Bailout Nation 2: General Motors

[TJones]

Hemi is an abbreviation of hemispherical which refers to the shape of the combustion chambers cast in the head.

Correct, and although Dodge never cornered the market on this type of engine, they were just the best at it back in the 60's and early 70's. They got away from the concept back in about 1971. The "LAST" Hemi, was put into a CUDA, and I saw it get auctioned off just the other day. It is a MOPAR thing which made all the Slowpar guys drool when it came back out in '03. So it is not just in name, it is an actual HEMI, just an improved design, I know, I know, PURISTS will disagree. Don't go by some blog writer's (bob sheaves) opinion of it, "Bob is referring to the head design. It is not a true hemispherical head, but looks vaguely like a hemispherical head with parts filled in." How does it look "vaguely like" and not be ? Again though, it is all about perception to the consumer.

[TheNiche]

Hey, so what does all this car fetishism have to do with the bottom line?

What's the gross margin on a hemi-equipped vehicle? How does that vary from a non-hemi-equipped vehicle? Is there a substantial unrealized upside to that market? Is it enough for a merged GM/Chrysler to stand on?

[Mark F. Barnes]

You do realize that the modern "Hemi" is a Hemi in name only, don't you? It isn't some unique, groundbreaking design like the Hemis of years past.

I have a pretty fair idea you might say. I've shoe horned a couple in '07 Rubicons in the past year. I have a pretty good grip on the MAP Curves, and Fueling rates. I've managed to hot box a few tune upgrades with ICMS Tool Box to take ful advantage of the wide torque range of the new SRT 6.1. Really don't know of any other V-8 on the market that sports the Hemispherical Head design, though this newer version is refered to as a Semi Hemi, because they tweaked the chamber to improve the fuel burn to help the mileage, something that they were worrying about back in the good old days. So whether or not it's ground breaking technology or not, it's still one of a kind. Honda does sport an in-line quad that has a semi Hemi head on it, but it can't compete with the real deal.

This was my first, was happy with the wiring, but learned a lot. for the next one

This is the second one, it's a lot cleaner look, you learn by trial and error, since it's not the normal swap

This is a '57 model 392 Hemi I scavenged out of an old Imperial and built for a guys Coupe a few years back. I hand fabricated that "Log" that I mounted the six Deuces on it. Man that was a sweet sounding power plant once it ran it on the dyno to seat the rings and last the cam and valves. The 392 was the birth of the Hemi, before the 426 took life.

Here's the log on the bench post fab and fit

Oh yeah, what was your question again?

[editor]

Hey, so what does all this car fetishism have to do with the bottom line?

It illustrates a very important point -- when you get a bunch of American guys together they'll puff up their chests and talk about horsepower and towing capacity and how some people will never give up their full-size trucks.

Meanwhile, the Europeans and Asians are building the cars that regular people actually want and are busy NOT going out of business, while the gearheads in Detroit try to measure their testosterone in inches instead of admitting who the real competition is.

[BryanS]

BINGO! This is exactly what I am talking about. I think they may also keep the Challenger and Charger, these retro throwbacks are still a seller, and the Hemi will definitely stay. Anyone says that they wouldn't want a Chevy truck with a Big Block Hemi SRT in it, is either lying or not a real car person and is just running their mouths. Hemi is legendary on the race track, and most of the die hard brand lovers are race related in some way, either a fan, Saturday night dirt tracker, or professional racer, in some for or fashion. Hemi rules the drag strip, everything in the nitro classes run a Hemi, no matter what body they have on them. The Hemi will survive any merger I feel for certain.

Yeah But the GT-R does not fit in my Bow Tie collection. Got to keep the Series Going.

If it doesn't have a GM V-8 in it... it wouldn't be a Chevy truck.

[Mark F. Barnes]

If it doesn't have a GM V-8 in it... it wouldn't be a Chevy truck.

Okay Bryan, listen up. I at the very moment am Driving a 2008 Chevy 2500HD with a Duramax Diesel engine, Built by Isuzu, is it not a Chevy Truck? Or how about all those Dodge Rams You see running down the road with Cummings Diesel Engines in them, are they not Dodges. Or How about all those Ford Power-strokes built by International Harvester, not Fords correct. Or the GMC 5500, or Ford F-650 with the Caterpillar Engine in them, not what they say they are? Ford does not own IH, Chevy Does not own Isuzu, Dodge does not own Cummings, (actually Ford is the managing partner in Cummings) If Chevy buys Chrysler and puts a SRT Hemi 6.1 twin turbo, in a Short wheel base Chevy 1/2 ton and names it Bastard Ape, it's still a Chevy. Like it or not.

