Not supporting ANYthing GM did in the 80’s, it was all crap but pandering to short term stock prices was not the problem. Not in the 80’s anyway. GM stock was known to be a solid and steady blue chip, not a speculative stock. Individuals and pensions purchased and held GM stock for the dividends, not so much the stock price.
That changed in the 90’s as the stock got more volatile. About then, GM employees had stock holdings they could trade daily with no fees in their 401K’s. And they did. It got so bad, the phone system would almost lock up at 3:50 pm before market close as employees played the “dither” in daily prices. It made the stock more volatile and the fact that employees were to blame was generally ignored.
That wasn’t why GM failed, that would take a very large book to describe!
The short term mentality was in FULL swing once Delphi was spun off as an independent company in the mid 90’s. That quarter-to-quarter profit problem was felt all the way down to day-to-day spot purchases. I was blocked from buying $10 worth of O-rings because we needed to make “the numbers” for one quarter. That short term thinking brought Delphi to bankruptcy.
I’d contend it wasn’t key to GM’s bankruptcy a decade later. It added to the mess but it wasn’t key, IMHO.
Yeah, I should have been more precise. Investors were delighted that GM was getting quick profits even though that wasn’t why GM was chasing the short term numbers. I suspect that may have led to the idea of routine speculative short-term stock holdings for the rest of the market.
I think the key was that it was at that point that the attitude shifted from “let’s make good cars that people will buy their whole lives” to “let’s make rolling crap boxes that we can sell for much, much more than we spent on them and rely on our solid reputation to keep people coming back.” Once you take that attitude you’re headed for trouble no matter what the impetus for that attitude is.
I’d add; The philosophy that people would rather drive a 3 year old Buick than a Japanese car. Credit Roger Smith for that little early 90’s pile of stupid. GM did get their act together quality-wise through the 1990’s. They were still burdened by too much GM “oldthink” and the legacy costs negotiated in the better times when it took 5 time more employees to build cars than it does now.
And a lot of that GM “oldthink” was embedded at Delphi, too. As one Ford manager us; “You smell a bit too much like GM for us to be comfortable buying products from you”. Well, yeah, we still tested those products at GM’s own proving grounds!
Back in the 80’s GM switched from making cars to selling car loans. That’s where the money was. They could care less what type of car or quality of car. The high profit margins were in the car loans.
Not unlike the Consumer Products division of General Electric. GE was recently reorganized with reduced emphasis on GE Capital! Back to making good products but the consumer division is gone. The last of it, appliances will be sold shortly, if it has not been sold already.
I will venture to say there are very few rich idiots. At least, they are not rich for long. So they probably know EXACTLY how to continue being rich(er). They just do not share the same vision as the people who work AT the company. Their motivation is making the most money in the shortest time and then they move on. Business is constantly evolving just like everything in life. What worked during the industrial revolution doesn’t work today and what works today is unlikely to be successful in the future.
I dunno. I still consider them idiots. The “Screw everyone as long as I keep getting richer” approach will indeed make them richer. And eventually enough screwed people will look around and see that they’ve been screwed so badly that their lives are in shambles. And so they will start hunting rich people, at which point the rich people can only hope that they will do so metaphorically, although history does not give good odds to that hope.
The “greed is good” mentality has destroyed a lot in this country, and it keeps destroying more, and eventually people will get tired of it and do something about it. Personally, I’d rather be decently well off with a strong country than filthy rich with a failed state. If the, as I call them, rich idiots saw it that way, they wouldn’t be idiots.
The sale took place last year, IIRC. I believe that Haier (of China) is the purchaser, so the poor quality of GE appliances will likely get even worse. The ONLY good appliances that GE sold were their ranges and ovens.
There are MANY… Most were the ones where they inherited their money…and then of course there are the lottery winners. And I know a few sports figures who were not the brightest bulb.
The GM problems included those already mentioned, but it was even more complicated. GM operated on the basis of keeping each of its manufacturing facilities at their maximum productivity as defined by the point at which the total cost per unit is the least. The theory is that the facility is the most profitable at that “point”. The volumes were not tied to demand. When there was plenty of demand, any excess volumes were stockpiled and, at the end of the year, cleared through discounts and kickbacks to the dealers and/or customers. When the economy changed for the worse, each manufacturing facility continued to operate at maximum productivity; that’s what the senior managers were judged by. Demand dropped, and stockpiled continued to build until countless storage lots were crammed with unsold vehicles. Combine that with poor demand, the Japanese taking over the small car markets, and all the other already mentioned mistakes, and the rest is history… manifesting itself as bankruptcy.
Bottom line: GM created its own mess through bad management. And its employees paid the price.
Edit: Oh, yeah, I almost forgot, we the taxpayers paid dearly too…
I’ll expand a little later when I’ve thought about this some, but just because you have a lot of money does not make you good at business or finance. When you think about the financial markets and the investments companies, some people have said to read the NYT wedding announcements for entertainment. One rich old money family marrying into another rich old money family and where do the newly weds go to work? Do they start at the bottom of some corporation or bank and work their way up like most of us, or do they get a fast track at 500K with options? Was it talent or their ivy league background that made them so wise and employable? Or was it family and network connections regardless of talent? You do realize that there are folks that operate at a whole different level and bubble than the rest of us. You know, the ones that never spend any time in a supermarket or order car parts. Let them eat cake she said, we don’t need no Chrysler assembly plant, just another dot on the map or line on the ledger.
Guess I expanded a little more than I thought so I’ll shut up. It’s hard work to make a business work but not so hard to just break it up.
I agree with mountainbike, but to return to the topic of Chrysler, their bad management goes back… decades. For instance, in (I think) 1965/66, they were selling Plymouths for very low prices if you bought one that was painted silver. They were advertised as the “silver specials”, and they cranked-out huge numbers of cars–that failed to sell. Those cars sat around in storage lots for ~a year until they were all sold–at an even lower price than originally planned.
Later, it was revealed that some folks in the production end of the company had been able to get a large quantity of silver paint at fire sale prices, and they pushed this scheme. The sales division was never consulted about this hare-brained scheme, and that led to a mini-disaster in terms of sales.
Yes, we had a late 70s double oven GE Talisman Americana range. The upper oven also had a built-in fan and light. It was a heavy brute and lasted till we redid the kitchen in 2005. The range was gold and the color just did not fit in with the new scheme. Only replaced 2 circuit breakers and a couple of light bulbs over that period.
My wife fondly remembers this appliance which would do 2 roasts at the time if necessary.
So far Haier is known for cheap fridges that catch fire. The low end Sears fridges are, or were Haier with a Kenmore name on them.
As for good sense and wealth I recall that Henry Ford was convinced that his Model T was the ultimate driving machine that needed no improvements. I guess his success resulted in financially outgrowing his good sense.
My own take on Detroit in general and Chrysler in particular is that all the quotes on committees seems to be true
IMHO it WAS the ultimate driving machine for its time and needed no improvements that were available in its era. Great progress was rapidly made in the decades to follow, but it all had to start somewhere.
Re: Chrysler, I’m not sure in my own mind exactly what happened. Lee Iacocca saved them from Chapter 7 once, managing to get government backing for loans (an action by the congress that I disagree with to this day) and then left them prosperous. And with the courage to try new approaches. They started the “retro” look, the “big truck” look, created a factory-built hot-rod (in truth an oxymoron), but somehow went rapidly downhill from there. Their marriage to Daimler made a death struggle out of a bad marriage.
