Monday, June 01, 2009

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


  1. The "big three" deserve the problems they are currently having. As you say, the cars they produce are boring. I recently had the occasion to drive a Ford Focus for a week. (My Subaru was in the bodyshop and the FF was the loaner.) What a POS! The inside design was so ergonomically crappy it was hard to believe. After a few days I understood why people are running away from these companies.

    As with most people, when buying a car you have a budget. But I find that you get more bang-for-the-buck by buying a 4 year old Subaru than a new American car. (It's an Impresza Outback Sport.) Comfort, design and quality.

    GM should take some lessons from Hyundi. Anyone remember the old Pony. Classic POS -- but it looked great! Now Hyundi competes with Toyota - the industry standard.

  2. Echoing your comments is an article in today's Greensboro News-Record that quotes all the good-ole-boys who own Corvettes and GM trucks rising to the defense of the indefensible. They just can't figure out what the problem is.

    Thanks for your dissection of exactly what offends most of the knowledgeable car buyers in the US today.


    Still driving an '89 Toyota Cressida which handles like new.

  3. I agree about their design probs. As a GM tech in the mid 80's and again in the late 90's . It was very sad to see each "new line" come equipped withe same old 2.2L 4or tired old 3.1L V6 .Or else that horrible "quad 4" . I don't care that "technically" the quad 4's were a great engine and could have V6 power in a four cyl. , they were a nightmare to work on for even simple stuff , had major design faults and rattled themselved to death . Yea , GM really did themselves in with their lack of actual design changes . I also admit their Pickups are the best of all . I've got over a quarter million miles on my 93 , and still going strong . But for Car reliability and lack of expensieve maint. Nothing beats a Toyota . I need to haul wood and hay and brush and garbage and no subaru will do that .
    an aging W3ski

  4. SQ, that 4 year old Subaru is going to cost you a *lot* of money to service it in the future. That is true of most imports. I was quite distressed back in 1999 to find out that the air conditioning compressor on my Kia was $1800 and only available from the dealer. On an American car at the time, an air conditioning compressor was under $800.

    GM's cars certainly lack in the fit and finish department, but the problem is designing to a cost point, not technology. Their technology is as good as anybody's, if sometimes not reliable or easy to work on because the engineers ran out of budget to finish the job. And there's nothing wrong with boring. Hyundai makes boring cars. Toyota makes boring cars. Both sold lots of cars until the recent downturn (Toyota's sales have dropped like a rock in the recent downturn -- over 40% since this time last year!). Most people just want boring transportation that gets them from point A to point B in an economical and reasonably comfortable fashion.

    So if GM resigns itself to being the Toyota of the United States -- a maker of boring but reliable and comfortable cars -- they have a future. Not an exciting future, or one that will make them the world's largest car company ever again, but a future. It'll take quite a bit of work on their part to get there -- to dump the legacy overhead, dump the dealer network that has no idea how to sell boring economy cars, invest the money in engineering to actually *finish* the cars they sell rather than dumping them on the market half-baked with half-ass fit and finish, etc. -- but they have the talent and technology to do it. We'll just have to see if they execute, I guess.

    - Badtux the Car Penguin

  5. >"forensic economist"
    Greg Palast
    "...Rattner was one of the privileged, select group of investors in Cerberus Capital, the owners of Chrysler. "Owning" is a loose term. Cerberus "owned" Chrysler the way a cannibal "hosts" you for dinner. Cerberus paid nothing for Chrysler - indeed, they were paid billions by Germany's Daimler Corporation to haul it away. Cerberus kept the cash, then dumped Chrysler's bankrupt corpse on the US taxpayer...."

  6. Even in the boring basic transportation category, one can have a little bit of excitement. Take our Honda Fit: boring basic transportation. Yet cutesey to look at and fun to drive--at least here in Boston where the typical GM sedan turning radius is way too wide.

    Good analysis, Tux.

  7. The Volt has a range of 40 miles (or so), and will be expensive 30K or more. Once upon a time, there was an electric car that had 100 mile range, 60 MPH capable, all the bussers & whistles of a 'real' car, made possible by an innovative battery developed by a subsidiary of the manufacturer. That eas back around 1990, and guess who the maker was? GM.

    The car was only distributed on a lease, and when the CA requirement for Zero Emission Vehicles was killed by the courts, as the leases expired, so did the cars. They were crushed. And the battery? Rights for the batery went with the company, which GM sold, guess WHO????? to the oil companies (Texaco, who was bought by someoen else), never to be seen again. The car was the EV-1. It was 20 years ago.

  8. 11 year old honda for me.

    lots of cosmetic problems, but the engine and structure still goes great.

    when i sell this one and get a new one, it will be a honda again.

  9. You hit the nail on the head when you said "Most of GM's automotive line other than Cadillac is today what Japanese cars were back in the 1970's". GM is 40 years behind the competition AND they have a higher cost structure.

    As you know, I'm no fan of GM-not because of blind hatred but because I've experienced the problems first hand with GM cars (I've owned four). They were all 'okay' cars until they reached the 90-100k mark and they all failed predictably. They were nothing special-about as boring as the Toyotas of today.

    I had a 1982 Toyota truck-nothing special-except for the reliability. It had 500k miles on it when I sold it for $800 to a friend starting a lawn care company. It had a 5 speed manual and I could light up the tires in the first two gears at 400k miles. At 100k, I couldn't even start two of my GM cars. The cars were driven and serviced with the same level of maintenance. The best part? I paid twice as much for the GM products as I did for the Toyota truck.

    The problems of GM today are the same problems Durant had in the '20s when he ran the company-too many products, too much diversity and no focus on anything in particular.

    It's possible to design a car to a price point and still make it a good car. GM has great designers-they just need someone to tell them what GM wants to be when it grows up.

    I just sold a 7 year old Nissan that still has more technology than brand new Chevys (not to mention that it runs like brand new with 100k miles) and replaced it with a Mazdaspeed3.

    I sincerely hope both GM and Chrysler succeed. As a taxpayer, I don't want to 'own' stock in either company.

  10. BadTux: While the parts are more expensive, they don't have to be replaced as frequently. (I am on my third Subby). On the other hand, my last (absolutely, positively last American car) was a Jeep YJ -- I bought it brand new. At 26k, the dealer was trying to convince me that it was normal for the master cylinder to be replaced (it was leaking). At 26k! After a phone call to Chrsyler head office and mention of "hidden defect", they paid for it. What a load of crap! No sympathy for these guys...

  11. The Jeep YJ was built in Canada. So there :-).

    Your dealer was an asshole. On the other hand, defects do happen, regardless of the car. As do design defects -- Honda, for example, had a bad case of the exploding transmissions in the period 1999-2004 that afflicted the Odyssey, Accord, and other cars. The Jeep YJ was by and large a very dependable vehicle, unlike the 2000 Honda Odyssey, which was a piece of shit.

    - Badtux the Car Penguin


Ground rules: Comments that consist solely of insults, fact-free talking points, are off-topic, or simply spam the same argument over and over will be deleted. The penguin is the only one allowed to be an ass here. All viewpoints, however, are welcomed, even if I disagree vehemently with you.

WARNING: You are entitled to create your own arguments, but you are NOT entitled to create your own facts. If you spew scientific denialism, or insist that the sky is purple, or otherwise insist that your made-up universe of pink unicorns and cotton candy trees is "real", well -- expect the banhammer.

Note: Only a member of this blog may post a comment.