Its balance sheet, for starters.
Toyota is catching up to General Motors in terms of sheer size, but has passed up the Detroit behemoth in many respects.
The proof of looming disaster is in the balance sheet. Here is GM’s balance sheet, full of bullet holes. Here is Toyota’s balance sheet, which is bulletproof. Focus on a few items, like long-term debt and equity. Note that General Motors has a $480 billion balance sheet, and only $28 billion of equity. (Balance sheets as of Dec 2004)
Toyota has a $142 billion balance sheet, with $84 billion in equity. And it has one-sixth of the debt load as GM does.Rumor has long been that Toyota will/may acquire the GM behemoth. That is unlikely to happen in any straight sort of business sense. Perhaps GM has two options for survival: a bailout by the Feds, which Leviathan likely couldn’t afford, or, an acquisition by a foreign company such as Toyota. But why would Toyota, with its masterful financial outlook and its vastly different culture, want to acquire an inefficient, union-laden abnormality with $300 billion in debt? It wouldn’t, unless of course, the acquisition was bankrolled by the US government, which would be far less costly than a total bailout. Bankruptcy is one way in which Big Guv could subsidize a merger/acquisition, but a dangerous move for an auto manufacturer that relies on brand loyalty.
Despite turning cash flow-negative, GM has cash, and a lot of it, and that is its only ace-in-the-hole. Right now, GM’s cash comes from its GMAC financing arm, its VEBA (pre-funded retiree account), and large-sum bank lines. GM may soon have to hold back dividends to keep ahold of its cash. Another huge cash drain for GM would be a Delphi strike, which could drain $10 billion+ over the span of a quarter.
Though it is only Business Week magaize, this is a fantastic rundown of the current General Motors scenario.
All said, it explains some of what I have been arguing about GM’s potential for bankruptcy–that it would be a deadly move on GM’s part, considering that it could lose a major portion of its customer base due to the reasons described therein. People don’t want to buy cars — a long-term purchase — from an auto manufacturer in Chapter 11. The rental market–another way the American automakers stay afloat–would also cave in, due to the liquidation factor that car rental companies would be faced with were GM to claim bankruptcy.
{ 44 comments }
great post …I would offer china GM. They have the cash … they have a powerful motivating management approach … they key to change is getting rid of the IDIOTS currently running the company. They have no vision or imagination.
It’s time for manufacturers to stop blaming global competition for lousy results. They should look at their own inability to drive innovation and growth.
I saw that someone said “offer China GM”. They would be insane. How awful. One should really look at the inherent dangers of continuous foreign acquisitions of US businesses and of them funding our debt, as well.
The millstone of unions and years of bad-management. I don’t see any way for GM to stop circling the drain thanks to the former in particular.
I thought here would be as good a place as any to ask this question about GM. In a recent article on the WSJ’s opinion page, the CEO of GM claimed that it’s “unfair” that they established their (now expensive) pension programs when the public “expected” it of them through their “social contract” with business. Now, please stop me if I’m wrong here, but I thought the way pension programs were funded was that, when paying out wages, they put money they *had* then in a separate investment fund, which then pays out later in life.
But the way the GM CEO is talking, it sounds like a GM pension is basically a Ponzi scheme where they say “Hey, if we have enough money later on to throw around after wages and all, we’ll pay you some. If we’re still around, that is.” Am I misunderstanding how their pension program affects current costs?
Toyota sells on a world market, as do all Japanese car-makers. The economies of scale are phenomenal. If GM went, & Toyota & other Japanese car-makers got the market, economies of scale would be even greater. Everyone would get a wider range of choice, cheaper & better cars.
Apples to Oranges.
Its nearly impossible to tell anything from the balance sheet of Japanese conglomerate at the head of a kieretsu, like Toyota. Most of the balance sheet items in the form of the cross-share holdings with its 900 or so suppliers and afilliate companies that it partially owns, and the financial relationship with its bank (which provides money at negative interest rates and is probably functionaly insolvent like most big Japanese banks) are largely off its balance sheet. You probably won’t find a financial statement for most of these companies, only the parent companies results are usually reported. Toyota is a much larger company than its balance sheet would indicate, and one that makes a lot less money (as a whole) than it reports.
I suspect Honda (which operates somewhat outside of the Japanese norm) or Nissan (which broke up its kieretsu in the early 2000′s) would be a better comparison.
Toyota is a very efficient and well run company whose main goal is not profit but market share. Toyota is also the crown jewel of the Japanese business-government mercantilist complex that most Austrians should find deplorable. That by itself doesn’t guarantee anything as the near death of Nissan shows. But they are hardly the type of company that any Ausrian should admire.
