Another reason not to buy a GM car

by Russ Roberts on December 22, 2009

Starting Jan. 4, General Motors Co. plans to do something unprecedented in the U.S. car industry: It will run its assembly line here around the clock on a permanent basis.

While common in other industries, not even car-efficiency benchmark Toyota Motor Corp. operates its plants routinely with more than two shifts. Car-assembly lines need too much scheduled maintenance and restocking for such intensive production to make sense, many industry experts say.

Later in the article:

The Obama administration auto task force that oversaw GM’s reorganization last spring was startled to learn that the industry standard for plants to be considered at 100% capacity was two shifts working about 250 days a year. In recommending that the government invest about $50 billion in GM, the task force urged the company to strive toward operating at 120% capacity by traditional standards.

But industry manufacturing experts are skeptical, noting that the federal task force had limited automotive experience. “Do those guys understand the business?” asked Ron Harbour, whose Harbour Report is a widely followed analysis of auto-plant efficiency.

I think that was a rhetorical question. But don’t call it meddling, or being active. From a November news story:

U.S. President Barack Obama said today his administration did not want to meddle in the decisions of General Motors and said he was pleased GM may repay government loans sooner than expected.

Asked in a Fox News interview if he opposed the use of U.S. government bailout funds for an overseas operation such as GM’s European unit Opel, Obama said: “We are not going to meddle in GM’s decisions.”

“We are a shareholder but we are not an active shareholder,” he said while traveling in Asia.

“We have specifically said that we are not in the business of running a car company. We’re not getting involved in day-to-day management.”

I don’t think this is going to end well.

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The Wally

Just amazes me. GM is going under because they build a substandard product and then advertise it as quality. This only works for a while. It's not engineering, it's build materials and long term build quality. I persoanlly work on Gm cars. I see it daily, if there is a cheap way to build something' GM will do it. They care nothing for customers. We run a fleet of vehicles and no longer purchase any GM or Chrysler/Dodge products. Reliability and constant maintainence issues have no longer made these a feasible purchase. The dealers always have an excuse instead of a fix when there is a warranty issue. It's really simple, it is about trust in the product. People no longer trust the hype. Don't take my word for it. Just ask any GM mechanic.

Jack765

It's no hard for me to figure out you are full of baloney. Sure, the mechanics are stupid enough to tell consumers don't buy GM because they make them cheap with lousy quality. Any mechanics undercutting their jobs would be just plain dumb and I don't believe a word you saying. For your information, GM now makes some of the best vehicles out their. GO play with your rice burner!!

Jack765

The reason to not buy a GM car is not a good one. But, I can give you a good reason not to buy a Toyota. This reason is a valid one for sure.

http://www.autoblog.com/2009/12/24/toyota-cutti...

oldaxe

One shift can supply the demand, Two shifts will require drastic price cuts to sell.
A third shift comprised of the least experienced workers half asleep will be the lemon line. To move this many cars and trucks the price will be so low Ford will be down to one shift until GM folds their tent. http://nolimit-cell-matr.com

Jake

Did you mean http://nolimit-cell-mart.com ?

Daniel

Please have a look at http://iwontbuyfromgm.wordpress.com/

Daniel

please have look at http://iwontbuyfromgm.wordpress.com/

D. Kennedy

Dr. Roberts - I disagree with your thought: "I don’t think this is going to end well".

What ending could possibly be better than the failure of Government Motors and the United Awful Workers?

jack7665

It's obvious you don't llike GM. You must be a Toyota lover, to a company that can do no wrong. Why don't you pick on Toyota who's getting record recalls.

Get a life!!

sethstorm

Well, some people like to throw turbos on a golfcart and call it a car. These same people will accept something that started as a foreign design and ended with assembly instructions as an American built car.

The foreign makes from the East try as they might, but they can only try to flood the market with knockoffs or golfcarts. Or they buy First World makes like Jaguar, Rover, Hummer, and (soon) Volvo with the idea that they can hoodwink people into knockoffs.

JohnK and mark seem to have incredibly bad luck with cars. Perhaps they should try maintenance.

Mark

"The foreign makes from the East try as they might, but they can only try to flood the market with knockoffs"

These foreign makes are putting your crappy GM and Ford out of business, and I say good riddance!

john

That's because fools like you don't know the first thing about cars.

mark

You get a life, JACK! Don't try to get us to like a company that's produced junk for years and now is owned by the gubbment!

