The Conclusion of the Car Culture

How to succeed in business in the twenty-first century: Outsource as much as you can, to the point that the CEO makes over four-thousand times what the poor schlub doing the grunt work is paid. Ask the government for bailouts, and then make sure you have an excuse for not paying back all that you were loaned, by compensating the government with stock you know will never be worth the amount you borrowed. Concentrate your efforts to specific models or types of products as the future, even when you’ve suffered huge losses by betting on that model’s marketability, and your firm’s limited ability to make new models profitable (let alone work) before. Put all of your bets on unproven models, unproven technology and areas where your firm has limited experience and expertise, especially when your firm’s past experience with innovation is sketchy at best, and when your business has a track record of abandoning innovative thinkers. The American car culture is passing on. Read on to see why.

 

“That men do not learn much from the lessons of history is the most important of all the lessons of history.”- Aldous Huxley

 

Just In Time Just Insane

GM was by no means alone when, after decades of success, its market share was purloined right out from under its leading, bloated and pedantic nose. GM’s first attempts at small cars were disasters such as the Vega and the Chevette, of which thankfully few have survived, to remind GM of its ineptitude. GM joined with Toyota (a corporation called NUMMI, or New United Motor Manufacturing) and made cars at the Fremont California plant where Tesla now produces its innovative, market-making, and tradition-shattering all-electric cars. At NUMMI, Toyota learned that they could produce cars profitably in the U.S. and GM learned how to stress out everyone in the supply chain by adopting JIT (Just In Time) manufacturing. JIT was created out of necessity on an island nation (Japan) whose land mass was only slightly more than California, and the livable part even less. Despite having all kinds of room, GM adopted the JIT model, where one missing part shuts down an entire assembly line, costing up to six thousand dollars and hour, (you read that right, $6,000 an hour) until the part is delivered. One of the Japanese manufacturers, after one of the hard earthquakes, lost $4.5 million due to lack of a piston ring costing $.89.  J.I.T. was a system that dumbfounded thousands of workers, along with one of my former-GM business professors, whose disdain for JIT was palpable.

 

Rationalization of Reduction

According to CNBC: “Consumers, ages 21 through 34, are taking out new auto loans at a 21 percent higher rate than Gen X borrowers did when they were that age, according to a study released Wednesday by TransUnion.” It’s nice to see people buying cars, because the automotive industry accounts for 1 in every 22 jobs in the U.S. Nonetheless, it seems from observation that the “car culture” of America is fading. The Gen Xers scaled back buying cars, and the latest research indicates that Americans will be buying fewer cars.

 

The speculation that Americans will be buying fewer cars is prompting GM to reduce manufacturing cars in advance, that is to say, within the near future GM will stop producing several models of passenger cars. According to Onpoint, consumers are switching to SUVs, crossovers and pickup trucks. Ahh, yes, GM needs to make more pickup trucks, just like they did between 1997 and 1999, when the showrooms and dealer lots were crowded with pickup trucks that no one wanted to buy. This time, it will be permanent, shutting down the American plants that make the “Chevrolet Cruze and Volt in North America as well as the Buick LaCrosse, Cadillac XTS and Cadillac CT6.” It’s not like GM’s competitor, Honda, sold 322,655 Honda Accords in 2017 (not even counting Honda Civics) or anything like that; the conclusion is that GM’s future is in trucks, crossovers and SUVs.  

 

GM’s management is as sure of the demand for trucks in 2018 as they were when, in the late 1990s, they made pickup trucks by the thousands and ended up with thousands of pickup trucks sitting at the dealers and no interested buyers. “That men do not learn much from the lessons of history is the most important of all the lessons of history.” Their ability to predict future demand has been dismal, but this time they’re even more serious, by closing plants and shedding workers. A rebound in the passenger car market will have to be covered by Ford, Honda, Toyota, Nissan, and the others.

 

From General to Specialized

GM wants to become a crossover and pickup truck company. Perhaps they should become Specialized Motors, since they really aren’t general anymore. Incidentally, (according to the Detroit Free Press) of the federal government’s $51 billion investment, $11 billion was never repaid. That story is a bit more complicated. Our government gave GM $51 billion for stock, and then took an $11 billion loss when the stock turned out to be not so valuable. I’m not a socialist, but what is it when the government gives cash (generated by tax-paying citizens) away to someone, isn’t that kind of like socialism? Give me just a month or two, and I’ll create a corporation, make sure it tanks, and ask for just a few million in bailout. I’ll promise to pay the money back, but when I can’t I’ll just tell the government that they made a bad bet, and there’s nothing more I can do. Oh yeah, I’ll have to pay myself several million a year.