None of this makes any excuses for GM, which is a mess, due to a lot of decisions made a long time ago when things were way different. But GM and Ford operate in a different circumstance than Toyota from a financial standpoint. They have to pay interest on their loans and are actually required to pay them back and their shareholders require that they make money.
A lot of GM and Ford’s troubles stem from the fact that they have the assets and fixed costs of companies designed to own a much larger share of the market than anybody should expect. There are almost 40 auto manufacturers in the world and at least 20 of them sell in America. GM is supposed to have 50% market share in that environment? I don’t think so. GM attained that size in an unusual and temporary market circumstance a long time ago, partially by serendipity. Those circumstances are over and GM needs to reduce its size to match reasonable market share expectations (about 25%).
GM does not have a chance with the current management team. One only has to look at what they see the problem as being today – Pensions and health care. A little more than two decades ago it was cheap Japanese workers. GM and Ford executives do not know how to manage. They are all financial stewards who like to play with P&Ls, balance sheets and the like. The only problem is thatthey suck at it. Just look at the financials of GM and Ford versus Toyota.
The problem is simple, GM and For Executives STINK. Fire the top brass and bring in a new team who actually wnat to make cars that Americans want. A turn around is around 2 years after we take the first step. GM has bench strength and a solid work force.
GM does not have a chance with the current management team. One only has to look at what they see the problem as being today – Pensions and health care. A little more than two decades ago it was cheap Japanese workers. GM and Ford executives do not know how to manage. They are all financial stewards who like to play with P&Ls, balance sheets and the like. The only problem is that they suck at it. Just look at the financials of GM and Ford versus Toyota.
The problem is simple, GM and For Executives STINK. Fire the top brass and bring in a new team who actually wnat to make cars that Americans want. A turn around is around 2 years after we take the first step. GM has bench strength and a solid work force.
The problems GM and Ford face are complex, and systemic. They were bullied into giving the store away to the unions by government 70-odd years ago. Many of their management decisions since then were driven by that, from pension funding and new-product development to management training and infrastructure construction / maintenance. Somewhere along the way (WWII) they became “partners” with the Federal government, and it has been downhill ever since. The only way they have lasted this long is the protectionism that limited foreign market share until the gas crises of the 1970′s forced the hand of the Government / Auto Complex. The Japanese keiretsu were even more connected with government, as someone pointed out, but it is a difference in degree, not in kind. Toyota, et al, for all of their connectedness, are still light-years more viable in the long-run.
I wouldn’t bet on any long-term viability anywhere. Toyota might get destroyed by China. GM and Ford’s problems aren’t complex – they adapted and created long term infrastructure during a summer of economic dominance, assuming they were in the tropics. Now that the Kondratief winter is setting in, they are doing about as well as Cacti. The Toyota kiretsu should be viewed in a similar manner – they played some things better, but the rules can still change. If nothing else the currencies and interest rates can fluctuate to make things expensive.
And don’t bet on energy benefiting the Japanese. It takes energy to make steel and the rest of things that go into a car. $100 oil will make cars more expensive, and I’ve heard one statistic (I’ve been unable to confirm) that more energy goes into the production of a car in total than is consumed in fuel.
China might just undercut the Japanese (the Koreans have started this already) in such a way they will be the next GMs and Fords. Or things might shift back to benefit our domestic auto industry.
Before you say the execs stink, ask what they are or have been rewarded and/or punished for. GM met wall street expectations for a long while. Taking risks and downsizing and innovating would be punished. It is only on the table because the alternative has become suicide. If you work for someone who rewards passivity, paper pushing, and risk-adverseness, would you innovate and get really bad reviews, small bonuses, etc. or just go along, shut up, and buy that new mansion?
(The Japanese also show this problem, though it tends to occur in a different form. They value consensus so much it is hard for them to truly innovate).
I would simply note that no one has even suggested forming a domestic US Auto corporation even if they could do it today (hence without any legacy retirement, labor, or benefit problems). But if not, the problem runs deeper.
The idea that Ford and GM were “bullied” into the union situation is a little simplistic. There was substantial advantages perceived in these unions, especially in the “united” autoworkers union, by the managements of these firms. That they were no more than helpless pawns being bullied into these labor arrangements is not an accurate perspective.
Forgive me for being simplistic, but Henry Ford opposed unions until he finally was relieved of command of his enterprise by the US government due to the onset of incapacity. The whole reason he raised wages in his factories above those prevalent in the era was to keep unions out. He resorted to arguably criminal means to combat the equally criminal unions. When Ford was taken over by professional managers, the company recognized the value of unions in cartellizing the industry, as GM and Chrysler (among many other businesses) already had. This class of managers badly miscalculated on benefits, urged on by government.
