Thursday, February 12, 2009

Stimulus package and the “American” automobile industry

Will the stimulus package save the “American” automobile industry? Professors Jay Heizer and Barry Render write that the cost of a Pontiac LeMans breaks down this way:

“About $6,000 heads to South Korea for the auto’s assembly; $3,500 goes to Japan for engines, axles, and electronics; $1,500 goes to Germany for design; $800 goes to Taiwan, Singapore, and Japan for smaller parts; $500 heads to England for marketing; $100 goes to Ireland for information technology; and the rest, about $7,600, goes to GM and its US bankers, insurance agents, and attorneys.”

In other words, the LeMans is barely American at all.

So why are GM and Chysler coming to our US government with hat in hand? Why don’t they demand handouts from the governments of Korea or Ireland? For that matter, why aren’t Ireland and Taiwan stepping up to hand billions to GM?

Actually, the German government is opening talks with GM’s local subsidiary, Opel, and the talks might lead to a bailout. So I can’t in fairness go all righteously indignant about that.

But I can reasonably be snarky about this: GM wanted all this globalization that led to the bleeding away of American jobs. If they’re in trouble now, why don’t they whine gimme-gimme to their precious World Trade Organization? A fine thing, to use WTO to marginalize the Congress and sovereignty of the United States - and then tell Congress they might or might not pay on Tuesday for a hamburger today.

In 1971, I worked for General Motors as a Junior Mathematician. (Yes, you read that right.) Never have I met people so out of touch with ordinary Americans. They had plans to build a car with windows that couldn’t be opened – only a slot to pay tolls through. They put our orientation group on buses to move us to another building 40 yards away; we trainees looked at each other in disbelief. It astonishes me that it took them another thirty years to go bankrupt.

When Toyota and Nissan became the quality leaders, GM said what me worry, Americans will buy American cars just because they’re American cars, doesn’t matter if they’re not very good cars. And GM was right – for a while. You can draw many messages from this story, but one of them is: Americans have already given GM their bailout, and GM blew it. Time to pack it in, General Motors.

1 comment:

Marketing Excellence Inc. said...

The American car companies have been mismanaged for decades. The focus for this time period has been money and profits. Improving quality and addressing customer demands have not been used to drive the business objectives. It is terrible business practice when the accounting and finance departments are driving product quality and customer demand decisions.

American car companies have no valid plan for getting it right. If they focused on basic customer needs such as extended reliability, defect reduction and increased miles per repair costs, they would have never needed bail out money.

Your discussion justs adds to my thinking that US car manufacturers should be forced to figure it out on their own or fail. Lets bail out industries that are trying to do it right. Wait if they are doing it right they probably don't need the help.

How interesting?