 

Mary Barra, GM’s CEO, pulled down a paltry $22 million last year, 2017.  I’m sure Barra’s not a socialist, even if just a few years ago our government pitched in (read socialized) GM to the tune of $51 billion. Top pay at the Mexican GM plants is a generous $2.17 per hour. No wonder GM can’t make any money with those Mexican workers walking away with all of those profits. I’ll bet the Mexican union rep makes Jimmy Hoffa look like an innocent kindergartner.  Regarding compensation, management guru Peter Drucker advised CEO pay be no more than 20 times the wages of the average worker. In the case of GM, the CEO makes 4,652 times what the highest paid Mexican worker makes. I’m sure the GM C-Suite suits and I went to different business colleges. For comparison, Honda’s CEO, in 2014, made $1.4 million. I’m pretty sure Honda has been doing as well as GM, yet Honda’s CEO makes $20 million less than the iconic GM CEO. I guess Ms. Barra is just a better negotiator, don’t you think?     

 

America the Abandoned

GM, once an American icon, has, to a large extent, concluded that they cannot profitably make cars in the U.S. anymore. Especially when the CEO makes $22 million and all of the others in the C-Suite are pulling down dozens of millions, all of which are dozens of times what other leaders in the industry make. GM operations in Mexico and China are great, but where the whole thing started has been on a downward slide for several decades. The innovative move that GM is taking, moving to driverless cars and electric vehicles, which are still largely unexplored territories, sounds like a very dangerous course to take. GM has not been an innovative firm by most measures, and the innovators that have tried to influence GM’s culture have, for the most part, failed miserably. (Read “On a Clear Day You Can See General Motors” by John De Lorean.) GM’s culture has, for decades, been status quo to an exponential degree. Setting out on a strategy of innovation and new products for what has been one of the most stodgy corporations ever, sounds like trying to get the Pope’s Choir to start covering Ramones tunes. The Corvette has been the exception to GM’s stodgy reputation, but Corvette existed in its own enclave hundreds of miles away from Detroit’s button-downed, drab decorum.  

 

All of this sounds like change for the sake of change. Honda and other manufacturers have been able to generate profits making passenger cars, and GM has been making cars a lot longer than Honda. Unexplored territory which really has no road map, combined with the legacy of a company known more for adopting new technology than developing it does not sound like a winning combination. GM considers successful models with a decline in demand as being a permanent market situation in a market whose volatility has revamped many older players into much more nimble competitors, a trait GM has yet to attain. Models yet to be developed, not being bootstrapped on other models is somehow going to make GM great? Vast areas of software that need to be developed, with few working copies, again, being adopted from a manufacturer of cars, not a software company. A complete redirection of a company who major projects and accomplished goals have been closing down and shedding divisions, with successes in products it has made for decades, and little success, or even experience, in innovation.

 

GM has yet to prove itself as an innovator; is has neither the culture, nor the attitude, nor track record for success in the area of innovation. The turnaround that GM is attempting will be either one of the greatest turnarounds in business history, or the decline and fall of a manufacturing giant led astray by barely competent managers. Perhaps the old guard has been discarded and the new geniuses are taking over. As one of the management consultants once said, “If they can’t get the payroll straight, (see the previous paragraph beginning with Mary Barra) think of all the other things that can’t do.” I have yet to be impressed.

                                                        

Comments

George N Romey Added Dec 15, 2018 - 9:43am
Back in the 50s through the early 70s you knew makes of cars.  Today makes seem almost all the same.  No surprise automakers are reducing the number of makes and models and moving towards cross overs and trucks.  It should be interesting to see what happens when gas soars again and large vehicles become out of favor again.  The move towards larger vehicles, SUVs and trucks is because that's where the margin is.
 
I think we will be seeing automobile bailouts again in the not too distant future.
Leroy Added Dec 15, 2018 - 9:55am
The crazy car cultured culminated circa the 70s.
 
