The June 22 letter by retired General Motors executive William H. Noack, defending the company, reminded readers of all that is good with GM, including higher annual unit sales. The problem is that higher annual unit sales are contributing to the company's immense problems because they mask bottom-line realities.
How can high unit sales be good when they are driven by incentives so high that GM loses money on every car it sells? Toyota is many times more profitable than GM. It offers only half as many models, sells far fewer units annually and has a far smaller market share. But Toyota chases profit, not market share.
The GM focus on sales and market share has run the company into the ground. On the bottom line, this focus is far more expensive than the health care or union-related production problems. To date, incentives hover at about $4,000 per vehicle sold. This level of unit sales and production volume cannot be sustained, but GM cannot seem to grasp this.
To reverse this tailspin, GM needs to shrink its model offerings and unit sales to increase profitability per car sold. Sure, some factories would have to close and fat would have to be trimmed. But GM no longer has a choice. Until GM's executives understand this, one of America's industrial giants will continue to slowly kill itself.
Laguna Niguel, Calif.