[BryanS]

Okay Bryan, listen up. I at the very moment am Driving a 2008 Chevy 2500HD with a Duramax Diesel engine, Built by Isuzu, is it not a Chevy Truck? Or how about all those Dodge Rams You see running down the road with Cummings Diesel Engines in them, are they not Dodges. Or How about all those Ford Power-strokes built by International Harvester, not Fords correct. Or the GMC 5500, or Ford F-650 with the Caterpillar Engine in them, not what they say they are? Ford does not own IH, Chevy Does not own Isuzu, Dodge does not own Cummings, (actually Ford is the managing partner in Cummings) If Chevy buys Chrysler and puts a SRT Hemi 6.1 twin turbo, in a Short wheel base Chevy 1/2 ton and names it Bastard Ape, it's still a Chevy. Like it or not.

Not in my book, not in the 1/2 ton class. But you are right... It would be Bastard Ape. Like many of the combinations you describe... which are beyond the typical 1/2 ton pickup I see most of, everywhere. I just don't see GM or Chrysler mixing their power plants, across their platforms, should a merger happen...

[TheNiche]

Hey, so what does all this car fetishism have to do with the bottom line?

What's the gross margin on a hemi-equipped vehicle? How does that vary from a non-hemi-equipped vehicle? Is there a substantial unrealized upside to that market? Is it enough for a merged GM/Chrysler to stand on?

bump

[crunchtastic]

bump

heh. I know nothing about hemis. But I'm gonna go out on a limb to answer your question and say ..... no.

There is no unrealized upside for GM in the testosterone car market.

I reckon I'll get another 10 years out of my cheap little 4 cylinder Toyota, and by then, the Japanese will have come close to perfecting battery technology. Volt, schmolt. GM could rid itself of the union problem if it declares bankruptcy, right? Let them file. Pouring more money down the black hole is ludicrous. Although, I'm hearing reports now that Congress doesn't think it has the votes for any big 3 bailout, so the point may be moot.

[dudemeister]

Yeah General Motors has been mismanaged for so long, it probably would be better if they declared Chapter 11, that way they would be given enough time to revise their business plan. I was just concerned that the fall of General Motors could have a domino effect on several other automotive companies.

On another note Ford has improved and they are investing more into hybrid technology. I think one of their cars won an award from J.D. Power associates which ranked higher than even Toyota.

[jm1fd]

I just don't see GM or Chrysler mixing their power plants, across their platforms, should a merger happen...

For the most part I would agree with that. I could see a few exceptions made for exceptional engines such as the LS9 and the Viper V-10. I could also maybe, possibly see them using the Hemi brand, but probably not the modern "Hemi" engine since Chevrolet is already producing engines with similar characteristics. Let's face it the "Hemi" doesn't possess any meaningful characteristics to differentiate itself from engines from other manufacturers. That's not to say that the original Hemi wasn't a bespoke, exceptional engine, but Chrysler has slutted out the "Hemi" brand in the name of sales, and has, IMHO tarnished the legend of Hemi.

[citykid09]

I hate to see American Auto companies fail like this (always like to see America #1 in everything) but no one wants to drive their ugly cars. They let the foreign auto companies out do them and set back and did nothing about it until it was too late. I use to go to the Houston Auto Show every year and would see all the American and foreign concept cars. Well over the years the foreign companies eventually came out with there concepts, but the American companies kept the same old ugly cheap design that no one wants. Why do they do that? Give us the good stuff while its hot, not 15-20 years later, we want it now. But they F**ed up and now they are paying the price.

[BryanS]

I hate to see American Auto companies fail like this (always like to see America #1 in everything) but no one wants to drive their ugly cars. They let the foreign auto companies out do them and set back and did nothing about it until it was too late. I use to go to the Houston Auto Show every year and would see all the American and foreign concept cars. Well over the years the foreign companies eventually came out with there concepts, but the American companies kept the same old ugly cheap design that no one wants. Why do they do that? Give us the good stuff while its hot, not 15-20 years later, we want it now. But they F**ed up and now they are paying the price.

GM sold almost 10 million vehicles in 2007. Plenty of people not only want GM vehicles, but are buying them, by the millions. Both domestic and foreign auto makers are suffering because of the global rapid downturn in the economy. No US automaker would be in this position if the economy were good. Even right now, with the crappy economy, I bet GM sells at least 5 million cars this year.