When a company is failing, turn it over to a woman.  There's even a name for it.  My memory fails me.  They generally run the company into the ground.  It's not necessarily their fault.  The company was already headed towards destruction.  Carly Fiorina ran HP into the ground.  Some say she was ahead of her time.  When a traditionally male-driven turns the reins over to a woman, it's time to get out.  Don't get me wrong; it is not a criticism of female leadership.  It is more a criticism of male leadership.
Jeff Jackson Added Dec 15, 2018 - 9:58am
I think you're right George. The thing is, if we give them the money to bail them out, they should no longer be able to move jobs to Mexico, have private corporate airplanes, and pay CEOs dozens of millions of dollars. Honda doesn't pay that, and they seem to be doing OK. Thanks for your comments George.
Jeff Jackson Added Dec 15, 2018 - 10:04am
Thanks Leroy,  Marissa Mayer, leaving Yahoo, after several years, with a $187 million severance package. Ginni Rometty at IBM, there are others. Thanks for your comments Leroy.
George N Romey Added Dec 15, 2018 - 10:24am
Like retail there’s too much capacity chasing too few customers. When people turned cars over every few years all the makes and models made sense. Today with the average car around 10 years old it doesn’t make sense.
opher goodwin Added Dec 15, 2018 - 10:44am
I don't suppose Trump's steel tariffs are helping.
Leroy Added Dec 15, 2018 - 10:44am
I looked at GM trucks and SUVs.  Why would anyone pay that much money?  In a few years, you will be able to sell them for a fraction of what you pay upfront.  It's cheaper to buy a Mercedes.  Yeah.  GM may give you a $10,000 off the suggested price, but it is still too much, IMHO.  How long will Americans pay their stupid price?  I guess as long as they can stretch the payments out long enough to make it affordable.  
Jeff Jackson Added Dec 15, 2018 - 10:49am
Yes George. We like the fact that cars now can go 200k miles, but we hang on to them a lot longer than the disposable cars of before. I must admit car makers have come a long way, but some of that was the reliability of the Japanese cars like Honda and Toyota that can go 200k easily that forced Detroit to increase their quality. Longer life spans decrease demand, as there are more out there still chugging along.  I also see young people not wanting a car, or even knowing how to drive until their late teens or even twenties. I was driving a Willys war-surplus jeep when I was no more than fourteen. Thanks George, great point.
Jeff Jackson Added Dec 15, 2018 - 10:58am
Yes, Leroy, I haven't a clue why anyone would spend $60k on a pickup truck, and everyday I am around people (young people) who think they have to have a $60k pickup truck. I ask them why they need a pickup truck, what is it that they have to haul around, and they look at me and can't name anything they have that needs to be hauled around. If gas prices go up again (and eventually they will) these gigantic (that's another essay) beasts will go for almost nothing. I woudn't give much for a vehicle that I am primarily going to use to haul things around, things that won't fit on to my trailer. I'm glad it's a free market and free country, people can choose what they want to drive. I also believe that truck popularity will diminish and passenger cars will come roaring back, and GM will be screwed. Thanks Leroy.
Stone-Eater Added Dec 15, 2018 - 11:49am
Jeff
 
Interesting one. I guess in our time people overestimate their capabilities, men and women. Business is no household to be taken care of, and not only a carpenter shop. The PC drive to minimize the difference between men and women and feminism has for result that women get (however they get there...) into positions where they are clealy not suitable for, because at the top you don't have to sleep your way up or look pretty anymore but you have to deliver. The same counts for men who are rich men's sons, went to Harvard and other elite schools, and once they get into the hard business life and to the top due to their connections, they are overwhelmed by the power fights and intrigues of their lower charges.
 
