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Writer calls for death of Buick, Pontiac, HUMMER, GMC, Saab


ixlar8

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I disagree with him with respect to Buick. Cadillac (as it exists) is too expensive a leap from Chevrolet to make for a palatable product structure. Also it's image is not practical or mainstream enough to appeal widely, the way Lexus/Volvo/BMW does. I've said for years Buick should be building BMWs for the American market while Caddy built the Bentleys.

Sadly, it's hard to fault his logic on much of anything else in the piece. <img src="http://forums.aaca.org/images/graemlins/frown.gif" alt="" />

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Guest Skyking

I wonder what make of car the writer drives........ <img src="http://forums.aaca.org/images/graemlins/confused.gif" alt="" /> I've talked to people who own the Lucerne and they find it far superior to anything they've owned, American & Foreign. But, there are still people that won't give it a thought because it's domestic........ <img src="http://forums.aaca.org/images/graemlins/confused.gif" alt="" /> <img src="http://forums.aaca.org/images/graemlins/confused.gif" alt="" /> <img src="http://forums.aaca.org/images/graemlins/frown.gif" alt="" />

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I wonder where THAT writer (a "senior" one at that!!??) has been hiding and just who he's been mentored by???

A few points -- Nobody missed Oldsmobile? How about 250,000 prior Oldsmobile buyers (in one year!) that did NOT return to GM (typically) for their next car. If they had wanted a Buick or Cadillac, they would have already been driving them for decades, not the Oldsmobiles they were loyal to. Not to forget about the many Oldsmobile dealers who were either single-point (i.e., Oldsmobile only) or the smaller multi-point (i.e., "channeled") dealerships that lost those buyers, period!

-- GM needs to follow Toyota in what products they have "on the ground" . . . if you look at how the Toyota product mix has expanded over the past two decades, it VERY closely mirrors what GM (including Chevrolet) has had all of these years. Not to forget that GM started with one product (i.e., Buick) and then added additional product lines (brands, which were unique in orientation, design, and engineering) as time went along, getting more owners in the process and keeping buyers who wanted something better than a Chevrolet (the 2nd GM brand, after Buick) buying GM products. What we see in the United States of Toyota (and Mercedes-Benz) products is only a small part of what they build for their home markets, so saying that GM should follow Toyota in their product mix is like telling the teacher to follow the student's directions in class curriculum (perhaps not the best analogy, but you know what I'm getting at).

-- GM needs to shrink it's size . . . By observation, every market that GM has vacated in the past 20 years has been "filled in" by an import brand vehicle, typically. First it was the intermediate-size coupes that went away, then we suddenly got Toyota Solara (and others). Camaro/Firebird went away and suddenly there was a Mitsu Eclipse hot rod (and a convertible!)--and now a better MUSTANG (finally!). In a related area, when the last gen rwd Impala went away, it took a while, but then Chrysler Group (with Mercedes "items") drove right into that market (including the police car market).

On related "Follow Toyota" things, many "experts" now look at the limited number of Toyota franchises and how many vehicles each one sells. Then they look (typically) at the average Ford dealership, which sells about 1/2 what Toyota does in each average dealership, and use that as making their case that the domestic brands have too many dealerships. These same people see the larger Toyota stores as more efficient revenue generators, but that might not really be the case. Plus, Toyota is also in an initiave to put "satellite" dealerships in the smaller, rural areas which are NOW not served by a domestic dealership (which either closed or WAS consolidated by the manufacturer). Soooo, an import brand filling a void left by a domestic brand that is not in the particular market area (for one reason or another).

Used to be that every little rural town had a Ford dealership, which sold Ford cars, Ford tractors, and possibly Philco applicances. That got Ford established very well into the rural/agricultural markets. Some are still there, but now all they have is vehicles and not the other stuff (which Ford sold off in years past).

-- "Downsize" . . . Why is this the magic bullet for everything???? Look at how much GM has downsized in the past 20 years and look at how the market share has similarly decreased! All of these downsizing/consolidation strategies were done to make GM "leaner and meaner and more profitable", but it seems to have done more harm than good. If GM has really saved as much money as all of these things were supposed to have saved, corporate profits would not be having issues, possibly? If GM was still selling vehicles as it had been, all of the major issues the financial people talk about would be better paid for with increased vehicle sales (remember that 250,000 Oldsmobiles in the last full year of production?).

