who knew nothing about the auto industry start rolling off the lines. As I noted last year, the success of the IPO was significantly premised on a number of business decisions made by Rick Wagoner and others fired during the bailout. Wagoner deserves the credit for his emphasis on China (and places like Brazil), which is the biggest source of GM’s profit these days and was widely touted as the reason it made a good stock buy. And Bob Lutz deserves the credit for GM’s improved product line.
So we won’t know whether the bailout succeeded until we see whether the guys now in charge can make decisions that are as smart as those made by the guys fired in the bailout.
Yet, as MSNBC lays out, thus far, it looks like the finance guys Steven Rattner brought in to run a car company have, predictably, made some really stupid decisions.
[GM CEO Daniel] Akerson recently told the Wall Street Journal that a GM car was just like the can of Diet Coke he was drinking during the interview.
“It’s a consumer product,” he said. “GM has to start acting like a consumer-driven, not engineering-driven, company. We sell a consumer product — our can just costs $30,000.”
Industry insiders with a memory of the 1990s immediately blasted this view as a return to [GM]’s failed [early 1990s] strategy to commoditize a product for which a strong emotional connection is important to drive sales and to cultivate brand loyalty.
“The only difference between GM then and GM now is that this is a company that has only recently emerged from the abyss of bankruptcy, one that can ill-afford a single misstep brought upon by misguided leadership, even though it has the most competitive lineup (of vehicles) it has had in decades,” [auto writer Peter] Delorenzo said.
It’s one thing to try to sell sugar water with nothing more than emotional attachment. But so long as there are well-engineered vehicles like Hondas on the road, you can’t dismiss the importance of engineering in designing cars.
In addition, Akerson (like Ed Whitacre before him) is trying to cut the time to market for GM’s cars.
Now Akerson says speed and cost are the aspects on which he will concentrate, telling the Journal that “during World War II, GM produced tanks and equipment within four years. Why should it take four years to put a car out?”
There have, historically, been two models for cutting the time to market for cars. There’s the model Chrysler used in the late 1990s, which led to the introduction of things like the PT Cruiser that were cute but which weren’t really good cars; that’s one of the things that led to a serious decline in Chrysler’s quality. Then there’s Toyota’s quality driven approach, which has served as the standard for Ford and GM in recent years as they have accelerated their own development time frame.
But as Toyota’s recent troubles show, not even Toyota can make cars in as short a time frame as they do and ensure their quality. What makes Akerson think GM can do what Toyota can’t?