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Is GM's Biggest Problem Too Much Emphasis on Profit?

Is GM's Biggest Problem Too Much Emphasis on Profit?

By Colin Mathews's avatar Colin MathewsColin Mathews December 17th, 2008

creative commons - flickr.com: http://www.flickr.com/photos/mattdesmond/2180250029/

creative commons - flickr.com: http://www.flickr.com/photos/mattdesmond/2180250029/

Enlarge Photo

Were you aware that GM started development on the minivan a decade before Chrysler introduced that concept to the marketplace in the 1980s? Or that GM had invested considerable money into research and development of hybrid vehicles in the 1970s? The company also stopped development of a rotary engine it was to sell to AMC for use in the Pacer; the lightweight engine would have lent the porky Pacer the low curb weight it needed for good efficiency. And you all know the story about the GM's all-electric vehicle, the EV1, destroyed in front of distraught owners before the vehicle even had a chance in the market.

Even former GM CEO Robert Stempel (who green-lighted the EV1 program) admits to being furious about GM's failure to continue hybrid vehicle development in the 70s. He said in a 2003 interview: "G.M. had the technology. The lead was there. I know it."

The New York Times' Autos section recently wrote a comprehensive look at GM's decades of too-little, too-late mentality when it comes to product innovation. The Times feels this has led them to the door of their current economic crisis. Says the Times: "G.M.'s biggest failing, reflected in a clear pattern over recent decades, has been its inability to strike a balance between those inside the company who pushed for innovation ahead of the curve, and the finance executives who worried more about returns on investment." The paper cites industry analyst John Casesa of the Casesa Shapiro Group, who feels that GM has been impatient for a return on its investment with experimental technology due to the fact that a disproportionate number of its highest-ranking executives have been financial experts, not engineers. That helps to explain why the company aborted so many promising technologies such as hybrids, minivans, electric vehicles, and even let the entire Saturn division flounder without further nurturing after a promising start.

GM has made it to the impressive age of 100 years old, having lived through a host of decisions and products both brilliant and abysmal. Will reorganization, elimination of unneeded brands and vehicles, and governmental mandates for efficient vehicles finally balance the overzealous beancounters who've had too strong a voice in the company for far too long?--Colin Mathews
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Make sure you check out our partner sites dedicated to focused news, reviews and more for Ford, Chevrolet, Toyota, Honda, and the Toyota Prius. creative commons - flickr.com: http://www.flickr.com/photos/mattdesmond/2180250029/Enlarge PhotoWere you aware that GM started development on the minivan a decade before Chrysler introduced that concept to the marketplace in the 1980s? Or that GM had invested considerable money into research and development of hybrid vehicles in the 1970s? The company also stopped development of a rotary engine it was to sell to AMC for use in the Pacer; the lightweight engine would have lent the porky Pacer the low curb weight it needed for good efficiency. And you all know the story about the GM's all-electric vehicle, the EV1, destroyed in front of distraught owners before the vehicle even had a chance in the market. Even former GM CEO Robert Stempel (who green-lighted the EV1 program) admits to being furious about GM's failure to continue hybrid vehicle development in the 70s. He said in a 2003 interview: "G.M. had the technology. The lead was there. I know it." The New York Times' Autos section recently wrote a comprehensive look at GM's decades of too-little, too-late mentality when it comes to product innovation. The Times feels this has led them to the door of their current economic crisis. Says the Times: "G.M.'s biggest failing, reflected in a clear pattern over recent decades, has been its inability to strike a balance between those inside the company who pushed for innovation ahead of the curve, and the finance executives who worried more about returns on investment." The paper cites industry analyst John Casesa of the Casesa Shapiro Group, who feels that GM has been impatient for a return on its investment with experimental technology due to the fact that a disproportionate number of its highest-ranking executives have been financial experts, not engineers. That helps to explain why the company aborted so many promising technologies such as hybrids, minivans, electric vehicles, and even let the entire Saturn division flounder without further nurturing after a promising start. GM has made it to the impressive age of 100 years old, having lived through a host of decisions and products both brilliant and abysmal. Will reorganization, elimination of unneeded brands and vehicles, and governmental mandates for efficient vehicles finally balance the overzealous beancounters who've had too strong a voice in the company for far too long?--Colin Mathews --- Make sure you check out our partner sites dedicated to focused news, reviews and more for Ford, Chevrolet, Toyota, Honda, and the Toyota Prius.

