On GM and Hummers

It is fashionable to diss GM. The problem is, GM's cars really aren't that bad technologically speaking. Oh yeah, they're bland and have about as much personality as a blender, with a few exceptions here and there, but they are technically decent cars that suffer only because they've been designed to a cost point. Most of GM's automotive line other than Cadillac is today what Japanese cars were back in the 1970's -- cars that you buy because they're cheap and get good fuel economy, not cars you buy for excitement or high quality fit and finish.

GM's trucks are even better than that. Other than the lamentable Chevy Colorado / GMC Canyon, which has the best fuel economy of any small truck sold in America but the aluminum engine head has been problematic, GM makes the best work trucks in America. Dodge and Ford make go-to-the-mall trucks. But when you want work done, you buy a GM truck, because they have a lower bed, torquier engines, more rugged transmissions, higher load capacities, and heftier towing capacity. They're not stylish like the Dodge mall cruisers, or luxurious like the Ford mall cruisers, but they work.

Of course, GM has their stupidities named Hummer and Saturn. Saturn was a good experiment that GM abandoned to create just another badge-engineered line. Hummer... well. I understand GM is trying to sell Hummer. If John Holmes bought Hummer, would that mean we all get hummers? Sounds... exhausting! (Bada boom, yeah, this whole post was setup for that line :).

So anyhow: GM's biggest problems are solvable:

1. A dealer network incapable of selling GM's fuel-efficient automobiles. They're a buncha good ole' NASCAR boys who are more comfortable selling trucks and Corvettes and big iron than small cars. GM needs to punt most of the dealers and take on dealers who are, like, less than 600 years old and who speak English rather than NASCAR.
2. Too much debt. GM's debt both to its pension fund and to bondholders was managable when GM sold 60% of the cars sold in America. Now it's not. Solvable via bankruptcy.
3. Too high of an expense basis. GM has too many factories for the amount of cars that it sells, and too many of all kinds of employees for the number of cars it sells (other than engineers -- GM doesn't have too many engineers) and leases far too many buildings on long-term leases that it doesn't need anymore but can't dump because breaking the lease would be too expensive outside of bankruptcy. So yeah, bankruptcy solves this one too, since all contracts -- labor, leases, etc. -- can be voided by the bankruptcy judge.
4. Hummer and Saturn. Duh.
5. Dull unadventurous management that approves too many boring cars and that flubs the rare attempt at exciting cars (Pontiac Aztec, anybody?). Okay, so this one isn't going to be solved by bankruptcy. But Toyota proves you can sell boring cars, as long as they're high quality.
6. Poor fit and finish of cars due to engineering to lowest price point possible. Well, this can be solved, but it's going to take a long time before GM can shed their reputation as a bottom feeder manufacturer of cheap shitboxes. But dumping all that overhead ought to allow them to invest some money into this area, so hopefully the bankruptcy will help here too.
7. GMAC. This is now owned by Cerebus Capital, not by GM, and thus GM is no longer able to offer competitive financing. This has to be solved. It's unclear whether bankruptcy will help solve it.
8. The banking industry meltdown in general. It's hard to get a car loan now. People don't buy cars if they can't get a car loan. Toyota is suffering the same problems for the same reason.

So anyhow, I'm not as pessimistic about GM's chances as many people are. Their core technology is sound, their cars are boring but are competitive at the price point they've been engineered to (i.e., they're engineered more to Hyundai price and quality than to Honda price and quality), and their current (new) management is unimaginative but quite capable of running the car company that GM has become -- a car company that makes bargain cars at a price point for people who are interested in basic transportation and don't care that the cars are cheaply built. GM can go on for many years doing that, as long as their expense overhead has been cut down to size. It might disappoint those who remember when GM was the largest car company in the world, but (shrug). Everything ends, nothing lasts forever. The days when GM was a leader in the automotive industry are over, by and large, unless they come up with something game-changing. Which I don't think the Volt will be, alas -- too expensive, too slow, too short-ranged. So it goes.

-- Badtux the Car Penguin