GM falls further behind Toyota. Who cares?

Posted by: David Welch on October 29, 2008

Here’s an irrelevant bit of news. Global sales at General Motors fell 11% in the third quarter to 2.1 million vehicles, knocking it further behind Toyota. The Japanese juggernaut beat GM by more than 100,000 sales. I’m sure the harried executives in GM’s C-suite are fretting over that one.

The company is delaying new-car programs to save money and weather the recession while cajoling Washington for cash or loans to make it through next year. The sales race against Toyota? Who cares. It’s a race GM can no longer even afford to think about, not when government intervention might be needed to stave off bankruptcy.

Besides, If GM ends up acquiring Chrysler from Cerberus Capital Management—which is looking more and more likely as talks progress—GM will preserve enough Chrysler business to move convincingly ahead of Toyota.

But then, GM will have a lot of work to do. Management will have to restructure Chrysler while fixing its own mess. No one expects car sales to rebound until later in 2010. The only race on anyone’s mind will be Detroit’s car companies scampering for survival.

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Reader Comments

Our Complacency Really Shows

October 29, 2008 10:35 PM

Our complacency as a nation really shows when one of our leading business magazines issues a comment of " who cares " concerning the welfare of one of the biggest producers and employers in the history of our country.

Funny how every other nation on the earth is working to nurture and develop their domestic auto industries, and we "don't care" about ours. Call me an old fashioned protectionist if you want to, but when one of the biggest companies in the history of our country is not doing well, I do care.

We take our country for granted every minute of every day. We should feel honored to say that the largest auto maker for the last 70+ years is an American company. But instead we take silly little things like living in an industrialized nation for granted.

I have now read a few too many Japanese - biased statements about American auto in Business Week, and will now get my news elsewhere, since it is clear where the allegiance of this publication lies.

David Welch

October 30, 2008 10:42 AM

David Welch here. I'm the magazine's Detroit bureau chief and the writer of this blog post. Let me make one thing clear. It's not that I don't care about the survival of our car companies. I hope they do pull out of this crisis stronger. The point of the blog post is that GM shouldn't care about a sales race against Toyota. What's far more important at this stage is finding profitability and positive cash flow. In other words, GM and the other Detroit companies need to find the right size and structure to survive the crisis. If that means Toyota is the world's largest automaker, that's fine. I'm sure GM's executive team would rather be No. 2 and very profitable than No. 1 and trying to stay out of bankruptcy.

Paul

October 30, 2008 11:49 AM

I think it was clear to me that Mr. Welch was not implying that no one cares. However, I do feel that "Our Complacency Really Shows" does have a point about "...a few too many Japanese - biased statements."

An example of this can be seen in BW's Mr Kiley's recent blog post ("Worst Cab Ever: Chevy Malibu") suggesting that the Toyota Prius is superior to the Chevy Malibu because of having more legroom. In his posting, he initially did not mention that the Malibu had a divider between the seats unlike the Prius which did not. Only after reader posted a question did he update his original posting to include that critical information. Secondly, Mr. Kiley relied on a single cabbie's characterization of the Malibu to suggest there was excessive wear after only 20,000 miles.

Do I think Mr. Kiley has something against the domestic auto industry? Probably not. But haphazard blogging like that (not in the case this blog entry about GM/Toyota) certainly gives substance to perceptions of bias by your readers.

Chad

October 30, 2008 02:31 PM

I suppose the only people that may care if GM fails are the hundreds of thousands (yes, that many) of employees, retirees, suppliers, transportation companies, dealers and others who would lose their jobs as a result. It's bigger than just the headcount on the GM HR report. It may put over 1% of the US population out of work in a matter of months as companies who have hitched their wagons to GM fail once they lose the income that a contract with GM provides. GM has made its bed, but why does everyone seem to be betting against the United States?

