Garbage in Tuesday November 22, 2005, 4 comments

Everyone is aware that General Motors is screwed, right?

Yesterday the company announced massive layoffs and plant closures in an attempt to stem what has obviously become terminal hemorrhaging. The closures affect both American and Canadian workers in several locations. Pressure from competition, and to a lesser degree the sudden end of the North American love affair with the SUV are being cited.

In response to the “crisis,” Buzz Hargrove, the leader of the CAW (Canadian Auto Workers Union) told the media that the union could not handle the layoffs through normal channels of attrition. “Normal” channels of attrition apparently include contract clauses that force General Motors to provide handsome early retirement packages to more senior workers. Buzz went on to state that the union was going to work toward forcing the company to move production from US factories up to Canadian ones to prevent the layoffs.

Mr. Hargrove wasn’t finished there though. He went on to say that the problem was one of import and export. While Asian and European car makers are able to sell cars in the North American market, North American manufacturers are unable to sell in those foreign markets. I was stunned to hear this, as I am absolutely positive General Motors sells cars in Europe and fairly positive they do so in Japan as well. They most certainly have a Japanese branch of the company.

It is possible Mr. Hargrove was deliberately misleading the media in an attempt to sway public opinion enough to force the government to intervene, but that is speculation. This is, after all, the same union that was willing to let Canada’s largest airline go bankrupt instead of allowing the company to cut jobs (and therefore deficit) like all other airline unions had.

Only slightly more important here is slumping SUV sales. Recent General Motors sales have relied heavily on the SUV market. High gasoline prices, pressure from environmental groups and changing American tastes have taken a toll on the luxury truck market, and subsequently on General Motors’ bottom line. What is interesting is that this change in the market is not unique to General Motors. All automotive companies, including Asian and European manufacturers have seen an impact on the luxury truck market.

Mr. Hargrove is either lying to us or ignorant of the facts.

Perhaps General Motors is suffering at the hands of foreign companies not because of unfavorable international trade but because the cars it builds are garbage.

While at least one GM plant in Canada has won several awards for construction quality recently, the fact is that GM cars may be well built but they are not well conceived. Further, GM deliberately confuses the market by providing essentially the same automobile through several different channels (Chevrolet, Pontiac, Buick, Oldsmobile, Cadillac, AC General, etc.) in a “wide spray” approach to marketing which insults the intelligence of potential customers.

Foreign manufacturers have overcome poor build/design quality of the past and poor reputations to become the dominant sellers of automobiles in the North American market. They have overcome nearly criminal levels of import tariffs and still managed to market a superior product at comparable prices. If 40 percent of cost of an imported car is duties and tariffs and they still cost the same amount as a domestic car, what are domestic companies doing with all the extra money?

The free market is speaking. This is the fundamental basis of capitalism. General Motors is a dinosaur, an artifact of a bygone era when it was insulated from the real market by consumer fear, patriotism and blind loyalty. Loyalty that has been (ab)used to sell inferior products at larcenous prices. Now the company is being forced to compete on a more level playing field.

Weighed in the balance, and found wanting.


Comments

Daniel Wednesday November 23, 2005


Yeah, I read or hear about all the doom and gloom of various economic upheavals and I have to expect that every culture through history has weathered similar. Either it contributed to that culture’s eventual downfall, or opened the way for novel innovation and expansion. Either way is fine with me. The primativist in me wants the whole thing to fall apart anyway.

Adrian Wednesday November 23, 2005


I have to admit that there are parts of me that want it to collapse too Daniel.

I’d rather be sailing anyway.

Jorge Friday November 25, 2005


The time is ripe for banana powered cars!

Clever pun, eh?
;)

Adrian Friday November 25, 2005


Oh Jorge….

I won’t hold it against you.

Commenting has ended for this post, but I'd still love to hear from you.

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