[Dan the Man]

I hate to see American Auto companies fail like this (always like to see America #1 in everything) but no one wants to drive their ugly cars. They let the foreign auto companies out do them and set back and did nothing about it until it was too late. I use to go to the Houston Auto Show every year and would see all the American and foreign concept cars. Well over the years the foreign companies eventually came out with there concepts, but the American companies kept the same old ugly cheap design that no one wants. Why do they do that? Give us the good stuff while its hot, not 15-20 years later, we want it now. But they F**ed up and now they are paying the price.

I've always felt the same way about most American cars; the styling is so bland and generic. GM is probably one of the worst offenders, though they produced some beautiful automobiles in the '30s, '40s & '50s. While different GM brands often shared a common Fisher body, stylistic gestures helped set each brand apart and allowed all the models to be unique and aesthetically pleasing (it's easy to differentiate a 1955 Chevrolet from a 1955 Pontiac). Unfortunately, this all went down the tubes in the '70s & '80s. Facing stiff competition from Europe & Japan, efforts to cut costs resulted in more and more parts-sharing (and problem-sharing) between the GM divisions. Eventually, it got to the point where many GM cars were virtually the same automobile, though they still retained differences in price. The Cadillac Cimarron was a notorious example, basically being a Chevrolet Cavalier with a huge price tag and unreliable engine.

Somehow, GM forgot one of the basic rules of the automobile industry - aside from price, styling & performance are what sell cars. Later on, these factors determine which cars eventually become collectible. Unfortunately, I doubt many American cars being produced right now will ever become collectible. 50 years from now, people will be restoring BMWs or Nissan 350Zs.

[TheNiche]

GM sold almost 10 million vehicles in 2007. Plenty of people not only want GM vehicles, but are buying them, by the millions. Both domestic and foreign auto makers are suffering because of the global rapid downturn in the economy. No US automaker would be in this position if the economy were good. Even right now, with the crappy economy, I bet GM sells at least 5 million cars this year.

What percentage of those are not fleet vehicles and are not international sales? Also, how many more vehicles would Ford and Chrysler sell if GM went kaput?

I'll bet that Kia sells lots of vehicles too, certainly enough that if I just threw the number out there without any kind of context, some number of people might interpret it as though they should be impressed.

[memebag]

GM sold almost 10 million vehicles in 2007. Plenty of people not only want GM vehicles, but are buying them, by the millions. Both domestic and foreign auto makers are suffering because of the global rapid downturn in the economy. No US automaker would be in this position if the economy were good. Even right now, with the crappy economy, I bet GM sells at least 5 million cars this year.

GM was in financial trouble before the credit crunch. They sell a lot of cars (#2 worldwide behind Toyota), but they lose money doing it. Let them fail so a smarter company can sell those cars.

[Subdude]

First, Dodge is Chrysler, not GM... and there is no real separation among GM brand names/badges. A Pontiac "Firebird" was also known as the "Chevrolet Camaro." A GMC Sierra... aka... Chevrolet Silverado. You either keep all the GM brands, or you eliminate them all, at this point.

It makes NO SENSE for GM, or any automaker, to merge with any other automaker, for the same reason that it makes no sense for every airline to merge with every other airline: there is too much capacity - currently.

We should assist the auto industry, through these tough times, just like we did with Chrysler in 1980's. It paid off then, it will pay off in the future.

It is a lot harder and more expensive to terminate a brand than people realize. When GM shut down Oldsmobile they were flooded with lawsuits from dealers wanting compensation. I believe they are still in the process of settling these. One big advantage of Chap. 11 is that it would let GM get out of dealer franchise agreements and eliminate brands. It was not a big problem when Chrysler closed Plymouth because there were no stand-alone Plymouth dealers. Every franchise also had Chrysler brand products. This is one reason GM has been consolidating Buick, Pontiac and GMC dealers over the past few years - so they don't have to produce a lot of products for each brand.

In the event of Chap. 11 bankruptcy it is likely that Chevrolet and Cadillac will be the only GM brands to survive in America. Buick will live on as rebadged Opels for China.

[Subdude]

I've always felt the same way about most American cars; the styling is so bland and generic. GM is probably one of the worst offenders, though they produced some beautiful automobiles in the '30s, '40s & '50s. While different GM brands often shared a common Fisher body, stylistic gestures helped set each brand apart and allowed all the models to be unique and aesthetically pleasing (it's easy to differentiate a 1955 Chevrolet from a 1955 Pontiac). Unfortunately, this all went down the tubes in the '70s & '80s. Facing stiff competition from Europe & Japan, efforts to cut costs resulted in more and more parts-sharing (and problem-sharing) between the GM divisions. Eventually, it got to the point where many GM cars were virtually the same automobile, though they still retained differences in price. The Cadillac Cimarron was a notorious example, basically being a Chevrolet Cavalier with a huge price tag and unreliable engine.