Now, not to say that GM operatives have not made some "sub-optimal" decisions on things and/or tended to ignore others, but Toyota and the other imports have not been that "golden" either. In reality, many of the Toyota products (since the first Tundra pickup was introduced in the 1980s) have not been that ground-breaking. Nor has their market research (which led to them) been as accurate as many would suspect (including the new full-size Tundra). It seems that Toyota knows what a typical Toyota customer wants and desires in a vehicle, but when they venture off into new market areas (i.e., mid-size and full-size pickup trucks), after they get into the ballgame, they find the rules are a little different than they suspected (or envisioned). But, as long as they hit their target production rates, much of this is forgotten as they are suddenly "successful" with that new product.

General observation -- It seems that every "expert" that calls for GM to further downsize and lose brands (which are deemed not necessary or relevant to a "future" and smaller GM) finds some way to downplay the "vehicle for every purse" orientation which used to work for GM (which is now considered "outdated" by these same "experts") and IS working for every import brand selling vehicles in this country. Look at what KIA and Hyundai started out with and look at what they have on the ground NOW. Not to forget about Honda and Toyota! In every case, they started with a small (or ONE) product offering and expanded it as sales grew AND to keep existing buyers buying their brand of product (just as GM added product lines and brands to increase their corporate sales and market share). These expanded product lines didn't happen overnight, but took several decades to blossom out, but blossom out they did.

As far as GM now being the #2 vehicle manufacturer in the world, all they'll have to do is purchase Chrysler Group and that should take care of that deal. Then, you'll Toyota buy????? Fiat?

As much negative orientations as there seem to be by the (allegedly) "informed press", GM sure seems to be doing a lot of things right--product-wise--with more neat products getting ready to land on dealership lots in the next year or so. And, what 'bout Cadillac nipping at the heels of BMW for sales numbers (BMW was #2 in that segment, with Cadillac not that far behind in #3!)--who would have ever thought that???? In a marketplace where BMW is iconic to many (and "untouchable" with "free maintenance")?

But, I guess if you're "a target" for these "informed press" writers, that should say something in itself. PLUS, that particular writer plowed up NO NEW GROUND in his comments! Nothing which we haven't heard before . . . more than a year or so ago. Guess the magazine needed some filler material that would get readers riled-up???

In reality, GM needs every product it's got--period! Saturn is evolving into what many wanted it to become in the 1990s--Oldsmobile. Saab is needed for European products, plus expanding in the USA as a higher-end import. HUMMER might be hitting a different market than anything else GM has, but a JEEP it is NOT.

A key thing which many people seem to not grasp is that each GM brand has its own unique demograhic of customer (just as an Oldsmobile buyer bought Oldsmobiles for a particular reason and did NOT want, generally, a different GM product . . . which they would have already been driving if that was what they really wanted). This customer would gladly pay another $500.00 to drive a Buick than a Pontiac built on the same platform (but with orientations toward Buick rather than a "generic" GM product), for example.

Similarly, that "generic customer" which many people seem to perceive exists is much more elusive than is suspected. If a Chevy Impala, Pontiac Grand Prix, and Buick LaCrosse are sitting next to each other on the dealer's lot, each with a $28K price tag with comparable equipment, that is the possibility of using one platform (with different orientations--orientations which cost the same for each vehicle, with minimal additional development cost) to get THREE buyers . . . different buyers. Each of those brands has their own customer demographics which affects how the product generally evolves. Too many choices for the same price point? No.

Another point that is missed with all of the "downsize" talk is plant efficiency. It takes a certain number of vehicles produced to make the plant pay for itself. FEW current GM plants have only two products, much less ONE, with most of the car plants now having three products each. Taking one product line away will make it harder for GM to make profits (especially if you consider, historically, that once a GM customer is lost as their desired product is no longer produced, that customer is "gone") with less sales. That seems to make the whole "downsize operations" orientation self-defeating! Not to mention "DUMB"! Downsizing operations is supposed to generate profits due to decreased overhead . . . provided that sales remain pretty much where they were (which they NEVER do).

One thing that is never mentioned is how GM (or Ford or Chrysler Group) could BUILD their sales and product lines. It's all about "cutting" rather than BUILDING. Building via better advertising, for example. Building via better products (which has been happening for many years, now, but "nobody" generally notices). Building via more product choices or trim levels (interior, especially!). Building via more vibrant exterior color choices, with distinctive styling, body contours, and signature roof lines! Building and expanding our "American Heritage" products (i.e., "halo" and iconic muscle cars) which the import brands generally have none of.

Have a great week!

NTX5467

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Guest BJM

The writer is wrong in that the answer is to cut out car lines. The entire problem is related to high costs of the union contracts agreed to by the big Three and the unfunded liabilities related to these same retirees.

