GM's ignition recall issue explained.

BenK wrote:
Bean counters and when they pervaded automotive and ruined corporate America

Love this article and once found reference it often...and what used
to take me pages is boiled down to a one pager...

Who else should be blamed for the decline of America's two remaining automakers?

MotorTrend wrote:


From the November 2006 issue of Motor Trend

editor-in-chief Angus MacKenzie

Wall Street hasn't done Detroit any favors over the years. The Street is supposed to be the hard-nosed arbiter of success for corporate America, the white-hot cauldron of capitalism that's made this country's economy the most powerful in the world, the place where the money talks and you-know-what walks. (Though having allowed Enron to happen, Wall Street seems no longer to see the difference.) And, yes, Detroit has hardly covered itself in glory over the past 30 years. But I can't help wonder whether Wall Street should share some of the blame for the decline of America's two remaining automakers.

Let's be absolutely clear up front: Few people buy stock in a company for any reason other than they expect a return on their investment, and stockholders in auto companies are no exception. But in an era where screen jockeys zap billions of dollars a day through the ether at the touch of a computer keyboard, Wall Street's institutionalized ADD has resulted in a feverish short-term view of a business whose lengthy product cycles and huge investment costs are just too damned difficult to deal with.

Maybe that's why many of today's most successful automakers--Toyota, BMW, Porsche, to name three--are those who've never had to sweat a quarterly earnings call with a posse of skeptical Wall Street analysts looking for an opportunity to make a fast buck and ready to trash the stock price when they can't see one. To these companies, the concept of shareholder value has a very different meaning: "I don't watch (the stock price)," Dr. Shoichiro Toyoda once told Toyota North America president Jim Press. "I'm not going to sell my stock. If I worried about that, the decisions that I make wouldn't reflect the fact my name is on the back of every car."

Most Wall Street analysts will tell you Toyota, famously stingy with dividends, doesn't treat its shareholders well. But its stock is worth roughly four times that of General Motors. Go figure.

As Pulitzer Prize-winning author and journalist David Halberstam records in his book, "The Fifties," Bunkie Knudsen, who ran Pontiac and Chevrolet in the 1950s and 1960s, reckoned it all started to go wrong for Detroit when Fred Donner became president of GM in 1958. Knudsen was outraged that Donner would insist on talking about GM's stock price, and what the analysts on Wall Street thought about it, at his daily meeting with the heads of GM's divisions. Before Donner, those meetings were mostly about making cars.

Financial engineering quickly replaced product engineering as Detroit's primary business. GM and Ford essentially morphed into highly profitable finance companies with an auto business attached. That meant you could easily get a great deal on a new car. Only problem was, that new car wasn't always so great anymore. But the fat earnings on the loans and lease deals made the business look good and that kept the stock price pumped.

It's a sign of how entrenched this view of Detroit's business model has become that GM's decision to unload a majority share of its finance company, GMAC, earlier this year was treated by many as something akin to selling the family farm. But the sale is good news, because it means GM is shifting its focus back to its real business: designing and engineering cars and trucks. Meanwhile, over at troubled Ford, there are rumors the company may buy back its stock, now worth barely 15 percent what it was in 1999, and become privately owned. I hope the rumors are true, because Ford will then be free to concentrate on what it needs to do best: make cars and trucks.

Bunkie Knudsen, David Halberstam writes, believed in a simple concept: The people in Detroit had to make good cars, and if they did, the people in New York would take care of the stock. If only it were still true...

That was back then and now say the Japanese have caught up and/or
copied our corporate mentality of Bean Counter CEO's that manage
the bottom line...instead of their 'product'

Betcha if you ask any of the bean counters what their product is..exactly
that they won't know...

If it wasn't for those hated "bean counters" you would most likely be riding a horse today for transportation, because automobiles would be way too expensive. Henry Ford started it by developing the modern automotive factory which cut costs and put the hand made car manufacturers out of business. If suppliers could charge anything they want for each component on a car today the dang things would probably start at a half a million dollars. Do you think the auto manufacturers stop at the ignition switch? They demand the lowest price possible on every single thing on a vehicle, 10s of thousands of parts. And yes, often the part has to be less than the absolute best. Personally, I am fine that the clock is a cheap digital and not a Rolex Presidential.
As for the safety aspect of the current problem, it is pretty easy to blame GM with 20/20 hindsight, but in reality, it takes a lot of incidents to actually separate an ignition failure due to defect from ignitions failing due to the fact that someone abused the ignition by having 3 pounds of keys hanging from it, by trying to pry the keys out when they haven't actually turned the ignition to "off" , or when they accidentally whack it with a two by four they just bought at Home Depot and were trying to wedge into car to take it home.