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When General Motors filed for bankruptcy protection this week, the world seemingly changed forever. The industrial icon of the world for nearly a century had succumbed to problems it faced time and time again since the 1970s.
The issues of providing health care for employees and their families, rising costs of materials and increased competition from foreign manufacturers was topped off with an economic firestorm eating through incomes and credit availability only hastening the failure of GM's late efforts to remain a viable corporation. Insult was added to injury later on Monday when News Corp announced it would remove GM from the Dow Jones Industrial Average since corporations that file for Chapter 11 protection are not allowed to be listed amongst America's blue chip stocks.
But why were so many surprised? Why did GM - and Chrysler - fail to recognize the main issue behind most of their troubles? Inability to produce quality, efficient and attractive vehicles has been the steering factor in their long time demise.
Providing health care may have played a role in weakening the General, but it was not the core problem. GM reports the benefits it provides to employees, retirees and their families adds approximately $1500 cost to every vehicle it makes. C'mon GM, that's roughly equivalent to a sunroof or an integrated GPS system ... which they only pay a fraction of to suppliers anyway. It kind of goes back to Wal-Mart's business mentality, buy in bulk and drive down the cost to the business.
The one thing the General had to do well was make cars and sell them, which became harder and harder with all the rebadged models, recalls, and ridiculously low efficiency ratings. The cross-brand mixing of bodies and components, known as rebadging, killed their namesakes like now extinct Oldsmobile and soon to be extinct Pontiac; Isuzu ceased U.S. production too.
The "different kind of company, different kind of car" Saturn line was supposed to combat growing market share of Asian manufacturers and initially did; but it too fell victim to inefficient GM bureaucracy. Saturn is up for sale and industry observers expect it to be strong despite new ownership.
Chevrolet, GMC and Cadillac SUVs and trucks sustained the company through the SUV boom of the 1990s and early 2000s when gas was cheap. At one point, GM executive leadership actually figured they could continue to build these types of vehicles forever, only increasing profits.
We're now left with a bankrupt GM, that's right ... taxpayers own 60 percent of it. GM is finally being forced to make the tough decisions and changes it needed two decades ago. Battered, broken and bruised, a short and lasting recovery is critical. As one automotive writer put it, "GM stopped caring about making cars." And thus consumers stopped caring about GM.
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