General Motors: Specifically Shameless

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Has General Motors (NYSE: GM  ) no shame?

Check that. I just remembered -- these are the guys who flew to Washington in a corporate jet to beg Congress for a multibillion-dollar handout. Well, lacking shame, does GM at least have a PR department?

No shame...
Speaking in response to A123's announcement last week that it will begin building its first battery factory in southeast Michigan, GM Vice Chairman Bob Lutz reportedly applauded: "A123's proposal to manufacture advanced battery cells and packs right here in the United States is a positive development for our industry and the nation."

Just days later, though, GM turned down A123's bid to build the battery pack for GM's new Volt electric car. Instead, GM gave the contract to Korean chemicals concern LG Chem.

... And no common sense
Now, for those not familiar with the company, let me explain: A123 is a Massachusetts-based battery maker, financed by such leading names as Motorola (NYSE: MOT  ) , Qualcomm (Nasdaq: QCOM  ) , General Electric (NYSE: GE  ) , and Duracell owner Procter & Gamble (NYSE: PG  ) .

Thus, A123 offers itself up as the "Buy American" solution to both our addiction to foreign oil, and to the monopolization of battery production by foreign automakers like Toyota (NYSE: TM  ) -- a practice that three years ago, Ford (NYSE: F  ) Chief Operating Officer Jim Padilla termed "predatory."

Yet no sooner does A123 commit itself to opening factories right next door to Detroit,  no sooner does it promise to invest $2.3 billion in the effort to supply 5 million hybrid car batteries by 2013, and create 14,000 jobs in the process, than GM pulls the rug out from under A123, giving the contract to a foreign company.

In defense of GM
Now, in GM's favor, there are at least a few arguments backing LG Chem. The Korean company boasts around $10 billion in annual sales, versus less than $60 million for A123. (The vast majority of LG Chem's sales owe to its principle product lines, including PVC pipe, paint thinners, and the like. But the company's IEM business, where LG makes car batteries, booked roughly $1.7 billion in revenue last year.) GM can be forgiven for not wanting to risk its big push into electric cars on a start-up when there's a more established player available.

There's also the technological edge to consider. LG Chem's batteries use a "flat-cell design" reported to be better at dissipating heat. Conversely, GM seemed to think that A123's cylindrical cells were less efficient, and possibly even less safe.

And yet, if I'm understanding GM right, it seems to be saying that its choice of LG Chem over A123 basically boiled down to going with "who's biggest" and "who's best."

Call me a cynic, but I can't help wondering whether those are really the criteria GM wants to bandy about. Sure, there was a time when both size and quality were on GM's side. But from what I hear, Toyota's set to overtake GM as the world's largest automaker any minute now (if it hasn't already.) And not one of GM's eight brands made it into the top 10 slots on JD Power & Associates' latest survey of automotive initial quality. Both of Toyota's biggest brands are there.

Foolish takeaway
Listen, I'm no "Buy American" fanatic. I support outsourcing when it makes economic sense -- though I'm also on record predicting the trend's demise. I loved my old Chevy S-10, but I've got similarly fond memories of my late, lamented Datsun 310. In short, I like to think that I can look at these kinds of issues objectively.

But when I hear GM beg for a taxpayer-funded bailout, insisting it's essential to support American industry ... and then turn around and torpedo its own arguments by "buying foreign" when it suits the company's own purposes, I have to wonder whether management realizes that economic jingoism cuts both ways.

Want to know more?

The Fool owns shares of Procter & Gamble. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

Read/Post Comments (34) | Recommend This Article (29)

Comments from our Foolish Readers

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  • Report this Comment On January 14, 2009, at 3:56 PM, hahn37 wrote:

    Yes , right on.

    there are so many Companies in this country who

    are in the Battery business, one of them is: LTHU

    ( Ticker Sympol ) one of the bet around, but don't get too much attention, because it's a smaller company.

    Wake UP AMERICA, thats all I can say.


  • Report this Comment On January 14, 2009, at 4:12 PM, TURI57 wrote:

    In the last 30 years we've shipped our know how and our jobs to cheap labor countries...this is what we get back...they have the know how...

    This is a major investment for gm ...they can't afford to take a chance...what MR. SMITH fails to mention is that the battery will be assembled in Michigan.

    To me MR.SMITH sounds like an other Toyota republican...all ways looking for some negative to say in regard to GM.

