It’s Pearl Harbor Once Again!

Why is GM failing? Pundits are analyzing the horror as it becomes disentangled. The heartbeat of America is losing its pulse.

The whys are not too difficult to size up: bad economic times, skyrocketing gas prices, poor management, poor quality, unions that will not compromise, lack of foresight, poor government policy, increased competition, and consumer buying patterns gone awry.

The biggest hit–Japanese cars. Japanese cars are edging too much into the domestic market, and this is hurting American manufacturers. The Japanese are not enemies of Americans. Albeit, they are very efficient entrepreneurs.

Yet, it is impossible to compete with Japanese auto manufacturers. The playing field isn’t equal. American Auto Unions are sinking in the quicksand and everyone knows it.

To be fair, the Japanese are turning top quality made vehicles. Honda,Toyota, Mitsubishi, Subaru, and Nissan are brand names that resonate.

It is estimated that almost $2000 per vehicle is lost due to GM paying medical benefits and pensions. Toyota does not incur this collateral damage; the company does not pay these benefits.

The problem began in the early 1980′s when Japan started selling cars in America. In 1981, U.S. and Japan agreed on Voluntary Export Restraints (VER’s), which actually helped Japan. The idea was to stop the increase of Japanese cars flowing into America. It didn’t work.

This inevitably raised the prices on American automobiles. Even though the Japanese were selling fewer cars, they raised prices and had nothing to lose. Their business model paid off.

GM was marketing gas guzzlers, and Toyota was marketing dependable, efficient cars.

How did Japanese manufacturers get around the VER’s? Simple. Build plants in the United States. There are no restrictions on plants in America; that isn’t considered importing.

This has costed American jobs on a grand scale, and the situation is getting worse.

The auto market is truly a global market. Toyota now imports more cars from Japan than it makes in the U.S. These are cars that are purchased in the United States.

Toyota has taken a big part of the market in America. But Toyota knows that America may someday refrain from buying foreign autos. The job market in the U.S. is suffering.

Markets are growing and so is the competition. The Big Three have lost dominance in the U.S. This may not change. Let’s hope at least there is opportunity for some recovery.