Tuesday, September 27, 2011

General Motors – Industry Leader?

Regardless of various company officials and politicians assurances that General Motors Company’s rescue is a success, several facts cast a cloud over its viability:
● Its products are not cost competitive.
Hourly union labor costs are too high at approximately $58 per hour. Its USA based Asian competitors have lower labor costs. Two are at $40 per hour – a significant 31% difference.

In this recessionary economic climate the recent union contract settlement seems to be a continuation of GM’s past practices of agreeing to a high cost settlement. Did it increase GM’s labor costs?

High labor costs have been and continue to be GM’s Achilles’ heel and needed to be corrected during its bankruptcy process.
● The Chevrolet Volt does not appear to be a viable product. High price at $40,000. Limited performance and cost disadvantage. Not competitive versus alternatives.
● Its Chief Executive Officer does not have in-depth experience in a manufacturing company – his experience is largely in service companies. This is a negative. In comparison, Ford Motor Company’s CEO has the in-depth background and experience operating inside a manufacturing company that bodes well for Ford’s success.
Mr. Jack Welch is an example of a highly successful chief executive officer of a manufacturing company. He started at a relatively low, entry level position at General Electric Company. As he progressed upward, he gained knowledge of all the functions in manufacturing which gave him the experience and instincts to develop GE into a successful company.
Can GM return to its leadership position with a number one USA market share in the next several years? With its high labor costs and questionable product line-up it is doubtful that GM can be successful competing with lower cost, well-run Asian competitors.

The New York Times, September 2011