White House tells GM boss to step down

[Valmy]

Which is why the original bailouts were such terrible ideas. Giving them $20 billion on some pipe dream that they were going to survive was $20 billion that was completely wasted.

Bailing out failing companies is generally a terrible idea.  It basically enables bad behavior from firms since they never have to really worry about paying the ultimate price and it enables Unions to continue to push their employers in bankruptcy since their jobs will always be protected to some extent.

The US people =  the ultimate enablers.

I guess somehow it makes everybody feel better to waste tons of money to make sure GM and Chrysler die slow deaths rather than quick ones.

[KRonn]

Maybe this bail out, bankruptcy will work - some new cars, new ideas, changes in the way the corp does business, and a smaller but more focused product line. They're restructuring and all, but won't they be retaining some of their old problems? I feel, and felt at the time, that they should have gone through a controlled bankruptcy before the first bail out. At that time they didn't seem to be doing any significant changes that would keep them going except for govt/taxpayer funds.

I'll wait and see; I hope GM makes it. But I tend to not think GM can do enough to pull them out of trouble, given how deep in they've already gotten to. And it that's the case, I wonder/worry that the government will take even more measures to keep them going. Maybe added tariffs on imports, or taxes on foreign cars made in the US. Or pressure on foreign corps manufacturing in the US to unionize, which may cause some of those corps to leave the US, costing more jobs. Or what ever else the govt cooks up, with the unintended consequences.

[Zanza]

I wonder how long it will be before GM goes bankrupt a second time.

Again the really annoying thing is is that people on this board have been saying GM needs to dump most of its brands and reorganized for years.  It is only now that GM does that very thing.

It's actually interesting that everybody always says that GM has to shrink to be competitive because in Germany they say that you need size for economies of scale. Mercedes and BMW (each builds about 1-1.4 million cars/year) are generally considered to be too small to survive alone and are now considering deeper cooperation, mostly to compete with Audi. Volkswagen-Audi (>6 million cars) are a huge group that can share development costs and exert more bargaining power in procurement. Porsche was too small but just bought the bigger Volkswagen (even if it may end up as a subsidiary of VW soon). Mercedes tried to get the necessary size by buying Chrysler and parts of Mitsubishi, but we all know how that ended. BMW tried the same with Rover in the 90s and failed.
Fiat's attempt to buy Chrysler and GM Europe was also motivated by Fiat's chairman saying that you need to build 5-7 million cars to be competitive.

[alfred russel]

It's actually interesting that everybody always says that GM has to shrink to be competitive because in Germany they say that you need size for economies of scale.

If you buy that argument, GM should be liquidated. If you need economies of scale to survive, and auto demand has significantly dropped, you can't preserve the economies of scale for everyone. Someone has to go.

[Valmy]

It's actually interesting that everybody always says that GM has to shrink to be competitive

GM has some very profiteable brands but alot of ones that are black pits.  It was simply suggested they need to drop the money losing ones and concentrate on the cars people actually buy.  That may or may not have looked like building overall fewer cars.

Now they are at the point that they need to shrink simply to reduce overhead.

[Savonarola]

It's actually interesting that everybody always says that GM has to shrink to be competitive because in Germany they say that you need size for economies of scale. Mercedes and BMW (each builds about 1-1.4 million cars/year) are generally considered to be too small to survive alone and are now considering deeper cooperation, mostly to compete with Audi. Volkswagen-Audi (>6 million cars) are a huge group that can share development costs and exert more bargaining power in procurement. Porsche was too small but just bought the bigger Volkswagen (even if it may end up as a subsidiary of VW soon). Mercedes tried to get the necessary size by buying Chrysler and parts of Mitsubishi, but we all know how that ended. BMW tried the same with Rover in the 90s and failed.
Fiat's attempt to buy Chrysler and GM Europe was also motivated by Fiat's chairman saying that you need to build 5-7 million cars to be competitive.

In the United States smaller automotive manufacturers were either forced to merge with larger ones (Hudson) or went under (Packard and Studebaker) because they were unable to upgrade their factories and invest in new technologies.

GM is in a different position; it's factory capacity, dealership network and brands are sized from thirty years ago when it had about 40% of automotive sale in the United States.  Now they have about 20%. 

[Barrister]

I wonder how long it will be before GM goes bankrupt a second time.

