G.M. continues to be run by ostriches
“The General Motors Corporation reported a stunning second-quarter loss of $15.5 billion on Friday because of a dramatic decline in United States sales and charges for job cuts, plant closings and the falling value of trucks and sport utility vehicles.”
The automaker’s pickups and sport utility vehicles, like the Cadillac Escalade, are critical to its turnaround.
G.M., like its Detroit rivals Ford and Chrysler, was surprised by the abrupt shift to smaller, more fuel-efficient cars.
Surprised cannot be the right word here. But screwed? Yes.
UPDATE: This New Yorker piece (12/8/2008) brings it home.
The Secretary of Transportation’s report to Congress begins on a dark note. “Over the past year, the domestic auto industry has experienced sharply reduced sales and profitability, large indefinite layoffs, and increased market penetration by imports,” it states. “The shift in consumer preferences towards smaller, more fuel-efficient passenger cars and light trucks … appears to be permanent, and the industry will spend massive amounts of money to retool to produce the motor vehicles that the public now wants.” The revenue to pay for this retooling, though, will have to come from sales of just the sort of cars that the public is no longer buying—a situation, the report observes, bound to produce “financial strain.”
“To improve the overall future prospects for the domestic motor vehicle manufacturers, a quality and price competitive motor vehicle must be produced,” the report warns. “If this is not accomplished, the long term outlook for the industry is bleak.”
The Secretary’s report was delivered to Congress in 1980, a year after what may soon become known as the first Chrysler bailout. Depending on how you look at things, the report was either wrong—three years later, Chrysler returned to profitability—or prescient.
