The Frontal Cortex

G.M. and Ford Just Don’t Get It

The recent decisions of G.M. and Ford will soon be taught in business school as an example of how not to run a business. Despite gas hovering at $3 a gallon, both companies seem determined to sell the public precisely what it doesn’t want: big trucks, bigger SUV’s and lumbering V8 engines.

Just yesterday, Ford unveiled a special new Shelby GT edition of the Ford Mustang. Billed as “the anti-Prius,” the muscle car has over 325 hp underneath its hood. No word on fuel economy. Ford also announced that it had scrapped plans for a sub-compact car. (Back in January, Ford promised that it would rush a sub-compact car to dealers in order to compete with Honda and Toyota. I guess it’s easier not to compete in the fastest growing segment of the car marketplace. Since March, Toyota has sold over 32,000 Yaris cars in the U.S. alone.) Plus, Ford still doesn’t have plans to revise the one small car it builds, the Focus, which was last updated in 1999. In the meantime, the Honda Civic has gone through two complete redesigns. And Ford executives wonder why nobody buys their cars.

Of course, GM isn’t much better. Their big news last week was the unveiling of the 2008 Chevy Silverado and GMC Sierra, both full-size pickups. Yesterday, GM announced that it was cutting $1 billion out of its mid-size car development budget. While the Toyota Camry hybrid enjoys three month long waiting lists, GM is happy to churn out crappy cars that only a rental fleet could love.

The Big Two still act like gas is going to be 99 cents again. But it isn’t. I just hope they wake up before they go bankrupt.

Comments

  1. #1 Left_Wing_Fox
    August 10, 2006

    Just yesterday, Ford unveiled a special new Shelby GT edition of the Ford Mustang. Billed as “the anti-Prius,” the muscle car has over 325 hp underneath its hood. No word on fuel economy.

    How did my friend put it? Oh yeah…

    (\) (/) *VROOOM* (/) (\) … (\) (\).

    Meanwhile, Nissan has brought out a Yaris-style subcompact with a CVT, and is making a Hybrid version of the Altima.

  2. #2 Mark Paris
    August 10, 2006

    Ford/GM management philosphy: If what we’re doing isn’t working, we need to do more of it.

  3. #3 Adam Ierymenko
    August 10, 2006

    Every time I rent a car it’s a Ford, Chevy, or GM car and I’m always amazed at how much it sucks.

    By contrast, even cheap commodity asian cars are much easier to drive and get much better fuel economy.

    The U.S. car manufacturers aren’t crashing because of unfair trade, or because we need more protectionist legislation. They’re crashing because they build shitty cars.

  4. #4 Shelley Batts
    August 10, 2006

    I just hope they wake up before they go bankrupt.

    I don’t. Even though I live in Detroit (well near it– Ann Arbor) and the economy depends on Ford and GM, I believe that the only way the American car companies will wake up and smell the gasoline if if they go under. Its the nature of capitalism. Good products sell well, bad companies go under. Except now Americans have been guilted into buying sub-par cars because they were made in America which defeats the purpose of capitalism. I say let GM fall, and maybe it will light a fire in the pants of Chevy, Ford etc who still may have a chance to revivie themselves.

  5. #5 Davis
    August 10, 2006

    I think part of the problem is that Ford and GM lose money on the smaller, cheaper cars. Pension obligations and the like are slowly crushing them both. They keep selling things like the Focus to help them meet CAFE standards (i.e., losing money on fuel-efficient cars allows them to sell more of their profitable, gas-guzzling trucks and SUVs).

    The funny thing is that having, say, universal health care would probably lift some of the pensions burden.

  6. #6 somnilista, FCD
    August 10, 2006

    You might be too young to remember this, but exactly the same thing happened to US automakers in the 1970s. Their dumbness seemingly knows no bounds.

  7. #7 Mark Paris
    August 10, 2006

    Davis, I don’t buy the argument that pension obligations are causing all the financial problems at Ford and GM, or that they are the reason these two can’t make money selling smaller cars. I think there’s some room at the top for blame. For example, when Daimler bought Chrysler, they found that the top executive at Chrysler made more than the entire executive board at Daimler.

    But there’s one way Ford and GM can get rid of all those pension obligations: go bankrupt and dump them on the American taxpayers.

  8. #8 Davis
    August 10, 2006

    Absolutely, I agree that Ford and GM have lots of idiocy at the top; in fact, I think that’s part of why they’re having such a hard time maintaining those obligations.

    But there’s one way Ford and GM can get rid of all those pension obligations: go bankrupt and dump them on the American taxpayers.

    It’s starting to seem more like a matter of when, not if, at this point.

  9. #9 Crusty Dem
    August 11, 2006

    Business-wise, they might be making the right decision sticking w/the gas guzzlers. Their massive gas-guzzling behemoths are the best cars they make, plus the profit margins are huge. Compare a Suburban or Expedition with anything anyone else makes in that size range, they’re less expensive and of reasonable quality. Compare the Ford Focus (which is FAR better than anything GM has in that size) with a Civic or Toyota Matrix, it’s not nearly as good and not significantly cheaper.

    This is no excuse for their management, which is deplorable. My dream job is CEO of GM. I wouldn’t be a great executive, but I would look awfully good next to the masters of industry they’ve had running things for the last 30 years.

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