A lot of reaction to my post from Paul Fenner, who works at an parts supplier in Detroit--including an interesting response at the bottom from someone inside GM.
Andrew R. was surprised at Fenner's candor:
"This country so desperately needs honest and straightforward talk right now. Thanks for sharing."
From Kevin S.:
"Thanks for sharing this excellent letter from someone who seems to understand the realities of the Auto Industry as a whole. I agree most strongly with the following portion of the letter:
'There is no diversification between a GMC Envoy and a Chevy Trailblazer, or a GMC Sierra and a Chevy Silverado.'
"GM still has 7 Automotive Divisions (Chevy, Pontiac, Buick, Cadillac, GMC, Saturn, SAAB) After killing off Oldsmobile!...Differentiation is now limited to superficial marketing or branding differences such as the logo on a steering wheel, or signature design of the grill… Sure, you can argue that engineering and manufacturing costs are shared across the 'platform', but that is only rationalization to support status quo, not a market driven strategy...And look at the costs that are not shared: portions of engineering and manufacturing for the 'superficial' design changes, marketing costs, dealer networks & support costs, SG&A costs…
"Can the customer really see and buy-in to differences between 7 Different Divisions? How many ways can you slice "Sedan", "Wagon", "Sports Car", "Pick-up Truck"? Toyota (Toyota, Lexus, Scion), Honda (Honda, Acura) and Nissan (Nissan, Infinity) do fine with just 2 or 3 Divisions. Porsche, BMW, Mercedes (2 if you count "SMART"), with only 1! Why can't GM do the same?...
"If I can come up with this, then GM must have 10 different consulting firms telling them the same thing! It's just tough to take the advice, decide which of the 'divisions' or 'brands' survive and which go the way of Edsel, DeSoto, Plymouth, Oldsmobile, etc. If current leadership can't make these tough choices, then they should be ousted either by the Board of Directors or the Bankruptcy Courts!"
Mike was not a fan of the blog:
"Just don't see the credibility in this guy's statements...'I speak from experience, having spent almost my entire 10-year career in the auto industry.' Oh my… a 10 year career with almost his entire 10 years spent in the auto industry! ooo… aahhh… 'Just recently, due to the crisis, a company laid off all salaried employees who had exhausted their allotted vacation time. Although we are in unprecedented times, I saw this as a horrible method of trying to save costs. These are typically the employees working beyond standard requirements...' Criticism of this move makes no sense to me. If management was going to use some type of metric, this would be one to use. He states these are the keepers? That seems backwards to me - these seem to be the very people that, if you had to let someone go, would be them..."
From Paul C.:
"The voting block that is the UAW helped in putting Obama in the White House. He is beholden to them now and he will 'bail out' the auto makers. The free-market system will not be allowed to function - not that it has recently anyway. Those few of us who want to see the 'big three' go into bankruptcy and reorganize are told that we don't understand the gravity of the issue. Really. Oh look here's Chrysler back AGAIN looking for another federal hand out... There are two Hondas in my driveway; inexpensive to run and maintain. Hey now, there's and idea."
From Jason J.:
"Great insights from Paul - I liked his perspective. Thought - Perhaps the auto industries big 3 should get bailed out by the oil companies. Those companies actually have a profit, and the cars the big 3 create help keep the oil companies rich with profits. It is time for the big 3 to pick another pocket. Then again, the oil companies would make the big 3 pay them back - our spineless, toothless Congress would probably just forgive the debt. Another thought - perhaps the big 3 C-level executives should be paid a percentage of profitability of the company - their pay will not be limited, and the more money the company makes the more money they make. Finally, on their cost cutting measures (that I read on CNBC), what is the over-under on cheaper pencils and clocks which don't have battery power vs running a private jet that costs between $7,000 and $10,000 an hour to run? Randomly eliminating post-it notes and number 2 pencils is not the answer - a horrible and knee jerk reaction to how these companies waste money…"
Finally, a longer email, but an important one, from a "Salaried GM Employee":
"Part of me agrees with Paul Fenner, so I guess I am sitting on the fence, just like him. GM is certainly in a difficult position. And realistically, the 'sound bite' mentality that pervades our society is really part of the problem as well. Paul points out the jobs bank -- everybody uses that sound bite to make their case about how bad the UAW contract is for industry. On the surface, he is correct. However, what he, and almost all of the others who bring it up, doesn't say is that less than 1% of the workers are actually in this bank, and it is getting smaller by the day.
"Rick Wagoner makes a lot of money. True. So does every CEO in America. This is not just an auto industry problem. Why should the auto industry be singled out for that? I like Rick, but I would have very little problem with the GM board replacing him. Having said that, I am pretty sure nobody could have done better -- these are very tough times. Hindsight and all. Rick is 100% correct. You don't declare bankruptcy in an industry with an average buying cycle of greater than 5 years in a mature market with close replacements. That just doesn't make sense...
"What scares me more than anything is that GM will get money, and be asked to appoint a CEO with an agenda rather than someone committed to a turnaround. The term is 'be careful what you wish for'. I don't want Al Gore running GM. That would be bad for business. Of course, if Al Gore ran GM like he runs his personal assets we'd be just fine. What I detest is those people who bask in the glory of GM's troubles because they think that GM isn't eco-friendly enough. That is just stupid and misguided. If GM could make money on hybrids, they'd be pumping money into them, believe me. They already do that in trucks, but hybrids don't even make money there.
"What sets Toyota and Honda and all the other foreign automakers apart from GM and Ford is simple legacy cost. Foreign automakers build plants in right to work states because it's good business. Put GM and Ford in that position and they beat all comers. As it is, GM has had car of the year the last 2 years (Aura and Malibu), and sells the number 2 and number 5 midsize sedan in the world in the Impala and Malibu, with the brand new Epsilon coming right behind it (car of the year in Europe this year), and the Cruze right behind that.
"I would love to see an end to the UAW. I think it is in the best interest of just not the auto industry, but industry in general. UAW likes to point out that this isn't their problem and, really, they are somewhat correct. But the problem is that strikes in good economic times work. We aren't there anymore. The perception and the jealousy about the contract is just fodder. But when you can move manufacturing offshore and improve quality, it is time for a change, and that time is now.
"In closing, don't look now but one other thing could save the big 3. Gas prices are down, and SUV sales are up. It's a beautiful thing. GM dumped a bunch of capacity, and now they are working overtime to keep up with demand. LIKE IT OR NOT, business will ALWAYS provide what the customer wants, unless the government is right there to screw with customer perception.
Barack Obama will have none of this. He will support a bailout of GM and Ford with job guarantees for the union. And then he'll put a tax floor on gas so high that he'll guarantee the industry goes belly-up anyway. And it'll be all GM's fault."
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