Better Companies with Better Technology Will Rise from the Ashes
GM and Chrysler are back at our doorstep, hats in hand, asking for a bailout that could
exceed $130 billion
. We should say, "No, and shame on you for asking!" GM is failing because of horrible mismanagement, a complete lack of long term planning, outdated technology and the fact that they make, by and large, high maintenance, gas guzzling cars that few people want to buy. One need look no further than Consumer Reports to see the rampant quality issues of many (most?) of their models and the fact they simply don't hold up as well over time as their Japanese counterparts. Are they the victims of an environment within which no automaker can survive? They are not. Despite the recession, Toyota sold over 620,000 more cars than GM last year and invested heavily in R&D. They sell more hybrid cars than all US automakers
. This year Toyota will release third generation hybrids, including new budget and luxury models. They have a
business plan. Does GM have a 10 year plan? During tough times people want fuel efficient cars that don't incur high maintenance costs. That is why they are buying Toyotas and Hondas. End of story.
Am I being unpatriotic by inviting this comparison and touting Toyota's success? Keep in mind that Toyota has been a model employer in this country since 1957. Today they operate five major assembly plants in the US and employ tens of thousands of employees in six states. From Jan 2006 to July 2008 GM laid off 5,500 workers. During this same period Toyota laid off zero. Not one American worker. I realize poor management, outdated technology and quality control issues area not the only factors contributing to GM's woes, although I would argue they are the most significant. There are external factors, such as UAW's stranglehold and public companies in the US having difficulty building cash reserves. Japanese companies are encouraged to build cash reserves to weather difficult economic times, while companies in the US are pressured to pay dividends if they have substantial money saved. Its obviously not a friendly economy for anyone, but bubbles and recessions are well known features of capitalist systems. The ability to plan for them and weather the storms is a proper test of the worthiness of a company to survive. That is the way our system is supposed to work, and it
the way it works for those of us without droves of lobbyists. Its time for us to step up to the plate. I would love to see GM replaced by five or ten hungry, agile automotive start-ups that have the ability to lead in the areas of fuel efficiency and alternative energy vehicles. Does anyone really think GM, under the direction of a new federal car czar, can accomplish this? There is no evidence of any such collaboration bearing fruit. GM's time has come and gone. Will this cause a short term jump in unemployment and a nasty cascade effect on suppliers? Yes, but making the right decision is often painful in the short term. We need to swallow this bitter pill, let GM fail, and give a new generation of smarter companies a chance to build better cars.