I would say if anything GM cars are more dissimilar by brand now than they have even been in GM history. Badge engineering was largely terminated in the 1990s. GM cars across brands were far more similar in the 1940s - 1980s than they are now. The J-body Cimarron, Cavalier etc. was the only body ever shared across all five traditional brands, but even so stylistically Cadillacs were never that far away from Chevys.

[editor]

On another note Ford has improved and they are investing more into hybrid technology.

Far too little, and 20 years too late. It's time to let Ford go. Or GM. Or both.

[TJones]

If it doesn't have a GM V-8 in it... it wouldn't be a Chevy truck.

Bryan, if I cracked open two of today's engines side by side, I'll bet you dollars to doughnuts that you couldn't tell the difference of which one is which. Back in the 60's and 70's it would have been far more easier, as all the companies even color coded their blocks to ell which one was which. Even though Chrysler had an orange on some of their hemis, it was a different orange color from chevy's.

The problem with American consumers is that we want to have the biggest car on the road and still get 50mpg with it. The styling of American cars and the downward spiral of the perception of poor quality of American built cars has also killed Detroit.

[RedScare]

The styling of American cars and the downward spiral of the perception of poor quality of American built cars has also killed Detroit.

My brother manages an auto service shop. According to him, the perception is well deserved. They make their living off of GM products, and to a lesser extent, Ford. He never sees a Toyota. He loves to tell the story of the faulty fuel pump that GM refuses to reengineer. They happily charge hundereds of dollars to change them out, while GM happily charges hundreds of dollars selling the replacement. Frankly, this is not a Detroit problem. This is an American business problem. When accountants took the reins of American business from the engineers, business principles such as "planned obsolescence" came into vogue. When a manufacturer is run to maximize short term profit, long term quality declines. Foreign manufacturers build autos in the US, but the management team is run out of Japan, Korea and Germany. The corporate culture is the culture of the home country. GM, Ford and Chrysler's corporate culture is that of the US.

Americans are caught in a catch-22. We want to invest in these short sighted companies to maximize profits. But, as consumers, we are also forced to consume products that are built cheaply, in order to maximize short term profit. When the quality of US products declined, new tricks were developed to maximize short term profit. Now, the cost to return to well built products is staggering, and the companies are still run by accountants. In a sense, we ALL contributed to GM's demise. And, as GM goes, so goes the country.

[TJones]

I will happily agree on the fuel pump issue on GM vehicles. It is more prominent in their truck lines, and you can hear their audible buzz from about the 3rd month of ownership. Amazingly though, the fuel pumps will go on buzzing like this for say 3 or 4 years. Only those individuals who think their truck is gonna explode without replacing it, at the mechanics persuading, decide to change them out, at the cost of hundreds of dollars. On the other hand though Red, Consumers who buy Chevys and Fords over Toyota trucks tend to actually use them more for their intended purpose, beating the crap out of them, and not the occassional trip to IKEA for the big box take home.

[RedScare]

On the other hand though Red, Consumers who buy Chevys and Fords over Toyota trucks tend to actually use them more for their intended purpose, beating the crap out of them, and not the occassional trip to IKEA for the big box take home.

Yeah, I know. I've seen the commercials.

[memebag]

My brother manages an auto service shop. According to him, the perception is well deserved.

Absolutely. It's backed up by resale value figures and reliability surveys. I asked my mechanic (Scotty Kilmer, of KHOU's "Crank it up" fame) what I should buy when my Kia started to die. He said Toyota and only Toyota. He works on a lot of cars, and they are the longest lasting and easiest and cheapest to keep running.

This line that the difference in reliability between foreign and domestic is only "perception" is BS.

[TJones]

Absolutely. It's backed up by resale value figures and reliability surveys. I asked my mechanic (Scotty Kilmer, of KHOU's "Crank it up" fame) what I should buy when my Kia started to die. He said Toyota and only Toyota. He works on a lot of cars, and they are the longest lasting and easiest and cheapest to keep running.

This line that the difference in reliability between foreign and domestic is only "perception" is BS.

Well meme, I have a 36 yr. old GM product and a 4 yr. old Toyota product. I'll let you and Scotty know in 32 years how the Toyota is doing.