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With respect to "retirees", as I get closer to that age, my sensitivities have shifted a little in that area. I see what the Feds have on my scheduled payments, so I don't fault the retirees for getting what they're scheduled to from their pension plans at the automakers, or other related compensation. Many outside of the plant environment really understand what it takes to work in such a situation (where you go in the door at the start of the shift and don't emerge from "the city" until it's time to go home). Although there might be some office workers with the same arrangement, it's not the same situation at all. Sure, there are breaks in both environments, but having to work to keep the line going in the plant environment is a completely different type of stress than an office (or other similar work) environment where the work pace can be somewhat sporadic or changeable . . . with all due respect.

And, I don't know how THIS might play into these things too, but there are massive amounts of "former" workers that took early buy-outs to retire and go do something else, earlier than scheduled. In Ford's case, this is reputed to have caused the "brain/expertise drain" which might have contributed to some of their more current engineering and design issues--whether with respect to plant workers or white collar employees.

Another part of the wage agreements included the Jobs Bank situation. Part of the agreements was a slightly reduced wage rate for when there was no work in the plant (i.e., inventory adjustments, lay offs), which includes the Jobs Bank. As I understand it, a laid-off worker (still being paid the reduced rate) would report to the Jobs Bank just as if they'd go to work. Once there, they were "available" for work . . . but did not have to accept work assignments. In the Jobs Bank situation, workers could be dispatched to do civic improvement work (as in fixing school playgrounds before school started, or other similar situations or charity work) . . . or they could stay there and surf the Internet or play video games at their discretion. Personally, I'd rather see the retirees compensation stay pretty much where it is and put some added restrictions and requiremments into the Jobs Bank situation.

We all know about medical costs and where they are going, so it might be reasonable to let the retirees' co-pays go up a little, but as regular corporate and smaller businesses' co-pays have gone up significantly in the past years, using private businesses entities for a "guide" to follow might not be that great of an orientation to follow. Be that as it may.

When those wage/benefit concessions were agreed to in the middle 1980s, I thought it was out of whack then (orientation-wise . . . you basically don't pay somebody to not work, unless they are on unemployment or there is another compelling reason to do so other than the nature of the business involved), but everybody seemed happy to do it and glad it happened (probably suspecting that nothing bad would result from it).

But then what about the white collar employees that also gave their working life to the corporation? We can't cull out the ones that made bad business decisions or followed bad advice from "advisors" from the ones that did great jobs for the greater glory of the corporation. Everybody has to be treated the same. But I think many of these people would be somewhat exempt from qualifying for some government benefits due to their income/financial situation.

To me, the whole "retiree compensation" issue is a little misdirected, from my point of perspective as "getting there", but that does not mean that there might be some concessions in that area in some cases. But, as you add complexity to a program (just as on the production floor of the factory), you add production cost and longer production time into the mix. So, perhaps it might be less expensive in the long run to keep their compensation situation where it originally was as what might come from "cuts" could result in more administrative expenses.

Just some thoughts,

NTX5467

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<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The writer is wrong in that the answer is to cut out car lines. The entire problem is related to high costs of the union contracts agreed to by the big Three and the unfunded liabilities related to these same retirees. </div></div>

Then explain this:

2007 VW Passat V6 MSRP: $25,225

2007 Honda Accord V6 MSRP: $25,200

2007 Toyota Camry V6 MSRP: $23,540

<span style="font-weight: bold">2007 Buick Lacrosse MSRP: [color:"blue"]$22,415.</span>

I think the "entire problem" can be summed up in 2 words: <span style="font-style: italic">Buick Somerset</span>. People see what typical 15 year old Camrys look like (physically and on paper in reliability terms), and see what typical 15 year old Buicks look like, and make their decisions accordingly.

It'll take a long time to live down the cars that have made the impression which is predominant among most car buyers today. It's very true that today's Buick sedans seem to be the equal (at least) of their competitors. It's also demonstrably true that they're a realtive bargain, corporate whinings over legacy costs included.

That task would be <span style="text-decoration: underline">much</span> easier if there weren't 8 or 9 quasi-competing brands all of which need the same rehabilitation. I believe that is the point of the article. And while there are elements of throwing the baby out with the bath water to his logic, I find it hard to dismiss.

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Dave,

So the corporate execs saying they are hand bound by the union contracts past and present are lying? They can't even lay people off without it costing the company money. Now, granted I may not be getting my facts straight and multi media stories may not tell the whole story, but 1. the pensions which include health insurance are under funded, are contracts that can not be broken and add to the bottom line of the products GM sells. 2. VW has some high costs related to importing and the Japanese makes you note, which I knew about their pricing, only means they are making higher profits and they are building new plants in America with some of those profits in communities that then become very loyal to these fair companies. Good wages, worker input, and healthy (mostly Southern sector) communities.