Concerning cars: People ARE stupid here in Europe. Everybody talks about climate change (whether it's true or not I can't judge), and at the same time they buy SUV's for daily shopping and going to work in cities while these cars are designed for places like Africa....and they consume a lot of gas.....
Jeff Jackson Added Dec 15, 2018 - 1:23pm
Thanks Stone. You know, I could never figure out why people buy 4-wheel drive SUVs and pickup trucks and they never get anywhere near any open spaces.  While it snows where I live, I have never seen so much snow that my front-wheel drive car could not go through. I think GM is seriously overestimating what it is capable of doing, while abandoning the thing that, after over 100 years, you would think they know how to do. Thanks for your comment Stone, stay warm there in the Alps.
Bill H. Added Dec 15, 2018 - 3:41pm
Great article, Jeff!
I've watched both the auto industry and the oil industry work in cahoots with each other since the early '70s.
How better to drive up profits for both! Up go the oil prices and up go the compact car sales. Down go the oil prices and up go large vehicle and SUV sales. It's been working for years, and the public has no idea.
Now many cars are software-based, so they can build in all of the bells and whistles from day one on all of their production, and simply sell the "options" by enabling them within the software at the dealer and marking up the price.
I suspect it won't be long until they begin "obsoleting" vehicles by simple remotely-downloaded software patches, as is being done in the cell phone industry, the computer industry, and the computer printer industry.
Software Induced Obsolescence....The latest way to ripoff the consumer and smile all the way to the bank!
Ian Thorpe Added Dec 15, 2018 - 5:04pm
Jeff, the problem of the car industry lies in the arrogance of bosses. US makers really missed a trick when they decided to build their own small cars instead of rebadging the designs of their European partners.
GM had Vauxhall in UK and Opel in Germany making good cars. The Chevvy Chevette looks about the size of a Vauxhall Cavalier or Opel Rekord, both good cars and much better looking.
Chrysler had a long standing tie up with UK's Rootes Group which merged with Peugeot in the 80s.  Cars brand.ed as Peugeot had some good models back in the 1980s and the 205 / 206 /207 series from 1985 to recently was a brand leading super - mini. but that opportunity was missed and Chrysler is now owned by Fiat. Oh well, at least Alfa Romeo is a first cousin
And Ford Europe had the Sierra, Escort and Fiesta, all European best sellers in their class, and sharing the Ford name didn't even need a new badge.
European designers and engineers had been making small, fast, economical cars for decades. US firms stuggled to evolve after a lifetime of building gas guzzlers.
Jim Stoner Added Dec 15, 2018 - 5:47pm
I don't know if I should be ashamed to admit it, but I have never owned a GM car in my life.  It's not that I have some prejudice against it; it just never made sense.  Ford is a different story.  
I've rented their Cruse; it's an OK schlubby car.  There's no reason they can't sell it if the sell it at KIA prices.  Can they make them here  and distribute them globally at those prices?  That's the whole question.  
I'm guessing Trump has something in mind (for the factories) like migrant incarceration and global license-plate manufacturing.  If they don't cooperate with what he thinks make him look good , he will punish everyone! 
Jeff Jackson Added Dec 15, 2018 - 6:10pm
Excellent point Bill. The present management of GM must think oil will stay cheap forever, and they'll keep selling gas-guzzling monster trucks. They thought that, as the essay said, in the 1990s. I think they're putting too much money on too few horses, but then, I'm not making $22 million an year, now am I? I love that I've had to buy new software for new computers. As I have said many times, I learned lots of software only for it to become obsolete. Revised software that won't work on new computers is the new "planned obsolescence." Excellent points there Bill, thanks for your comments.
Jeff Jackson Added Dec 15, 2018 - 6:16pm
Great perspective Ian. I knew about some of the European models from Ford and GM from family friends in England, and yes, for sure, the Europeans had been building great fuel-efficient cars for some time, as gas was much more expensive in England and Europe. I find that the European engineers are considerably better when it comes to efficiency and quality. Too bad GM didn't see fit to bring some of that intelligence across the pond. You're right, they just couldn't engineer a car that didn't get better than 15 miles per gallon. The 80s GM cars were, for the most part, quite horrible. I'm puzzled that Fiat is still in business. I was told Fiat stood for "Fix It Again Tony." Thanks Ian, great perspective from across the pond.
Jeff Jackson Added Dec 15, 2018 - 6:25pm
Thanks Jim. In the 1950s if you can believe it, 50% of all the cars in the world were made in the U.S. Then the Europeans rebuilt after WWII and they got their act together again. Our advantage was that many of the factories and resources had been badly damaged by the war, and it took a while for them to get back economically. There are too many good manufacturing firms all over the world, and the "talent" that builds them is not limited to U.S. by any means. India keeps trying to build cars, but they just can't seem to get it together. I guess they need to stick with software, as bending metal isn't their strong point. I think Trump just wants to even a playing field that has favored the labor of other countries for too long. Trump might not succeed in having the U.S. build things that go all over the world, but I think he'll at least even the playing field of international trade. Thanks for your comments Jim.
George N Romey Added Dec 16, 2018 - 9:56am
One of the problems as I see it is the affordability of automobiles.  Yes cars are more advanced than just 10-15 years ago but the price tag is soaring.  Watching a Ted Talk the other night nearly 40% of auto loans were subprime.  Car loans are now in the 7 to 8 year range. 
 