Tags: North America, Technology, Industry, Electric Cars, Politics, General Motors, Car Publications

Posted in: 2008, Hybrid, Green



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Responses (5 total)

  1. By Reece #1, Posted: 12/17/2008

    The Accountants Killed the US Automakers!
    its true, more so than not investing in technology was the penny pinching in so many areas. Ford Mustang, yeah would be much better drive with fully independent rear suspension but lets keep the old set up with a few tweeks and save a couple of bucks. interiors? So what if people spend more time int he car than looking at it, lets have crap interiors with cheap parts! Anyone seen the interior of a Jeep or Dodge lately? Egad! Badge engineering, lets build the same car for everyone and just change the badge! Cadillac Cimarron anyone! All these are examples of cutting costs. The best car companies are run by engineers or those with engineering backgrounds. they udnerstand the fundementals of the industry. US car makers are run by a cabal of accountants, union reps and marketing twits.

  2. By R2dad #2, Posted: 12/17/2008

    I would wager that all three of the Diminished Three have this issue, hence the "Car-guy" vs "bean-counter" arguments that have raged for as long as I can remember. Random case in point: Ford Fiesta, 1976-1983. Fun to drive, economical. In 1984 they replace it with the Escort (WTF? does it come with a co-ed?) Now I understand how Dilbert was created. Somehow, the pointy haired boss convinces the engineers this is a good idea. This is a bad idea for 3 strategic reasons, to which upper management is oblivious. 1) Existing Fiesta customers, looking for another, learn their car is obsolete, which means it must not have been very good in the first place. Ford, which must have hired all their marketers from soap companies, has no clue that killing models hurts the brand. After all, model value and equity must be zero, because it doesn't show up in my NPV calculation so it must not be important. 2) The "replacement" which is actually worse than the Fiesta, convinces customers that Ford is going downhill. They start looking at competitors: Hondas (which they've read are reliable but ugly--some things never change), and VWs (Rabbit? that sounds soft and cuddly, which I like, because I'm a complete buffoon and wouldn't buy a car called a Golf), chevy caviliers (maybe not--expensive and ugly), and the Datsun 210 (Nissan, paranoid we still remember their WWII airplanes, builds a brand from scratch). 3) If for some odd reason the car buyer had some allegiance to Ford and bought the Escort (without the co-ed, damn), the piss-poor reliability and dealer maintenance bills put a stop to that. Not that Ford cared; just as with the ever-so-robust Ranger, keeping your dealers happy with lots of maintenance work (the short-term fix) was more important than keeping your customers happy with vehicles that didn't need lots of maintenance (the long term solution).

  3. By Allan #3, Posted: 12/17/2008

    Why follow when you can lead? It is amazing how the US Corporation pays too much attention to the short term bottom line (like those whose only edge is to make things cheaper) that it forsakes its leadership role to innovate.

  4. By Elroy #4, Posted: 12/17/2008

    I would beg to differ with Reece. There really aren't many marketing people in the Big 3 .... maybe sales people who now call themselves marketers but they really aren't.
    True marketers are also concerned with profitability and maximizing revenue and all those financial type things.
    In the Big 3, the beanies are there to balance the sales execs to whom market share at any cost is more important than profitability.
    Pricing is one of the 4 P's of Marketing (read intro to Marekting). In the Big 3, is pricing a Financial responsibiility or a Marketing responsibility? (Financial.....otherwise the Marketing guys would never raise prices!!!)
    The Marketing guys rely more and more on expensive incentives....i.e., cutting the price. If you had a business, would you hire sales people who could only sell by having the lowest price?
    There is nothing wrong with some financial discipline to investment and product decisions.

  5. By Carl F Thelin #5, Posted: 12/20/2008

    Marty: You should have mentioned the Unibody, front wheel drive Citation-sized car that GM Engineering Staff had ready in early 1960. Instead, the bosses decided to develop my gross Toronado with FWD - but what was the advantage, other than having a premium car like the Riviera and Eldorado?

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