What always riles me about the UAW penned contracts is that a laid off employee still gets salary and benefits. If this is media misinformation I'd like to be corrected because every time I hear about 20,000 lay offs you would think those are permanent terminations wherein those UAW members need to get a new job BUT I have heard they still get a salary, still get health insurance and a retirement pension.

I don't care if the UAW and it's retirees get their fair share and that's fine and all, but if the company goes out of business and can't fund those pensions and benefits, then it's lose/lose. And it's not a fault issue, I applaud the UAW for getting it's members those fat contracts years ago and maintaining that standard for so long but it is similar to the welfare system in that there is a sense of entitlement that is detached from the economic realities of the modern car business.

GM's number 2, Ford is, well, Ford is bankrupt, and Chrysler is a joke with Mercedes doing whatever it can to unload it. I'd bet they would sell it to the Chinese if they could! Yet we all agree their products are fairly priced and nicely built. Perception is part of it, lack of leadership is obvious, but these UAW contracts past and present are the real issue.

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As I understand it, the underfunded pension plans at GM came to light about a decade ago. At that time, they were having some financial issues and started putting money back into those pensions . . . at least enough to satisfy the financial observers outside of the company. Then, things got better plus the pensions were now "safe" again, so the issue of pension funding kind of went away.

Part of the Jobs Bank situation, as I understand it, has to do with what to do with laid-off employees that are still being paid a significant percentage of their prior compensation. Obviously, the active participants of this program have done lots of good and charitable things for the State of Michigan and other areas. I also suspect many of these same active participants have and are performing other productive functions for GM, also. To me, with all due respect, as long as some good comes from these Jobs Bank assignments, that's great as some utility is being received from the employee.

I can also understand a shift having to shut down early as a "just-in-time delivery" part is not received when it should be, and the worker still getting a full shift's pay for that day. And being paid a normal wage during training for new product production while the plant is shut down for model changeover.

But, if you consider that when these wage concessions were agreed to, a huge amount of industry people were looking at the Japanese production model of how to do things and seeing what they could implement in the USA to mirror the Japanese success in high quality production. At that time, it was the Japanese custom for the worker to start working for an industrial company when young and remain with that company until they retired. "The company" took care of the worker in all respects, as I recall--which would include wellness exercise activities/breaks, medical care, plus other things which would keep them happy and with the company "forever", being a high quality (or better) during their time with "the company." So, if you use that as the benchmark for the middle 1980s contract orientations, it was doing nothing more than mirroring what the Japanese had been doing for decades. These higher levels of compensation were previously unknown in the USA, but somewhat typical of the then-existing Japanese industrial business model.

The Japanese also had a really close relationship with their parts vendors too, from what I've read. I recall one time an associate needed a particular accessory for a new Nissan. The dealership ordered it and it was on backorder. A week or so later, it was still on backorder, but the customer was getting a little antsy for the part. Further checking revealed that the vendor for that part kit was a small-volume family business in Japan . . . which had closed to go on vacation. They built the kits "as needed", so there was no excess inventory. When the family came back from vacation and reopened the plant, the customer got their part. I suspect you can imagaine the uproar that would have caused if it had been a USA company, but as it was in Japan and that was their culture, it was tolerated and accepted. I don't know what changes to the traditional then-Japanese industrial business model that Carlos Goshen have been made with his involvement at Nissan, though, but I suspect there have been some.

So, to me, to fully appreciate how these "pay for no work" contracts came about, you have to understand some of the historical side issues of that time. At the time, they were highly unusual, but in our more current timeframe when everything is supposed to be so whittled-down and spit out to "slash" costs and improve productivity AND quality of said productivity, for those used to the more current point of reference, they seem really questionable.

Remember, too, that it was the union that helped to fuel the rise of the middle class in the post-Korean War era. Those production jobs were typically higher pay jobs than other non-college-degreed jobs of that time, so they were good for the total economy. It should also be noted that with each successive contract, some "improvement" has to be made for the new contract (be that an increase in hourly wages, better work conditions, union administrative issues, better and/or expanded medical care coverage, or a guaranteed minimum wage rate when the plants are closed temporarily or closed altogether). By the time the middle 1980s came around, most of the prior issues had been taken care of so that left the "take better care of the worker's welfare" as a key issue to deal with . . . from what I observed back then.

