Detroit in Turmoil

If you haven't been watching what is going on in the auto industry the past few years and how it has been getting worse and worse, get your head out of the bag it's in. There are so many reasons GM is in its current situation. Where shall we start? Beginning with the biggest problem facing all three automakers, being the lack of innovation. They have been putting out variations of the same cars for far too long while foreign car makers grab more and more of the market cap. Thomas Freidman offered a priceless piece of advice in his recent article, How to Fix a Flat, saying "somebody ought to call Steve Jobs, who doesn't need to be bribed to do innovation, and ask him is he'd like to do a national service and run a car company for a year. I'd bet it wouldn't take him much longer than that to come up with the GM iCar." That very well might be the innovative spirit GM needs. Next, the cash problem facing our American Automaker. GM burned through $2.3B in October, estimated the automaker burns through over $1B a month and will be bankrupt by the end of the year baring no bailout. Government assistance is needed for these companies to stay alive.

Congress denied GM's initial request for $10B and said it will give the industry as a whole $25B to make cars more fuel efficient. Well why are the American cars such gas hogs to begin with? Safety standards that have packed on a few hundred extra pounds might have added to them being less fuel efficient, definitely. Another main problem the automakers are dealing with is the proud UAW (United Auto Workers Union). This group of inefficient workers, their pensions, healthcare plans, overpaid wages, and underworked hours is one of the biggest problems GM especially has to pay for. "Lets punch in, do work for a few hours, go home and take a nap, then have our buddies punch us out. Ha we sure fooled them." Geez Mr. Union Employee, you definitely fooled your employer. These people should be held responsible if the auto maker goes bankrupt in my opinion. 

Poor management is another example of this company's past steps toward its current downward spiral. In talking to a family friend yesterday whose husband is a junior executive at GM, she told me stories her husband would relay back to her about how bad the management really is. These individuals would fund vacations with company money, be on the clock while at home, and most importantly, only want to stick with what GM has been doing since they joined the company. This brings a phrase to mind, "change or die." Obviously the original strategy sucks a fat one and it needs to be revamped asap. Hopefully things will change soon and this old-style of managers will either retire or be forced out of the company, in order to let new ideas and most importantly innovation run free in the conference rooms. Restructuring this company, starting with management, is the most important move GM can hope to make for any future whatsoever. How crippling is this? Read this article.

One last thought to leave you with - the auto industry in Detroit is responsible, directly and indirectly, for employing almost 3 million people. There are also two GM retirees being paid benefits/pensions for every US zip code. Can you afford to pick up the slack?