GM: Governmental Motors?

**Publishers Note- This is Don's first post**

General Motors, an American icon, is close to a complete financial collapse and close to being taken over by the U.S. Government. Chrysler is right behind them and Ford is in only slightly better shape. There has been much discussed over the past few months on what got GM, as well as the other American car companies, into their current financial situation. All of us have heard it was caused by bad management, the unions, making cars that people don't want, or bad quality products. Other causes have been discussed, but I believe these to be the main ones.

First, bad quality products, This is something that may have been true in the past, but is hardly true today. J.D. Power and Associates just came out with their 2009 Vehicle Dependability Study, and Buick was tied for first with Jaguar, knocking Lexus down to the number 3 spot. Toyota is 4th, Mercury is 5th, Infinti is 6th, Acura is 7th, Lincoln is 8th, Cadillac is 9th and Honda rounds out the top 10. Half the cars in the top 10 are American (Jaguar is owned by Ford, or at least it was until recently). What about those high quality German brands such as BMW, Mercedes? Both Ford and Chrysler are rated higher. The sad reality is the American car industry has increased its quality significantly over the past years, but the average American consumer would never believe a Buick is better than a Lexus. Who is to blame for bad quality, management or the unions? They can both take credit for that.

Second, building vehicles people don't want. It is said over and over that the 'Big Three' build too many trucks and SUV's that people do not want. The number one selling vehicle in the USA for the past thirty-two years has been a Ford F-150 pickup truck, and that includes last year when gas cost over $4.00/gallon. The number 2 vehicle still isn't a car, it's a Chevy Silverado pick-up truck. This might explain why both Nissan and Toyota have started to build and sell full-size pick-up trucks in the United States. Last year GM manufactured and sold around 9 million vehicles, the same as Toyota. I guess these people were never told they really didn't want these vehicles.

Third, unions and management. These two entities really need to be discussed together, as they go together hand-in-hand. The health care for life, and pension costs that the 'Big Three' are saddled with, were negotiated and agreed on by both management and the unions. At the time many of these decisions were made, the cost of health care was relatively low, and it allowed management to keep the direct employee compensation lower and it helped keep employees. The unions viewed it as good for their workers and a win-win solution. Everybody was happy. No one could foresee the cost of health care ballooning like it has in the past 20 years. Management didn't pay close enough attention to outside competition coming into the market. The unions have been too concerned about saving positions in stead of making their members more productive and thus their companies more competitive. Management began to rely on their financing arms as a major profit centers and their truck divisions as another. Hindsight is always said to be 20/20, but in reality it is even better than that. It is always easier after the fact to say how something should have been handled.

Currently GM is paying three people in retirement for every one they actually have making cars. The "Big Three's" labor cost is $25.00 more per hour than their competitors. This is due to the pension and health care costs mentioned above. These costs add an average of $5,000 to the cost of every vehicle. The only way any of the American car companies can compete and survive is to be able to eliminate these legacy costs. Sadly, the only way that is going to happen will be either bankruptcy or the government taking over the pension obligation. The goverment can assist these companies, but we don't want or need the government to run them. I will quote from Bill O'reilly, "If the unions don't bend, we won't lend."