On the other hand, looking back to the 1990s, some suboptimal financial situations were put into play that have ended up NOT being nearly as great as they were touted to be back then. Some things which resulted in things going downhill (rather quickly!) rather than staying level or getting better. I suspect the money generated from these spin-offs pleased the financial advisors of the time (and probably some "profit-taking" shareholders), but they further weakened the corporate profits more than anybody might like to suggest. Kind of interesting (to me) how those who champion these spin-off deals as "great for both entities" (the parent and the newly-spun-off prior corporate divisional operation) as it can allow both to do things they could not do previously, but without the prior revenue stream in the corporate treasury, well . . . you see where THAT can go.

I know that knowing some of the history behind some of these union transactions might be helpful to know and consider, but that knowledge will not put more black ink on the Profit/Loss/Dividend Statement. Besides, whether the Union did good or bad in what they did back then would be highly dependent upon where your particular point of reference might be. If I had been a union worker back then, I would have EXPECTED the UAW to do what it did in securing those wage concessions . . . that was what I would have been paying union dues for. But from the outside, looking in, it certainly looks different . . . be that as it may.

I know it has been widely reported how much less the "legacy costs" are for the Japanese makers who have plants in the USA, due to the generally younger workforce. Yet with all of the layoffs and attrition of the higher-seniority workers for USA-based vehicle manufacturers, I suspect that gap might not be quite as wide as many might like to claim it is. Of course, the definition would be "cost per worker" with no consideration of how many workers are involved. BUT a younger workforce is NOT, repeat NOT, a guarantee of lower legacy costs--on any continent!

By observation (from my own workplace), the older employees are generally on more patent medications to maintain a higher quality of life as they progress toward retirement age, with a few castrostrophic illnesses involved, yet the more middle-aged employees seem to be more prone to more long-term medical issues (some from off-work activities!) which are not inexpensive to deal with or "fix" over the next 20+ years of normal work life. By the same token, the younger workers might not be as prone to go to the doctor for "a pill" to fix a health problem, so they might do more of it on their own (nutrition, vitamins, etc.). So, the issue of which age demographic is putting the most strain on corporate health care costs might be more variable than many might suspect.

With respect to union workers not being able to laid-off or terminated "at will", this is something that has been in existence for decades. There is a formal procedure for the company operatives to go through with the plant's local union operatives (and vice versa) BEFORE any termination can be requested and/or acted upon. Some might call this "tying the corporate operatives' hands", but it can work both ways. As with anything else, before a problem can be addressed, the existence of the problem has to be acknowledged . . . which might take a while in some cases.

As I've observed many times, the "on the surface" both sides of the story might not be the whole and real story. It's when you get to the third and forth and fifth and sixth (or more!) sides of the story that the real story comes out. And that can be just as real in a union environment as it can be in a "right-to-work" non-union environment.

Enjoy!

NTX5467

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In terms of dropping brands, the business logic doesn't agree with the emotional fervor some people seem to feel for this idea. Consider several things:

1. Oldsmobile. GM really seemed to want to get rid of what they thought were too many dealers, so they killed off an entire brand in order to reduce their number of dealers, assuming Oldsmobile buyers would just go buy another GM brand, such as Buick. They didn't; there probably were better ways to reduce dealerships, and GM would LOVE to have back those 260,000 annual units they lost when they killed Oldsmobile. The proof of that is the huge fire-sale sized rebates they were doing around the 2002-2003 model years, trying to buy more market share.

2. GM has returned to making a profit. If they are making a profit, why kill off one or more brands, unless they are really loosing a ton of money on each model within that brand. If that is the case, you redesign the model, even change model names, such as going from Lesabre to Lacrosse and Park Avenue to Lucerne in order to give the new product a wider appeal, but you DON'T kill off an entire brand. If GM were still in the days when they made one make or model only in a specific factory, killing off the line might make sense. But these days, nearly every factory does or has the ability to make multiple models or makes in the same factory. So, if the factory is making money, it doesn't make sense to kill off the product.

3. People keep talking about the medical benefits liability, which is real, but reducing product isn't going to reduce that liability. Most of it came from the benefits put in place for workers who actively worked 5, 10 or even 20 years ago, so that liability isn't going away until those people literally live out their lives and fall off the GM rolls. It may seem morbid, but reducing product or workers now isn't going to reduce the liability that was incurred 5-20 years ago.

Finally, I think GM is on the right track. They are starting to build cars and trucks that are catching people's attention, and if they can hold out until these retiree benefit recipients fall off the payroll, they will once again be in a very profitable position.

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