Designing and building a quality product costs resources. You can’t afford to expend your resources on design and quality if you’re spending so much of them on salaries and benefits.
Not directly, but indirectly.
The Big 3 had a hard time trying to compete with the Japanese on price & quality, because of union control. So they had to focus on larger vehicles and SUVs because there was less foreign competition in this area. Once these vehicles fell out of favor, they were doomed. Had they not moved aggressively into the SUV area, they would have been doomed even sooner.
Why would the unions fight against a higher quality product. That makes no sense. Most workers are pissed off when a product is going downhill. Most auto workers were bitching because the big 3 didn’t plan on the cars of the future while SUvs were making tons of money.
Even a lame program like the TV show where bosses go undercover, show that workers are invested in the company regardless of how little they make. They are trying to do a good job. There is no payoff doing poor workmanship. Union workers are pretty proud of the work they do. Most of them could tell you what is going wrong in the process, but in America we dismiss their input because they don’t have the prerequisite education to allow it. In Japan they respect the workers input far more than we do. They empower workers. KAIZEN - The Japanese Strategy for Continuous Improvement (Your first-ever Business e-Coach) Kaisen
Management was just plain dumb at times. A glance at auto history of the last several decades shows dozen of very high profile and expensive mistakes. Not recognizing the threat of foreign car makers sooner, producing some spectacularly shitty cars, very slow to learn any lessons from more efficient companies, a total disconnect from what their customers wanted at times, some of the dumbest PR moves I’ve ever seen (private jets to ask Congress for money being a recent example), etc. No doubt about it, GM and the others deserve to be bankrupt for how incompetent some of it’s leaders were.
However the union is to blame also. Once management finally wised up that their business practices needed to be overhauled, the unions fought them every step of the way. They kept the cost of labor significantly higher than other car makers. They did everything they could to block efficiency upgrades since more efficient means less employees needed. They refused to take cuts in pay or benefits even when it was pretty vital to keeping the company alive. Unions pushed for long term benefits such as pensions and health care that just are not economically viable for a company to provide when their competition does not. In general, the UAW viewed management as an enemy to be destroyed instead of as a partner they had to co-operate with to ensure the company and it’s employees were successful.
Which of the two is more to blame for the problems is open to debate. However, it’s pretty clear that both management and the UAW each have a large part in the bankruptcies. I’m cold hearted enough that I tend to think they shouldn’t have been bailed out. It’s not like the workers who would lose their jobs were blameless or that those were high skilled jobs that deserved the high pay/benefits provided.
The question is whether they spent less money on design. I said they did, because they had less money available for this purpose, having such high labor costs. You seem to be saying that they spent the same resources on design as the Japanese, but were just stupider.
Neither of us has produced any actual evidence, but for some reason you seem to think this is only a flaw in my argument.
All else being equal, the unions would have been much happier if the Big 3 could have put out a higher quality product. Of course. But all else is not equal. There’s a tradeoff between money spent on quality and money spent on workers. And faced with this choice, the unions would much prefer workers. Makes a lot of sense.
I would quibble that the US companies produce a much broader and diversified product line than the Japanese did, and their R&D per vehicle - and product line - was probably a lot lower.
[Also, my vague recollection is that the US companies ramped up their R&D once the sky started falling, but I could be wrong.]
Not so. The US automakers market a more diverse product line in the US than the Japanese did/do, but not globally.
If anything, the opposite is true; the Japanese even now design and build entire classes of passenger vehicles which the Big Three don’t bother with. The most obvious is the K-car, but there are others.
The early Japanese cars of the 70’s were nothing but rusty tin cans with tiny motors. The smallest motor Oldsmobile made was a 5.7 Liter V8.
Japanese companies spent less on wages and did not have a retirement legacy pointed at them like a 16 gun from the deck of the Missouri. When the oil embargo hit the US the core of the automobile market was based on “family sized” cars that seated 6 passengers. Economy cars like the Ford Pinto were using European engines and cars like the Maverick were using straight 6 engines right out of the 50’s. All the engine development was in the V8 and all of that was focused on power.
The other advantage Japanese companies had was a more modern infrastructure owing to war destruction. What started out as a huge advantage for the United States (no loss of facilities) turned into an anchor. Money that should have been reinvested was spent on wages and retirement packages.
And that leaves us with bad legacy cars such as the Chevy Vega, Pontiac Fiero, and Oldsmobile diesel, which were huge engineering failures. Add in the Quad 4 engine which was actually advertised separately in magazines for it’s technological achievement.
By the 1980’s the individual cars of GM had ceased completely. The individual engines of the various brands were gone. The company was nothing but a re-badging extravaganza which produced such cars as the Cadillac Cimarron and Oldsmobile Omega.
There’s a very good BusinessWeek article about GM’s predicament as of 2005, written in 2005. Worth reading for anyone interested in this topic. (Among other things, they say that GM’s R&D was spread too thinly, as I wrote above. But a good article in general.)
Isn’t Ford unionized, too? If the UAW were the death of GM, why didn’t they drag Ford down, too? It seems to me that a significant chunk of the blame has to fall on something GM did differently than Ford, and they both have the UAW to deal with, so that can’t be the only (or probably not even dominant) factor.
From what I’ve read that’s already gone, on both sides. The companies that prospered from ultra-hard working workers who were relying on that “cradle-to-grave social contract” went ahead and fired large numbers of those workers despite their promises. And as a result large numbers of the upcoming generation have little interest in working any harder than they need to keep fed. Or they just stay home and live off their parents. An interesting article about it.
The interesting difference between America and Japan is that no matter how badly American workers are abused and exploited, most don’t seem to care.
Ford barely made it, and is not out of the woods yet either. The same paradigm that faced GM faced Ford (& Chrysler). No two companies are exactly the same, and if you take any three companies in the same industry one will be the strongest of the three. But it’s not as if there’s this huge difference between Ford and the others.
To the contrary, your argument proves the opposite of what you suggested. The fact that all three companies in the industry ended up in the same straits implies that it was some common factor that faced all three, not that each individually happened to be run by morons.
Perhaps. But the authors of that article felt that GM salary/benefit costs robbed them of the ability to be competitive on R&D and produce quality cars.
I think Hello Again’s point is key here. The Japanese eliminated a major advantage for the US automakers by building their own US factories, and thus saving themselves the cost of shipping completed vehicles halfway around the world.
This brings us back to why American automakers didn’t do the same thing - and the answer is because they didn’t build cars that could compete in the global market. That’s not a failing of research and development; that’s a failing of corporate planning. One of the reasons Ford isn’t in such dire straits is because it started building cars that people outside the Americas wanted to buy, and selling them here too.
