2005-01-10

GM Cuts and Struggles in North America


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The Detroit Free Press reports that GM expects to cut its North America workforce by roughly 7% this year. The cuts, to be exacted mainly through retirement and attrition, should match the pace that the auto-maker has maintained since 2002. When you add it up, this makes 45,000 jobs cut since 2000 as GM continues to struggle with profitability and market share here in the US.

The problems:

  • Rising health care costs: Yes, the side of the debate not often heard. We want cheap vehicles and expensive workers. The viability of the company is not a concern - their job is to employ a lot of people in the U.S. Using really rough math: GM produced roughly 5M vehicles last year, and paid $5.1B in health care costs. That's $1,000 on every car going to health care. Did I mention that Toyota and Nissan aren't having these problems? At least not to the crippling extent that GM and Ford are experiencing.

  • Rising oil prices: This one plays no favorites. Auto-makers across the board must deal with this. Unfortunately, Ford and GM are banking on the success of vehicles in the fuel inefficient category.

  • Aging truck models: Again, problems in the key part of GM's product line. Their trucks have done well, but the basic structure of these vehicles is outdated. This means they are harder to sell, and require heavier use of price concessions and other incentives which will further impact profitability. GM is stuck with this problem for at least two more years.

Previously, I blogged as follows:
"Personally, I still view the big three as bloated, plodding dinosaurs in a world that demands speed and flexibility."
This is exactly the kind of thing I was talking about. The auto industry is already fraught with challenges that simply can't be avoided. But GM's strategy has not positioned it well to respond to the additional, unforeseen issues.

Oil prices? That one should have been bankable. You don't know when or how much, but you have to assume the crunch is coming.

And a product line that is getting ready to age GM right out of the game! Real, real hard to have any pity here. The fact that 2005 is 7 years after 1998 isn't an auto biz problem. It's simple math. That GM has done nothing to prepare for the fact that time marches on is puzzling.

I hopped over to GM's FastLane Blog to see if Vice Chair Lutz would have anything to say on the matter. So far nothing, which isn't surprising. This was more of an informational piece and not a breaking story. Plus, Lutz has bigger fish to fry with the Auto Show going on. Still somewhere along the line, amid his talk about the new Saturn interiors, I'd like to hear something on grand strategy.

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