meccano

October 30, 2008 02:56 PM

GM should merge with itself. They should have one brand - GM - and within that a couple Chevys, Buicks, GMC trucks & a Caddy or two plus that Halo car in the form of the Corvette. Throw in a Opel sold as a Saturn to fill out the European side of the market. Sell Hummer and SAAB divisions. Each model should be world class cars; no dogs or repeats in the line up. Close every single aging shop, keep only the modern and efficient ones and keep the top dealerships. When Rick Wagoner resigns, which should be sooner rather than latter, he can apologize to all the people being laid off. License hybrid technology from Toyota and offer it as a option in every single car they sell. In return, license the technology from the Volt back to Toyota. Make enough cars to sell and not one more. If they have to file for Bankruptcy to reorganize from top to bottom fine. What in god's name will merging with Chrysler do? Chrysler should say its apologies to William P. Chrysler and Lee Iacoca, close and sell their assets. Sell the Jeep name to someone who can afford to deal with it; seems like it would work in Sabaru’s line up. Viper can go to a small group of investors and become a independent small volume maker of American hand built sports cars. Now on to Ford…

willwebreathe

October 30, 2008 03:00 PM

the article was meant in gist because it doesn't matter if we're competitive with toyota. how can you be competitive if you don't exist. get it. good. it's a play on words because it shows how insifignificant it is to see if you are competitive with another company when you aren't competitive to stay alive. furthermore, the company should not be helped because it only promotoes a broken model that doesn't work. unless you like buying a GM Vehicle and having something break every month, you would agree; however, something tells me you're going to dismiss that for the common good of continuing to aid a failing company to continue to produce bad products that don't work and that aren't competitive. grow a brain.

Larie

October 30, 2008 03:40 PM

And,one has to pay thru the nose for a prius !! Not affordable by the average worker.BTW, Malibu has many positive reviews.

Porky Publictrough

October 30, 2008 03:46 PM

I'm not sure I really do care whether GM makes it or not. Companies survive because they are the best at doing something - and GM hasn't been the best at doing anything in a long, long time. Why bail out a company that remains having long-term fundamental issues, such as bad management, an overpaid, inflexible workforce, and massively costly legacy entitlements?
Americans only deserve to have a high standard of living if they are the best at doing something. We are clearly not the best at making autos.

Erik

October 30, 2008 04:50 PM

If 'blog' is synonymous with 'absence of analytic ability', then I have no qualms with this post.

However, being profitable and being the world's largest auto maker are not mutually exclusive. Mr. Welch seems to say that things are so awful, it doesn't matter if GM continues its sales slide; it should worry about being profitable. But the company needs to worry about both margins and volume; ignoring one for the other would be flawed reasoning.

As a company, you need to cover all the bases at the same time. Or does Mr. Welch think that GM cannot worry about margins and volume simultaneously?

I'm sure that nowhere else in the world would major media outlets celebrate the suffering of a major industrial icon, as Business Week is doing here.

mpumi malangabi

October 30, 2008 10:16 PM

Next super-subprime global crisis.

It took the US 400 years to build a $5.7 trillion federal deficit. Note that this figure has almost doubled durung the Bush Era and we still do not know how deep the hole in the US financial system is. Nothing in the horizon even begins to address how the US Government will solve this gigantic problem. The US Government deficit for fiscal 2008 hit $455 billion, up from $162 billion last year. This does make the case for the world to go back to the Gold Standard. This will take five to ten years to playout when the price of oil and gold hit $1,000 and $5,000 respectively.


mary

October 30, 2008 10:17 PM

I am from michigan,my husband works for GM,we love our state ,and it's been hurting for many years,because of the economic conditions. We are your fellow brothers and sisters in this great country,and believe we should all be sensitive to americans who are in danger of losing their jobs and the way things are going many people are worried and concerned about their futures,my husband is proud to have worked for GM for many years!! We got married when we we're teenagers right out of high school and GM has given us a good living, it hurts to read so many comments about our american car companys and hear people tear them down. Please remember real people are reading your comments,and try to be kind!!! We wish you only the best,just an american workers wife...

john

October 30, 2008 11:37 PM

I too am from Detroit, and count many of my relatives among the very lucky to have benefited and continue to benefit from working for the General. Truth be told, people working for the General are not more productive than the average man in USA, but he or she enjoys a much higher standard of living than the average person. And the market share trend of General Motors in USA offers clear proof that the collective efforts are in fact inferior to the competition. If the General can not compete - whether the cause is labor unions, poor managment, poor design, sub-standar quality, legacy costs or a combination of the lot - then coddling the General with taxpayers money will not change that fact. And I would argue that coddling the company in order to save jobs will only weaken the company further, through to its ultimate demise. I am not saying anything we all don't already know. But its something none of us in Detroit want to say.

P G

October 31, 2008 01:59 AM

It's obvious who cares. The scavenger media types in North America that no longer wait for the news to happen and then report it. No, they want to be the first to spew about it and then be able to say, we said it first, na-na! Anyway, GM does have a lot on its plate at this time and no I didn't see any reps from GM making any press releases about how worried they are about Toyota leading in sales. However, David Welch seems to think it is worth mentioning.