Yes the idea of a talking car as reality sounds neat.  But how many Americans can afford the $40K sticker price now?  
Jeff Jackson Added Dec 16, 2018 - 1:21pm
Great point George. With cars having a longer lifetime, the loans get stretched out so people can afford $60k trucks, even when they beat the stuffing out of the truck in the first two years. Next to a home, a vehicle is the second biggest purchase one makes, though I'm not sure where student loans come in on that chart. There are quick-cash loans that can be made against the equity in your vehicle, with rates that are astronomical, of course. The other point is that the auto manufacturers are making it harder and harder for anyone except the dealer to work on the cars. Your neighborhood gas station and repair shop started disappearing in the 1980s, with few surviving. Thanks George.
Adolf Dick McMenace Added Dec 16, 2018 - 1:47pm
@ Jeff - At my last job, I cannot count how many orders we lost and/or never got in the first place, thanks to JIT. The jock asshole who "ran" it was a big believer in JIT and all that shit.
 
"one missing part shuts down an entire assembly line"
 
That routinely happened. Someone still should a baseball bat to that asshole.
Dino Manalis Added Dec 16, 2018 - 2:23pm
 We love our cars, they're part of our freedom!
Bill Kamps Added Dec 16, 2018 - 2:51pm
George, you are correct demand is falling.  In fact I cant remember the last time I bought a new car.  The last few cars I bought were used.  By a top end Mercedes with 40K  miles on it, and you get it for less than half price.  It is barely broken in at that point.  Same is true if it is Lexus or Cadillac. 
Bill Kamps Added Dec 16, 2018 - 3:00pm
Jeff, with Uber, cars are starting to turn into just transportation rather than some extended expression of personality.  Cars sit idel 95% of the time and cost a lot of money.   People are getting more smart about their money, and see less reason to own them.  At the very  least many 2 car families will downsize to one car, and use Uber for the rest.
Jeff Jackson Added Dec 16, 2018 - 5:52pm
Adolf, you are so right. I saw no good from it, and yet they kept saying it worked. One supplier told me that it saved millions of dollars, so I asked them to show me that on paper, in reality, and they said that they couldn't. Of course they couldn't because it didn't, but it was new and it was change for the sake of change. Thanks Adolf, great point, though I am sorry you had to endure the pain of J.I.T., it's pretty much a stress-filled wreck of a system, designed to please people who never have their hands on the real objects of production. Thanks again Adolf.
Jeff Jackson Added Dec 16, 2018 - 5:53pm
Thanks Dino, I just hope the younger folks begin to love them!.
Jeff Jackson Added Dec 16, 2018 - 5:57pm
Bill, you are quite correct. Uber and the other internet-based transportation systems are killing demand for cars, and there is research that supports that notion that younger people see cars as a burden, when Uber can take you anywhere with just the push of some buttons. I also see though, that physical games like golf are being abandoned, because young people aren't interested in physical games when they can play them on their phones. Many outdoor sports are being abandoned for the same reason cars are no longer a necessity. Thanks for your comments Bill, great point.
Jim Stoner Added Dec 16, 2018 - 6:17pm
Mogg, I think there exists what can rightly be called a domestic retrofit industry; it is decentralized to some extent, but repair-and-resale of autos is alive and well.  
 
Jeff, thanks for a well-moderated discussion!
 
Jeff Jackson Added Dec 16, 2018 - 8:06pm
Good point Jim. While the auto parts stores like Pep Boys and Autozone are scattered, there are still the independent garages that do repairs and such, and I like that there are still some around. Elon Musk is talking about buying the GM plants that are going to be closed down, that is what his Tesla plant in Fremont California is, the old NUMMI plant. I hope Musk buys them and makes even more money. GM's idea that they are for some reason now an innovative company is wishful thinking. They aren't, they haven't been, and I do not see then as being innovative in the future. Thanks for your comments Jim.
Will Meek Added Dec 17, 2018 - 1:50am
Jeff Jackson Added Dec 17, 2018 - 3:58am
Many governments have instituted "cash for clunkers" programs that offer government payback to get rid of inefficient cars. Thanks for the reference Will.
Bill Kamps Added Dec 17, 2018 - 2:34pm
Uber(and its ilk) is still relatively expensive compared to where the price  is headed.  As Uber does more things, fetching meals, dry  cleaning, etc, the cost is coming down.  Uber is starting to offer discounts if they can pair you up with someone else.  Autonomous cars, while not here now, will cause the price to drop MUCH more.   When that happens things like city congestion and downtown space will be able to be redesigned as we wont need as many down town parking spaces. 
 