JohnK

My Toyota has spent less time in the shop in the last 16 years than anything I've owned from the Big Three, none of which I had for more than four years.

You can never convince me to purchase something from them again.

franklong

Maybe not, but if GM had sold Opel, it would have been the end of them as a serious player in the global car market.
Opel/Vauxhall are huge in Europe, with some very competitive models. If one subscribes to any of the theories about the growing scarcity of oil, global warming, continuous rising demand for oil from Asia or the forthcoming age of frugality, then the EU's car market is the one to watch. The fuel efficiency standards and levels of reliability are more exacting there than anywhere else in the world. While Asia may provide current growth, the technologies that perform on the European market now are likely to be the technologies of choice for the rest of the world (outside of the US) tomorrow.
The US car companies are failing because they are based in the US. They don't *get* the rest of the world. Bigger is not better in Europe and Asia. 30MPG is pathetic mileage in the rest of the world.

Without Opel, GM is a busted flush.

For the long term viability of GM in the USA, bailing out GM so that they could retain Opel was vital. Of course, living in Europe, I would have preferred to have seen Opel being bought by a European company. It would have strengthened Europe's car industry and helped keep any future profits (and thus tax revenues) on this side of the pond.

I assume that if the cash for clunkers subsidies end and the US government insist on 120% run times, then a number of GM factories in the US will have to close due to overproduction. Won't that, em, cost jobs? There may be trouble ahead.

sethstorm

That, and GM would have to go back to a non-Opel platform to build their First World(US) targeted Buick Regal.

Opel would have gone to some Third World country like Arcelor and Rover have.

Ray Gardner

This is what I do every day; production scheduling and capacity planning for a 24/7 manufacturing plant.

We have to build the downtime into our 24/7 schedule so it's 2 shifts (4 actually - A and B are the alternating day shifts, C and D nights). So when we say 100% capacity, we mean about 80% cap with the rest going to maintenance, changeovers, etc.

And our machinery is complex enough, but it's not likely to be anywhere near as complex as the type of machines found in an automotive plant.

Since the government is involved, I can imagine a Soviet type of solution to this. GM will just buy more machinery, and then alternate production on these various lines. They would have to hire about 40% more people - all highly skilled and relatively highly paid technicians. So there's job growth!

Then they'd essentially have 30 to 40% more capacity in terms of extra equipment, since they would have at least that much in a constant state of maintenance.

They'd still be able to report running at "full" capacity since all they would do is create a special category in their scheduling codes for the maintenance. It's just like shifty accounting - something I have to keep my own departments from doing to manipulate their internal numbers.

And the shareholders and taxpayers will never know, and the cars will still be crap, and they'll cost even more unless the government subsidizes the sticker price directly. (More equipment, more technicians, same amount of cars = higher prices.)

And yes, they're still crap. My 5 year old Silverado has more problems than my 15 year old Lexus. The radio quit working, little things are always coming loose in the interior, what does work is just clunky when compared to the imports I've had, etc.

chrisoleary

Does anyone else see the parallel?

The government didn't see why mortgage companies weren't writing subprime loans, so they compelled them to. Now the government doesn't see why GM isn't running its factories 24/7/365, so they are compelling them to.

Generally, when businesses don't do something, there's usually a pretty good reason (and that reason may not be obvious to some meddler).

Mark

Good point, Chris!

Justin P

"there's usually a pretty good reason"

You mean it's not just greed. Or my favorite trying to exploit the workers?

tomofthemissouri

The new GM assembly line: http://www.youtube.com/watch?v=4wp3m1vg06Q

Tom Nally

Or this one: http://www.youtube.com/watch?v=CYbsBcPDVQM&feat...

("Modern Times" starring Charlie Chaplin"

tomofthemissouri

My hat is off to you. I had forgotten about that one.

politicalcalcs

It's the illusion of efficiency. High rates of capacity utilization often mask problems with not being able to meet real demand (say in the case of Canadian health care and MRI utilization) or in this case, that resources are being used inefficiently, far below their real productive capacity.

Given the level of demand for GM vehicles, what this announced change means is that they're going to really slow down their production lines to spread the production out over more of the day. Look for more frequent line stoppages to accommodate maintenance and supply issues.

indianajim

Ironically fatal conceit never seems to die.

mark

Yeah, just look at muiranus and count danku.

tomofthemissouri

How does a plant operate at 120% of capacity? Do they run 28.4 hours per day? Is this a new form of government math?

