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Thread: GM cost-cutting

  1. #1
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    GM cost-cutting

    GM is famous for the cost-cutting that made their cars so crappy in the 80's and 90's.

    What I was thinking today was that GM wasn't wrong in cost-cutting. Every business needs to do that.

    What they did wrong was cut costs in the wrong place -- in the product itself. From an accounting standpoint, it makes perfect sense -- building the vehicles are a variable cost, so in order to see a larger 'savings', you cut the costs there rather than in your fixed expenses.

    What they should have done is cut costs in the fixed portion -- the overhead of all those layers of management & bureaucracy. But there wasn't anyone at the top to enforce a dictate...

    Chip H.

    Former owner: 2012 Honda Civic LX, 2006 Honda Ridgeline RTL, 2000 Honda CR-V EX, 2003 MINI Cooper S, 1992 Honda Accord LX, 1999 Mercedes ML-320, 1995 VW Jetta GLX, 1991 Mercury Capri XR2, 1981 Mercury Zephyr, 1975 Chevrolet Impala

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    Re: GM cost-cutting

    It's hard to remove a lot of layers of management... after all, most management is dedicated to making itself indispensable.

    What is even more depressing is that there are uni grads in management who actually believe customer surveys and 'scientifically-proven' drivel. And if their Dad has 'connections'.... excuse me or I will launch into a tirade!

  3. #3
    Senior Member grouch's Avatar
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    Re: GM cost-cutting

    Quote Originally Posted by robmcg
    It's hard to remove a lot of layers of management... after all, most management is dedicated to making itself indispensable.

    What is even more depressing is that there are uni grads in management who actually believe customer surveys and 'scientifically-proven' drivel. And if their Dad has 'connections'.... excuse me or I will launch into a tirade!

    We have an engineer at work who went to college. I was rather mystified when he named the first gate you come to as "Gate 0", put a truck scake in without a drain or sump pump so it won't work in rainy weather, put a drain at the top of a rise in the pavement and recess it so that lift trucks got stuck every time and put a 4 inch pipe to drain a 40 acre field. Then it occured to me. He went to Ringling Brothers Clown College.

    I'm not very popular at work as I told him that, in front of the company division vice president. Fortunately, I'm very good at my job and have pulled their bottoms out of an expensive jam several times.
    Honk if you love Jesus.

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    Vulture of The Western World Eric's Avatar
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    Re: GM cost-cutting

    Quote Originally Posted by chiph
    GM is famous for the cost-cutting that made their cars so crappy in the 80's and 90's.

    What I was thinking today was that GM wasn't wrong in cost-cutting. Every business needs to do that.

    What they did wrong was cut costs in the wrong place -- in the product itself. From an accounting standpoint, it makes perfect sense -- building the vehicles are a variable cost, so in order to see a larger 'savings', you cut the costs there rather than in your fixed expenses.

    What they should have done is cut costs in the fixed portion -- the overhead of all those layers of management & bureaucracy. But there wasn't anyone at the top to enforce a dictate...

    Chip H.
    In GM's defense,part of the problem they're dealing with is legal/contractual - and very hard to do much about. I'm speaking specifically of the commitments/obligations to the dealer network, which makes it very difficult for GM to do some much-needed pruning of its brand structure (for openers).It is crazy to have 6-7 full-line divisions (each with 6-8 separate models or more) when you have 25 percent of the market.....

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    Senior Member misterdecibel's Avatar
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    Re: GM cost-cutting

    Then how'd they manage to axe Oldsmobile?

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    Vulture of The Western World Eric's Avatar
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    Re: GM cost-cutting

    Quote Originally Posted by misterdecibel
    Then how'd they manage to axe Oldsmobile?
    It was no easy thing; and they had to buy out a bunch of dealers - huge bucks involved there. But it was a little easier with Olds because that division really had slipped into obvious irrelevance. Buick and Pontiac still sell some cars - though arguably, there's not much reason anymore for these badge-engineered divisions, either.

  7. #7
    Senior Member misterdecibel's Avatar
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    Re: GM cost-cutting

    Consolodate Buick/Pontiac into a single division. I bet a majority of their dealers already sell both brands anyway.

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    Re: GM cost-cutting

    Quote Originally Posted by Eric
    Quote Originally Posted by misterdecibel
    Then how'd they manage to axe Oldsmobile?
    It was no easy thing; and they had to buy out a bunch of dealers - huge bucks involved there. But it was a little easier with Olds because that division really had slipped into obvious irrelevance. Buick and Pontiac still sell some cars - though arguably, there's not much reason anymore for these badge-engineered divisions, either.
    The solution is combine BPC and call it the X car.

  9. #9
    Vulture of The Western World Eric's Avatar
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    Re: GM cost-cutting

    Quote Originally Posted by misterdecibel
    Consolodate Buick/Pontiac into a single division. I bet a majority of their dealers already sell both brands anyway.
    But what would the resultant entity be called? Which models would be cashiered?

    If I were in charge, I'd shuffle the entire structure of GM. There should be three divisions - at most.

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    Re: GM cost-cutting

    GM looks a bit like the British motor industry did in the 1960s.

    Austin, Morris, Wolseley, Riley, MG, ... where are they now?

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    Re: GM cost-cutting

    That's a pretty good comparison, Rob.

    Hopefully, when GM 'rationalizes' their production, they don't end up with being another BMC.

    Chip H.

    Former owner: 2012 Honda Civic LX, 2006 Honda Ridgeline RTL, 2000 Honda CR-V EX, 2003 MINI Cooper S, 1992 Honda Accord LX, 1999 Mercedes ML-320, 1995 VW Jetta GLX, 1991 Mercury Capri XR2, 1981 Mercury Zephyr, 1975 Chevrolet Impala

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    Re: GM cost-cutting

    GM may not be around long enough to rationalize much of anything. A share of stock has lost some 68% in value in the past year.

    http://www.bloomberg.com/apps/quote?ticker=GM:US

  13. #13
    Senior Member misterdecibel's Avatar
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    Re: GM cost-cutting

    Quote Originally Posted by Eric

    But what would the resultant entity be called? Which models would be cashiered?

    Buick/Pontiac. They'd have some cars with Buick nameplates and some with Pontiac badges, depending on market position. Pontiac for performance and entry-level models, Buick for bigger sedans and people haulers.

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    Re: GM cost-cutting

    Quote Originally Posted by chiph

    Hopefully, when GM 'rationalizes' their production, they don't end up with being another BMC.
    Actually my 2001 LS1 (70k miles) is showing less durability than my 1957 Jaguar did. Piston-slap, serpentine belt, now the valve lifters are very noisy on startup and for about a mile... in spite of excellent modern SJ oil and regular servicing and ordinary driving...

    Mind you, they make Jaguars in India now don't they? I think I'll stick with the 1950s British tech stuff. Rose-tinted glasses and all.

  15. #15
    Senior Member misterdecibel's Avatar
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    Re: GM cost-cutting

    Quote Originally Posted by robmcg


    Mind you, they make Jaguars in India now don't they? I think I'll stick with the 1950s British tech stuff. Rose-tinted glasses and all.
    The CFO may be in India, but I don't think they're moving the factories or engineering facilities.

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