As General Motors Corp. and its Detroit brethren scramble for government bailout cash, the companies and their advocates have spread the blame for their troubles widely. Foreign competition, uncompetitive union contracts, tight credit markets and falling employment are just some of the many reasons given for the automakers' troubles.
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Each target shares some blame for a downward spiral that has now lasted nearly three decades. But it is important not to exclude GM's management from the list of those to blame. Management in recent years has arguably caused much of the predicament GM now finds itself in by not grabbing cash by levering up when it had a chance, as Ford Motor Co. did, not pursing hybrids as aggressively as Toyota Motor Corp. and, of course, allowing the company to become overly reliant on high-margin SUV sales to compensate for losses in other divisions.
Take for example a blog post authored by Bob Lutz, GM's current vice chairman of global product development, in an October 2005 crowing about the company's "little dose of unconventional wisdom" in pushing SUVs and full-sized trucks onto the market despite climbing fuel prices. He argued that the company is mindful of fuel economy, but offered no sign that the automaker had considered that if fuel hit a certain high no amount of "exterior styling" would be enough to attract buyers to the gasoline-hungry category.
The belief seemingly was that there would always be a market for SUVs, and so all the company needed to do was build a competitive model to keep sales strong. Lutz wrote on his blog at the time:
We began developing these trucks three years ago when fuel prices were stable and historically low in real-dollar terms. Nevertheless, we made fuel economy an extremely high priority item, even back then.
This is one reason why we are still very confident of their success. In addition, we have a huge owner body, it's a segment we think will level off at about 750,000, and we're going to have the newest and best products out there, with substantial improvements in fuel economy. If you're using our Displacement on Demand technology and you carefully manage when and how often you go on four cylinders, you can do better than the EPA ratings!
Let me make this clear: I don't think anything exemplifies the state of our art today like our all-new full-size sport-utilities. We've made significant strides forward in exterior styling, interior refinement, vehicle dynamics, safety, quality and reliability.
Less than three years later, in June 2008, GM CEO Rick Wagoner announced the company was scaling back SUV production and closing four plants. The executive said the moves were "all in response to the rapid rise in oil prices and the resulting changes in the U.S., changes that we believe are more structural than cyclical." In other words: SUVs were no longer selling.
This, of course, is not to suggest that factors outside of management's control have conspired with factors that were to create previously unthinkable problems at General Motors. But it is a reminder that when it comes to what ails the largest of Detroit's Big Three, there is plenty of blame to be spread around. - Lou Whiteman
See Lutz's blog post
See GM statement with Wagoner's comments
Lou Whiteman is The Deal's senior airline and automotive reporter.
Comments
We absolutely need to hold GM accountable, but at the same time recognized they are only going to change as fast as we give them a clear signal that that's what we want. Let General Motors to become Green Motors. Use your power as a consumer to enforce corporate responsibility!