GM: What Took You So Long?
Have you seen the new “Reinvention” ad from GM? Mr. ToughMoneyLove actually likes it – right message, good production values. So I decided to do the Chapter 11 version of GM a little favor and share the video with my readers. Take a look. Then see if you agree with any of my follow-up comments:
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GM says all the right things, including acknowledging that it had too many brands and too many models. It even – but barely – pointed the finger at bloated UAW contracts and retiree benefits by a brief mention of it’s “cost structure” no longer being competitive.
What took GM so long?
The ad alleges that there was a time when having eight different brands “made sense” and that GM could “compete” with its out of control labor and legacy costs.
When was the exactly?
GM has been burdened by its cost structure for much longer than it – and the UAW – cares to admit. Case in point: GM’s market share and profitability declines have persisted for decades. In just the 8 year period from 1981-1989, GM market share fell from 45% to 35%. This coincided with a surge in Japanese competition. Between 1980-1992, GM losses totaled almost $30 billion. (Source) Today, GM’s market share stands at less than 18%.
Critics have been telling GM that it had too many brands, yet it continued to add new ones (Saturn, Saab, and Hummer), reluctantly shedding only Oldsmobile in 2000. (The brand name itself says it all.) In 2006 – a year after GM had suffered an $8.65 billion loss – one of its biggest investors (Kirk Kerkorian) openly challenged the GM board to get rid of under-performing brands. They refused and Kerkorian smartly sold his stock.
GM earned a temporary reprieve by cranking out dozens of new SUV models only to see that short-sighted strategy crash and burn when gas prices went up.
As recently as July 2008, GM claimed that maybe Hummer needed to go, but all other brands were safe. Bankruptcy was out of the question.
Everything about “reinvention” that is being said by GM was being said to GM years before.
I feel bad for most everyone involved in this, including America’s once proud manufacturing industry. China has been waging and winning a war with us on that front. I don’t feel sorry for GM management and UAW leadership. They were fools and have rightly earned mention in this week’s “fools of finance” post. But I suppose their jobs are safe.
Will any U.S. manufacturers that remain learn from this? Will the business school textbooks be rewritten or just thrown out? Or will they also wait to “reinvent” until its too late?
Photo credit: sun dazed