Forgive me for being simplistic, but Henry Ford opposed unions until he finally was relieved of command of his enterprise by the US government due to the onset of incapacity. The whole reason he raised wages in his factories above those prevalent in the era was to keep unions out. He resorted to arguably criminal means to combat the equally criminal unions. When Ford was taken over by professional managers, the company recognized the value of unions in cartellizing the industry, as GM and Chrysler (among many other businesses) already had. This class of managers badly miscalculated on benefits, urged on by government.
Perhaps it’s not entirely on-topic, but the Japanese automakers also enjoy a dynamic and competitive market at home. Nine major Japanese companies build cars in Japan, and all but one are big exporters. German (BMW, Mercedes, Audi) and French (Peugot, Citroën) cars are also fairly common on Japan’s roads. The market here (in Japan) seems to be driven by competition rather than consolidation.
I sold Chevrolets for 9 years (10 years ago). Here is the problem from that perspective. GM simply made inferior products. If someone came to test drive a Cavalier and I couldn’t deliver the vehicle to them right then, the chance of the client actually coming back was slim if they drove a Toyota Corolla, or Honda Civic in comparision. GM’s philosophy when it came to small cars (where Toyota built it’s brand loyalty)was to build them cheap. Cheap, purely focused on price point with no regard to value. Toyota knew that if they developed great engines and put them in quality little cars, people would spend the extra 10 or 15 %. Especially when resale on imports could justify the higher price. The rest is history. GM is the equivelant of “the deer in the headlights”. I believe the corporate sentiment at GM was as long as I can get mine today, or this year, or this contract period to hell with looking 5 or 10 years down the road. Now they are paying that price. Unfortunatly, while GM quality today is very high and they have introduced some nice, appealing models, the facts fall on a small audience. The ones who left 10 or 15 years ago have a brand loyalty to companies they perceive as “quality”. It is much easier to keep a customer or gain a new one, than it is to lure back somebody who placed their faith in you and got burned by a 4,6,8, Cadillac, or a “not ready for prime time” GM V8 diesel. Or countless other pure crap products GM has put out there. What to say? I feel bad for a company that put out some truly inspirational cars in the 50′s and 60′s to now be teetering on the brink. Take a nostalgic ride through time and look at pictures of old Impala’s, GTO’s, Camaro’s, Belairs, Chieftans etc. Makes me sick. What has happened to them? They failed to look forward, and everyone was just worried about today. Do you think they are looking forward now? I doubt it; but hope so. How many Solstices could they sell with a small V8? Probably a WHOLE BUNCH! But knowing GM they wouldn’t have the capacity because they would fill their extra capacity with the re-introduction of the Aztec Classic LE SS Edition. What we used to call “Putting Lipstick on a Pig”. GM has used lot’s of lipstick in the last 30 years. Maybe GM secretly owns Maybeline.
GM needs and deserves a second chance by all Americans. Has everyone forgotten that it is the U.S. auto companies that created the middle class in this country? Toyota sent $9,000,000. (thats 9 billion) in profits to japan last year off the backs of the American consumer, money which would have otherwise stayed in this country and benefitted the U.S. economy for the most part. And although Toyota claims to pay thier workers well their new trick is to hire temp workers at 9.50 and hour and force them to quit before one year and re-hire them as temps again. Toyota also loves to wave the American flag and brag about jobs here but the actual US content of their vehicals remaing at 40% vrs. 80% for GM cars. For every job Toyota adds the U.S. auto industry actually loses two due to actual US content from other U.S.suppliers. This will trickle down to affect millions of other jobs that are not auto related. But why wouldn’t Americans want to buy from American companies? I know that in the 80′s and 90′s GM put out some terrible cars but those days have passed. I understand the anger but punishing them for mistakes made 20 years ago won’t help anyone. If they go down one million people will become the burden of US taxpayers. GM now produces more cars that get over 30 mpg highway than Toyota, Nissan and Honda combined! Nobody seems to know that. The quality is also just as good if not better in some cases. Three out of the top five quality auto’s produced in North America are GM. I also know several people that have had several problems with their new Honda’s and Toyota’s. But the quality difference between them is nil when put on paper. I have had several cars in my life, some good, some bad, but today with the huge decline in American manufacturing shouldn’t we at least give them a fair chance? I remember when the US electronics industry was in trouble.