  • Report this Comment On January 14, 2009, at 4:48 PM, hahn37 wrote:

    TURI57 - you must have lot,s of stocks with GN, lol

    Wake up Buddy

  • Report this Comment On January 14, 2009, at 4:49 PM, hahn37 wrote:

    TURI57 - sorry I meant GM

  • Report this Comment On January 14, 2009, at 4:50 PM, katheter wrote:

    I too am tired of the GM bashing. My husband owned a Lexus ES300. We sold it before we got the notice that the oil turns to gel in them. My neighbor had a Toyota Tacoma truck. They bought it back from him because the frame was rusted out. Regardless of the rust issue the frames in the Japanese cars are not near as strong as the Ford and Chevy trucks. Check out the video on UTube if you don't believe me. My daughter has worked as an engineer at both Toyota and GM, so we've owned them both. By the way, I LOVE my new Cadillac CTS.

  • Report this Comment On January 14, 2009, at 4:57 PM, teejaecee wrote:

    BTW Katheter, I also LOVE my CTS!

  • Report this Comment On January 14, 2009, at 6:15 PM, TURI57 wrote:



  • Report this Comment On January 14, 2009, at 6:35 PM, 181736065 wrote:

    "Call me a cynic, but I can't help wondering whether those are really the criteria GM wants to bandy about."

    GM doesn't "get it". I own several companies and I have told all my purchasing managers to lease or buy foreign.

    GM needs to die. Strip away the legacy costs and start anew.

    Case closed.

  • Report this Comment On January 14, 2009, at 6:53 PM, TURI57 wrote:



  • Report this Comment On January 14, 2009, at 7:05 PM, redneckdemon wrote:

    Yeah, GM has done good things. So did Hitler. The problem is what GM is doing TODAY, which is not much of anything.


    You're telling me the frame of a CAR is not as strong as the frame of a TRUCK? No kidding? I wonder why?

    I own a 2000 Ford pick-up and an 85 Jeep. I like them. But they get horrible mpg. Toyota made cars are cheaper, better made, and get great mpg. Am I supposed to "buy American" just because it's American?

    Well, I'm an American with half a brain, and I'm a Navy man who has been in over 30 different countries, and I can tell you that American isn't as great as some folks would like to believe, and I'll be danged if I'm going to shell out my hard earned cash on something expensive and poorly made just because of the brand name.

    I don't shop at Old Navy or wear anything with Ralph Whoever's name on it for that very reason.

    If you like them, great. Give them your money. But don't whine if people point out their faults and short-comings, or don't share the view that just cause it is made in the states means it is better than the competition.

  • Report this Comment On January 14, 2009, at 7:07 PM, rserb1 wrote:

    Hey fe3lixallen do me a favor and list the companies you own so those of us that support American made products can make sure we don't do business with you!

  • Report this Comment On January 14, 2009, at 7:22 PM, kayakingkarl wrote:

    I wanted to do what I thougt was the right thing when I bought my 2004 GM Saturn Vue. It had 55K on the odometer. Unfortunately I didn't pay $2500 for a warranty. Big Mistake. At 60K the oil pump failed, which in turn caused the motor to blow. At 65K the transmission failed. When I took the vehicle to the dealer they acted like they didn't know who I was. Now I drive a Honda with 65K miles, no problems, and will NEVER BUY GM AGAIN!!!

  • Report this Comment On January 14, 2009, at 8:23 PM, TURI57 wrote:



  • Report this Comment On January 14, 2009, at 8:56 PM, TURI57 wrote:

    F.Y.I. REDNEK...2009 toyota camry v6 $24,200 24mpg.

    2009 chevy impala v6 $23,790...24mpg

    As for quality...Toyota’s much publicized quality problems resulted in Consumer Reports actually removing from their recommended vehicles list the Lexus GS luxury car, Camry V6 sedan, and Tundra pickup. This demotion occurred in October 2007.

    If you are one of the many Americans who gave up on Detroit’s cars because of a bad experience many years ago, it’s time to rethink your position. Rethink Detroit.

  • Report this Comment On January 14, 2009, at 9:12 PM, redneckdemon wrote:


    And no, I haven't had any bad experiances with any auto maker. I just like to get more for my money. Watching the big three push thier pick-ups and SUVs while gas prices climbed over 4 bucks a gallon was a clue to me that they didn't give a damn about mileage. Meanwhile, Toyota and Honda where working on making their cars get even BETTER mileage then they usually do.

    And what is a "Toyota Republican" exactly? Are there any "Triumph Libertarians" out there?

