Why so much focus on cars?

Back at my parent's cottage, there's a refrigerator that is as old as the hills, but still runs fine. It has the GM logo on it. When I asked my dad about it, he said that was from an era where GM used to make products other than cars like appliances, construction equipment, generators and things of that nature.

With all of this massive bailout money being poured into GM, it seems to me that we are trying to hold something afloat that is a relic of the not so distant past; which is around the late 90's when everyone and their brother seemed to buy a new leased car every few years.

Decades ago, most people actually kept cars longer than 3 years and spent time in the garage keeping them running. Not so much in recent years.

Now that everyone has had a hard financial wake-up call, this "I need a new car every few years" market will start to nose dive as our economy shifts away from luxury items and more towards basic needs items.

The big problem is that companies like GM have spent a huge amount of resources creating factories and assembly plants that were meant to feed the auto market as of late. Now with the shift in buying habits, all of these physical assets and manufacturing plants face closures and a future of just sitting somewhere not being used. And what good does that do? That's the equivalent of throwing both GM's money out the window and the money of the American people.

In my opinion, GM would do well to focus on other industries. For example, I read a recent report that the mining industry has experienced little or no job loses. GM has enormous engineering and manufacturing competencies. They should branch out into industries that are more "basic need". Perhaps items like mining and farming equipment, power plant machinery, generators, marine transportation equipment, and others. I think just about every company is hurting at this very moment, but when we come around, the auto market may very well be different.

I think the biggest challenge is what items could GM design and produce that wouldn't incur a huge cost in converting a production plant meant for automobiles? The next challenge is to find out exactly what items to produce. This is where some foresight and a little luck would come in.

What are all of your thoughts on this?

You mean like:

GM Defense
OnStar
Hughes (sold and now DirecTV)
EDS
Or back in the early 1900's when GM bought train companies and shut them down?

You mean like:

GM Defense
OnStar
Hughes (sold and now DirecTV)
EDS
Or back in the early 1900's when GM bought train companies and shut them down?


GM Defense would have been a good start, but it was sold to GD in 2003. I don't think divisions like OnStar or Hughes will help too much either. First because OnStar is basically a luxury item, and not a basic needs item (I'm not familiar with EDS...computer consulting, right?). The idea I have here is to try and recover the cost of GM's infrastructure; i.e. all of their automotive production facilities.

A large production facility costs a lot of money to build, and that money is wasted when it's just sitting idle or closed permanently. But a company can recover at least some of the costs by using the production facility to build something else. Of course there will be a cost to convert the plant to produce something other than cars, and that's the tricky part, but it's better than throwing the money out the window.

Problem is, GM would need money to get setup in another type of industry....which they don't have.

GM Defense would have been a good start, but it was sold to GD in 2003.

So was Hughes and EDS and GMAC. That's the point I was trying to make, they sold their non-core automotive businesses.

While I don't disagree with the overall sentiment - diversification is a good thing - the appliances market got so competitive that GM lost $40 million on Frigidaire sales of $450 million in 1978. I'd guess that it looked like a pretty good reason to get out of that business at the time.

Back at my parent's cottage, there's a refrigerator that is as old as the hills, but still runs fine. It has the GM logo on it. When I asked my dad about it, he said that was from an era where GM used to make products other than cars like appliances, construction equipment, generators and things of that nature.

With all of this massive bailout money being poured into GM, it seems to me that we are trying to hold something afloat that is a relic of the not so distant past; which is around the late 90's when everyone and their brother seemed to buy a new leased car every few years.

Decades ago, most people actually kept cars longer than 3 years and spent time in the garage keeping them running. Not so much in recent years.

Now that everyone has had a hard financial wake-up call, this "I need a new car every few years" market will start to nose dive as our economy shifts away from luxury items and more towards basic needs items.

The big problem is that companies like GM have spent a huge amount of resources creating factories and assembly plants that were meant to feed the auto market as of late. Now with the shift in buying habits, all of these physical assets and manufacturing plants face closures and a future of just sitting somewhere not being used. And what good does that do? That's the equivalent of throwing both GM's money out the window and the money of the American people.