Gary

October 31, 2008 08:12 AM

For those who are complaing about GM quality, you need to get yor heads out of the sand. Go drive a Cadillac CTS. Go drive a Buick Enclave, GMC Acadia, Saturn Outlook, or Chevy Traverse. Go drive a Chevy Malibu, a Saturn Aura, or a Pontiac G6. Go drive a Chevy Cobalt. Go drive a Buick Lucerne. These vehicles are all industry leading in mileage and quality and are not breaking down. In many cases these vehicles are superior to the japanese imports that Americans seem to love to buy so Japans economy can be better than ours. I've been on business out of town for three months driving a rental 2008 Honda Accord, and I can't wait to get home and back into my Malibu.

Johnny Bagels

October 31, 2008 08:23 AM

It's just business week, who cares?

Porky Publictrough

October 31, 2008 09:56 AM

For those who are insisting that GM makes good cars: The market has been consistently proving that thesis wrong for the past 30 years, and still is. They may be good cars, mechanically speaking, but they are unmarketable cars. They are either styled in ways that most people don't want, or they are too expensive for what the consumer is getting, or some other thing. Consumers make rational choices; they don't choose products to save your job. When will Detroit and those who work for Detroit, figure this out?

Paul

October 31, 2008 11:35 AM

Gary - I agree that people are stuck with bad perceptions of GM quality which affect their current purchasing habits.

I'd love to buy a GM car. But I tend to buy VWs and Audis. Why? Because I like how they handle and the fact that I can get a mid-size car with a (real) manual transmission in it. If only the domestic car companies would offer that. Heck, I'd even pay extra to get a manual transmission. I'd love get a Malibu with a manual transmission.

(GM...if you're reading this I'd be first in line for a wagon version of a Malibu with a manual transmission...I'd even pre-order if it had all-wheel drive!)

I'm convinced GM has better quality than VW. Especially with the electronics. But sadly, I am so fanatical about a (real) manual tranny in a mid-size car that I continue to take the risk with Vws/Audi/s.

GM...help me help you...put a manual tranny in the Malibu!

ps

October 31, 2008 12:39 PM

I think people should realize that David Welch is right. We shouldn't care because it was inevitable. GM does build some world class cars now but their tarnished image was 30 years in the making. As a result, in most cases, a GM car is cheaper than an import or transplant equivalent. The wage/benefit differnce is a sham. Toyota workers in Japan are equivalent or better paid than US counterparts, Germany too. The wage disparity is in the executive levels, not the shop floor level. While I think GM cars are now good and in many cases getting better mileage than imports, I drive a Jetta, and for 1 reason- I like driving a 5 speed manual. Great for inclement weather and fun. I'm not saying the Jetta is any better than Detroit iron (it's not) but you can only get a manual tranny on a few GM models- Like Paul said in an earlier posting, put a 5 or 6 speed in a Malibu or a Lucerne and you'll have a number of new buyers coming to the showroom floor.

Porky Publictrough

October 31, 2008 02:17 PM

Paul and Ps have raised an example of the problem I was referring to: GM is out of touch with the market. While I own a VW with a 5-speed manual trans, I realize that this alone would not save GM. But, it is a fine example that Paul and Ps have brought up for the overall lack of market research and understanding that GM has. GM probably has people on the front lines who know what the market wants, but (I would guess) the higher-ups in the organization think they know better, and veto the market researchers' findings. That's the hallmark of a bad company that needs to be done away with to make room for a better-run company.

Steady

October 31, 2008 04:39 PM

There seems to be a lot of different avenues being taken above and I would like to put my two cents in the pot.

1. First of all, we care about people losing their jobs but as in all other industries, i.e. clothing, footwear, toys, to name a few, the American worker lost out because the American buyer wanted a lower price for either the same quality or better. Detroit has had years to improve quality and is just now doing it. The mfgs. and the unions have milked this cow dry and we are all now paying the price and will continue to pay until things change. I was a little shocked here some time ago to learn that an assembly line worker was drawing a salary of $85K before overtime.

2. I own a GM car. I traded in my last GM car after 16 years but that is because I nurse my cars. I had to have the transmission replaced twice, the first time at 60k miles and it only had 160k on it when I traded it in. I owned a GM car before that. I have tried to give GM every chance. By the way, my wife drives a 1994 Toyota Camry. Like I said, we nurse our cars. There have been problems with it also.