  • Report this Comment On January 14, 2009, at 9:17 PM, Proudaoutoworker wrote:

    I don't know where Rich Smith does his research, but if you would like to view the FACT go to:

    and See the REAL results GM, Ford and Chrysler ALL have vehicleas in the top THREE positions of the IQSR..seems like MOST journalists just spout the views(i.e biases) of their Toyota Republican employers! For a NEW perspective check out NBC's Matt Lauer's talk with Rick Waggoner and Ron Gettelfinger and Kieth Olberman's coverage of the TRUTH about the Senate vote.Seems the UAW DIDN'T kill the deal!!

    American Auto Industry still controls the lions share of the US market. Toyota sold less total vehicles than GM, and less trucks than GM, Ford and Chrysler.

    Honda's total vehicle sales were LESS than Chrysler's. So BEFORE people talk about ho outdated or unimportant the Domestic Automakers are they should know the REAL truth.

  • Report this Comment On January 14, 2009, at 9:18 PM, redneckdemon wrote:

    By the way, how about a link to the site you got those prices from?

  • Report this Comment On January 14, 2009, at 9:35 PM, Proudaoutoworker wrote:

    Your RIGHT about the price and mileage issue TURI57.

    You forgot the Cobalt ESV around $13,000 .....37 MPG ... GM has 17 cars that get 30+ MPG and they're not little cracker boxes either! Gm's LD pick-up trucks get the BEST mileage in their class!!

    Ford Focus and Flex also get Great mileage.

    My 1998 Pontiac Grand Prix GTP has over 300hp at the wheels and gets 26 MPG. The nomally aspirated 3800 in my Dad's 1996 Buick Le Sabre got 30 MPG. The Domestic automakers have been achieving high MPG for quite some time, the Government makes sure of that.

  • Report this Comment On January 14, 2009, at 9:41 PM, TURI57 wrote:


  • Report this Comment On January 14, 2009, at 9:51 PM, falang1 wrote:

    Holy cow. Nothing like a GM article to get people fired up.

    On the negative (sort of) side for GM: GM cares about cost. If LG put in a cheaper bid, guess what? They want all their suppliers use low cost countries (China) and moved their purchasing department to China. Also Lutz is known for making bonehead comments.

    On the plus side: GM cares about safety. If there was a hint of overheating in the A123 batteries, GM would have shied away. Even regardless of cost. Hard to believe, but true.

  • Report this Comment On January 14, 2009, at 10:05 PM, newworldodor wrote:

    I shun GM vehicles after what that company did to Flint Michigan. Period. I wouldn't care if GM made the best vehicle in the galaxy.

    Watch "Roger and Me" if you haven't.

  • Report this Comment On January 14, 2009, at 10:51 PM, egastrophe wrote:

    Before everyone goes nasty. I have always bought GM, Ford or Chrysler. I have a couple of friends who work at Ford and I asked them when they walk through their parking lot to take a note of how many cars were from NA and how many from Offshore. There were more cars from offshore than domestic. Take it for whats it worth. JD power had the Olds Silouette mini van ranked highest in 2004 the next year GM closed the plant. Ford has the worst designs, Chrysler poor quality and GM bad management. I'll buy a KIA next time.

  • Report this Comment On January 14, 2009, at 11:17 PM, Milligram46 wrote:

    GM doesn't do anything ehhh? A Spring Edition Chevrolet Malibu gets 33 MPG on the highway, better than Camry, and only 1 MPG LESS than a Toyota Yaris! A YARIS for cripes sake, and no the Spring Edition is not a stripped down model and not a hybrid.

    I mean this story is insane. GM is betting the farm, literally, on the Chevrolet Volt - they were working with two suppliers and funded BOTH of them with tens of millions of dollars of R&D development. The A123/Continental batteries didn't make the cut. What they picked the WORSE solution on the "bet the farm" vehicle? You even wrote the A123 solution is bulkier (hint, open the trunk of a hybrid Camry) and doesn't dissipate heat as well. Heat is death for Lithium Ion batteries.

    A123/Continental was not General Motors single partner (funny you didn't mention that) and is funded by other heavy hitters including General Electric.

    I'm just tired of more hyperbole not based on any kind of facts.

  • Report this Comment On January 14, 2009, at 11:35 PM, TURI57 wrote:

    Right on PROUDAUTOWORKER! And the cobalt is build in USA!

  • Report this Comment On January 14, 2009, at 11:37 PM, Tinka82 wrote:

    Quoting Redneckdemon:

    Watching the big three push thier pick-ups and SUVs while gas prices climbed over 4 bucks a gallon was a clue to me that they didn't give a damn about mileage. Meanwhile, Toyota and Honda where working on making their cars get even BETTER mileage then they usually do.