The Japanese sompanies all came over and set up shop in the US. After RCA and Zenith were sold off to foreign companies, the Japanese plants were promply closed in favor of cheap labor in Mexico. As soon as GM and Ford go belly-up the same will happen and the foreign plants will head south of the border. The US auto companies and the UAW keep wages up and keep foreign manufacturing in this country. I currnetly own a Pontiac Aztek, a GM failure? I made it to 82,500 zero problems or repairs. I finally had the brakes replaced because I got tired of waiting for them to fail, it holds as much as a minivan and I get about 26mpg overall(mostly highway though). It may be ugly but it is a well built and well engineered car for my $19,000. spent. For the sake of our next generation please give the U.S. auto’s and other U.S. companies another chance.
Anthony,
Do you not realize that the Japanese manufacturers ( and the Germans) are building cars here in the US because this is where their most profitable market is? Production in the market saves on shipping, while in the case of the Germans, labor is also relatively cheap here. But the workers in these plants are American workers, and their wages are spent here. GM’s wages and costs are too high, their pension obligations overextended, their products too bland, poorly designed, and badly built. Sure they have been making strides recently, but they have a long way to go. They should have been focusing on quality when they were asking the federal government to cartellize the industry back in the 30′s and 40′s, and asking the government to protect them in the 50′s-80′s. The current situation is the joint responsibility of unions, management, and government, and they are loathe to accept responsibility. Thus they will be wiped out. Too bad.
Vince,
Obviously you haven’t been inside a Cadillac dealership in say the last decade have you? How about reading a Car&Driver where the STS is compared (Extremely favorably!) with the “Best” Germany has to offer?
You’re exactly right that the unions and pensions at GM and FoMoCo are noxious. That will have to change. There are simply no other options.
However, your myopia with regard to the products made by GM and Ford is simply breathtaking. The new products out of Dearborn are stunning and put the Japs & Germans on notice that America isn’t quite out of ideas yet.
It’s inanities like “there products are too bland, poorly designed and badly built” that indicate you didn’t bother to do your homework.
Faultolerant sez;
“However, your myopia with regard to the products made by GM and Ford is simply breathtaking. The new products out of Dearborn are stunning and put the Japs & Germans on notice that America isn’t quite out of ideas yet.
It’s inanities like “there products are too bland, poorly designed and badly built” that indicate you didn’t bother to do your homework.”
Dude, I was referring specifically to GM. I will stipulate that premium products like Cadillac, Corvette, and GM Truck are decent. I will even go further and say that the products are improving across the board. However, even the lowliest customer walking into a Toyota, Honda, Mazda or Nissan dealership has available a selection of brilliantly-designed and built cars that offer superior value at affordable prices. This is the foundation of the car market, and where all eventual premium customers come from. GM in particular has provided terrible, terrible cars in this segment, along with skimpy warranties and bad service since the late 60′s.
I have been traveling for work recently, and have been in several GM products for a week at a time. The Chevrolet Impala, for instance, is a nice car, one that looks good, is fairly comfortable, and goes and handles well. It is still completely outclasses by my 10-year-old Nissan Maxima, the current model of which it alegedly competes against. This is simply unacceptable. This is why GM will not survive.
Of course, I meant to say “is completely outclassed by my 10-year-old Nissan Maxima”.
If you walk through any college campus parking lot and look at the cars driven by 19-25 year olds, you would not bet on the survival of American auto manufacturers. Young people, by a large margin, drive autos manufactured by Asian auto companies. It will be very difficult for GM, Ford, and Chrysler to win back these people and their future children.
One of the dumbest things I have ever read.. eliminate competition and you will get a better price when GM is offering fire sale prices on vehicles… DUMB COMMENT
“Toyota sells on a world market, as do all Japanese car-makers. The economies of scale are phenomenal. If GM went, & Toyota & other Japanese car-makers got the market, economies of scale would be even greater. Everyone would get a wider range of choice, cheaper & better cars.
“
I have to say by reading the other posts here, I get the feeling that others share the same frustrations. Most don’t seem to be “hammering” GM, but are frustrated at what appears to be serious missteps perpetuated over 30 years. Yes, the car manufacturing is the industrial backbone of manufacturing in this country. Yes, the auto business provides prosperity for millions of Americans, and yes as an American I would love to contribute to Americans. However, these are not good reasons to buy cars that are sub-par. The lack of competition in the late 60′s and early 70′s is what started GM to think “hmm, lets just get the product out there and they will buy it”. No regard for customer service, reliability, etc. That was the begining of a slippery slope, that got much worse in the late 70′s and 80′s. GM could not handle the onslaught of better built cars from Japan. It has taken 10 plus years to begin to turn this ship around. I know most of you know this history lesson. I just think this is the heart of a lot of frustration. Let’s hope GM has some true visionaries that can make radical changes and rebuild this company. I’m rooting for them. My lease on my 2004 Maxima is up this August. I will do my part at that time to contribute. Not because I feel sorry for them, but I could actually be excited about a CTS-V with a powerful V-8.
