General Motors CEO in Wall Street Journal

malorn · 12-06-2005, 04:42 PM

An interesting read, especially near the end:

A Portrait of My Industry — By Rick Wagoner
The Wall Street Journal
December 6, 2005

DETROIT -- Since mid-October, General Motors has announced plans to cease production at 12 North American manufacturing facilities and eliminate 30,000 jobs by 2008; trim $1 billion in net material costs in 2006; and, incooperation with the United Automobile Workers, reduce GM's retiree health-care liabilities by $15 billion, or about 25%, for an annualized expense reduction of $3 billion.

The reason for these dramatic actions is no secret: GM has lost a lot of money in 2005, due to rapidly increasing health-care and raw-material costs, lower sales volumes and a weaker sales mix -- essentially, we've sold fewer high-profit SUVs and more lower-profit cars. What is less clear is why things turned sour so fast for GM, as well as for other American auto makers and suppliers. To put it another way, why are so many foreign auto makers and suppliers doing well in the United States, while so many U.S.-based auto companies are not?

Despite public perception, the answer is not that foreign auto makers are more productive or offer better-quality or more fuel-efficient vehicles. In this year's Harbour Report, which measures manufacturing productivity, GM plants took three of the top five spots in North America, including first and second place.
In the latest J.D. Power Initial Quality Study, GM's Buick and Cadillac ranked among the top five vehicle brands sold in America, ahead of nameplates like Toyota, Honda, Acura, Nissan, Infiniti and Mercedes-Benz. And GM offers more models that get over 30 miles per gallon (highway) than any other auto maker.

In fact, this kind of operating performance makes GM's recent financial performance all the more frustrating. The fact is, we're building the best cars and trucks we've ever built at GM, our products are receiving excellent reviews, and we're running the business in a globally competitive manner. Outside of North America, we're setting sales records. In fact, for the first time in our history, we will sell more cars and trucks this year outside the United States than inside, aided in no small part by our market-leading performance in China.

So why, fundamentally, are GM and the U.S. auto industry struggling right
now?

Intense competition, for one. The global auto business grows tougher every year, and we accept that. Our ability to compete has made us the world's No. 1 auto maker for 74 consecutive years, and we're fighting hard to stay on top.

Beyond that, our performance in the marketplace has not been what we've wanted it to be. While we've been strong in truck sales, we've been weaker in cars, and, yes, the recent surge in gas prices hurt sales. While we've led in technologies like OnStar, we've lagged in others like hybrid vehicles. Rest assured, we're working hard to address the areas where we lag. Simply put, we are committed to doing a better job of designing, building and selling high-quality, high-value cars and trucks that consumers can't wait to buy. No excuses. We will step up our performance in this regard.

But competition and marketplace performance are not the whole story. To fully understand why GM and the U.S. auto industry are struggling right now, we have to understand some of the fundamental challenges facing American manufacturing in general -- challenges well beyond the control of any single company.

There are those who ask if manufacturing is still relevant for America. My view: You bet it is! Manufacturing generates two-thirds of America's R&D investment, accounts for three-fourths of our exports, and creates about 15 million American jobs. And the auto industry is a big part of that, accounting for 11% of American manufacturing, and nearly 4% of U.S. GDP. Together, GM, Ford and DaimlerChrysler invest more than $16 billion in research and development every year -- more than any other U.S. industry. And GM, alone, supports more than one million American jobs.

So what are the fundamental challenges facing American manufacturing? One is the spiraling cost of health care in the United States. Last year, GM spent $5.2 billion on health care for its U.S. employees, retirees and dependents -- a staggering $1,525 for every car and truck we produced. And the figure is going up again this year. Foreign auto makers have just a fraction of these costs, because they have few, if any, U.S. retirees, and in their home countries their governments fund a much greater portion of employee and retiree health-care costs.

Some argue that we have no one but ourselves to blame for our disproportionately high health-care "legacy costs." That kind of observation reminds me of the saying that no good deed going unpunished. That argument, while appealing to some, ignores the fact that American auto makers and other traditional manufacturing companies created a social contract with government and labor that raised America's standard of living and provided much of the economic growth of the 20th century. American manufacturers were once held up as good corporate citizens for providing these benefits. Today, we are maligned for our poor judgment in "giving away" such benefits 40 years ago.

Another factor beyond our control is lawsuit abuse. Litigation now costs the U.S. economy more than $245 billion a year, or more than $845 per person. That's more than 2% of our GDP. No other country has costs anywhere near this level.
And the perverse thing is that, in many cases, the majority of courtroom settlements go to the lawyers and other litigation costs, not to the injured parties.