    You have to step back and take a look at your time frames before you form your opinions.

    1) the inventory for the upcoming year and dealer stock is not something that is turned out in a week's time, nor is it something that can be restructured overnight. It is akin to a huge cruise ship with a tiny rudder. Any changes in course must be planned long in advance, and it's just the nature of the product and industry. When an automaker's capital, and the dealership's capital is tied up in the inventory that was built in February-March, then shipped but not yet sold, (BTW, I'm using those months as an example. Not an auto industry afficianado. The production months may be off) they can't change their inventory overnight.

    2) the gas prices climbed to $4/gal in a split second relative to the time it takes to retool the country's entire auto inventory.

    3) the oil/gas price increase was not a predictable phenomenon, nor was it based on real supply and demand. It was yet another investor/speculator bubble created in the futures market. Not something Detroit, economic analysts or anyone else expected, much less prepared for.

    The 'give a damn about mileage' thing didn't matter to the vehicle buyers until that oil futures bubble. Do you think it would have been wise for Detroit to have prepared and built vehicles (planning stages and build stages for the 2008 model year were pre-bubble) that didn't historically report a market demand? All previous and current buying trends prior to the bubble pointed to SUV/Truck heavy demand, thus that is exactly what they built.

    And I'll second the Camry/Impala comparison. Chevy puts out some pretty quality products these days, as does Ford.

  • Report this Comment On January 14, 2009, at 11:40 PM, TrailerParkJawa wrote:

    Pointing out invidiuals experiences is largely a waste of time. We all can find 1 person who got 300K out of an import and 1 person who got 30K out of an import. Few of us own enough cars in a life time to get valid statistical experience with reliablity. It all comes down to preferences, customer service, consumer needs, and ultimately the business model.

    GM doesnt make anything I want to buy. Neither does Chrysler. The Ford Focus is a possiblity but I dont need a new car and hence the problem. I'll get another 10 years out of my Subaru wagon and there are lots of people who DONT need a new car of any kind (foreign or domestic) so that leaves the weakest companies to the mercy of markets.

  • Report this Comment On January 14, 2009, at 11:52 PM, Tinka82 wrote:


    You are correct about most people lacking enough data from our past/current ownership to form a meaningful statistical model, but buying things for us humans is largely emotional. Most buyers aren't the "owl" type, (making buying decisions based on data) and most rely heavily on thier past experience as well as their Uncle Joe and nieghbor Charlie.

    To be honest, I think most of us have spent more time googling and checking JD Power articles recently to write these posts, than we ever did prior to buying a car. :)

  • Report this Comment On January 15, 2009, at 2:15 AM, GoNuke wrote:

    In a relatively free market economy the consumer is king. Citizens get to vote for politicians every few years but we all vote with our dollars every day. Toyota won and GM lost. Toyota actually went to some lengths to improve GM's performance by teaching GM employees how to run a car company the Toyota way. Toyota was always afraid that if GM failed Toyota would be in danger of a legislative backlash that would make it difficult to sell Toyota's in the US.

    Toyota entered into a partnership with GM as far back as 1986 just to show GM how to achieve high levels of productivity.

    How many of you punters remember NUJMMI? Toyota took over an old GM plant and built Corolla's using UAW employees. The cars were sold as Chevy Novas.

    The following is taken from the journal Science July 18, 1986.

    "Gleaming against a backdrop of the coastal Hamilton Range, surrounded by carefully manicured grounds and immaculate parking lots, the bustling New United Motors Manufacturing Inc. (NUJMMI) is the flagship proving ground for applying Japanese management systems to American workers. NUMMI represents a marriage between the world's two largest automakers: Toyota and General Motors. The assembly plant, which opened 20 months ago, represents Toyota's first exercise in building cars in the United States. And it is the United Auto Workers' first experiment with a novel contract that eliminates many of the traditional work rules and stresses cooperation rather than confrontation with management."

    "The NUMMI plant has nothing noteworthy in the way of high technology, with the exception of its modem Japanese stamping plant, which is on the premises. What distinguishes it is the Toyota production system, which means its managcment. It is in essence a Japanese plant with American workers.

    Toyota, in line with what has become the common pattern, has flown several hundred managers and union people to Japan for indoctrination at NUMMIs sister plant Takaoka in Toyota City, where they experienced the system in its pure form. Five of

    NUMMI's eight general managers are Japanese,

    in addition to the president and vice-president.

    Japanese trainers are also being continually ferried back and forth. NUMMI is said to embody the best of both worlds, and to a large extent this appears to be true. Gone are the intricate hierarchical management structure and management-union antagonism that characterize the American system."

