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JohnT
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Capitalist
Mar 1999
time: 00:24
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quote:
Originally posted by Ned
Now, why has GM failed to automate? |
GM's goal in the early 1980's was to "automate away from these ***holes", the ***holes being UAW workers. Their efforts to do so remain legendary in business history as possibly the worst example, in the post-war era, of throwing money at a problem.
GM spent $75 billion on automation, factories, and process improvements from 1980-1989 alone. In an April 1986 conference of GM's top-500 operations people, CFO Alan Smith (no relation to then-chairman Roger Smith) said (in regards to the Saturn program and others): "For the same amount of money, we could buy both Toyota and Nissan. This would almost double our worldwide market share. Can we expect to double our worldwide share with this spending program?"
Of course not. One of the early automation programs put into place by Roger Smith was a fully automated, "no man on the floor" axle factory in Saginaw Michigan. The fact that the axles would cost 50% more than those made at the already-existent UAW plant was ignored, and the factory was built... lauded, even, as the "Factory of the Future."
But that was small potatos compared with Hamtramck. Here, GM would be able to show the world its control and mastery of a fully automated manufacturing process, with every day at Hamtramck being a robotic ballet as machines built, whirled, and danced as they pumped out custom-ordered car after custom-ordered car.
It didn't work out that way. When the plant went online in the fall of 1985, it was supposed to showcase Roger Smiths dream of a 21st century car company, however it became the factory that marked the beginning of the end of Roger Smiths fascination with automation. The factory was supposed to eliminate Toyota's $2,000/vehicle cost advantage over GM, but instead turned into a horrible parody of what happens if you put GM executives in charge of a "Toyota style" system (which is what they thought they had.) GM spent over a billion dollars on robotics alone, but nobody thought to rearrange the production system, so when the factory opened it had over 5,000 UAW employees on the payroll! And, as is common with new technology, GM had many bugs and problems to work out - usually this isn't too much of a problem, but with the hundreds of brand-new systems it meant that something was breaking down every day. In addition, not one of the people on the plant were trained in the care of robots or software - GM had to call that specific robots manufacturer to send out a representative so they could repair the robot. Even worse was the operational design that had the entire line shut down if just a single robot broke.
The financial effects were felt immediately. 3Q 1985 results showed that GM suffered the first operating loss in 60 years, $20.9 million, and total cash reserves fell by 40% in 1985. Two years after it opened, the newly automated, "let's 'bury' those ***holes" factory in downtown Detroit was putting in a stunning 100 hours of labor for each car, five times as much as GM's Japanese competitors. Car design didn't help either: the front and rear bumpers of a Cadillac Seville had more than 460 separate parts and took over 33 minutes of labor to assemble and affix to the car. Each.
Regardless, GM spent an additional $35 billion on automation and "factories of the future" after it became evident that Hamtramck and others like it were colossal failures.
The fact is, seeing what has happened to this company since 1980 makes you realize that Michael Moore was right... but for the wrong reasons. Roger Smith was a horrible CEO, possibly the best example of the wrong person in the wrong place at the wrong time in the history of corporate governance. When this is all said and done, with GM's name writ in water, people will look back at his reign and say "Yup. That's where it went irreversibly wrong - somewhere between 1982 and 1989."
Last edited by JohnT on 09-05-2005 at 19:45
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Ted Striker
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United States of America
Jan 1970
time: 21:24
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Excellent post, JohnT, very interesting.
I just can't believe some of the things GM does. I mean it seems so amatuerish, at times as if someone is TRYING to fail.
Case in point was that Pontiac SUV that came out in 2000. It was versatile but the ugliest vehicle in the history of mankind. It's like they gave the CEO's troubled high school kid an intern job to design the car and see how bad he could do.
I WAS shocked however, to see Pontiac's two newest cars, the G6, and the Solstice. These seem like Nissan copycat cars (Maxima and Z), but they seem to be the best looking cars I've seen from Pontiac in a very long time.
In other news, now that I'm actually looking for those Priuses, they are literally everywhere. Last year they had a 7 month waiting list to get them. But I heard Toyota increased their production something like 5 times of what they were making before. They are everywhere. They have made a major play with their Scions too, those things are selling like mad.