Is this like health care bill deficit reduction?

hoyasmeg

"120% capacity by traditional standards [i.e., two shifts, 250 days]"

Running anymore more than that would be above capacity. Probably fine for short periods of extra demand; not something that is sustainable in the the long run.

David

That's going to be great for quality!

sethstorm

But it'll still be light-years beyond China, Mexico, Brazil, Russia, India, and the rest of the Third World - where quantity is Job One, and quality is inexistent.

David

I didn't say anything about the quality of GM compared to foreign competition (though it seems to be worse than the Asian and European imports...and Ford). I was only making the point that without adequate time for assembly line prep and maintenance, they're going to run a greater risk of quality control issues. China, Mexico, Brazil, Russia, India, and "the rest of the Third World" don't even compete in the US auto market, so I'm not sure why we should bother to compare with them.

Mark

Oh yeah, give us that good old Made in America!!! Everything made here is just top-notch, isn't it? We're just genetically superior to them foreigners, huh?

Tom Nally

If running the manufacturing plants for 24 hours would have a net positive impact on the bottom line, the successful car companies would already be doing it. After all, those who own the companies, the shareholders, don't care whether a business runs for 1 hour per day, 8 hours per day or 24 hours per day. They just want the maximum return on their investment.

If 24-hour-per-day operation was great for the bottom line, somebody would have figured it out already. That would have resulted in investors taking their money out of the less efficient companies, and directing it toward the more efficient companies. In turn, this would have motivated the less efficient companies to adopt the same production practices as the more efficient companies. The fact that we aren't seeing 24-hour-per-day operation suggests that it's not the key to efficiency.

Along with other commenters, I suspect that 24-hour-per-day operation will have an adverse effect on the bottom line. But I also suspect that this adverse effect will be hidden for as long as possible. When it finally comes to light, the adverse financial situation will be even more difficult to correct.

JohnK

It will have an adverse effect, but that does not matter. Intentions are all that matter. Unintended consequences are completely unrelated to the action that caused them. Completely unrelated. Those consequences mean that the original idea was not given enough teeth or money. No, even if that 24hpd operation causes catastrophic failure, it will not end. Because that would require someone in the government admitting to making a mistake. And that will never happen. Ever.

nmg

"I don’t think this is going to end well."

It's not going to end.

J Cortez

Wow.

Impressive.

You have to stand back in awe and just marvel at how completely wrong they've got this.

Have we learned nothing from past? Government mandated manufacturing always ends in either stagnation or complete failure.

I expect that quality and efficiency will fall, new designs will suffer, and then costs, plant accidents, and worker dissatisfaction will increase.

Until retiring, my father was a manufacturing plant personnel and safety manager for decades. I can't wait to tell him about this. I expect he will have very interesting, insightful, and completely negative things to say about this.

A Murricun

I'm waiting for the same thing to happen with Bob Lutz's area, product planning. Lutz has been the single most influential individual responsible for the recent product home runs. Somehow, I don't think he will take kindly to micromanagement. He's rich enough not to need the job, and has been known to be very direct in dealing with meddlers and other fools.

Ike Pigott

Won't the union complain about the ownership?

Justin P

Only until they remember that they are the owners.

Ike Pigott

A true Marx brother
would not let a punch line hang
dialectically.

Mommsen1625

I cannot wait until GM and Chrysler are liquidated.

Robert

GM will not be liquidated. It will eventually turn a profit if left alone by the govt. Chrysler is less certain. I'm not sure Fiat is the answer, but at least they will give it a try.

Methinks1776

"if left alone by the government" is the insurmountable obstacle, though.

Methinks1776

My only brush with the shining product of Detroit in the past 20 years has been rental cars. Rental fleets invariably consist of Detroit produced jalopies . The standards at American car companies are already rock bottom, I didn't think they could get any lower, but building shoddy cars on shoddy equipment will surely achieve that.

Edit: Clearly, nobody in this idiot's administration has either heard of or cares about diminishing marginal returns.

Is anyone concerned that improperly maintained equipment is a health hazard for auto workers? Hold on - here comes my now expected daily comparison to Soviet manufacturing. Plants were given production standards that made no sense - either run at X times capacity, or produce a certain minumum amount or weight or whatever. If workers died or the product was crap, who cares? Who are you going to sue?