In my opinion, GM would do well to focus on other industries. For example, I read a recent report that the mining industry has experienced little or no job loses. GM has enormous engineering and manufacturing competencies. They should branch out into industries that are more "basic need". Perhaps items like mining and farming equipment, power plant machinery, generators, marine transportation equipment, and others. I think just about every company is hurting at this very moment, but when we come around, the auto market may very well be different.

I think the biggest challenge is what items could GM design and produce that wouldn't incur a huge cost in converting a production plant meant for automobiles? The next challenge is to find out exactly what items to produce. This is where some foresight and a little luck would come in.

What are all of your thoughts on this?

GM, Ford, and Chrysler all went through a round of diversification starting in the 1980s.

The result is very well known to anyone who recognizes the quality of American cars nosedived during that decade.

At Ford, Jac Nasser attempted exactly what you proposed during his tenure at the turn of the decade.

The result was countless recalls & the shortcuts in vehicle development that caused them while resources were diverted to running other companies.

Chrysler & GM's diversification in the 80s contributed to almost killing them at the start of the 90s.
In the late 90s, Chrysler foocused on cars again, and they made more money than they had in it's history. The past 5 or 6 years, Ford has been dumping assets to focus on it's core car business, and today it's the only US car company capable of lasting through the year without government money, despite an aggressive product introduction pace. BMW has been always focused on cars, and they are still extremely strong.

It's the K.I.S.S. principle: "Keep It Simple Stupid" that works in stablizing a company and ensuring the best product possible..

A car as a 10-year (or more) durable good?

Fix cars and deal with minor problems instead of signing a new lease?

What is this crazy language you're speaking?! :p All good things have to come to an end, and buyers can't sustain their car habits in the current economy.

Auto stores and repair shops might do well because of it.

GM, Ford, and Chrysler all went through a round of diversification starting in the 1980s.

The result is very well known to anyone who recognizes the quality of American cars nosedived during that decade.

At Ford, Jac Nasser attempted exactly what you proposed during his tenure at the turn of the decade.

The result was countless recalls & the shortcuts in vehicle development that caused them while resources were diverted to running other companies.

Chrysler & GM's diversification in the 80s contributed to almost killing them at the start of the 90s.
In the late 90s, Chrysler foocused on cars again, and they made more money than they had in it's history. The past 5 or 6 years, Ford has been dumping assets to focus on it's core car business, and today it's the only US car company capable of lasting through the year without government money, despite an aggressive product introduction pace. BMW has been always focused on cars, and they are still extremely strong.



Diversification should in no way be an excuse for poor automotive quality. That is a symptom of poor management of engineering and manufacturing resources. A diverse company would have to have different divisions with their own core competencies.

While some companies like BMW may focus on cars exclusively, companies like Honda make aircraft engines, generators, snow blowers, ATVs, tillers, and are even looking into human walking assist systems. Does Honda have a company-wide car quality issue due to it's diversification?

In other industries such as defense, plenty of companies manufacture more than one type of product. Take, for example, BAE systems. They produce military jets, combat vehicles, submarines and ships, just to name a few. If companies like BAE made their fighter jet quality suffer because they build combat vehicles, they would be in trouble. Raytheon, Lockheed Martin, and General Dynamics also have core competencies in a range of different products.

The problem is that there's so much capital and physical capacity in the automotive industry now, that there's no way to continue using it all to build cars. And that's because the car market is not what it used to be, and will not return to it's previous state for a long time, if ever. Here in SE MI, I see so many plants and factories just sitting there, empty. And that is all wasted money and resources.

I hope so.

<-- works on cars.


A car as a 10-year (or more) durable good?

Fix cars and deal with minor problems instead of signing a new lease?

What is this crazy language you're speaking?! :p All good things have to come to an end, and buyers can't sustain their car habits in the current economy.

Auto stores and repair shops might do well because of it.