U.S. Car Makers Are Doomed to Fail Again

Back in 2006 and 2 years before the global economy downturn became in full effect, our international business management professor brought the topic of American car makers in one of our classes. Having lived many years in the States he was well informed about that topic and their ordeals with the Union of Auto Workers (UAW) specially GM; regardless of the crisis, he was confident it was only a matter of time before they all filed for bankruptcy. Sure enough when the winds went south in 2008 GM and Chrysler were among the very first companies to jump into Uncle Sam’s lap for comfort and security.

The answer to why Leman Brothers and its 160,000 + workforce were allowed to fail and the carmakers were not will always remain a secret, but what’s done has been done and now 5 years after the drama the same 2 companies don’t seem at a much better position than they were in 2008. Both are still struggling, both have failed to produce appealing and sustainable products, both have failed to create the promised and desired turnaround and most importantly both have failed to increase their global market share.

GM has still not been able to produce a car that would turn heads, they still have not been able to implement an effective operation their only way to cut costs is still the same way that  got them bankrupt in the first place. GM does not have any efficient operation, their strategy is to do bulk purchases in order to cut costs and for many years they unified the design centers for all their brands so this is why the GMC envoy and the Chevrolet Trailblazer are just like twins and this is why Saab lost its uniqueness and why Opel, Vauxhall and Saturn before it died were just exact cars and also not to forget to mention that Holden is Australia’s Chevy. To be fair, they tried to ride on the green energy technology wave by investing heavily in the Chevy Vault but again it was another failure and it failed to compete with its much smaller and more efficient rival the Nissan Leaf. Last month, they had to cut more than $6,000 of its price in order to push sales but still they were not able to come close to the leaf in the USA.

As for the Chrysler, well it is like the betrayed wife or girlfriend (or husband for those who might label me as a sexist chauvinist). For the last decade or so, the company has been switching hands from one owner to another. At first it was Daimler; and although the German company presumably lost 20 billion dollars at the end of the merger, they benefitted from Chrysler’s dealers network to increase the exposure and access of Mercedes Benz cars in the US market at a first stage and then in building their own factories at a later stage. Then it fell under Uncle Sam’s and the UAW mercy and recently Fiat’s Marcchioni purchased a big stake in the troubled carmaker in his bold attempt to make Fiat Group the 5th largest global automaker. Problem is, it is obvious that Marcchioni has the same interests that Daimler had. Soon after the purchase, FIAT or “Fix It Again Tony” as elderly Americans might recall introduced its flagship car the FIAT 500 again in the American market with hopes to capture a big market share in the fuel economical cars section. Whether the strategy worked or not is of little importance; what matters here is that after all this time, Chrysler has failed to produce fuel economical cars or any car that is appealing for the mass markets and FIAT has failed to market Chrysler to the rest of the world except for Jeep which was already the best selling line at Chrysler. Recently Chrysler found itself in the middle of a heated and renewed debate between FIAT that is pushing to increase its stake in the company and the UAW that is pushing for an IPO. The reason is simple and it is this: there is more than $10 billion of liquid cash sitting in Chrysler’s vaults which FIAT wants to use in helping out in its troubled European Units while the UAW wants it to pay for its pension plans. Again there’s nothing for Chrysler in it.

Ford seems to be somewhat of an exception, for years they have had some good products like the F150 truck, the once upon a time most selling Ford Taurus and their legendary Mustang and they were the only ones not to take bailout money from the US government. But they were not as successful globally; over the years they owned Volvo, Jaguar, Range Rove, and Aston Martin not to mention a majority share in Mazda yet they failed in transforming any of these companies to profitable ones. Ford has a big lineup of hybrid cars but they don’t have a star product like the Prius for example. They are also betting on the Focus to win the hearts of European and Asian consumers and while the car has had good results, it is not price competitive with cars of the same size nor it is enough for Ford’s global expansion.

 Nissan is leading the world in electric cars; Mercedes Benz is the Guru of Fuel cell technology, BMW is building factories around its microfiber plans, European car makers are increasing their fleets of small and economical cars even Tesla Motors which has not posted any profits yet has a higher market cap than Detroit’s big 3 because of its unique technology (Elon Musk’s weirdness might also have something to do with that). 10 years ago, if you owned a Kia or a Hyundai you’d park it a few blocks away because you didn’t want anyone to see you in it, now they are the number 1 selling cars in most countries. As for American carmakers well they are still competing about who is producing the most selling truck, only in America………….


3 thoughts on “U.S. Car Makers Are Doomed to Fail Again

  1. Granted. Jeez, I miss my ’68 Rambler. Yep, we’re in another ‘bubble,’ stock market’s getting ridiculous, but, I believe/hope Barack and company’s caught the greed/panic in time. Soon I gotta fire up my ’05 Suzuki. Only got 40,000 miles on it, running fine. Peace out.


  2. Vá em frente Marry forma, todos os diretores que já estudaram ou viveram em os EUA, conhecer a história da GM, mas se Deus o colocou lá, ele sabe disso, mas vá em frente tudo o que se opõem é o novo CEO e sua visão deve ser difente Erick Rodriguez Guatemala, na América Central


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