I would say that we've learned nothing from such experiments in the past, but that's unfair. Politicians have learned that they can live very well at the expense of the population even as the

Robert

Your assumption regarding "rock bottom" standards at American car companies is blatantly untrue. Please stop speculating on things about which you have no knowledge, only opinions carried over from 20 years ago. Detroit's business model was its Achilles Heel, not its production standards. While they did lag Japan in quality for several years, there was a statistically insignificant difference with European models regarding defects per unit. Every automobile magazine and rating service has confirmed that the domestics have significantly narrowed the quality gap with Asian (Japanese) makers. Given a little more time and less meddling from Washington, GM and Ford will get there.

Randy

"Your assumption regarding "rock bottom" standards at American car companies is blatantly untrue..... opinions carried over from 20 years ago."

Perhaps, but not really important. I don't give poor quality a second chance. These companies would not have survived the 80's if the government hadn't given them a defacto bailout via "trade agreements".

Methinks1776

Robert, my unfavourable opinions are from three months ago. How can you call standards top notch when you admit they produce low quality crap? When you say "statistically insignificant difference with European models" you're not talking about Mercedes and BMW. You must be comparing them to crap like Citroen and Fix It Again Tony (Fiat) and the Lada!! Narrowed the gap with Japan? They are STILL underperforming Japan? I don't care whether it's the business model or production standards - and really, how could a poorly produced product really be all down to business model? - I only care what happens when I drive it.

If these problems are a result of government meddling and Detroit can compete if left alone, then mazeltov. I don't think Americans are genetically incapable of making great cars. But, I think you'll agree that whatever problems car makers currently have, government commissars forcing them to run at 120% isn't going to improve anything.

Mark

"While they did lag Japan in quality for several years"

Several YEARS? Try DECADES! GM can rot in the trash can for all the junk they've foisted on America over the past 30 years. I'm sad those fools didn't lose their shirts. You don't even drive GM or Ford. If American auto quality was a problem for 'just a few' years, then why don't you own one? Actions speak louder than words.

johndewey

It's amazing to realize that, now in power, the Collectivist Left in the U.S. is oursuing exactly the same methods which failed in the Soviet Union. Amazing!

Methinks1776

I'm not surprised at all by the American left. I grew up around a university crowd, after all. They never for one second gave up the dream, no matter how much reality slapped them in the face, no matter what indignities of socialist life were revealed to them after the fall of the Soviet system.

What I am a little amazed by is the number of times over the past year I've been able to draw parallels between the Soviet Union and the United States. That has never happened before and it scares me.

mark

"I am a little amazed by is the number of times over the past year I've been able to draw parallels between the Soviet Union and the United States. That has never happened before and it scares me."

Why would having muiranus and count danku running things scare you?

Randy

I drive rental most of the time during the summer, and I always take the Hyundai if available. Great car. With XM.

sethstorm

The bailouts and interventions did not affect my car purchasing decisions; I just bought what I wanted.

GM just happens to make very solid cars from the mid-sized and larger models. Environmental activism and shoddy Chinese parts are what's killing them. Forcing a large-car company to build smaller cars (and larger ones with lower quality parts) only makes them worse for the effort.

I just hope that my Aurora isn't the most American car in my lifetime, since I'm not about to go buy a golf cart from a transplant brand. I will carefully look through to see that I'm not getting a Chinese engine block (a la Equinox), a Mexican built car, a European rebrand(Opel Regal, Saturn Astra), or a Korean captured import(Aveo).

Methinks1776

How big? I've driven a giant (size of an Escalade - maybe bigger) SUV on a ski vacation once. That seemed okay to me. But the large sedans were like slow moving, uncomfortable yachts. The mid-size was total, uncomfortable shite - and yet, still had no pick-up. I used to drive a 1970 Chevy Impala and a 1972 Cadillac Sedan DeVille and they were BETTER cars than the crap today, IMO. On the other hand, my Lexus SUV is smooth, responsive, comfortable - as easy to drive as a small car and so much easier to drive than a smaller American car. You asked for it, you got it. Toyota!

sethstorm

The Aurora's about as big as a Seville (same platform, nonetheless). While it's not meant to be floored, it does have a good engine note and pull to it.

Yes, I've driven foreign cars as well as pure(as possible given foreign part content) domestics.

I had one of the 2wd 4runner's as a rental - and while it did the job quite well - I kept on noticing a trend with it. It looked and felt like it was trying to be American but couldn't go the complete way with it.