About the Aztec. I would have liked to have been in that meeting when this abortion was approved for production.
Head of Product Development: Hey chief we have been working on this awesome vehicle, that is gonna just be gangbusters to the young crowd.
Cheif: Yea, lets have a look at it. (Pass the Bong while you are at it).
Head of product development: Here it is.
Cheif: WHOA, Dude. WOW! WAY COOL. Can we make it in pea green?
I would order everyone that was involved with this program to be drug tested. What were they thinking?
American:
1. Notice I said “Toyota _& other Japanese carmakers”. There are a number of carmakers in Japan. “Japanese” cars are _not_ produced by a single carmaker, even tho’ they’re all “Japanese”. They _are_ separate.
2. So GM has incredibly high costs — compared with other carmakers. Of course it has trouble with price. As it happens, other carmakers _can_ produce more cheaply. And remember, there are _several_ Japanese carmakers, not to speak of car manufacturers in/from other countries. They _are_ all separate & independent, even tho’ they’re all “foreign”.
As someone who has consulted on R&D for the Big 3 for about 5 years, I know that there is no shortage of engineering talent or good ideas. The unfortunate thing is that management (driven by Wall Street) don’t give innovative ideas a chance to mature into product. It takes time to transition R&D to product but I have seen too many projects being cancelled (and sometimes restarted when there’s the “Oh-s**t, Toyota has done it”) by bean-counters trying to make quarterly numbers. On the other hand, for example, Toyota and Honda showed commitment to hybrid technology and worked at refining it over the last 6-8 years inspite of poor sales numbers early on. However, I really see this as a cultural reflection – the penalties of instant gratification (short-term profits of US companies) versus the rewards of long-term vision (market share gains and steadily growing profits through innovation, service and commitment). Needless to say, investing in long-term goals costs a significant amount of money as R&D projects are high-risk/high-payoff and the payoff usually comes only if you’re willing to play for the long haul. Add into this the burdens of health care and pension benefits that are virtually non-existent in China or India and are absorbed into government budgets in other countries and the problem really has no fix without workers at all levels in the US manufacturing industry accepting lower standards of living.
Even though unions are burdening American auto makers right now, we have to remember that it’s these unions that give blue collar workers a better way of life. After all, it’s the middle class (blue collar workers) that fuel our economy. Although the middle class is slowly eroding, it won’t be long before we realize that we have a major shortage of skilled workers, and an abundance of pencil pushers that our society unfortunately demands be made from the “college mold”.
Anyways, the important thing is that we remember GM has been the #1 company in America and the largest auto producer since the invention of the automobile. They are good at what they do, they are just in some hot water right now. Take Chrysler for example. 20 odd years ago they were in a jam, but look at them now. If we stick by GM, they’ll pull through. That brings me to the point of my philosiphy on “buy American”. When you sell out America and buy a foreign vehicle you are really contributing your money to another country that doesn’t give a care about you. Every dollar you give to them won’t be recycled into our economy. We’ll never see it again, only in the future foreign models that will arrive again to rob us of the American dream. Just imagine that, they are taking it away from us and making it their own. I mean, how patriotic is that? After all you live here, act like it.
Another thing that deserves mention is that foreign companies can’t touch the strength and reliability of American iron. Tonight I hauled over 2,000 pounds of tile in the bed of my Dodge Ram. Try to do that with a Honda Ridgeline, Ha! The Toyota or Nissan V8′s? How much experience do they really have in that segment? Not enough as far as I’m concerned. Ford made V8s in 1932 when these foreign companies either didn’t exsist or were in their infancies. Doesn’t it mean something to you to buy a vehicle that a fellow American built, someone you can relate to. If not, go chat with Yoshi in Japanese about how he built your car.
I don’t want to step on any toes, I just want to make a point. Drive a vehicle built here, because if GM goes under there will likely be another depression. See, Yoshi won’t feel it, but we Americans will. And if the time comes remember that buying something foreign contributed to it. And I assure you, they will laugh and once again not care about what they are doing to us. I’m only asking you to be a good American.
Bravo, Robert. Your comment has to be more densely packed with fallacies than any I’ve seen in a very long while.
GM is a laggard. This holds true for Ford as well as Chrysler. The big three are fat,lazy, arrogant and stupid. They do not compete and their products suck. I would like to see all three of them out of buisness. My advice fire all of the fat ass executives and focus on energy efficient vehicles as opposed to the crap they keep selling (i.e. SUV’s). In an era of global warming and skyrocketing gas prices these morons still do not get it. As it is they are 20 years behind and this is only going to get worse.