[editor]

Frankly, this is not a Detroit problem. This is an American business problem. When accountants took the reins of American business from the engineers, business principles such as "planned obsolescence" came into vogue. When a manufacturer is run to maximize short term profit, long term quality declines. Foreign manufacturers build autos in the US, but the management team is run out of Japan, Korea and Germany. The corporate culture is the culture of the home country. GM, Ford and Chrysler's corporate culture is that of the US.

Very insightful. The same thing happened in many other American business sectors, too.

The American textile industry used to be full of pride (heck, it was one reason we fought a war). Then the accountants and "business managers" came in and decided they knew how to run things better. Now everything is made overseas and run from here, and the quality blows.

The same thing happened with the mass media. Before the 80's they were owned and run by media people and journalists. Then they all started going public. Next thing you know all the TV companies are owned by bigger companies with no experience in television (GE, Westinghouse, Capital Cities) who used their in-house and imported consultants to tell the journalists how to do their job. Now we're reaping the rewards of that mistake -- the public doesn't trust the media, and the media is answerable to Wall Street and not to the viewers.

[jm1fd]

Absolutely. It's backed up by resale value figures and reliability surveys.

Resale value isn't necessarily reflective of reliability. Due to union obligations it is cheaper for the domestic automakers to keep the production lines running and put huge incentives on new cars than it is to just idle the lines for a while. That creates oversupply and drives resale values down....why buy used when you can get a new one for the same price or less? Used prices have to come down to be competitive against the new ones.

I asked my mechanic (Scotty Kilmer, of KHOU's "Crank it up" fame) what I should buy when my Kia started to die.

One fame-seeking-mechanic's opinion does not a comprehensive scientific survey make.

This line that the difference in reliability between foreign and domestic is only "perception" is BS.

So the JD Power surveys which rank domestic brands on par with the top foreign brands are BS too? Really? Care to cite a source saying the surveys are FOS?

[memebag]

Resale value isn't necessarily reflective of reliability. Due to union obligations it is cheaper for the domestic automakers to keep the production lines running and put huge incentives on new cars than it is to just idle the lines for a while. That creates oversupply and drives resale values down....why buy used when you can get a new one for the same price or less? Used prices have to come down to be competitive against the new ones.

That doesn't make any sense. If domestic cars are sold at artificially low prices, they should have higher resale values, not lower. Used prices stay high for cars that last a long time.

One fame-seeking-mechanic's opinion does not a comprehensive scientific survey make.

I never said it did.

So the JD Power surveys which rank domestic brands on par with the top foreign brands are BS too? Really? Care to cite a source saying the surveys are FOS?

Lexus has finished #1 in that survey for the last 14 years, and foreign cars (Toyota and Honda brands, mostly) were ranked best in14 of the 19 vehicle segments, but JD Power only covers 3 years of ownership. We could look at Consumer Reports, where foreign cars also dominate the reliability ratings, but their survey is also of 3 years of ownership. Let's use a different source. Got any that cover longer time periods?

[jm1fd]

That doesn't make any sense. If domestic cars are sold at artificially low prices, they should have higher resale values, not lower. Used prices stay high for cars that last a long time.

Makes perfect sense. If I'm looking to buy a Chebrolet Suburban and the used ones are $17k and the new ones are $18k then I'm gonna buy new. Under the same circumstances, if I'm trying to sell my used Chebrolet Suburban then I'm going to have to cut the price if I want to get it sold. Thus driving down resale values.

Lexus has finished #1 in that survey for the last 14 years, and foreign cars (Toyota and Honda brands, mostly) were ranked best in14 of the 19 vehicle segments, but JD Power only covers 3 years of ownership. We could look at Consumer Reports, where foreign cars also dominate the reliability ratings, but their survey is also of 3 years of ownership. Let's use a different source. Got any that cover longer time periods?

Eh...maybe trudelta.com but I'm hesitant to suggest it since the participants self select.

[memebag]

Makes perfect sense. If I'm looking to buy a Chebrolet Suburban and the used ones are $17k and the new ones are $18k then I'm gonna buy new.

But domestic resale values are low, so they aren't priced the way you describe. People buy new domestic cars because they don't trust used domestic cars, even though the resale values are so low.

Under the same circumstances, if I'm trying to sell my used Chebrolet Suburban then I'm going to have to cut the price if I want to get it sold. Thus driving down resale values.

You're going to sell it for as much as the market will bear, which isn't as much as a similar used foreign car.

Eh...maybe trudelta.com but I'm hesitant to suggest it since the participants self select.

All I see on "trudelta.com" is something about Delta Airlines and some college fraternities.