GM has bigger problems than pensions and health care

But that's the meme that has come out of the recent news that both GM and Ford have serious financial issues and are losing market share. Sure--the expense of their health care and pension funds doesn't help matters a lot in a soft economy, but that's not the reason Ford and GM are losing market share to Toyota, who is poised to become the world's number one automaker. The problem is far more basic than that.

Ford and GM vehicles suck.

That's why they're not selling at premium prices, why Ford and GM are practically giving them away and providing low APR loans to move them off the lot. They're crappy cars, and have been for quite a while. If Ford and GM were making the American equivalent of the Prius--hell, if they were making the equivalent of the Corolla--we wouldn't be hearing about GM and Ford losing market share to Toyota. But they don't make the equivalent--they make crap cars that look flashy for about two years and then fall apart.

There's another problem with those cars--they're not fuel efficient. Ford and GM were riding high not too long ago with the SUV craze. Their quest seemed to be to put thirty-inch rims on a school-bus, trick it out with a dvd player and a Playstation in the back for the kids, make sure it got less than 8 miles to the gallon, and then sell it for as much as they could. And they made money doing it.

But they had no foresight, and this time there's no excuse, because the auto industry has been through this before. It was called the Carter administration.

The OPEC oil crunch during the Carter administration is the reason companies like Toyota, Honda, Nissan (nee Datsun) and others were able to make real inroads into the American car market, and it looks like they never forgot that oil is a limited resource, and that gas wasn't always going to be cheap. Even when Toyota and the other Asian manufacturers stepped into the SUV market, they did so gingerly, and with smaller vehicles which were--surprise!--more fuel efficient and better built.

So now Toyota is cleaning GM's clock, and the only reason the press can come up with is that GM spends more on health care costs and pensions. Sorry--there's far more to it than that.

On the plus side, there's always the remote chance that pressure from big automakers will force the issue on universal health care, and I'd like to see that happen, but it won't solve GM's problems. Until they start looking forward and building better cars, they're not going to recapture any of the market they've lost.

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