During my two weeks in Hawaii, it seems that the decline of Ford and GM became much more apparent to Wall Street and the general public. I think I’ve written about this before in this Weblog, but I continue to be surprised that this isn’t covered more from the angle of “What would you expect to happen in a society that pays financial engineers 10-100X what it pays automotive engineers?” It is true that Ford and GM are being sunk to some extent by pension and health care obligations (something their highly paid financial engineers should have noticed before signing those union agreements), but they’d have a much easier time if they had designs like the Honda Accord or the BMW 3-series sedans instead of the clumsy sedans that they end up having to unload on the rental car companies (is there anyone who ever rented a Pontiac Grand Am and walked away saying “I need to buy me one of these”?). . In fact, why should car renters have to suffer with the Pontiac Grand Am? Perhaps it is time for GM and Ford to give up on design engineering of ordinary sedans. If you look at Car and Driver’s 10-best cars, the only American nameplates on the list are the Corvette, the Mustang GT, and the Chrysler 300. The Corvette and Mustang are specialty sports cars that seem to have attracted some able and creative engineers. The Chrysler 300 is built on top of a Mercedes design and possibly points toward a sustainable future for Ford and GM. Let the Germans and the Japanese engineer the fundamentals of Ford and GM sedans. The American companies can tweak the body design and add some electronic intelligence (GM was way ahead of its (moribund) peers with the OnStar system).
10 thoughts on “The decline of General Motors and Ford (maybe they should license designs)”
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They need to shake up their engineering management. Japanese and European engineers are very good, and are currently better, but I see no particular reason North American engineers could not regain that status if given the right goals. I think that Ford and GM have, consciously or unconsciously, decided to make worse cars than Honda and Mercedes, to cut certain corners, to be cheaper in certain ways. They may be fully aware of the decisions and think they are the right ones.
if you look carefully, you will also notice the Ford especially, offers a much better lineup of cars to the rest of the world and we only get the substandard models here in the US. As would be expected, Ford’s international operations have been keeping the company afloat for years. I would suggest two indeas. One of course is to finally get a single payer health insurance system so health care costs are spread evenly and the other is to reduce required safety standards to international standards (with upgrades being optional). It doesn’t make any sense to have high standards for cars, driving up price (which is the goal) when you have motorcycles and SUVs with little no no standards. The highest accident rate is for 50-60 year old men driving motorcycles.
We should be able to buy a car model designed in Europe as easily as here. Research studies have also shown that as we add safety devices, the gain in minimized as we put more poiwerful engines in and people like to drive at the edge. Limit the power/weight ratio of vehicles that drive public roads and you will gain more safety without the cost
“What would you expect to happen in a society that pays financial engineers 10-100X what it pays automotive engineers?”
Point well taken. How many people working at GMAC might have worked at GM under different circumstances?
Nevertheless, it’s hard for me to pin the troubles on bad design and bad engineering, per se. They could make better cars if they chose to, yet they choose to not to. Anheuser-Busch could make better beer if it chose to, yet it chooses not to. Budweiser, like the Grand Am, suits A-B’s purpose of maintaining the mass market fairly well.
Where they seem to fall down (Anheuser-Busch and US auto makers alike) is long term shifts in the preferences of the mass market: beer consumption becoming a smaller percentage of overall alcohol consumption, for example.
The hottest American way is to outsource to whomever capable of doing things cheaper and/or better. The real question is, what are things that Americans (still) do best? Financial engineering, perhaps? Lawyering? Plumbing? Spending money?
Why was my comment deleted?
The reason car renters have to suffer junk like the Grand Am is that car rental franchises are usually owned by American-brand car dealers, who can get their cars really cheap. A Grand Am feels like a piece of junk compared to an Accord, but it’s a lot cheaper, especially at discounted wholesale cost.
I recall a recent interview with one of Toyota’s top executives. They are worried about … Hyundai. A friend of mine chimed in that South Korea’s top engineering grads from the best schools, are guaranteed at job at Hyundai. It is a point of national pride for Hyundai to have better and better cars. What patriotic American ever got an engineering degree and chose to go to Ford or GM if they could get into the space program?
I think GM and Ford are basically finished. Unfortunately we the tax payers will have to foot the bill for the unfunded pension plan. In fact GM and Ford are only the tip of the iceberg. Many many large US corporations are in the very same situation.
Like I posted in my deleted (why?) comment. This is indeed the tip of the iceberg. These corporations are taking advantage of the current political climate that makes it easy to shed their obligations to their employees.
It is true that Ford and GM are being sunk to some extent by pension and health care obligations (something their highly paid financial engineers should have noticed before signing those union agreements),
The key word here is “obligations”. Why honor them anymore if the current administration makes it easy for you dissolve them? Bush is doing the job that the big corporations put him in office to do. They want to pay folks minimum wage, with no health coverage, and no pension benefits. Would you stand on an assembly line all day for that?
You can expect many more of these annoucements before the current administration’s term is up.
I think that Ford and GM have, consciously or unconsciously, decided to make worse cars than Honda and Mercedes, to cut certain corners, to be cheaper in certain ways.
They could make better cars if they chose to, yet they choose to not to. Anheuser-Busch could make better beer if it chose to, yet it chooses not to.
This has always perplexed me. American mass-market products seem to aim deliberately for mediocrity — US cars and beer are both international jokes.
GM and Ford seem to be contemptuous of their customers, thinking they can produce corner-cutting, defect-prone products and compensate for it with bombastic marketing and aggressive flag-waving.
National levels of engineering talent are not the cause – many foreign models are designed in US studios, and Toyota has a major tech center in Detroit. Nor are national differences in assembly-worker capabilities, given the many import-brand factories in the US. It comes down to arrogant, short-sighted, out of touch management.
They’ve been chanting the same “this time it’s different, high-quality priduct is on the way” mantra every time they’ve hit a financial crisis since the 70s, but the import-beating product never arrives.
And there’s always something else to blame — it used to be low Japanese labor costs (until Japanese costs rose to US levels, and the Japanese started building many of their cars in the US), today it’s health care costs, tomorrow it’ll be something else.