Hey Roy,
Would you please elaborate on your one liner? I’m not sure where you stand. Are you like Dean who posted below us, who obviously has no idea what he’s talking about? Maybe I was appealing to the emotional side of the issue too much, creating too many “falacies”. But if GM folds, do you realize the economic repercussions that our country will be faced with? GM directly supports millions of Americans with a good income (whether it be salaried, hourlies, or retirees) and inderectly supports millions more (dealerships, part suppliers). If they all lose their jobs, from there it’s a domino effect. Everything in the Eastern reigon of the country will literally collapse economically. Who wants that? I surely don’t, but if you’re like Dean I guess you do. And consider this Dean: what happens when domestic automakers fold? The competition is gone, and once that happens there is no incentive for foreign automakers to produce quality vehicles. GM folding will be a disaster for the U.S., whether you like American vehicles or not.
Unions are not just a burden on the automakers, they have made wage gains for union workers at the expense of other workers in the American economy. Unions aren’t entirely responsible for the car manufacturers’ problems–auto and steel tariffs, government safety standards, and other govt. regs have also contributed–but the unions have not helped American automakers be competitive on the world market.
The fallacy of “Buy American” has been discussed on Mises many times, especially when considering the alleged trade imbalance situation. If you spend less by buying foreign, you have more money to spend on other things in the market, and thus increasing jobs in other industries. Also, American dollars will eventually have to come back to the US and be spent on US goods, because they have little value to foreigners otherwise.
Some point to the potential military danger of losing our manufacturing base. I’m not sure that that’s really a substantial argument, but even so, the point is that our manufacturing base has been strangled by government regulations, including the union situation, and it would get better if we eased up on the regs and let businesses take care of themselves.
I can only speak for myself as I explain why I switched from new GM products to new Honda products.
I walked into a Pontiac dealership in 1997 to test drive a Sunfire. When I told them that I cannot buy today because I still need to test drive the Corolla and Civic they told me that they will let me factory order any Sunfire any way that I want it for $50 over invoice plus any rebates, incentives, etc… that are applicable at the time of delivery.
I thought that was such a great deal that I signed on the dotted line.
My factory ordered car arrived some time later and when I picked it up and flipped it over the dang thing had a sticker that read HECHO EN MEXICO! When I signed on the dotted line I was not anal retentive about it being made in America; but a low wage country like Mexico?
This car was nothing but a pure lemon. By the time I had traded out of it for my first new Honda (made in Ohio) it had 56k miles and lots and lots of repairs. Like $1,300 (out of my pocket) for a new moonroof mechanism. An Oil pump, two ignition coils, stereo, rack n pinion steering gearbox, catalytic converter, and on and on and on. Every repair took the dealer at least three attempts to fix anything, and they introduced other problems at the same time of the repairs. It was an endless cycle of breakdowns, tow trucks, and appointments for repairs. I was in the habit of checking under the hood after every repair attempt looking for bolts and washers that they left out. It seems that my whole life revolved around the Pontiac dealership at times.
By the time I got rid of this GM product (remember, it had 56k miles) it was stalling on the highway every 20 minutes, the power steering fluid was leaking on a hot radiator hose and the resulting (carcinogenic?) fumes in the passenger compartment were suffocating me, it needed yet another rack n pinion steering gearbox, and the engine was at times making a horrendous screeching sound as if journal bearings where seizing or something. I was also keeping a dahon folding bicycle in the trunk just in case, and I tried not to drive too far from home so that I was always within pedaling distance of my apartment.
All the while throughout this ordeal the Pontiac dealer was “amending” existing work orders so as not to show that three attempts where made to fix anything. They told me that this paperwork is done this way because it is much easier and efficient – but the thruth is that they know not to generate all of these different work orders that prove that they are an icompetent service facility – better to show that all of these attempts to fix any one problem was one repair with only one work order.
My letters to Pontiac always came back with a form letter advising me to work to get these warranty problems resolved with the Pontiac dealership. The Pontiac dealership in turn told me that they will be more than happy to work something out about this defective product if I can get GM to do something for me. When I asked the Pontiac dealer who the regional factory rep for Pontiac was they told me that “these things are not handled this way.” In other words, the Pontiac dealer did everything they could to see to it that I got stuck with this lemon.
My experience with my new 20001 Honda Accord has been very different. No sooner do I get my new Honda home I get a letter in the mail – a form letter signed by the owner of the Honda dealership – advising me that at his dealership the customer does not put up with any headaches. If for any reason anything is not right then I am to speak with him and he will make it right.