Again the really annoying thing is is that people on this board have been saying GM needs to dump most of its brands and reorganized for years.  It is only now that GM does that very thing.

It's actually interesting that everybody always says that GM has to shrink to be competitive because in Germany they say that you need size for economies of scale. Mercedes and BMW (each builds about 1-1.4 million cars/year) are generally considered to be too small to survive alone and are now considering deeper cooperation, mostly to compete with Audi. Volkswagen-Audi (>6 million cars) are a huge group that can share development costs and exert more bargaining power in procurement. Porsche was too small but just bought the bigger Volkswagen (even if it may end up as a subsidiary of VW soon). Mercedes tried to get the necessary size by buying Chrysler and parts of Mitsubishi, but we all know how that ended. BMW tried the same with Rover in the 90s and failed.
Fiat's attempt to buy Chrysler and GM Europe was also motivated by Fiat's chairman saying that you need to build 5-7 million cars to be competitive.

According to Wiki GM made 8.3 million vehicles in 2008.  They can shrink by quite a bit and still maintain some economies of scale.

But for as much as people are saying GM needs to shrink, I think they're more saying they need to consolidate.  They may have made 8.3 million vehicles, but look how many brands it was spread over:

Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.

If GM did a better job of sharing its technology between its own units, sold the same model in more markets, it's stand a much better shot at being profitable.



I do wonder how a quasi-independent Opel is going to survive though.  Surely the issue of economies of scale applies to it.

[Zanza]

I don't really expect Opel to be successful in the long run. They produce for the mass market (low margins) and don't have economies of scale like Volkswagen. And their market share and volume at least in Germany (and I assume elsewhere in Europe) has been constantly shrinking.

[Barrister]

I don't really expect Opel to be successful in the long run. They produce for the mass market (low margins) and don't have economies of scale like Volkswagen. And their market share and volume at least in Germany (and I assume elsewhere in Europe) has been constantly shrinking.

Stronach was talking about selling cars in Russia, claiming it'll be an up and coming market, and selling and producing Opels in North America.  Neither of which sounds terribly reasonable.

[Zanza]

The Russia thing might work, however they'll probably have to move the factory to Russia too to actually pull that off. North America? No way. Unless they can leverage the GM dealer network or so.

[DGuller]

I don't really expect Opel to be successful in the long run. They produce for the mass market (low margins) and don't have economies of scale like Volkswagen. And their market share and volume at least in Germany (and I assume elsewhere in Europe) has been constantly shrinking.

Stronach was talking about selling cars in Russia, claiming it'll be an up and coming market, and selling and producing Opels in North America.  Neither of which sounds terribly reasonable.

I've seen a shitload of Opels back there, in fact they were probably the most common of the foreign makes there.  What's wrong with selling them in Russia?

[Sheilbh]

What it unfortunately reminds me of is shortly after the Iraq invasion the stories of people taking major administrative positions in Iraq who were just out of school and whose major qualifications were a connection with a group like the Heritage Foundation.

Me too.  Though this could just be that he works in the White House, rather than that he's been appointed to oversee everything.  From my understanding the staff of the President (and of Congressmen and Senators) is very often remarkably young.  In which case worry about GM no more than you worry about your country as a whole :p

Buick, Cadillac, Chevrolet, Daewoo, Saab, Vauxhall

These are the only ones I even recognise and I don't think I've ever seen a Buick, Cadillac or Chevrolet.  Cadillacs, especially, are associated with kitsch Americana in my imagination.

[Barrister]

The Russia thing might work, however they'll probably have to move the factory to Russia too to actually pull that off. North America? No way. Unless they can leverage the GM dealer network or so.

That's what he was talking about (and GM is still a large shareholder).

And yeah GM had (and continues to have) way too many brands across the world.  I dare say that companeis like VW, Toyota or Ford have it right - market one brand around the world.

[Caliga]

Me too.  Though this could just be that he works in the White House, rather than that he's been appointed to oversee everything.  From my understanding the staff of the President (and of Congressmen and Senators) is very often remarkably young.  In which case worry about GM no more than you worry about your country as a whole :p

That's because with our politicians, appearances are by far the most important thing.  If you're ugly, forget it (unless you're Nancy Pelosi, for some reason )

[DGuller]

I dare say that companeis like VW, Toyota or Ford have it right - market one brand around the world.

None of those have a single brand, and some have shitloads of them (like VW).