We are now seeing auto makers and dealers offering short term leases of cars, or car subscriptions, where you can  take a car for a week, and then a different car or truck for another week.  A person buys so many car days for a year. 
 
Uber is seriously going to damage the car rental market in big cities.  Especially for business where you have to not only pay very high rates for a short term rental, but then often have to pay high parking fees at the hotel.
 
All of this is addresses the idleness that exists for most cars.  Raise the usage factor for a car from 5% to 10%, and you cut the necessary cars in the US by half.  That wont happen in 5 years, but maybe in 10-15.
 
We will still have personal cars, especially in rural areas.  However, in cities the number of cars is going to fall quickly at some point.  This especially true since many families in the cities have two cars. If one of them is used much  less than the other, then Uber starts to look very attractive.
 
It would be difficult to create assumptions that new car sales will rise, for the many reasons mentioned in the threads here.
Mircea Negres Added Dec 17, 2018 - 3:04pm
Another excellent post, Mr. Jackson. Sad to hear about GM going down like this, but they've also left South Africa. That was in December 2017, and it hurt a lot of automotive guys. Apparently the Chevrolets and other GM products here will be serviced by Isuzu. As for Ford, they've broken faith with their customers with that Kuga stupidity that kept catching fire because of a sub-standard coolant hose. Quite frankly, I will not buy a Ford even with a gun to my head. Come to think of it, I actually told a friend of mine this year to avoid buying the Ford pickup truck he wanted. My friend got a Toyota Hilux instead and is happy as a pig in shit with it. Now, had it been my worst enemy, of course I'd have said "By all means, buy a Ford, ol' buddy!", but there was no way I was going to read about my friend burning to death on the freeway... The bailout business was bad. I'm not a heartless capitalist exploiter of the masses or anything like that. However, the business that needs a $51 billion bailout clearly does not deserve to survive. Either that, or shoot all the idiots from middle management up to and including the CEO and start again with better leaders. Hell, actual leaders!  
Dave Volek Added Dec 17, 2018 - 4:47pm
Nice article Jeff
 
I've never really understand the merits of JIT inventory systems. Plants do shut down if Truck #123 gets a flat tire or a speeding ticket. It doesn't matter if all the other trucks got to the factory on time. There should always be at least one day's inventory in stock to keep the lines rolling. But I don't have much experience in manufacturing. And I've failed twice in business. So what do I know?
 
I also imagine all the extra stress imposed on workers and managers with a JIT. There must be some mental health issues.
 
I've never owned a GM product. For some reason, I just don't like driving GM products.
 
You are describing a company that does not deserve to be bailed out again.
 
 
Jeff Jackson Added Dec 17, 2018 - 7:56pm
I agree Bill, and, another source of revenue moves from the auto companies to Big Tech, just like advertising, print media, television, movies, the music industry, and on and on. Tech is truly rearranging this society. Thanks for your comments Bill.
Jeff Jackson Added Dec 17, 2018 - 8:03pm
Thanks for some more interesting perspectives Mircea. I had heard that GM was not doing well in Africa, and the news from there mostly shows brands other than GM. I like your point on the bailout.  We gave even more to the banks, and they kept almost everyone who started the whole mess. The CEO of GM was required to leave, but the upper management stayed, and Ford never asked for anything. Thanks for your comments Mircea.
Jeff Jackson Added Dec 17, 2018 - 8:08pm
Excellent point Dave,  "There should always be at least one day's inventory in stock to keep the lines rolling. " Japan did JIT simply because of a lack of space. The U.S. had lots of space and had plenty of room to keep some extra parts, but instead stressed the chicken soup out of everyone. Lots of heart attacks, threats, fines, and general mayhem. It created a very touchy feeling with almost everyone and when the slightest thing went wrong, everyone tried to blame everyone else. The blame game and stress was endless. No pleasure, all stress. Thanks for you comments Dave, and remember, the third time is a charm.
Thomas Napers Added Dec 18, 2018 - 4:26pm
This whole article is false but the most false statement of all is the following:
 
“GM, once an American icon, has, to a large extent, concluded that they cannot profitably make cars in the U.S. anymore.”
 
GM makes lots of profitable cars and most of them are built in the United States.  The problem is that GM has massive union pension and healthcare obligations.  Another problem is that our government requires car companies to build fuel efficient cars, cars consumers aren’t interested in.  If it wasn’t for the union obligations and mandates, GM would be wildly profitable.
 