Another major concern is unfair trading practices, especially Japan's long-term initiatives to artificially weaken the yen. A leading Japanese auto maker reports that for each movement of one yen against the dollar, it gains 20 billion yen in additional profitability -- or nearly $170 million at today's exchange rate. No wonder Japanese auto makers have noted their recent record profits were aided by exchange rates. And no wonder the U.S. trade-balance deficit continues to grow by leaps and bounds.

There are other issues, of course, but my point is this: We at GM have a number of tough challenges that we must and will address on our own -- but we also carry some huge costs that our foreign competitors do not share.

Some say we're looking for a bailout. Baloney -- we at GM do not want a bailout. What we want -- after we take the actions we are taking, in product, technology, cost and every area we're working in our business today -- is the chance to compete on a level playing field. It's critical that government leaders, supported by business, unions and all our citizens, forge policy solutions to the issues undercutting American manufacturing competitiveness. We can do this. And we need to do it now.

Schmika · 12-07-2005, 08:58 AM

I would rather hear this from an independent economist, or at least confirmed by said economists, than to hear it from the head of GM...he lacks credibility as he is too close to the issue.

p.s.- Though I tend to believe what he said is correct.

MarinJohn · 12-07-2005, 02:25 PM

Quote:

Originally posted by malorn@Dec 6 2005, 01:42 PM
An interesting read, especially near the end:

A Portrait of My Industry — By Rick Wagoner
The Wall Street Journal
December 6, 2005

The reason for these dramatic actions is no secret: GM has lost a lot of money in 2005, due to rapidly increasing health-care and raw-material costs, lower sales volumes and a weaker sales mix -- essentially, we've sold fewer high-profit SUVs and more lower-profit cars. What is less clear is why things turned sour so fast for GM, as well as for other American auto makers and suppliers. To put it another way, why are so many foreign auto makers and suppliers doing well in the United States, while so many U.S.-based auto companies are not?

"What's less clear..." Aparantly management still can't see what so many ex-customers can. Inferior product, poor management, shoving the wrong product down out throats and trying to 'tell' buyers what they want.

Despite public perception, the answer is not that foreign auto makers are more productive or offer better-quality or more fuel-efficient vehicles. In this year's Harbour Report, which measures manufacturing productivity, GM plants took three of the top five spots in North America, including first and second place.
In the latest J.D. Power Initial Quality Study, ...

Still ignoring the public perception. Using JDP, a cheerleader for their products to justify how good they are.

In fact, this kind of operating performance makes GM's recent financial performance all the more frustrating. The fact is, we're building the best cars and trucks we've ever built at GM, ...

The fact is...they've built poor product in the past and permanantly lost market share. By ringing your own bell by making up their own 'facts' is not productive.

So why, fundamentally, are GM and the U.S. auto industry struggling right
now?

Intense competition, for one. The global auto business grows tougher every year, and we accept that. Our ability to compete has made us the world's No. 1 auto maker for 74 consecutive years, and we're fighting hard to stay on top.

Leaning back on their past laurels is no way to bridge the way into the future.

Some argue that we have no one but ourselves to blame for our disproportionately high health-care "legacy costs." That kind of observation reminds me of the saying that no good deed going unpunished. That argument, while appealing to some, ignores the fact that American auto makers and other traditional manufacturing companies created a social contract with government and labor that raised America's standard of living and provided much of the economic growth of the 20th century. American manufacturers were once held up as good corporate citizens for providing these benefits. Today, we are maligned for our poor judgment in "giving away" such benefits 40 years ago.

What a line of hogwash! No corporate goodwill is ever to blame. There is none anymore. They've raped and pillaged for their own short term bottom line and are now left with the results of their poor short term thinking.

Another factor beyond our control is lawsuit abuse. Litigation now costs the U.S. economy more than $245 billion a year, or more than $845 per person. That's more than 2% of our GDP. No other country has costs anywhere near this level.
And the perverse thing is that, in many cases, the majority of courtroom settlements go to the lawyers and other litigation costs, not to the injured parties.

We all know lawsuits are out of control, but for a good reason. Corporations will not voluntairly do the right thing unless they are sued

Another major concern is unfair trading practices,

Unfair trading practices??? How about using the US military to shore up corporate concerns. How about corporate welfare which is rampant and has not been addressed unlike individual welfare?

Some say we're looking for a bailout. Baloney -- we at GM do not want a bailout. What we want --

Is another bailout.

after we take the actions we are taking, in product, technology, cost and every area we're working in our business today -- is the chance to compete on a level playing field.

