GM and Chrysler Crumble

Chrysler and GM have filled bankruptcy.  These are two major employers, not just in North America but in the world.  This is why the government offer bailouts to these companies, so as to avoid a major layoff country wide.  I certainly don't want those people to lose their jobs, but why does the story seam to end here?  I hear in the news about how GM and Chrysler have both been able to get the auto unions to cut back wages, but what above the line cut backs?  If any other business, small or large, had run this many non profit years, what would happen.  Someone is loosing their job!  And not some factory worker or office intern somewhere.  Any other board of directors would have brought their General Manager or CEO into the boardroom and fired them a long time ago!  I'm sure they would have thrown in a nice severance package, more money then I'll make in a decade, but fired non the less.  But have we herd about any above the line layoffs?  Yes, General Motor did fire their CEO, Steve Wagoner, but they had to be told to do so by the US government as post of the bailout strategy.  Thats a good thing right?  The problem was the board of GM couldn't decided what was a fair severance package so they keep Wagoner on the payroll!  He was on the payroll for at least seven weeks, I don't know how long he was being paid for beyond that.  Can anyone think of a reason this company might be have financial troubles?  But even letting Wagoner go, is that enough?

Compare General Motors to a Hockey Franchise.  The way I understand it a hockey franchise yearly budgets are based on projected income for the season and breaking even at the end of the regular season.  So there is no profit unless the team makes it to the play offs.  General Managers and Coaches commonly get fired for not making the play offs after only one season.  The company is not in debt, it broke even for the year but people in charge are being fired.  At General Motors they run a deficit year after year, and nothing.

How could these major car manufacturers, the once kings of the industry, be in such trouble?  I think one major contributor is from over competing.  These companies have all evolved over the years, but I remember when I was a kid it seemed to me that each company had their own little corner of the automobile market.  For Chrysler it was the mini van.  They also had their Jeep line with the CJ and then the Wrangler.  Ford was trucks and mustangs.  Mazda was little sporty cars, Toyota was the small pickup, and so on and so forth.  General Motors was just that, general.  They had the Cadillac line, a strong Pick up, and the Blazer/Jimmy.  But then they all wanted a piece of each others pie.  Chrysler reinvented the Pickup truck with the new Rams.  Nissan and Toyota both make full sized pickups.  SUV, vans, compact, mid sized, small pick up, etc.  Everyone is making a little of everything and few are making anything good.  They had their markets, had they stayed at what they were good at, would they be in better shape now?  Maybe, but their products sure would.

Starbucks had done the same thing.  Starbucks had a corner of the coffee market all to themselves.  They had people who wanted expensive, specialty coffees fast and nobody could touch them.  Starbucks also made it impossible to go anywhere and NOT find an outlet.  But it wasn't good enough.  They had to take a step back and say, who else is selling coffee and how can we get some of their market too.  It started with McDonalds.  Studies showed that a large number of consumers stopped at McDonalds for a coffee and egg mcmuffin.  Starbucks wanted that crowd too and introduced the Breakfast sandwich.  They had to renovated millions of stores to make room for the new toasters.  Did they really need this market, no.  Did they get this market?  Probably not.  The people that go for McDonalds coffee are probably not willing to pay more for a different crappy breakfast sandwich.  Then Starbucks moved into Tim Horton's customer base by introducing Donuts.  Where did they end up.  Bankruptcy.  What did they do thought?  Fired the CEO.    

Returning to General Motors, another contributer to their financial downturn is how spread out they are.  How many divisions does GM have?  They have 8 brands under the GM heading in the United States and Canada.  According to the US website there are 102 different cars available and 52 on the Canada site.  Lets break down the Canada site a little bit.

SUV/Crossovers. 20.  The Chevrolet Equinox and Pontiac Torrent are almost identical.  Why does GM have to have two of the same car under two names.  Because one will appeal to the Chevy market and one will appeal to the Pontiac fans.  How much money does it cost to develop the changes of the second car.  Different grill, instrument panels, hub cabs, etc.  And do you think there is a Vice President of both Chevrolet and Pontiac?  What if you eliminated one?  Take the best selling and throw away the other.  They are likely make at the same factory, so there is no job loss.  Instead of making a million of each, make 2 million of one.  Less cost, same output.  What about the other 18 SUV/crossovers?  How many are close enough to the other that it could fall off the face of the earth and no one would be the wiser.  

What about research money?  How much research money goes into updated each model every year.  Every car has to be a little "better" then it was last year, and if we can find a way to build it cheaper, thats good to.  I say no more research and development into cars they already make.  Put 80% of the RnD budget into advancing technologies and stop holding onto the pass.  Lets not worry so much on how to make the suburban more aerodynamic, lets get the electric cars rolling, or Hydrogen technology.  Its time to make a newer better car, not remake an old crappy one.

GM plans to drop Hummer, Saab, Saturn, and Pontiac, closing plants and dealerships across the country.  Maybe some of these plants could have been saved by the development of newer better cars, hard to say.  But for me it still boils down to why are the below the line employees the only one being hit with job and wage losses?  How many jobs could be saved by eliminating 

one executive position?  The worst thing about these kinds of scenarios is while millions of people are loosing their jobs, the millionaires are still millionaires and they are still making millions.  The rich getting rich while the poor stay poor!