GM "Lost the Bet" on Lower Fuel Prices

[Ming]

Originally Posted by K-1

So, recouping the cost of a poor decision is all that matters? Don't you think GM has recouped the retooling costs by now? I do.

Note the bolded portion. Now answer me why the article is aimed only at GM.

Easy. Far as I can tell, it reads like a local (Wisconsin) interest story, not a national news one. So the "bet" GM made was on this one particular plant, not all of the GM SUV/Truck plants nationwide. See the red portion for why people in Wisconsin would care.

We've had stories like this here in the past that focus on local pains -- and some people inevitably extrapolate and take the bad news of one GM plant as a jab at GM nationwide when they shouldn't. Had a news article with the same reaction a month or two back that likewise was plant-specific and someone jumped on it for not mentioning Toyota, when Toyota's plant in San Antonio is irrelevant to people in Wisconsin or Michigan discussing a particular GM plant. Point made, I hope?

If anything, the first line of the article is a bit misleading since the rest of the article is heavily Janesville specific....but I guess you could make the case that a few lines towards the end that have Wagoner talking about future strategy are not so specific. Still, they don't get into how much money was "bet" on other SUV plants.

From unparalleled profits to gas-pump pain, the boom and bust of the big SUV was felt in week upon week of overtime for GM workers years ago — and now a downsizing that is likely to leave Wisconsin without a car-industry assembly plant.

''They rode a great wave, with a lot of profits, and a lot of money,'' Smith said of Janesville's work force. ''And it was a good time for them. We all knew it would end. But nobody thought it would be this brutal.''

Smith, based at the Center for Automotive Research in Ann Arbor, Mich., spent six years teaching classes inside the Janesville GM factory about the transformation of the auto industry.

''It was this very subject,'' he said in an interview after GM's announcement on closing the plant. ''My job was to come in on Tuesdays and discuss the changes in the industry, what was happening and what could happen.'' In some of the classes, the factory-floor workers and managers would debate whether GM should close some SUV plants.

In November 2005, when gas was $2.20 a gallon, GM spared Janesville in a sweeping round of plant closings. SUV sales were already off their peak in 2003, but GM managers were confident that a freshened lineup of Suburbans, Tahoes and Yukons would win back loyal customers.

Today, with gasoline prices doubled at $4 a gallon, it costs more than $103 to fill the 26-gallon tank of a Tahoe or Suburban made in Janesville, and buyers no longer care if the newer SUVs are slightly more fuel efficient than the older ones.

[Michael_S]

Originally Posted by K-1

So, recouping the cost of a poor decision is all that matters? Don't you think GM has recouped the retooling costs by now? I do.

Note the bolded portion. Now answer me why the article is aimed only at GM.

[EDIT] Ming correctly pointed out that K-1 and I both are mistaken. The article is only speaking about a gamble for GM at one plant, not on a national or global level.[/EDIT]

Maybe because even with this unexpected shift in the market Toyota and Honda are still wildly profitable!

The market shifted in May, and even with the big drop in Ridgeline, Odyssey, and MDX sales Honda's total sales volume went up 11%. GM's total sales volume dropped 30%.

Looks to me like Honda planned and GM gambled, and I say that as a disappointed and discouraged GM fan, not a Honda fan.

Maybe if the GMT900s had been postponed in favor of releasing the 2008 Malibu, 2008 CTS, 2008 Enclave, 2010 Cobalt, and 2010 Aveo in 2007, GM wouldn't be in this mess.

[Michael_S]

Originally Posted by VibenPontiac

Glad someone else has pointed this out. Think about it - right now if GM hadn't rushed the 900s out we would have Zetas and a new Full size truck/SUV all out in the last 12 months, talk about horrible timing. The moving up of the 900's allowed at least one year of solid full size SUV sales and the delay in Zeta has allowed GM to modify its plans for the platform accordingly. Ask me GM are much better positioned now that they would have been if the Zetas weren't delayed and the 900s moved up.

You're assuming the resources from the GMT900s should have been spent on Zeta. What about spending it on Delta, Epsilon 2, and E-Flex?

Yes, I realize it's easy to armchair quarterback these decisions. But the thing is, we armchair quarterbacks are just schmucks sitting around chatting on the internet. We aren't paid millions of dollars a year because we're supposed to be among the most brilliant automotive business minds in the world. Any idiot, including me, could have seen these problems coming years ago. Why didn't Bob Lutz and Rick Wagoner prevent this? They're supposed to be a lot smarter than me!

