^ I'm not so sure that's entirely true.

An article floating around on yahoo! today pointed out that the quality of their cars (measured in number of complaints per 100 autos sold) is actually consistently above average, and yet most folks believe that their quality is sub-Japanese. This is likely a holdover from 10 years ago, when that was in fact more often the case.

In the mean time, they are facing these costs that Japanese & European companies don't -- health care. I'm constantly surprised that Michigan doesn't act to provide state supplied health care a la Hawaii (and likely Massachusetts soon), taking some of that burden off of the Big 3 in MI.

Obviously, they bet heavily on the big vehicles we around here don't like much, and their late 90s early 00s payoff has soured quite a bit. Then, they didn't see the writing on the walls soon enough and had a glut of inventory, and had to sell it cheap to get rid of it.

It's a mixture of problems. Poor public perception, the wrong model line, and contractual medical benefits are all playing a role in GM losing so much.

I think they'll turn it around within the next 18 months.

-Stomv- I don't know about Japan, but what you say about Europe is not true, Germany has within about the highest
hourly labor costs in this world, Companies have to pay for health insurance, unemployment and retirement for their employies..

I think we've had some of this discussion before. GM actually sells more, yes more, small cars than anyone, no? And it absolutely dominates the market for the smallest, most fuel efficient models (Ward's lower small), no?

The discussion on costs is rightly centered on health care. If the US firms had the same healthcare costs as Toyota and the rest have in Japan, the savings would be $1,000 - $1,500 per vehicle, which amounts to billions in earnings. AT Kearney pegs Toyota's cost in Japan at about $100 per car, counting both employees and retirees.

Mike is right on Germany, but that is also why auto production there is under lots of pressure. They are perhaps 20 years behind us on facing import competition and maybe 15 behind in acess to cheap labor nearby. The strain is showing and it ain't pretty.

Health care is a big issue. But I think there are macroeconomic forces also working against U.S. firms at this point. The zillion-dollar budget deficits are draining asset markets of the capital needed to invest in industry, driving up interest rates in the U.S., though until the past couple of years that's been offset by capital inflows largely from Japan and China. 2005 was the first year in history in which total spending exceeded total income in the U.S., meaning that thanks largely to the budget deficit, we had an overall savings rate below zero!

Meanwhile, Japanese firms go on successfully raising massive amounts of capital while paying only their traditional 1% dividend, and China has something like a 40% savings rate. Europe also does enormously better than the U.S. in this regard, though I don't have hard numbers. For a manufacturing firm with significant capital costs, the U.S. just can't compete with that.

That's one reason why U.S. manufacturing did so well in the 1990s: the growing economy certainly helped, but the shrinking deficit turned surplus let us do better relative to the rest of the world.

[q->t to email]

I saw an article somewhere that says the cost of healthcare for GM adds a little under $1,000 to the cost of a vehicle. I don't think $1,000 a vehicle is making or breaking GM. A reputation for low quality, earned because of a generation of planned obsolescence, unimaginative car design, sleazy dealer networks has destroyed customer loyalty and replaced it with lingering suspicion.

Why is it that GM cars are often cheaper than Japanese cars if it costs the Japanese less to produce and they still don't sell? Even the big ones. GM minivans cost less than a Honda Odyssey.

I blame GM management. These guys seem to have a tedious grip on reality, as shown by these recent statements:
1. We hope to make a profit this year. [In April 2005 -in the end, they made a $8.6 billion loss].
2. The employee-discount program was a homerun. [Only as long as you ignore profits. While the programs was running 3rd quater 2005, GM made a loss of >$1.5 billion. Once the sale ended, they made a loss of almost $5 billion in the 4th Q, mostly thanks to the hangover. Homerun? More like a sacrifice bunt. Except that you have to ask who in his right mind will sacrifice profits for sales?]
3. We are going to be selling fuel-cell cars in five years. [Forget all the trouble of providing the infrastructure for the fuel supply. Currently each fuel-cell car costs about $1 million. So GM thinks it can reduce the costs by a factor of about 100 in the next couple of years and then have a factory ready to be churning out these cars in three years? Earth calling GM...]

If you assume they failed in thier goal your wrong. As I posted over a year ago gm made SURE they would post a huge loss. They just had to wait till suvs went out of style.

Except that you have to ask who in his right mind will sacrifice profits for sales?

Anyone with a glut of inventory. GM knew it had to make deep discounts to move all their cars before the new year turnover. I'd bet they also predicted then that they'd be cutting workforce to reduce the amount of vehicles they're making, so as to avoid another clearance sale this year.

If they didn't spin their inventory clearance as a PR move, they'd have lost even more money.