New CTS-v or E39 M5? - Page 8

wilsodh · 10th December 2008, 19:57

Quote:

Originally Posted by DouglasABaker

The American situation was a bit different, however: I've got all these government regulations telling me I need to produce these small cars, but no one really wants them. Consumers continuously vote with their wallets for SUV's and mid/large size sedans, and there are competitors from all over the world entering those markets, so I need to re-invest in those...

Hi Doug, well argued points in general, but one doesn't have to be an industry insider to see that continual investment/reinvestment in giant vehicles was a short-sighted strategy among the D3. We live in a world of fossil fuel addiction and volatile oil prices. It was inevitable that global events would sooner or later conspire to a dramatic increase in gas prices, leaving consumers scrambling for more fuel efficient cars. Didn't we learning something from the 70's? You mentioned a 3-4 year cycle time on new car development. Yet gas prices can soar and people's priorities can shift in a small fraction of this time. What was the contingency plan?

Good management means balancing both the short view and the long view for long term company health. The long view may entail investing in low or negative-return areas to ensure preparadness for the inevitable vicissitudes in external events and shifts in consumer preferences. And when that day arrives, one is in a much better position to ensure company health. Being seduced by big margins on giant SUVs in the name of servicing one's immediate market preference is a short view. Its really management 101.

Dave

DouglasABaker · 10th December 2008, 21:37

Quote:

Originally Posted by wilsodh

Hi Doug, well argued points in general, but one doesn't have to be an industry insider to see that continual investment/reinvestment in giant vehicles was a short-sighted strategy among the D3. We live in a world of fossil fuel addiction and volatile oil prices. It was inevitable that global events would sooner or later conspire to a dramatic increase in gas prices, leaving consumers scrambling for more fuel efficient cars. Didn't we learning something from the 70's? You mentioned a 3-4 year cycle time on new car development. Yet gas prices can soar and people's priorities can shift in a small fraction of this time. What was the contingency plan?

Good management means balancing both the short view and the long view for long term company health. The long view may entail investing in low or negative-return areas to ensure preparadness for the inevitable vicissitudes in external events and shifts in consumer preferences. And when that day arrives, one is in a much better position to ensure company health. Being seduced by big margins on giant SUVs in the name of servicing one's immediate market preference is a short view. Its really management 101.

Dave

Hi Dave,

I don't disagree with your points, and they are all very supported now in hindsight, but were not at the time. Yes, oil prices are volatile now, but they haven't been over the past 20 years or so before that. Yes, small cars are the hot sellers now, but as I said above, they haven't been in the recent past.

My observations were made from the viewpoint of having been there when they were made and to help provide some additional insight into how and why. Clearly in hindsight some of the decisions were poor, and in hindsight, everyone now believes that the D3 should have been investing more money in small cars. My question is this: To sell to whom? Many of those same people who sit back and say "Let them fail, they did this to themselves" are the same people who have a pair of SUV's parked in the driveway.

Lastly, I would challenge anyone here to name a company that is investing in technology or products that are losing money today, will continue to lose money for the foreseeable future, and for which no market in which they can participate exists. And just so we're clear on the criteria, let's make it the same one everyone is holding the automakers to by expecting them to have a full lineup of small cars: It needs to represent about 50% of your total investment and about 50% of your product line.

Last question: Does anyone here really think that adding government oversight is going to make a darn bit of difference?

d-

DouglasABaker · 10th December 2008, 21:56

Quote:

Originally Posted by DoctorV8

Actually, if you dig a little deeper, you'll see that many of the authors have close ties and anonymous sources in the industry. These are well informed, educated journalists, not just some moron with a computer in mom's basement.

I'm sure they are, and I readily admit I didn't read the whole site, or even a majority of it. I looked for credentials and couldn't find any. No credentials to me, and the absence of named sources, is a red flag in anything I read.

Quote:

Credible in your eyes or not, it's very hard to refute some of the basic tenets of incompetence that have contributed to GM's current situation. Protectionism and CAFE are certainly factors beyond their control, but the basic corporate culture that has rewarded people like Wagoner and Lutz despite the slow decline of the company under their reign is ludicrous, plain and simple.

Not to mention the fact that Rick, Bob, and others have changed their stories so many times over the years that my head spins. Their resolute denial that GM has needed sweeping reform for decades now, ie jettisoning the excess baggage (bloated dealer networks, too many divisions, unrealistic UAW contracts) is indicative of the alternate reality that they live in....a flawed corporate culture in which there is no accountability for poor performance! How can any company survive like this?

Just for the record, I'm not saying that there were no mistakes, or that the management team is perfect. In fact you will continually hear me argue that the biggest failing of the D3 is in marketing - they don't advertise their strengths and they've relied on consumers to "just know", which is a lousy strategy.

As for the reforms you've indicated above (examples, I know, but worth addressing) not a single one of those was within their control:

Dealer body? Can't touch - call your congressman if you'd like to see a change since they are protected by a myriad of laws.
UAW? Can't touch it - union busting is illegal and that is what would have been required to get the required change in the contracts.
Too many divisions - I couldn't agree more! Mercury needs to go, and so do a couple of the GM divisions.