With the Hyundai cars, I just wonder what car they're trying to be. If I want a Town & Country, I don't get a Sedona. If I wanted a Subaru sedan or Honda Civic, I don't go with a Forte. If I wanted a Lexus, I'd not go with their Equus. So be it if you want the copy, but I'll stick with the original.

As for domestics:
The Chrysler 300's one of those "unresponsive land yachts" in fleet form. The body appears to be a cross between a bad import and a cheapened domestic, with the Chrysler trim. If there's any redeeming quality to it, it would have to be with a larger engine, and better steering/suspension than what I had in it.

Ford is about par with GM, except a bit more spartan about the interior. If the car looks like it should cost more(read: 6 cylinder engines in a 4 cylinder price level), that's usually my red flag that it's a foreign built domestic (see Fusion).

Why I don't care that GM's being bailed out/gov't owned:
I just don't want it to be impossible to afford a domestic that was assembled, built, and designed in this nation(from beginning to end, and not in the Transplant style). Does the end goal have to be that we price out buying our own goods, but we can buy everyone else's?

Mark

So you just want a car that's made in the USA? What's the point? How strange. Would you be even prouder if it was made in your state? What about your county? What if you got a job on the assembly line and turned a couple screws yourself? Would that give you a patriotic thrill?

sethstorm

I'll settle for a US-built car that follows the general idea of providing a large amount of power for the dollar. No import/transplant brand outside of Germany has come close(and they only have the fault of being more expensive).

I just ask one thing to be made financially viable:

Tell the environmentalists to get out of the design studio and design the car in their absence.

Then let GM / Ford / Chrysler make mid-sized and larger cars and trucks. It is where they have some comparative advantage. Let the transplants handle the manufacture and sale of turbocharged golfcarts.

mark

"hen let GM / Ford / Chrysler make mid-sized and larger cars and trucks. It is where they have some comparative advantage. Let the transplants handle the manufacture and sale of turbocharged golfcarts."

Oh right. Like the Toyota Tundra won't grind Chevy and Ford into the ground. Ha! Just give Toyota some time. They'll destroy Government Motors and Fart in the larger vehicle segment as well.

dan747

You must be a dumb idiot who wished this country to fold. I would not say that if it were not for the fact "American cars are now better than the foreign cars. Check it out with an open mind and you'll see I'm right.

Methinks1776

Seth, if we can't build a competitive product, then we should stop. People in the United States are so good at so many other things and have access to resources that other people around the world don't have. Why are some people so determined to under use our labour force and capital to compete with poorer nations in old fashioned products?

Robert

What are you talking about? Both Consumer Reports and J. D. Power rate the Ford Fusion equal to Honda and Toyota for overall quality. The company I work for has a fleet of Fusion's (all V-6), and they drive very nicely. I currently own a 2004 Nissan Maxima and my wife drives a 2003 Toyota 4-Runner. Both are pretty nice, but we're considering the Lincoln MKZ and Cadillac SRX, respectively, as replacements. Don't think for a minute that domestics can't compete. Oh, and Seth, that 4Runner you drove was built in Kentucky with parts made all over the world. The Japanese (and Germans, and Koreans, and...) use the same processes and parts sources as Detroit does. Assuming the knuckleheads in the administration get out of the way, Ford and GM can succeed.

sethstorm

Oh, and Seth, that 4Runner you drove was built in Kentucky with parts made all over the world.

That's why I make the distinction between transplants like Toyota/Honda/Subaru/Kia-Hyundai/etc. and actual domestics such as Ford/General Motors/Chrysler.

I know that Detroit can make competitive cars.

You also need to get the UAW thugs out of the way.

You're going to need a bigger force if you're going to outdo PATCO in that regard. That, and the folks who wish to step in to run the companies will be apt to just making golfcarts with Detroit labels.

mark

"I know that Detroit can make competitive cars"

Keep the faith! Maybe someday magic will happen.

Mark

"Assuming the knuckleheads in the administration get out of the way, Ford and GM can succeed."

Umm, big ASSumption, don't you think? You also need to get the UAW thugs out of the way.

Go ahead, get an American car, and call us from the side of the road and tell us how great it is. I'll conference in JD power.

Jack765

I've sat along side of the road with my GM cars, but I have with a Toyota and a Nissan. Could it be because both are from the overrated Japanese cars?