When General Motors chief executive Rick Wagoner announced 25,000 lay-offs at the company's North American factories last week, the depressed stock rallied more than 10 per cent within days. But while shareholders applauded, vehicles analysts and industry insiders watched in disbelief. They had seen it all before. In 1986, GM announced the closure of 11 plants employing 29,000 people. Six years later, it presented a plan to cut another 70,000 jobs. Since 2000, GM has eliminated 30,000 jobs in the US. After each cull, its stock surged. But GM's share of its critical home market has fallen from almost 50 per cent to about 25 per cent over the past 25 years. Many experts think Mr Wagoner is aiming too low for what he wants to achieve. 'Getting rid of people and factories is not going to close gaps in product development and production efficiency with competitors such as Toyota,' said industry analyst Maryann Keller. She is hardly alone with her reservations. Robert Barry, an analyst at Goldman Sachs said: 'GM is only fidgeting to stay above the water.' The unions share this belief. 'They have to offer cars with world-class design and high quality,' said Richard Shoemaker, who is in charge of GM at the United Auto Workers. Ms Keller said GM had simply 'forgotten how to make cars that people want to buy'. The steady erosion of the leading global car manufacturer's position on its home turf seems to prove that claim. Where it accounted for half of all cars sold in North America in the 1970s, and one of three in the 1990s, GM now only sells one of every four passenger cars in the US. Plagued by excess capacity and rising health-care costs, GM lost US$2,300 for each car it sold in the first quarter of the year, plunging it US$1.1 billion into the red. The more the dust from Mr Wagoner's announcement settles, the more it becomes clear that America's 'big three' car producers - GM, Ford and DaimlerChrysler - are more than just victims of massive health-care burdens, demanding unions and undervalued Asian currencies. 'The great tragedy of Detroit's decade-long demise is that it's self-inflicted,' said Micheline Maynard, author of The End Of Detroit. In her book, Ms Maynard paints a picture of a car culture led astray by arrogance and insularity, as well as by its obsession with rapid expansion rather than organic growth. While Japanese and South Korean competitors started their onslaught in the US in the 1980s, GM's long-time chief executive Roger Smith bought Electronic Data Systems to shake up the firm's culture. He bought Hughes Aircraft to inject space technology, spending 'money that should have been devoted to designing better automobile engines', Ms Keller said. Mr Smith also added Saab and Saturn. Today, 'Saturn has been relegated to just another undistinguished GM brand that has cost the company more than US$10 billion', she said. Ms Maynard wrote: 'The overriding goal of GM and Ford has never been simply to be good, but to be big and to grow as strategically as possible.' Three of the last four GM chief executives, including Mr Wagoner, came to their posts through the ranks of the company's New York finance staff, fuelling a joke in Detroit that the massive company, with its huge credit, financing and mortgage operations, resembles a bank that builds cars. 'Selling one vehicle at a time to one customer at a time - the way the best foreign companies approach growth - was simply too slow,' Ms Maynard said. She believes that GM, Ford and Chrysler's sense of timing has been dulled by their tendency to look inward. In the early to mid-1990s, they began to focus on pickups, sport utility vehicles (SUVs) and minivans, assuming it would take foreign competitors years to catch up. But the Japanese, Germans and Koreans not only reacted fast, they also continued to pay careful attention to their established passenger car market. While the foreign manufacturers introduced better models of standard-bearers like the Camry and the Corolla, the Accord and the Civic, US companies - convinced of their own superior knowledge - refrained from upgrading and improving their existing models. 'They got distracted by the opportunity to make bigger profits on SUVs,' said Ms Maynard. A striking example of how Detroit dropped the ball is the Ford Taurus, a family car that once proved that Detroit could triumph against the foreign invaders. Despite the stiff challenge from Honda and Toyota, the Taurus became the best-selling car in the US. In the 1990s, it hung on to this title, but by 2002, it was almost forgotten. Ford, focused on maximising the profits of its SUVs and pickups, did not run a single ad for the car in two years. 'In a contest between short-term profitability and long-term customer satisfaction, profits won out every time,' said Ms Maynard. But now, with oil prices rising rapidly, America's love affair with the SUV has stalled. And with sales numbers crumbling, the huge profits that these titans generated are plummeting. Now, the big three are trying to push their SUV sales with discounts of up to 20 per cent. But this was more than just a costly promotion, said Ms Keller. She called the heavy rebates 'a self-defeating exercise that gives the impression that the company is having trouble selling its cars'. For neighbouring Mexico and Canada, the demise of the big three is not automatically all bad news. Their cost advantages are not only attracting Asian competitors of the US carmakers, they may also benefit from a restructuring that includes the relocation of unprofitable GM factories. In a couple of days, Toyota will announce the construction of a second plant in the central Canadian province of Ontario. The factory, initially planned to be built in the US, is part of Toyota's massive attack on GM's dominant position. Toyota wants to sell an additional 100,000 cars in North America each year until the end of the decade, in order to reach a global market share of 15 per cent and surpass GM as the world's No1. The Japanese car giant decided to build its new factory in Canada because of lower taxes and health-care premiums, as well as bigger government incentives. Gerald Fedchun, president of the Automobile Parts Manufacturers Association of Canada, said a car worker costs US$3,000 less per year in Canada than in the US. GM spends US$1,500 per vehicle on average to cover health-care costs in the US, but pays just US$120 per vehicle in Canada, thanks to a state-run medicare system. So while industry experts in Canada are expecting that 4,000 of the 25,000 GM lay-offs may occur there, they are optimistic about winning the next big automotive investments in North America.