Quote:

I watched some very nice people build my Z06 at the Bowling Green, KY plant in 2005. It was the experience of a lifetime, and the car has been fantastic....a clear indication that GM has (or had) great engineering prowess. Same goes for the good folks at Ford SVT who built my stunning GT. I spoke with some of them at length recently, many of whom have been forced into early retirement, and the stories there are similar, though Mulally seems to have a better handle on the situation than Wagoner.

What a pity that these poor folks are becoming the casualties of such piss poor management.

That is a nice collection of cars, and I'm glad that you realize the folks doing the work are a quality bunch of folks (with exceptions, just like everywhere else). And yes, Mulally does have a better handle on things, but Ford won't survive the collapse of either of the other 2 for the reasons I stated in my last post.

It is an unfortunate situation, and one that the D3 could have handled differently and better, but really, would everyone be having such a fit about this if Wall Street hadn't just received $700B?

d-

DouglasABaker · 10th December 2008, 22:00

Quote:

Originally Posted by DoctorV8

...But a Ch 11 reorganization and streamlining, painful as it may be, along with new management (at least for GM) should be a part of the bailout. I think Ford will make it...and if Cerberus can't/won't revive Chrysler (which they clearly won't), I don't see why taxpayers should shoulder that burden.

Agreed - the only caveat is that it needs to be Chapter 11 protections without the stigma or perceived consumer risk of a Chapter 7 filing.

Cerberus likely won't revive Chrysler, and the unfortunate answer to why the taxpayers get stuck is because the D3 all share a huge portion of the supply base. It is kinda like the old style lights on your christmas tree - 1 light goes out, they all go out...

d-

DoctorV8 · 10th December 2008, 22:11

Quote:

Originally Posted by DouglasABaker

Dealer body? Can't touch - call your congressman if you'd like to see a change since they are protected by a myriad of laws.
UAW? Can't touch it - union busting is illegal and that is what would have been required to get the required change in the contracts.
Too many divisions - I couldn't agree more! Mercury needs to go, and so do a couple of the GM divisions.

All the more reason for Ch 11 reorganization, right?

DoctorV8 · 10th December 2008, 22:12

Quote:

Originally Posted by DouglasABaker

Agreed - the only caveat is that it needs to be Chapter 11 protections without the stigma or perceived consumer risk of a Chapter 7 filing.

Cerberus likely won't revive Chrysler, and the unfortunate answer to why the taxpayers get stuck is because the D3 all share a huge portion of the supply base. It is kinda like the old style lights on your christmas tree - 1 light goes out, they all go out...

d-

Agreed!

gsfent · 10th December 2008, 22:30

Wow. I am gone for a few hours, and Doug has time to write another War and Peace!!

Thanks for keeping a great discussion going,

I will try to respond later when I have a chance to go through eveything.

Regards,
Jerry

wilsodh · 10th December 2008, 22:31

Quote:

Originally Posted by DouglasABaker

My observations were made from the viewpoint of having been there when they were made and to help provide some additional insight into how and why. Clearly in hindsight some of the decisions were poor, and in hindsight, everyone now believes that the D3 should have been investing more money in small cars. My question is this: To sell to whom?

Lastly, I would challenge anyone here to name a company that is investing in technology or products that are losing money today, will continue to lose money for the foreseeable future, and for which no market in which they can participate exists. And just so we're clear on the criteria, let's make it the same one everyone is holding the automakers to by expecting them to have a full lineup of small cars: It needs to represent about 50% of your total investment and about 50% of your product line.

Doug, isn't this overstating the situation a bit? There has been a US demand for smaller cars. Not everybody drives a Hummer or a truck. The point I think you are making is that the demand for larger vehicles has until recently eclipsed demand for smaller ones. But god knows the boozy party of low gas prices and big margins on large vehicles wasn't going to last forever. Maybe Detroit was hoping that there would be a three-year warning on an international crises? What would the contingency plan be, offer fat rebates?

I'm not sure a full line of smaller fuel efficient cars would be realistic or even necessary. But some well-developed, nicely engineered (eg. hybrid) offerings, smartly marketed with a dash of flare, along with healthy longer-range R/D funding with an eye toward the inevitability of rising oil prices would probably have left us in a better position for a sudden shift in demand.

I don't think this is just Monday morning quarterbacking. For years we've been seeing ever more big vehicles. Americans like big and they like cheap. But we've also seen the surging popularity of the Prius and other smartly designed cars from Japan. Detroit has been on a collision course with destiny for many years. It has been as painfully easy to see the trajectory then and predict the future as it is now painful to watch.

Dave

DouglasABaker · 10th December 2008, 22:43

Quote:

Originally Posted by gsfent

Wow. I am gone for a few hours, and Doug has time to write another War and Peace!!

Thanks for keeping a great discussion going,

I will try to respond later when I have a chance to go through eveything.

Regards,
Jerry

Trust me, it didn't start out that way...

And hopefully that'll teach you to go off for a couple hours

Doug

DoctorV8 · 10th December 2008, 22:56

Quote:

Originally Posted by wilsodh

But god knows the boozy party of low gas prices and big margins on large vehicles wasn't going to last forever.

Apparently Wagoner isn't on speaking terms with Him.

Quote:

It has been as painfully easy to see the trajectory then and predict the future as it is now painful to watch.

The trajectory of which you speak has been documented in detail in the GM Death Watch series at www.thetruthaboutcars.com since 2005. I honestly didn't believe things were that bad back then....guess I was wrong.