Yea right! Corporate welfare does not make a level playing field. Fact is, US corporations have done all they can to slant the playing field to their benefit and will continue to do so.

[snapback]168879[/snapback]

malorn · 12-07-2005, 03:38 PM

Quote:

Originally posted by MarinJohn@Dec 7 2005, 01:25 PM

[snapback]169443[/snapback]

Does the truth hurt? What facts did Wagner make up? JD Power a cheerleader for the big three? Hardly. Using the US military to shore up corporate concerns? weren't you the one yesterday blathering about Bush invading Iraq for personal gain? What corporate welfare are you talking about?

JKnight · 12-07-2005, 10:20 PM

When the staunchly conservative Wall Street Journal prints a fluff piece from a GM executive, I'm not going to take it too seriously either as analysis or even the truth as a GM executive actually sees it.

All I can do is draw from my own experience, and I've never bought a GM car. I look at them when I'm in the market and I always like something else better. Came close on an Oldsmobile Cutlass many, many years ago, and on a Saturn, but I took something else home.

On the other hand, I've never bought a Saab or a Volvo or a VW or lots of other cars, either. It's pretty much been Toyota, Honda, Ford and Chryslers. After my experience with Ford and Chrysler, I'm pretty solidly sold on Toyota and Honda. At this point in life, given the wide variety of models available from Toyota and Honda, I'll probably stick with those two companies rather than taking a chance on somebody else.

Jan

Oops...correction. I've owned two VWs (one I bought, one was a step-car) and they were both pieces of crap. Long ago, though, in the 1970s, and neither was new then. Still, the pain, when I don't block it out of my memory, keeps me from considering another VW.