My whole garage is Toyota. Except for me, I drive a Honda. 
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JohnT
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Capitalist
Mar 1999
time: 00:24
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quote:
Originally posted by Ted Striker
Excellent post, JohnT, very interesting.
I just can't believe some of the things GM does. I mean it seems so amatuerish, at times as if someone is TRYING to fail.
Case in point was that Pontiac SUV that came out in 2000. It was versatile but the ugliest vehicle in the history of mankind. It's like they gave the CEO's troubled high school kid an intern job to design the car and see how bad he could do.
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Thanks for the props. 
You might be a little young, but do you happen to remember Fords' "the Valet" commercials that ran in the mid-80s? In the commercial, a bunch of high society people were leaving some function and a person asks the valet to get his Caddy. When the valet returns with the car, person #1 starts forward, only to be stopped by somebody else saying "Wait. I think that's my Buick." The couple (I think) headed towards another car, only to be stopped by a third couple saying "No, that's my Oldsmobile." Pandemonium reigned as the GM owners couldn't determine whose car was whose... until the Hero steps forwards and suavely asks for his new Lincoln Town Car.
In all those surveys about "most effective" and "most humorous" commercials, this one always gets jilted though it was one of the funniest commercials I've ever seen (hell, I still remember it 20 years after it ran!)
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JohnT
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Capitalist
Mar 1999
time: 00:24
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Yeah, well, talking about pulling numbers out of your ass, I should know better than to posts ideas that occur to me when I wake from a mere 4 hours sleep.
That post of mine, about GM's interest cost? Incorrect, as the rating decline affects future issues not current contractual obligations. So the (for ex.) 3.5% 2002 issue is still just 3.5%.
However, GM's debt repayment schedule shows that $45 billion of their $300 billion is due by the end of this year, meaning that if GM rolls over that debt they will have to pay interest rates worthy of their new credit rating. The weighted average interest rate for that debt is currently 3.5%, a full 2.5% points below the 7% rate quoted above (I got that figure from the WSJ, somewhere.) This alone will increase their carrying costs by $1,125,000,000 per year.
In case y'all are interested in the long-term debt structure, here are some numbers: $38 billion of GM's debt is due in 2006, $24 billion due in 2007, $11 billion in 2008, $9.6 billion in 2009, and 2010-and-after $91 billion is due, with the weighted interest rate of all debt payable from 2006 onwards being 4.9%.
Last edited by JohnT on 09-05-2005 at 19:56
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JohnT
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Capitalist
Mar 1999
time: 00:24
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quote:
Originally posted by chegitz guevara
Yeah, all companies owe their workers is the lash and enough bread and water to do their jobs. Too bad they won't be able to buy any cars.
Why do conservatives never see that unless you pay your employees, you have no one to buy your goods? What, you think the employees of other companies are going to buy them, when other companies are going to do the samething you do? Conseratvies are always so short-sighted. That's why you're the enemies of humanity. |
Never heard Henry Ford described as a Progressive before... not too sure if he'd like that, either.
And, Che? If you're not going to talk about the issue at hand and rather would just insult the people participating in this thread, be a man for once, swallow your bile, and leave.
Here's an assignment to show you what would be helpful, more helpful than blanket insults: I made a comment earlier about GM's labor costs being $74/hour. Explain to us, using Communist financial theory (if such a thing exists), how that isn't enough and how you expect GM to continue paying it, while supporting new car development for an ever-changing market, increased debt carrying costs, and, of course, your basic COGS - after all, you need steel, iron, copper, electronics, upholstery, stamping dies, welding machines, thousands of miles of conveyor belts, and thousands and thousands of additional items in order to build a car, and all that stuff has to be paid for.
To give you an idea how how much material is needed to build cars, GM's COGS for their worldwide automotive divisions, less direct labor costs, was $138 billion ($161b in gross sales, COGS of $159.5, worldwide direct labor costs of $21.5).
Please, we're fascinated in how you'd fix this.
Last edited by JohnT on 09-05-2005 at 20:09
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08-05-2005 03:07
Because the market rate is too low?
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