Kudos to GM for doing the main thing it needed to do to become profitable again.  That thing was to close down factories in union states and focus on building SUVs in locations that don’t have a union labor force.  If it wasn’t for bailouts, they would have made this decision long ago.  
Jeff Jackson Added Dec 18, 2018 - 9:44pm
Nice to think so Thomas, but GM backed out of a lot of those obligations decades ago. Many of the workers of Delco, a GM parts-maker, were screwed severely. GM had already, and legally, of course, abandoned their obligations by 2009, when after declaring bankruptcy, they had no more obligations, those obligations went to the federal government, which is, of course, more socialization of corporate responsibilities. Our government does not require GM alone to build fuel-efficient cars, all of the other manufacturers must do the same.
"The whole article is false." I suppose the following sources are all fake news, huh? Get real.
https://www.wbur.org/onpoint/2018/11/27/general-motors-cuts-workers-factories-car-models
https://www.cnbc.com/2017/08/30/millennials-like-buying-cars-after-all.html
https://www.economist.com/business/2012/02/18/too-many-cars-too-few-buyers
http://www.autonews.com/article/19970616/ANA/706160718/current-sales-boom-may-be-prelude-to-light-truck-glut
 https://www.epi.org/publication/the-decline-and-resurgence-of-the-u-s-auto-industry/
https://www.freep.com/story/money/cars/general-motors/2018/11/27/president-donald-trump-gm-subsidies/2127846002/
Katharine Otto Added Dec 18, 2018 - 10:39pm
Jeff,
Your article validates what I also believe about GM and provides more information than I had.  I was shocked that GM is phasing out passenger cars and focusing on gas guzzlers.  Also, Mary Barra claims its rationale for closing down those plants was because GM wants to concentrate on developing EV and driverless cars.  As you say, this technology is unproven and we're not sure the market will be there.  It astounds me that American car manufacturers have not learned from the example of the Japanese, who seem to know American needs better than Detroit does.
 
It seems only a matter of time until urban dwellers won't be able to afford car, maintenance, parking, and taxes, what with Uber, public transportation, and the like.  EV doesn't make sense for apartment dwellers, or for those who do a lot of long-distance driving, but I don't hear many people talking about that.
 
Jeff Jackson Added Dec 18, 2018 - 10:48pm
Thanks Katherine. For the record, all three cars in my driveway are GM cars, and my family has owned GM cars for decades. Even when others were better, we remained loyal. But loyalty has become expensive, and honestly, what GM plans on making isn't anything I want to buy. Of course, like so many other things that occur, no one asked me. I'm glad I could validate your beliefs, and since a few people seem to think I just made all of this stuff up, the websites have been listed so the non-believers can see the truth for themselves. Thanks Katherine, your insight is valid and wise. 
Sam Nowaczynski Added Dec 19, 2018 - 9:01am
Car sales and cars made in the United States are higher than they have ever been.  Accordingly, America’s car culture is alive and well. Don't believe me, take a look at your driveway.  
Jeff Jackson Added Dec 19, 2018 - 9:37am
I think it's more of a truck culture now, Sam. You don't need to convince me, you need to convince Mary Barra, GM's CEO, who is predicting massive car buyer reductions. BTW, the newest car in my driveway is 6 years old. Thanks for your comments Sam.
George N Romey Added Dec 19, 2018 - 12:46pm
Car or now truck sales will be heavily economy oriented. More so now with so many sales tied to subprime loans.  When unemployment rises credit standards tighten and there goes the anything goes financing.  Since no one seems to be able to predict when a recession is coming the automobile companies are always behind the curve.  They will again need a bail out in the future.
Jeff Jackson Added Dec 19, 2018 - 3:19pm
Great observation George. If the present administration is in office, I doubt they'll get anything for a bailout, not when they're shutting down plants.  Better to subsidize a company that can actually create and sustain jobs. Thanks George.
Dr. Rupert Green Added Dec 19, 2018 - 9:13pm
One of the greatest US business failures was the Horse and Buggy Whip company. It continued making whips when cars were replacing horse and buggy. Could it be that the blindfolded GM of which you speak has gained it sight and has a bead on the future of motor cars? I cannot agree with their assessment as I believe the world has long been awaiting the Jetsons' type vehicles.
Jeff Jackson Added Dec 19, 2018 - 9:24pm
Well, Dr Green, as far away as is what GM is trying to be, Jetson's cars might not be too far away. As mentioned in the article, they have never been good at innovation, so I wouldn't put money on GM being able to build something never built before. Thanks for your comments Dr. Green, nice perspective.
Ari Silverstein Added Dec 20, 2018 - 3:51pm
Having an inventory costs money.  The less of it you need to make something, the more profitable your business.  However, having too little inventory can be costly for the reasons you outlined.  So managers and executives are in a constant battle deciding the right quantity of inventory to maximize profits.  
 