    Toyota has spent 20 years trying to get GM to become competitive enough to survive. GM has been steadfast in its refusal to learn.

    GM started with a commanding lead, the support of the US government (remember quotas?), and tremendous assistance from Toyota -and still managed to lose the competition.

    The consumers have spoken. GM is an embarrassment.

    Still, if GM is to survive it is going to have to sell a lot of cars. I can't risk losing sales because one of its most important suppliers can't produce enough.

    GM's choice of battery supplier was simply prudent management, any Harvard MBA grad would have done the same.

  • Report this Comment On January 15, 2009, at 7:41 AM, RaulChapin wrote:

    The author is not saying buying LG is a bad choice. HOWEVER if one of your reasons to get a bailout (or at least the PR for the bailout) is that you need to support the american industry... and then you go and do the exact opposite... it just does not taste right.

    This is relevant because when comparing companies and how well they do, there is more than just the quality of the car or the MPG... and GM has had a lot on its side helping it not go belly up... as fast as it would have otherwise.

    But trends do change and if buying GM is a sentiment thing, some people might no longer feel so cuddly with GM when it choses Korean vrs American... and it has nothing to do with logic, it has to do with feelings... kind of like pepsi or coke.

    Thus the mistake was a PR one and diehard GM people will pay no attention, but those on the fence might think "hey buying quality and price and disregarding origin is a good thing... perhaps i will stop buying with my heart and give those imports a chance"

    BTW I personally thing that Toyotas own popularity is what is hurting them now, they have become expensive. I for one would go korean if I were to go import. I have no loyalty to any brand, but still bought a Pontiac as my first bought in Canada car. Reason? You can find a GM certified mechanic in every corner. I was a little affraid of owning a Hyundai and getting stuck with few providers or bad service...o well (and the Vibe was cheaper than the Matrix :) :)

  • Report this Comment On January 15, 2009, at 10:00 AM, TURI57 wrote:

    RAUL...As i stated in my previous post every one forgets to mention that GM is assembling the battery in far as choosing the Korean co. over A123...the reason was that the Korean had a much better product then A123.

    Per haps they have a better product because their government gets financially involved in developing the product...socialism?...

  • Report this Comment On January 15, 2009, at 11:28 AM, hahn37 wrote:


    I owe a 1991 chevy Lumina with 148,000 miles on it,

    and the car runs almost like new, not one single rust spot on it, never had any big problems, no rattling and still runs smooth.

    My wife drives a 2003 buick Century and it's also a great car , ( 6 Cyl. 3.1 liter - same as my Lumina )

    Both cars are very nice to drive, and are the BEST CARS we ever owed.

    We had many cars in our lifetime , and GM were the best ever.


  • Report this Comment On January 15, 2009, at 2:29 PM, PhilColley wrote:

    I'm with GM Advanced Technology Communications and I’d like to clarify a few misconceptions in this thread.

    First, the bridge loan is being used exclusively to restructure our operations in the U.S. and aggressively retool our product mix. We would have made this announcement regardless of whether we received the loan because the Volt is one of our highest priority programs. All automakers source components from around the globe, and 92 percent of parts and components for our U.S.-built vehicles come from the U.S. and North America.

    Second, we made a balanced decision based on performance, production readiness, vehicle integration, efficiency and durability when selecting LG Chem. Independent tests have verified that their cell chemistry achieves the greatest calendar life in an automotive environment through accelerated testing. Plus, they demonstrated superior manufacturing readiness for prismatic cells to meet our program timing.

    And finally, we are adding to the U.S. workforce with this announcement, rather than reducing it.

    Critics keep glossing over the fact we will assemble the packs in Michigan and that the cell is only one component of the battery. We are continuing to work with A123Systems and other battery suppliers on development projects because we have many needs that need to be met with our broad portfolio of hybrid-electric and extended-range electric vehicles.

    Feel free to follow me or chat me up on Twitter @philcolley.

  • Report this Comment On January 15, 2009, at 3:38 PM, hahn37 wrote:


    I agree with you on almost everything but as I said before : " LTHU has one of the more advanced Battery

    Company in the World, many US , Army , Navy Air force orders.

    So why go to another Country when we have it right here.


  • Report this Comment On January 15, 2009, at 3:42 PM, hahn37 wrote:

    Correction !


    I agree with you on almost everything but as I said before : " LTHU has one of the more advanced Battery

    in the world - many US , Army , Navy Air force orders.

    So why go to another Country when we have it right here.


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