3. Don't give me the fluff that you would buy a car if only it had a manual transmission. How many sales do you think any mfg. lost because it did not have a manual trans.? Not many! Give me the numbers of people that won't buy a car because it doesn't have a manual trans. That is a weak, weak argument for the ills that GM has and will not pull them out of the hole they have dug.

Paul (Vw)

November 1, 2008 08:59 AM

Every car I've ever bought had a manual transmission. I'll agree that I'm in a small minority...but I think it is an *example* that Detroit is out of touch with what various consumers want. (and an issue very dear to my heart)

"Steady" is mentions about replacing an automatic transmission. That is another reason why I drive manual transmissions. Over my lifetime of new car purchases (3 Dodges, 1 Chevy, 1 Audi, 2 Vws --all w/manual trannies) I have never had so much as a hiccup from the transmission. And have never had to replace a clutch either.

Plan on owning a car for more than 4 years? Get it with a manual transmission.

Anyway ...

I'd be interested in knowing if Detroit has hurt itself with its fleet sales with respect to quality perceptions. I know many people who try to crucify (almost literally) their car rentals. Then they get sold. What % of bad perceptions can be attributed to used fleet cars which have been hammered?

Dan

November 2, 2008 10:22 AM

When the UAW cares, then I'll care. More plant closings, more strikes. So these strikes are for better health plans or whatever the reason, the UAW sends millions of dollars to elect corrupt democrats, Obama being one of them, wouldn't those millions of dollars be better spent if they were dumping it into health plans for the workers???? My next car is looking more and more like a Toyota.

Christian

November 3, 2008 12:24 AM

My uncle just got his brand new Lucerne. For just 3 days of use, the car died in the middle of the street. It won't start, the mechanic could not figure out what's wrong. He returned this car to the dealer and went for a Mercedes Benz. I can't believe a brand new luxury car has that kind of quality, I didn't expect it. Just wondering... GM needs to do their home work man.

bfuddled

November 3, 2008 10:54 AM

I have been a GM fan and dealership employee since 1976. While I believe it would hurt the country in the short term, I believe that GM and Chrysler should sell off its parts that are viable individually. let the markets decide. For too long, GM and Ford have been carrying lines and makes that are badge-engineered, redundant and not cost effective. Cadillac, Chevy and Jeep could probably compete individually, GMC, Pontiac and Buick, and Hummer, would have a tough road, but the names could be sold off to foreign makes looking to gain a foothold in the U.S. For example, Buick has only 3 cars.....the Enclave is best in class, but now that Chevy has Traverse, it makes it redundant with the Outlook and GMC The Lacrosse and Lucerne might be quality vehicles, but could be covered by Malibu at the low end and a luxury Impala (Caprice?) at the higher end. Each line should stand on its own. If not, sell the name(like Hummer) to someone else to raise capital to protect the core, profitable viable businesses.

Wes

November 3, 2008 08:08 PM

I am very proud to say that I own two GM cars - a 1997 Silverado and 2008 Corvette. The Silverado was purchased to replace a 93 Chevy with 165k on the clock which replaced a 84 Chevy with 201k on the clock. All the cars have been ultra-reliable.

GM cars not marketable? True, in a world of entry-level luxury where the masses are brainwashed into thinking that BMW is standard for automobiles. Let's see how the Tundra works for Toyota, it looks to be a good truck but not a match for GM or Ford.

I also drive a 2009 Impala daily for work and that's a wonderful, smooth riding car as well. Flashy? No. Comfortable. Yes. A good value - certainly.

I hope GM survives and I'll do my part to help them out.

c.l.shannon

November 4, 2008 03:45 PM

for too many years detroit pumped out poorly designed and shodily built cars and trucks and that fact was burned into the minds of the consumers who are now making their decisions with that past in mind.

so, sure, as many here say - detroit is building better cars - its just too little too late. its the 'fool me once, shame on you, fool me twice, shame on me' thing - people remember their father or mother's or uncle or aunt's junky detroit car or poor dealership experience and are not even going to give the detroit car a detailed look again.

i bought detroit (ford) exclusively for decades until my wife conviced me to look at toyota back in 2000. i did it only because my experiences at the ford dealership were pretty unsatisfactory - i was trying to buy a better vehicle and they wouldn't even bother to see what was on other lots around town. so i visited a toyota dealership - no comparison between build quality of the iron or dealership professionalism. now i won't go back to detroit iron.

