What Happened To General Motors ?

Last week it was revealed that General Motors is no longer the leading car producer in the world. In the first quarter of this year, Toyota sold 2.348 million cars, passing GM for the first time. During the same period, GM sold 2.26 million cars. And it doesn't look like this trend will be reversed anytime soon.

What happened? How could GM have lost the lead it had for so many years? MSN.com has a pretty good article on how this happened.

The article says that the two main reasons are "yester-think" and "bloated union contracts". I disagree about the union contracts. They have re-negotiated many of the contracts, and closed down many plants in this country to shift production to Mexico and other places. It has not helped, because that was not the problem.

But the engagement in "yester-think" was definitely one of the major reasons. GM was fat and happy and continued to build the same product, while Toyota (and other foreign companies) were constantly redeveloping and improving their product. By the time they figured this out, it was too late. Even most Americans now consider Toyota and Honda to be more advanced and more dependable than cars made by GM and Ford.

I think another reason for their downfall was the close ties between American car companies and the big oil companies. For many years, each looked out for the other. Big oil keep their prices fairly low, and the car makers refused to seriously consider building truly energy-efficient cars. When they did build a small car, it was more of an afterthought, and did not meet the quality of its foreign competition.

They were convinced that the world preferred to drive big gas-guzzlers. But then the big oil companies decided to go for enormous windfall profits, and by doing so put a knife in Detroit's back. Toyota, Honda and others never had a close relationship with big oil, and were able to build ever more efficient and dependable cars. When big oil went crazy, they were already in the market with appropriate products. GM and Ford are still trying to play catch-up.

Maybe they have finally learned, you just can't trust the big oil companies.