[Ming]

Originally Posted by Michael_S

Maybe because even with this unexpected shift in the market Toyota and Honda are still wildly profitable!

Nooo...you're feeding in to his idea that this was ever intended as a nation-wide general GM article. Please see my post above!

[Michael_S]

Originally Posted by Ming

Nooo...you're feeding in to his idea that this was ever intended as a nation-wide general GM article. Please see my post above!

I see. I will edit my post.

[Ming]

It's alright, sometimes a thread is a runaway train and it can be fun to see where it ends up.

[61BelAir]

Originally Posted by K-1

What, no special article jabbing the piss-poor planning of Toyota's brand-spankin' new Tundra plant?

My thoughts exactly! GM is the only one who does wrong, no mention of the Tundra which gets worse gas mileage or the fact that GM has the best MPG of all the big trucks. Every naysayer out there just loves to say "I told ya so" or "I was right all along". No **** sherlock, we all could have guessed the cost of oil would go up eventually and full size truck and SUV sales would fall, unfortunately there is no crystal ball that could have foretold when.

[K-1]

Originally Posted by Ming

Easy. Far as I can tell, it reads like a local (Wisconsin) interest story, not a national news one. So the "bet" GM made was on this one particular plant, not all of the GM SUV/Truck plants nationwide. See the red portion for why people in Wisconsin would care.

We've had stories like this here in the past that focus on local pains -- and some people inevitably extrapolate and take the bad news of one GM plant as a jab at GM nationwide when they shouldn't. Had a news article with the same reaction a month or two back that likewise was plant-specific and someone jumped on it for not mentioning Toyota, when Toyota's plant in San Antonio is irrelevant to people in Wisconsin or Michigan discussing a particular GM plant. Point made, I hope?

If anything, the first line of the article is a bit misleading since the rest of the article is heavily Janesville specific....but I guess you could make the case that a few lines towards the end that have Wagoner talking about future strategy are not so specific. Still, they don't get into how much money was "bet" on other SUV plants.

So, the argument is that they shouldn't have retooled Janesville and just closed it? On the local level, one could make the counter-argument that Wisconsin should have done a better job courting other automakers and not placed their "bet" solely on GM. The plant has been in operation for nearly 90 years, way to bite the hand that feeds.

[TJ95GAGT]

Originally Posted by PhishPhood

Rehashed or not, they were and they are selling the crap out of them. Across the board the Corolla get the best fuel economy of all compact models. Fuel economy sells. It puts fannys in the seats. That's the only purpose of this endeavour, sell units make profits.

I won't deny the sales argument but fuel economy?

08/9 Cobalt: 25/36
09 Corolla: 26/35

You talk as if the Corolla crushes all competitors in fuel economy.

[Sal Collaziano]

I know this is not a popular opinion amongst GM fanatics - but I'm kinda glad the full-size SUV industry is falling apart. I bought an Escalade ESV because I was sick and tired of being the only car on the road. I couldn't see a damn thing in any direction. So I bought a huge truck and now that problem is in the past.

I'm anxious for the day when I can get back into a "car" and not be surrounded by walls when I'm driving...

[TJ95GAGT]

Originally Posted by Sal Collaziano

I know this is not a popular opinion amongst GM fanatics - but I'm kinda glad the full-size SUV industry is falling apart. I bought an Escalade ESV because I was sick and tired of being the only car on the road. I couldn't see a damn thing in any direction. So I bought a huge truck and now that problem is in the past.

I'm anxious for the day when I can get back into a "car" and not be surrounded by walls when I'm driving...

I agree 100%. The wife wants a SUV for that exact reason.

[Sal Collaziano]

I hear ya. Believe me. Most of the driving population feels this way. Tell your wife to be a little more patient. Just another year or so and you're going to start seeing a difference on the roads...

[motorman]

GM needs to sell $40K vehicles to make enough profit to pay their legacy costs. they will not make enough selling $15K cobalt.

[GM-Joe]

Not a bad bet, kept some good people working and the extra capacity will give the consumer a better price to deal with.

[tgagneguam]

Originally Posted by K-1

What, no special article jabbing the piss-poor planning of Toyota's brand-spankin' new Tundra plant?

As mentioned previously, I still think that when people point to large SUV's and large pickups Detroit takes the heat because they make the best product in the market, and it's the markets that they still dominate. Really, would you choose a Sierra or a Tundra? Would you choose a Sequoia or a Tahoe? Remember who copied whom in the market. While I understand your point, Japan is mostly irrelevant in the market and has experienced only mild success (as opposed to other markets that Detroit just handed over to Japan, Inc.).