Car Guys vs. Bean Counters - Bob Lutz [81]
As if anyone could have foreseen an artificial and, as it turned out, temporary doubling of fuel prices. Lost in the maelstrom of exaggerated praise for Toyota, now elevated to the position of World’s Smartest Car Company, was the fact that they had just spent a staggering $1.3 billion on an all-new super-big family of full-size pickups and equally monstrous SUVs, the Toyota Tundra and its eight-passenger sibling, the Sequoia SUV, as well as the sprawling Texas assembly plant to produce them. The volume target was an initial 300,000 per year; the plant, when I last checked, was operating at less than half that number.
So, GM was officially stupid for having 50 percent of the most profitable segment of the market, the one that was in heaviest demand by customers, the one almost every other producer (including Mercedes-Benz) was eagerly trying to penetrate. Nobody ever “forces” the U.S. public to buy anything: at two dollars a gallon, these were the vehicles that sold, whether the leftist, elitist media or the proponents of global warming liked it or not. Imagine, therefore, the collective glee when that market collapsed, essentially leaving GM with its pants around its ankles.
Pundit upon pundit crucified GM for its “shortsightedness,” arguing that it would have been prudent to hedge the bet by also producing some small, fuel-efficient vehicles. Somehow, these simplistic scribes and TV superbrains forgot that GM offered the Malibu with a class-leading 32 mpg, a compact Cobalt at 37 mpg highway, an even smaller, more frugal Chevrolet Aveo, not to mention the Chevrolet HHR small crossover.All of these actually sold well during the gas price shock, but the profitability was low, and the loss of SUV and pickup sales could not be compensated for by the small end of GM’s lineup.
By fall 2008, it was obvious that we were going to run out of cash, as was Chrysler and, as they themselves thought at the time, Ford. Clearly, the U.S. auto industry was going to need additional loans to get through the crisis, but after numerous initiatives which proved to be false starts, we had to conclude that the U.S. banking sector, in turmoil after the subprime meltdown, was in no mood to lend billions to car companies. Even if they had viewed it favorably, they didn’t have the cash to spare.
And so the U.S. government was approached, and at the worst possible time. The Bush administration was a lame duck, on the way out and awaiting President Obama’s inauguration.They were most reluctant to engineer an auto industry bailout and, probably wisely, considered it the job of the next administration.
In mid-November, the nation witnessed the infamous congressional automotive hearings, during which the three domestic CEOs, Alan Mulally of Ford, Bob Nardelli of Chrysler, and Rick Wagoner of GM, were publicly humiliated by a series of grandstanding elected congressmen and senators who, clearly, were not out to help the domestic auto industry but instead displayed truly epic levels of ignorance and holier-than-thou arrogance. Accusation after groundless accusation rained down on the three CEOs, who sat silently, staring at the floor or their shoes like guilty schoolboys receiving a dressing down from a stern teacher. Not a single outrageous statement was even slightly challenged. I couldn’t believe my eyes and ears; it occurred to me that if abject portrayal of silent guilt was the order of the day, it was a good thing I hadn’t been invited to go along.
Later, when I told Rick Wagoner that I was dumbfounded over the failure of the CEOs to intervene politely and insert some reality into the congressional diatribe, he informed me that highpriced PR consulting help had urged the CEOs to sit through it, don’t talk back, don’t be defensive.The congressional public flogging and grandstanding by a bunch of politicians who knew little