Why GM is Screwed

Hyundai's New Motto: We're in This Together




Consumers have resorted to the only bargaining tool left to them in an economy in which their jobs have been trashed, their pay and retirement checks diminished, and their health care rendered dangerously unaffordable.
They are on strike.
And the scary thing, or what should be scary from the viewpoints of the nation's political and business elite, is that no union was needed to shut down the consumer engine that once drove the nation's economy to dizzying heights. There were no mass meetings, no marches on Washington, no shouts of "Solidarity now!"
Consumers, one by one, family by family, sitting around the kitchen table trying to figure out how to pay unpayable bills, or sunk in depression in the living room sofa in front of a TV blaring news about the latest employment cuts, decided all by themselves.
They struck back.
They stopped buying.
It was the final breach in a long, broken wall of contractual relationships between labor and management, government and the governed.
The power of that silent, unleashed discontent is downright devastating. Look at the damage being done to the automobile industry.
With the help of a big-city, East Coast/West Coast media mired in anti-Detroit bias, we allowed ourselves to believe that the auto industry problem was a Detroit problem, the result of "years of bad decision-making" by the Factory Kings of Southeastern Michigan, the inevitable result of Detroit's refusal to make the kinds of cars and trucks Americans want to buy.

This column argued that those charges were bunk, that the auto industry problem was deeper, bigger than Detroit, that it was something more systemic, not fixable by lopping off the head of one corporate executive and replacing it with another.
But the only company that seemed to get the message was Korean automobile manufacturer Hyundai Motor, the company that entered the United States in the mid-1980s as a manufacturer of four-wheeled junk, cars so bad they were used in movies and TV sitcoms as the antithesis of automotive quality.
That Hyundai no longer exists. Hyundai's automotive quality and reliability today is as good as the best -- better when the price-value equation is factored in. Hyundai's marketing is hands-down best. For proof, consider the Hyundai Assurance program, which has now morphed into Hyundai Assurance Plus.
The Hyundai Assurance program has been successful because it speaks to the underlying problem affecting the U.S. and, indeed, the global economy -- the devastated psyche of the consumer.
In its initial guise, Honda Assurance promised a "no-fault" purchase to consumers who lose their jobs through no fault of their own within a year of signing a Hyundai purchase agreement. Just bring the Hyundai vehicle back -- no negative equity, no bad credit report, books closed, case settled.
That first Hyundai Assurance plan opened in late October. Hyundai's January sales were up 14.3 percent in the United States, compared with an overall 37.1 percent drop, January 2009 vs. January 2008, for all of its competitors.
Convinced that it was on the right road, the one designed to take the consumer to a better place in a down economy, Hyundai late last month announced that it was extending the Hyundai Assurance plan to April and sweetening the package, to boot. Under the new version, if the Hyundai buyer loses his or her job within a year of purchase, Hyundai will pay the vehicle loan or lease for 90 days during that year while the owner looks for work. If the owner finds another job and keeps the vehicle during that 90-day grace period, Hyundai's "got-your-back" payments do not have to be repaid.
It's an expensive program -- how expensive, Hyundai won't say. But it's not nearly expensive as a massive loss of sales in an economy in which consumers are in full and open revolt.
Overall, February auto sales were down 41.4 percent in the United States compared with February 2008. And the numbers belie the misbegotten notion that the retail disaster in the automobile industry is somehow an isolated Detroit problem. Honda was down 38 percent; Nissan fell 37 percent; Toyota was down 40 percent. Yeah, Detroit got walloped -- sales were down 53 percent for General Motors, 48 percent for Ford and 44 percent for Chrysler.
But it was Hyundai -- the car company that has figured out how to break an effective consumer strike -- that finished on top with a relatively minor 1.5 percent decline in consumer sales in February.
Things are so bad that Honda and Toyota, neither one of them in immediate danger of bankruptcy, have nonetheless appealed to the Japan Bank for International Cooperation for emergency funding to help them survive the current consumer rebellion in the United States. Things are so bad, we're praising Hyundai for losing fewer sales than its competitors, for holding onto buyers by realizing that they are too angry, too frustrated and too scared to buy.
That's the problem our political and business elite have failed to address. They should take warning. It's not the United Auto Workers, whom Southern members of Congress want to beat into accepting the generally lower pay of nonunion automobile workers in the South. It's not some urgent need for restructuring Detroit's carmakers, something that has been going on for the last 15 years, with marked success, evident to anyone who cares enough to have paid attention. It's not product quality, type or availability.
It's the battered, devastated consumer, the guy or gal who has been shortchanged in pay and benefits, drawn into legal usury via credit cards falsely designed to compensate their diminished pay, laid off in the first waves of cost-cutting, deprived of health insurance via unemployment, and then frozen out of finance markets that never respected them much in the first place.
That consumer is angry. That consumer is on strike. Our politicians and business leaders had better wake up and follow Hyundai's example. They'd better do something before that consumer anger turns into something much more destructive than collapsed auto sales.

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ViRedd said:

Excellent post TBT.

Its like I've often said here in the forum on how to become successful: "Help enough people get what THEY want, and you will get what YOU want."

Have any of you checked out Hyundai's new luxury car? It runs about 35k for all the bells and whistles and competes quality wise with the best BMWs, Infinitis and Lexus.

Vi

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