Car Troubles
For just the first quarter of the year, General Motors has reported a loss of $1.1 billion (with a b). I don't think the WaPost report is quite right to compare the company's woes to airline problems, since the economics of airlines are completely different from the economics of car making. But it's certainly true that GM is burdened by the legacy of life before intense competition.
In his column a week ago, the WSJ's Holman Jenkins mordantly explained why the company can't invest the bucks that might yield hot new cars:
GM's boss should be the media's darling, running his company to provide job security and health care for its workers first, second and third. Wonder why GM invests just enough in new product to keep the game going, not enough to make its cars really sought after? Because the extra capital that would have to be invested goes instead to doling out gold-plated health care -- no copays, no deductibles -- to workers and to plumping up their pension fund, which two years ago required the largest corporate debt offering in history to top off....
GM made an effort to imply that Zeta resources were being deployed to speed up redesigned pickup trucks and SUVs, which will begin to appear next year. This was smokescreen. Zeta was shelved to free up money in coming years to meet the pension and health-care obligations to workers -- money that manifestly won't be coming from sales of G6s, Cobalts and LaCrosses, the new models that GM had nursed high hopes for.
All these cars are decent or even better than decent by every standard except the best of what GM's competitors have on offer -- such as riskier styling, meatier engines and more advanced transmissions (five- and six-speed automatics are state of the art today, whereas GM has tried to make it through another cycle with stale four-speed automatics).
Deep-sixing Zeta was GM's way of saying it will devote the rest of the decade to non-wow products. Risk taking, after all, is what you do when you're working for diversified shareholders, none of whom will go hungry if you swing for the fences and miss. It's not what you do when the primary goal is to sustain workers, retirees and their dependents in the accustomed manner until nature finally relieves you of the burden....
Mr. Wagoner has decided that GM will go the final laps in its race with the mortality tables without the possibility of any hits that Zeta might have spawned. This may be entirely rational, but the grim reaper had better hold up his end of the bargain. In the meantime, GM shareholders can expect the thrill ride to get only more, er, thrilling.
I'd say, "Read the whole thing," but you can only do that if you have a subscription.
Following my talk at this morning's conference, Grant McCracken--whose blog is almost as good as his books--gave a great talk about how the strange aesthetics of 1950s cars so effectively tapped into the aspirations of that era's culture, confounding the formulas of the famous Raymond Loewy, whose streamlined 1954 Studabaker was an embarrassing flop. The talk was drawn from a fascinating argument developed in Grant's new book, which due in a month or so