Another One Bites The Dust

As of Monday the 1st it's official - Ford is the only surviving member of the big 3 automakers. Oh how the mighty have fallen. GM's fate was likely unavoidable; this recession just accelerated the inevitable. GM has not been consistently profitable for years and has not really seen any sustainable growth in decades. GM and Chrysler never really learned how to compete with global competition in the key US market. Ford was a slow learner too, but is proof that an old dog can learn new tricks.





I don't lament the loss of GM. The firm failed because it did not adapt to changing customer tastes, competitive landscapes, and economic realities. There are lots responsible parties but the failure was primarily the result of poor management and the burden of the UAW. Management did a poor job of responding to the rise of Toyota, Honda, and others. Quality suffered and so did customer appeal because GM simply could not adapt fast enough. GM has long been criticized for having a very hierarchical structure that made it difficult for decisions to be made and change to happen swiftly. The fact is that in today's global world you simply have to be faster than that.


The UAW made it difficult for GM to cut costs and revamp organization and design to improve response times. The work rules and benefits awarded to union workers were incredible. It is amazing that everyone didn't want to work on GM's production line. While the UAW was trying to extract every extra cent out of GM, they lost sight of the fact that the welfare of the employees was inexorably tied to the health of the company, or at least it was until the UAW was brought under the graces of President Obama and his fiscal largess.



The sad truth is that the decisions made surrounding the fate of GM were made for political reasons not economic reasons. As if that wasn't bad enough, the people making these decisions don't exactly have years of experience selling cars. The result will be another gutted firm on taxpayer life support. You know, when I think about all the companies that Obama has bought in part or whole the U.S. is starting to look more like Russia or China in subtle little ways.