JIT was just a snappy catch-phrase to try to keep inventory down. After all, the word “just” can mean different things to different people.  In one case it can mean a truck coming to the warehouse the night before and for someone else it could be parts rolling directly off truck to the assembly line.  With different lead times for different parts, inventory management is obviously a complicated part of the manufacturing process.
 
With or without JIT, a factory could always come to a stop if a part was missing.  Please share this comment with your GM business professor.  He should appreciate the fact too much inventory can be a very expensive problem.     
Jeff Jackson Added Dec 20, 2018 - 6:00pm
Ari, in that he was a supply-chain management professor, as well a being employed for a considerable time at GM, I am sure he was aware of how to manage inventories. The supplier that told me GM saved all kinds of money using could not produce as much as one iota of evidence to support that claim. As the other comments reflect, JIT is quite stressful, in that it assumes everything will go right, and the backup plans are downright frightening. Having to put parts on an airplane to get them to the assembly plant on time has to cost more than having one shift of extra parts stashed somewhere. J.I.T. assumes everything will go correctly.
As I have said many times, I will be happy to get paid $80k a year to design something that only works when everything, and I mean everything, goes exactly as planned. Few times in my lifetime has everything gone as I planned it, and unfortunately, I have never been able to charge huge fines to those who didn't meet their obligations for not performing exactly the way I wanted things to go. I know of the older trucking managers who left the industry because anyone with experience knows there are too many variables in that algorithm. But unrealistic expectations seem to be the norm. Name for me one business that you have done business with who got it right every time, virtually every time, for years and years, and not something simple, but something with dozens of variables that could potentially fail, from mechanical to weather to human failure.
Take the Saturn V that took the astronauts to the moon. If one percent of the parts in that vehicle failed, that would have been thirteen thousand parts. (From an engineering psychology class instructor, a retired colonel in the Air Force.) Obviously, there are no spare parts in outer space, so they had to have a failure rate of almost zero.
For GM, like so many things, it looked good on paper, but to execute it, took sometimes extraordinary effort, burning through many employees who could not bear the stress. By the way, I got an "A" in the supply chain class, missing only 2 questions on the final. Perfection in humans is difficult, and sometimes impossible. Thanks Ari. 
Ari Silverstein Added Dec 21, 2018 - 9:57am
As I’m sure your professor would agree, there is a balance between the cost of inventory sitting around and the cost should inventory not be high enough.  Just in Time, if you had read my comment, is all about how we define “just.”  In the past, car companies would have way too much inventory and the Japanese taught us about how to reduce inventory levels.  I’m sorry if that created more stress for managers, that’s why they go to college, wear white collared shirts and get paid more than assembly line workers. 
 
To the extent a factory went idle because of some missing part, the managers only have themselves to blame for misapplying the principles of JIT.  Managers are expected to recognize when inventories are critically low and do what’s necessary to keep the factory humming. 
Jeff Jackson Added Dec 21, 2018 - 3:07pm
Well Ari, the people who wear white shirts and went to college really didn't understand, from a transportation perspective, what it was like to get things from one place to another.
Those same people who wore white shirts and went to college cut things razor thin and apparently didn't understand JIT. You are very likely correct when you say they didn't understand JIT. They were more than willing to blame anyone except themselves for shortages and shutdowns. I also blame those folks that wear white shirts and went to college who represented the transportation companies and made promises that they shouldn't have made. The expense of a trailer with spare parts in a parking lot made a lot more sense than shutting down an assembly line because of problems at the supplier, who readily denied problems and blamed it on the transport company. I saw a lot of that.
One of the aspects that the professor claimed about JIT was that it really only made things worse than they were before. Like many historic incidents, I have a tendency to believe the people that were there, especially the people that were there and were in charge, where they saw the bigger picture, as was the prof. Thanks for your comments. I find the people who encourage JIT are the people who never dealt with the stress that it creates. It is more of the bigger problem that the U.S. has had, with people in white shirts who went to college who are lacking in "real life" experience. Thanks again.

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