August 27, 2012

"We don't comment on production schedules"

Chevy Volt production appears to be headed for it's second temporary shutdown of the year.  According to a GM spokesman;
"We don't comment on production schedules," the spokesman said. "We continue to match supply and demand."
Insert your own joke or statement of the obvious here.

If it wasn't for people's jobs in the balance, it would be comical.  If it wasn't for the the fact that GM could be fixed properly if it was subject to real market forces and it was facing a sink or swim scenario.  It could have swam. True, it could have sank too, but at this point we may never know.

A government green agenda, combined with money to throw at it means a bailout combined with a Volt that nobody wants but that GM seems to have to produce.  They aren't halting production for good, just for now.  If this were Ford, would they continue to produce the Volt?  No.  Why?  Because it's throwing good money after bad to keep trying.

Unfortunately what that points to, is that another bailout is not only likely, it's quite possibly inevitable.  Back in February of this year, Democrats were ready to take some victory laps, despite the caveats at the time.

Via CNN:
That this has been an amazing comeback is indisputable. But the good news has reignited the fierce debate about whether or not the automakers -- which were reduced to begging Congress for a bailout in December of 2008 -- really needed to be saved by the government.

"I just gotta say "I told you so" to all the naysayers like Mitt and those Republican southern senators who tried to kill of the domestic auto industry," crowed Virg Bernero, the Democratic mayor of Lansing, Mich., in a tweet and Facebook posting Thursday morning.

But while the automakers are all posting strong results, taxpayers are still on the hook for billions of dollars. Taxpayers fell $1.3 billion short on the Chrysler bailout and are still waiting for $25.5 billion back on the GM deal. In total, the companies received about $60 billion between them.

And, particularly in the case of GM (GM, Fortune 500), it seems unlikely the taxpayer will be made whole anytime soon. Treasury holds 500 million shares of GM stock, those represent about one third of the company and if sold at today's prices, they would be worth about $13 billion.

The stock would need to roughly double in price for taxpayers to break even. Analysts predict a much more modest rise in the stock price in 2012. Still, advocates of the bailout say the success of the companies is proof that the bailout worked. The hit to the economy would have been far worse than the $15 billion or so that the bailouts might end up costing taxpayers, considering the estimated 1.5 million additional job losses, the closure of GM, Chrysler and many of their suppliers and the shifting of much auto production overseas if the companies had failed.
Except, that isn't the end of the story. The second quarter of 2012 was not so good. Clearly the fundamentals were not addressed in the bailout - legacy costs, profit margins etc.  Worse still, the government seems to willing to bail out a company that doesn't focus on automotive fundamentals.  As Louis Woodhill points out in his Forbes article, some car companies still focus on quality.
One way to answer that question is to compare the 2013 Chevy Malibu against the 2012 Volkswagen Passat, as Car and Driver did. Results: VW, first out of six; GM, dead last. However, additional insight can be obtained by looking at how GM’s CEO, Dan Akerson (63), stacks up against Professor Doctor Martin Winterkorn (65), the man handpicked by Ferdinand Piech in 2007 to be his replacement as CEO of Volkswagen AG.

Akerson has an engineering degree, but he also has a Master’s Degree in Economics, and his first big job was as CFO of MCI. Akerson was CEO of General Instrument, and then of Nextel, and then of XO Communications, which went bankrupt in June 2002. He joined the private equity firm, the Carlyle Group, in 2003.

Akerson got his first job in the automobile industry when he was named CEO of GM in late 2010. Recently, he has been hiring and firing top GM executives at an alarming pace, and he is understood to be working on a major reorganization of the company. Akerson recently gave a televised speech to GM employees on the need for “integrity”.

Martin Winterkorn has a PhD in Metallurgical Engineering, and he has spent his entire career in the automotive industry. At the 2011 Frankfurt Auto Show, Winterkorn was caught on amateur video sitting in, and studying Hyundai’s newly introduced i30, a competitor to VW’s best-selling family car, the Golf.
Quality.  That's a lesson GM has lost, and why it's destined to lose entirely unless it re-learns the lessons of quality.  The Volt is about an agenda, Volkswagen is about the fundamentals. Insert your own observations about the obvious here, but no joke.  This is not a joke.
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