The few warranty problems that I have had with my new Honda purchase where fixed at the very first attempt to fix them. I am totally amazed that they do not break anything else when they go about fixing warranty problems or performing regular maintenance. (The Pontiac dealer led me to believe that all service departments are like that.) At 95k miles it is still going strong with no out of pocket repairs (only maintenance items like new brake linings, brake fluid flush, manual gearbox fluid change, new tires, spin balancing, etc.). The two service writers at the Honda service department today are the same two people in 2001 when I purchased my New Honda. At the Pontiac dealership what they had was a revolving door of personnel.
I do not pretend to be am authoritative source as far as which manufacturer has the best product quality. I choose not to get into any slipery slope (read pissing contests) with people over product quality. I do not pay any attention to J D Powers or what EDmunds.com or Car and Driver are writing about the new vehicles. I am no different than most other folks whose past life experiences help shape and mold the person that they are today, and today my preferences for consideration for a new car purchase has to include Honda and Acura at the very top of my list.
If the new Cadilacs truly are great products that are just as good as any other luxury brand and the Cadilac service departments are the greatest things since sliced bread then I will never know because I will never buy a new Cadilac.
Who could blame me?
But I have other reasons not to buy GM products. I happen to know the couple who own the local Avis rent a car agency in town. Avis rents mostly GM products. This couple tell me that they send their GM rental products to their respective GM dealership for repairs only to get swindled out of their money because these GM dealerships never fix anything.
All that I have written about GM service departments may not be fair because it is not a randomized statistical sampling of service at all GM dealerships – and there are thousands of GM dealerships in America – but as far as life experiences go, these are the only facts that I have to go by.
Wow, after reading all the previous posts, it seems that there are a lot of disgruntled Domestic car buyers out there. I too am the owner of a domestic car, Ford to be exact and I have also had difficulties dealing with certain problems, that in my opinion were Ford’s responsibility, nopt mine.
The perforation and corrosion warranty for instance. My 99 Explorer was equipped with factory installed step rails that started rusting at the seams within 3 years, well below the stated corrosion and perforation warranty period. I was a liitle put out considering the initial investment was substatial. I tried getting somewhere with the dealership that sold me the truck but was told that this issue was not covered. I then contacted Ford’s head office and spoke with a customer service representative who also told me that the part wasn’t covered. I explained that the part wasn’t an after maket purchase, rather it was factory installed, yet this fact seemed to fall on deaf ears. All I got was the standard “I’m sorry you feel tha way sir but there isn’t anything we can do about it”
Surprised, no. Pissed off, yes.
So I took it upon myself at my expense to locate two used step rails and had them refinished and installed at the dealership where I had originally purchased the vehicle. The body shop rep was astonished (probably not) that Ford would do nothing about the problem due to the fact that the corrosion was obviously a design error.
Oh well, since that time the new (used and refinished) step rails haven’t shown any sign of corrosion
I could go on but I think that may explain why people are looking elsewhere for there new vehicles
My husband has been employed as a service technician at the Sam Swope Pontiac Buick GMC Dealership in Louisville KY for several years now. His pay has drastically declined in the last two and a half years by as much as $14,000 now. He tells me that the dealership has problems that they can’t control up front, but the managers insist that it’s the technicians faults. One by one Sam Swopes GM service technicians are loosing their homes and more, while service technicians at other dealerships seem to be making more money. My husband says “see who comes out of what dealership at the end of the workday and see who’s wearing dirty clothes and who still looks clean at 5 o’clock”. I think he’s right. I have noticed him come home almost as clean as when he left for work each day. To me this is proof enough that people ARE walking away from Sam Swopes GM Dealerships and buying other brands of cars like Honda. Now I don’t know the entire GM story. I just know Sam Swope’s service technicians are suffering really bad. My husband and I have decided we are going to have to put our house up for sale and move into a mobile home that his x brother-in-law owns. We don’t want to but Sam Swope is giving us no choice in the matter. Our bills are stacking up and my husband now earns LESS than minimum wage for the 40+ hours that he still has to be there, but that’s another Sam Swope story all in itself!!!
Open letter to General Motors. Here’s why you’re losing to Toyota. My mother took her Cadillac to the dealership for an oil change. There was a premium offered in that day’s newspaper for a discount on that service. When she claimed the discount she was told she needed to have the newspaper offer with her. She pointed to the #8 on her grill and advised the staff that this was her eighth Cadillac and she felt the actual offer in hand was a bit much. To her surprise, the dealer stood firm. She wrote a letter of complaint to GM and never received a response. The transmission went out on my brother’s Toyota 6,000 miles beyond the warranty. He only paid the tow bill because the dealer told him that the transmission shouldn’t have failed in the first place! Last week my mother traded her eighth-and last-Cadillac for a Toyota.