12-06-2005, 04:42 PM	#1
malorn Senior Member Join Date: Oct 2005 Location: "Somewhere in Flyover Country" Posts: 2,657 My Car: Other Non-Hybrid Package: N/A Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	An interesting read, especially near the end: A Portrait of My Industry — By Rick Wagoner The Wall Street Journal December 6, 2005 DETROIT -- Since mid-October, General Motors has announced plans to cease production at 12 North American manufacturing facilities and eliminate 30,000 jobs by 2008; trim $1 billion in net material costs in 2006; and, incooperation with the United Automobile Workers, reduce GM's retiree health-care liabilities by $15 billion, or about 25%, for an annualized expense reduction of $3 billion. The reason for these dramatic actions is no secret: GM has lost a lot of money in 2005, due to rapidly increasing health-care and raw-material costs, lower sales volumes and a weaker sales mix -- essentially, we've sold fewer high-profit SUVs and more lower-profit cars. What is less clear is why things turned sour so fast for GM, as well as for other American auto makers and suppliers. To put it another way, why are so many foreign auto makers and suppliers doing well in the United States, while so many U.S.-based auto companies are not? Despite public perception, the answer is not that foreign auto makers are more productive or offer better-quality or more fuel-efficient vehicles. In this year's Harbour Report, which measures manufacturing productivity, GM plants took three of the top five spots in North America, including first and second place. In the latest J.D. Power Initial Quality Study, GM's Buick and Cadillac ranked among the top five vehicle brands sold in America, ahead of nameplates like Toyota, Honda, Acura, Nissan, Infiniti and Mercedes-Benz. And GM offers more models that get over 30 miles per gallon (highway) than any other auto maker. In fact, this kind of operating performance makes GM's recent financial performance all the more frustrating. The fact is, we're building the best cars and trucks we've ever built at GM, our products are receiving excellent reviews, and we're running the business in a globally competitive manner. Outside of North America, we're setting sales records. In fact, for the first time in our history, we will sell more cars and trucks this year outside the United States than inside, aided in no small part by our market-leading performance in China. So why, fundamentally, are GM and the U.S. auto industry struggling right now? Intense competition, for one. The global auto business grows tougher every year, and we accept that. Our ability to compete has made us the world's No. 1 auto maker for 74 consecutive years, and we're fighting hard to stay on top. Beyond that, our performance in the marketplace has not been what we've wanted it to be. While we've been strong in truck sales, we've been weaker in cars, and, yes, the recent surge in gas prices hurt sales. While we've led in technologies like OnStar, we've lagged in others like hybrid vehicles. Rest assured, we're working hard to address the areas where we lag. Simply put, we are committed to doing a better job of designing, building and selling high-quality, high-value cars and trucks that consumers can't wait to buy. No excuses. We will step up our performance in this regard. But competition and marketplace performance are not the whole story. To fully understand why GM and the U.S. auto industry are struggling right now, we have to understand some of the fundamental challenges facing American manufacturing in general -- challenges well beyond the control of any single company. There are those who ask if manufacturing is still relevant for America. My view: You bet it is! Manufacturing generates two-thirds of America's R&D investment, accounts for three-fourths of our exports, and creates about 15 million American jobs. And the auto industry is a big part of that, accounting for 11% of American manufacturing, and nearly 4% of U.S. GDP. Together, GM, Ford and DaimlerChrysler invest more than $16 billion in research and development every year -- more than any other U.S. industry. And GM, alone, supports more than one million American jobs. So what are the fundamental challenges facing American manufacturing? One is the spiraling cost of health care in the United States. Last year, GM spent $5.2 billion on health care for its U.S. employees, retirees and dependents -- a staggering $1,525 for every car and truck we produced. And the figure is going up again this year. Foreign auto makers have just a fraction of these costs, because they have few, if any, U.S. retirees, and in their home countries their governments fund a much greater portion of employee and retiree health-care costs. Some argue that we have no one but ourselves to blame for our disproportionately high health-care "legacy costs." That kind of observation reminds me of the saying that no good deed going unpunished. That argument, while appealing to some, ignores the fact that American auto makers and other traditional manufacturing companies created a social contract with government and labor that raised America's standard of living and provided much of the economic growth of the 20th century. American manufacturers were once held up as good corporate citizens for providing these benefits. Today, we are maligned for our poor judgment in "giving away" such benefits 40 years ago. Another factor beyond our control is lawsuit abuse. Litigation now costs the U.S. economy more than $245 billion a year, or more than $845 per person. That's more than 2% of our GDP. No other country has costs anywhere near this level. And the perverse thing is that, in many cases, the majority of courtroom settlements go to the lawyers and other litigation costs, not to the injured parties. Another major concern is unfair trading practices, especially Japan's long-term initiatives to artificially weaken the yen. A leading Japanese auto maker reports that for each movement of one yen against the dollar, it gains 20 billion yen in additional profitability -- or nearly $170 million at today's exchange rate. No wonder Japanese auto makers have noted their recent record profits were aided by exchange rates. And no wonder the U.S. trade-balance deficit continues to grow by leaps and bounds. There are other issues, of course, but my point is this: We at GM have a number of tough challenges that we must and will address on our own -- but we also carry some huge costs that our foreign competitors do not share. Some say we're looking for a bailout. Baloney -- we at GM do not want a bailout. What we want -- after we take the actions we are taking, in product, technology, cost and every area we're working in our business today -- is the chance to compete on a level playing field. It's critical that government leaders, supported by business, unions and all our citizens, forge policy solutions to the issues undercutting American manufacturing competitiveness. We can do this. And we need to do it now. __________________ Current Household Vehicles: 2008 Chevy Tahoe Hybrid, 2009 Pontiac Vibe, 2007 CTS-V, 2008 Chevy Silverado Crew

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12-07-2005, 08:58 AM	#2
Schmika Senior Member Join Date: May 2005 Location: Xenia, OH Posts: 1,622 My Car: Package: Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	I would rather hear this from an independent economist, or at least confirmed by said economists, than to hear it from the head of GM...he lacks credibility as he is too close to the issue. p.s.- Though I tend to believe what he said is correct.

12-07-2005, 10:20 PM	#5
JKnight Join Date: Aug 2005 Location: LA CA USA Posts: 108 My Car: Package: Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	When the staunchly conservative Wall Street Journal prints a fluff piece from a GM executive, I'm not going to take it too seriously either as analysis or even the truth as a GM executive actually sees it. All I can do is draw from my own experience, and I've never bought a GM car. I look at them when I'm in the market and I always like something else better. Came close on an Oldsmobile Cutlass many, many years ago, and on a Saturn, but I took something else home. On the other hand, I've never bought a Saab or a Volvo or a VW or lots of other cars, either. It's pretty much been Toyota, Honda, Ford and Chryslers. After my experience with Ford and Chrysler, I'm pretty solidly sold on Toyota and Honda. At this point in life, given the wide variety of models available from Toyota and Honda, I'll probably stick with those two companies rather than taking a chance on somebody else. Jan Oops...correction. I've owned two VWs (one I bought, one was a step-car) and they were both pieces of crap. Long ago, though, in the 1970s, and neither was new then. Still, the pain, when I don't block it out of my memory, keeps me from considering another VW.