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These companies used to be run by private sector why did they fail and have to claim bankruptcy? I keep hearing from the republican side that private business keeps costs down. Where did all the profits go that these companies made for the past 10 years?
In short, bad business model. Any company that manages to lose money by doing exactly what it is in business to do qualifies.
I'm not taking sides in some Demican/Republicrat debate, but anyone can wear a dunce cap and run a business into the ground.
Profits? Yeah, sure. If GM and Chrysler made profit over the last decade or so, those quarters were few and far between. Naturally, if you lose billions from one quarter to the next, any cash put away is ghost pretty quickly.
They rested on their laurels, continuing to produce mediocre cars while the competition, domestic and abroad, retooled to meet the demands of the American marketplace. GM and Chrysler used to laugh at Hyundai, for example, not believing the threat posed was as great as Toyota had been in the 1970s. In short, it was the same old way of doing business that brought the companies to their knees -- mediocre products at inflated prices. Even Mercedes had to run away from Chrysler, realizing that it was dragging down the core Mercedes brands to try to integrate and redevelop Chrysler. Not every GM and Chrysler was/is a horrible product, but the good products tend to get lost in the bad press surrounding the junk.
Ford, on the other hand, read the market, and refocused a few years ago, before they hit a true crisis. Ford brought out new models, and tried innovative designs, and has been meeting with success.
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It was a large combination of things including gross unwarranted income for corporate execs, excessive union demands, accoutants dictating product designs, and competing against their domestic counterparts rather than which ever vehicle is currently selling more than they are. Then there was the grossly bloated amount of divisions GM had competing with each other: Caddy, Oldsmobile (an early one to get cut), Buick (GM's core original brand), Pontiac, Chevy, Hummer, Saturn, and Saab. They also owned Opel, Vauxhall, and Holden overseas. At one time Chrysler had five divisions. I was alive when it was only Chrysler, Dodge, and Plymouth and later Eagle and Jeep were added with the purchase of AMC. Eagle and Plymouth were dropped but they never really refocused the brands. They were on the right track with the Chrysler 300M. Their most popular models are made from leftover Mercedes platforms.
I think the major reason why they went under was, they were too busy building throw away cars, (cars that are built to last only a few years,) versus foreign cars, that will go 200,000 miles and still be just as reliable as it was new. American Motor manufacturers (Chrysler, Chevrolet and Ford) had pretty much gone away with quality. Not to mention most of the affordable cars looked like crap.
Cars like the Cavalier, versus cars like the HondaCivic. How many 95 Cavaliers do you see on the road today, driven cross country without the driver facing issues?
Also, they don't pay attention to what the consumer wants. I, as a consumer, want an American made RWD or AWD, 4 cyl diesel powered 4 door/hatchback sedan, that gets 30 MPG Highway at least, and is affordable (high 20K sounds reasonable.)
I know this car is available from the Big three (mainly Ford) in Europe, and I also know that safety standards and emission compliance is not the issue. The issue is they are too dumb to realize what the American Consumer wants/needs.
It was a large combination of things including gross unwarranted income for corporate execs, excessive union demands, accoutants dictating product designs, and competing against their domestic counterparts rather than which ever vehicle is currently selling more than they are. Then there was the grossly bloated amount of divisions GM had competing with each other: Caddy, Oldsmobile (an early one to get cut), Buick (GM's core original brand), Pontiac, Chevy, Hummer, Saturn, and Saab. They also owned Opel, Vauxhall, and Holden overseas. At one time Chrysler had five divisions. I was alive when it was only Chrysler, Dodge, and Plymouth and later Eagle and Jeep were added with the purchase of AMC. Eagle and Plymouth were dropped but they never really refocused the brands. They were on the right track with the Chrysler 300M. Their most popular models are made from leftover Mercedes platforms.
Great post, I completely agree it's a combination of things a couple of others to add are government mandated regulations, not adapting to a changing market. The consumer has changed as well. In the past many people bought brand X because that is what the father, grandfather , greatgrandfather drove, now the brand loyalty is gone. Also people seem to focus more on the functionality of their vehicles.. fuel mileage, reliability, resale, "greeness", focusing on the point a to point b thing rather than styling, driving enjoyment etc. And the our OEM's didn't seem to target these types of consumers, which the foriegn OEMS did.
I am not sure that government mandated regulations were responsible for their demise. All car companies have to abide by these regulations so this isn't a defining in regards to either company's failure. It should be noted that many of these regulations are there because GM (as well as others) have built dangerous unsafe cars in the past.
I went to the local car show here last week and noticed two things. First that Chrysler (and for that matter Nissan) and all its variants were no shows. This was the first time I can remember a major manufacturer not being there. I get the feeling that Chrysler is simply going to go bust this time and Fiat won't be able to save them.
The other was the GM area, which was the biggest display of cars at the show. The person I was with and I discussed afterwards that GM's lineup is extremely top heavy. There were a multitude of vehicles there that were over $40K, a hole where there wasn't much between $20 - $40K, then some very low end cars they were importing from off shore. The other thing we noticed was the repetition. Buicks look like Caddys, and then there this the whole GMC/Chevy/Caddy truck and SUV repetition. This tells me they simply still don't get the environment they need to be in. This isn't a comprehensive line up as I don't see the middle class headed here which is what GM needs these days.
Ford in comparison is doing a lot better than this with their lineup though I don't see any reason for Mercury to exist.
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