I first saw the Ridgeline campaign on TV for Honda turn signal and was intrigued by the peaks in the clouds concept — very inviting and giving the viewer that “truck that’ll go anywhere” feeling. Naturally, Honda wants to separate itself from the mid-size luxury touring sedan image it has gained over the years, but the eventual lunar landscape and slo-mo sexy jumping of the truck in the opening video, which appears to be the commercial from TV, are nothing new. Standard fare for a truck spot. Only the fact that this truck is a Honda keeps you watching.
Hey I understand all to well about GM’s rapid economic decline but for the Sam Swope Dealership mentioned above it’s MORE than an economic decline. Please Listen!!! Walk into a Sam Swope GM Dealership and you will find yourself in a dilapidated dump basically. Toilets overflow, a foul smell is in the air, it’s really hard to see who’s standing in front of you when someone walks up and the techs uniforms look so outdated. I knew I was in a place no one cared about anymore. Then the latest news I heard from a friend who got a job there, is that Sam Swopes GM stores went back to using an old DOS computer system! That’s right! Sam Swope’s GM Dealerships now use a DOS program to handle all of their daily business!!! I’m like do YOU want YOUR personal information kept on a 1980′s DOS computer system that any nerd can hack? Please! I don’t think so!!! I also understand that techs don’t get paid for their time on this DOS system and they spend long hours trying to figure out this DOS system while cars are virtually sitting there waiting to be worked on. Glad I don’t need to go there! I’m not even waiting for GM to build another Pontiac store in Louisville anymore, instead I’m going to trade my 2006 G6 in on something where I know I can take it in to a much better place to be worked on. I had to have the computer brain and brake rotors replaced twice in it already
Management is that the reason that General Motors is in financial trouble. Management controls everything and makes all the decisions period. Then when there are problems because of their poor management and the company is headed into bankruptcy, they blame the employees. This is the reality of corporate culture in America. Most of the CEO’s that make millions of dollars a year in salaries and perks truly have no management skills. The people with the innovation, vision and management skills were run out of the company long ago by the current management team that is systematically destroying the company. To rise to the top these managers connived, back-stabbed, lied, cheated and did anything else no matter how unethical to get to the top. These types of people will get rid of anyone who is more capable then they are and who they view as a threat to their hegemony without caring the least about the future of the company. They don’t really care cause they will just leave with their millions and the employees and shareholders will be left holding the bag.
I saw a post here mentioning “dealer invoice price”. I hope any intelligent person realizes that this is a marketing gimmick. Car dealers would be out of business in a few months if they actually paid what is called “dealer invoice” for their inventory. Mark up on a motor vehicle is the same as any other high priced product.
Great post! A very interesting read, today, after billions of dollars in bailouts have already come pouring in from Washington with many more likely to come. Oh, and GMAC, the cash generating cow? Not so much any more, eh?
Just remember Kersta, that Dick needs the money so they can pay the huge bills they run up sponsoring everything else including their own lifestyles instead of paying their employees. Incompetents like the Human Resources and Training Departments need more paychecks so they can live in their upper East End neighborhoods and then do everything to screw with their workers.
The more people that figure out that their family of dealerships lacks quality workmanship, bad policies, and outright lies, the more will leave.
I don’t blame anyone for trying to find another job with that dealership group. They try to act on the up and up but miserably fall short of the game. Its the propaganda they have to pursue to get people to stay there. Your husband obviously has some skills so why not take a shot at doing something else to pay the bills and try to get caught up. After all, they have to pay so pitifully that even their sales associates are making about 8 bucks an hour on draw and that’s not enough to live on in any economy. Plus at this time the sales is so bad that most people can’t make it.
They’ve pretty much screwed most of their people in the ground and it shows. At the dealership I worked at, we had about 10 sales people and within a few months only one or two were still with the company. A few of them got canned for slow sales at a time when the economy was purely garbage due to the credit crunch, etc. How do you sell cars when half the people have either low wage jobs or poor credit often caused by a lack of work and money to pay their bills. This recession or as some say depression is causing a lot of issues.
The thing that has helped me a lot is the education I got from working hard at every job and what I learned in school. As far as the people that work there, I hope they find happiness somewhere but it won’t happen there. They are ruthless in demanding obedience from their slaves. They tout themselves as a high class organization yet deliver little in the way or results.
Deal with Carrie or Piggy and you’ll see what I mean
simply just have to mention you assist make a great deal of great points and should put up a number of concepts to add on as soon as a day or two.
Wow! Your website is very interesting site I believe you?re a excellent writer
Thanks for the interesting information that ipicked up!
Comments on this entry are closed.