GM's Diseconomies of Scale

GMInsideNews says that GM's billion-dollar Alpha chassis design is in deep trouble.  Mickey Kaus summarizes:


Alpha is the latest American attempt to compete with the BMW 3-series. It cost a billion bucks. But thanks to classic bureaucratic product-bloat-familiar to students of the F-111 fighter and Microsoft VISTA-the supposedly small and sporty chassis has locked in a "sub-optimal geometry" on the front suspension (which GM is reportedly trying to mask instead of fixing) and is hundreds of pounds overweight. ... There's a reason some companies go bankrupt, you know. And corporate cultures are hard to change. ...
Edward Niedermeyer of The Truth About Cars adds:

Now, class, if you were developing a BMW 3-Series competitor, how important would the issues of weight and front suspension geometry be? Very important? Sort of important? Existentially important? Meanwhile, what about AWD? How important would that be? GMI may be reminded of the Sigma's development, but GM's history is rife with vehicles that started with a bold, simple vision, only to be re-engineered into mediocrity. A line of driver-oriented, four-cylinder-only, rear-drive small luxury cars is an intimidating step to make... but it could have been distinct, downright unique. And it would have easily handled the CAFE issue that Lutz worried about as ATS development was beginning in earnest in 2008. Heck, BMW is putting a three-banger in its next-gen Dreier... so why was Cadillac so worried about bigger engines and AWD, while glossing over the "locked-in" sub-optimal front suspension?

Kaus adds the obligatory anti-union rant.  I'll add the obligatory anti-corporate-conglomerate rant, which is, I think, a big part of the problem here.

Don't get me wrong: economies of scale are great stuff.  But the corporate relationship with economies of scale is too often like a fourteen year old boy's relationship with cologne, or a hipster's relationship with hot sauce: if a dash is delightful, five dashes must be utter heaven.  They end up trying to put the damn stuff on everything.

Re-using parts and tools for different marques is the benefit of being a big car company.  But taken too far, it is also a drawback.  It is very cheap to take a single chassis and drop every car you want to make on top of it.  It is also very stupid, because you end up with a bunch of poorly differentiated products, none of which are best in class.  Now, who does that description remind me of?  Just give me a minute and I'm sure it will come to me . . . 

Many companies face this temptation, and the bigger they get, the more tempting it is.  But at the point where you're letting Cadillac load down your 3-series competitor with extra weight and a problem suspension, because it's cheaper than having them develop their own damn chassis . . . well, you're showing signs of terminal Conglomerate Disease.



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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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