Ps

November 4, 2008 04:16 PM

Steady, we were just giving manual trannies as an example. putting 5 speeds in more models is not the way to salvation for GM but it is part of the problem with their marketing myopia. I'd love to see them bring over some vauxhalls ansd opels with crisp handling and manual trannies. Or better yet, build them here, like Saturn. Why doesn't the cutting edge technology and ride that is a requirment for Europe not a requirement here? They have the engineering and the style but not the marketing and executive vision that can take them the extra mile. And also, yes, a manual tranny is a requirment for me. Been drivin' 'em for 35 years and am not about to stop now.

John B

November 7, 2008 01:43 AM

America created the market economy. It is now a global phenomenon and America has to compete with an increasing roster of players, all of whom want to be the best. I have a Japanese car because it doesn't breakdown, my BMW did, and I value just getting for A to B every time. But if the Chinese are making a better car next time I come to buy, then hey I'm driving Chinese.

It's a global market - the capitalist vision, work with it or get out of the auto industry.

In 1977 the head of the UK auto industry said that UK auto engineering was the best and that consumers would not fall for Japanese gimmicks like electric windows. Today there is no UK auto industry. The market DID want electric everything, but more importantly they did not want vehicles that spent half their life in the shop.

GM is a victim of what the market wants and it is up to GM shareholders and execs to determine how well the company can deliver what the market wants.

Car-o-Rama

November 12, 2008 11:44 AM

Willwebreathe is probably the kind of idiot who will give Toyota an extra $6000-7000 for a similar car, with less options or capabilities, which, according to independent studies, will break as often if not more and is likely to break in two (ie Toyota pick-ups and trucks). Also, Toyota has in the past hidden defective products to save on costs, and they had at least twice had to apologize because some people died in Japan... GM is honest and recalls its defective products, which are caused most of the time by the independent supply chain that hires thousands of people in US, Mexico and Canada... not China.

GM really needs to work on its structure and image, the cars they build in 2008 are excellent on almost every point. Same thing for Ford (look at the JD Powers).

lance

December 13, 2008 10:39 PM

I could care less if GM fails. Only
way to get the unions out of the picture.
Besides there cars dont come close in
quality. Have one, but my Lexus
beats it hands down.

no i dont care if the overpaid workers,
loose there jobs, been on the gravy
train too long.

Irony

December 21, 2008 01:35 AM

I think it's ironic that we talk about bailing out the big 3 US automakers when we are starting to see more and more foreign automakers opening and employing Americans here whereas GM employs more people overseas than in the US. I believe a large part of the problem is that the big 3 have not been able to be competitive over the decades primarily because of the unions sucking the wind out of them over those years. Why do you think these foreign automakers are building plants primarily throughout the South where they don't have to deal with unions.

As others have mentioned there are numerous problems such as quality, marketing, etc that have led to their problems. I am curious if the Big 3 haven't been able to prove they have a successful business model, then what does the bailout do other than prolong the pain at the expense of tax payers. It's disgusting how the big 3 (GM and Chrysler more so than Ford) executives use the fear of thousands and perhaps millions being affected and losing their jobs if they don't get their money. Let them go bankrupt so they can restructure, fire all their executives and bring in some real talent, execute a competitive business model and most importantly......say goodbye to the unions. Unions were a good idea at one time but not in this global economy with razor thin margins. If the big 3 doesn't restructure, at this rate, they will go out of business and at that point, you won't have to worry about the unions because no one will have any jobs for them to unionize about.

Lance Shim

May 3, 2009 11:38 PM

The American public will not stop buying automobiles even if the Edsel,Studebaker,GM or Chrysler are no longer being made. They will simply be made by companies that can compete in price and quality with present market leaders. The jobs we fear that will be lost will simply be rehired albeit in a different management structure. Short term pain is needed to transform the industry. Scaring us that jobs will be lost forever is not surprisingly being pushed by overpaid CEO's and union bosses who will be among the first casualties.

oakley

September 18, 2009 01:47 PM

I grew up on GM vehicles I know they have had some issues if GM would build the big sturdy cars again with larger more powerful engines the japanese would have to leave my father owned a1973 olds station wagon 455 v8 that was one of the most reliable cars I had everseen come on GM you guys have ths=e intelligence to bring down the asian car market or german let cadillac rule again

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About

Want the straight scoop on the auto industry? Detroit bureau chief David Welch , Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.

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