In a recent interview reported in the Wall Street Journal (GM's Wagoner Targets Costs, New Products, April 14th), Wagoner said GM has one crisis: the health care cost issue. He went on to deny that GM's over capacity and build up of cars on dealer lots was a crisis, choosing to describe them as "adjustments" that are affecting near-term financial results. Even his response regarding over capacity implied, at least to me, that the capacity they have will be just right when they improve the ability to sell more cars. In addition, Wagoner so far is refusing to follow the lead of Carlos Ghosn at Nissan who went public with Nissan's Revival Plan that clearly laid out a turnaround plan for people to see, understand, and possibly support.

Overall, the responses in the interview sounded to me like someone trying to downplay the situation at GM. It is hard to imagine Mr. Wagoner is in denial but it sure sounds like it. Surely Mr. Wagoner isn't one of the few people in the U.S. who doesn't think the GM situation is serious, or that the automotive industry is starting to resemble the airline industry.

It may speak to the real problem at GM: leadership so mired in tradition that they're trying to apply old tactics to fix new problems. In fact, isn't that the definition of insanity: doing the same thing and expecting different results?

The UAW's response to Mr. Wagoner's health care crisis comments were also traditional, if not somewhat more understandable, seeing as how the work force continues to represent the "well" GM management goes to first in times like these. The other "well" Mr. Wagoner visited was the suppliers, challenging them to get their costs down, adding what sounded like a thinly veiled threat to buy more from cheaper off shore competition. Funny, his pronouncement of being more global didn't seem to have the expansive ring to it one would think. Maybe it was the third "well" Mr. Wagoner went to: a more centralized management and control process. It seems this happens a lot. When management leads a business into trouble, they centralize the decision making process to, I suppose, do more of what got them there in the first place, except this time expecting different results.

To be fair, this isn't limited to GM's management. A lot of companies, large and small, take these three traditional steps when there's trouble. It may be helpful to examine each more closely. If so many choose these as their first lines of defense against a business downturn, there must be something to it, right?

First, let's look in the labor well. While GM certainly has a health care and pension cost crisis they've brought it on themselves by being cavalier about absorbing the costs into the cars they sell to us, John Q. Public. However, others go to the labor "well" by reducing headcount in a number of ways, either through layoffs, incentives to promote attrition, or reducing benefits. For most operations, labor represents less than 10% of the product costs. Yet when there's an initiative to reduce costs by 20%, people get cut first.

Second, since materials often make up 50-60% of product costs its understandable to look to the suppliers to reduce their costs to save a significant amount. However, since materials have become globalized, the ability to reduce the material costs becomes problematic for many suppliers so they revert to well number one: their labor (which is a minority portion of their costs as well).

Third, management's decision making acumen has gotten them where they are, meaning in trouble with poor cash generation, poor sales, and bloated inventories. This stuff doesn't just happen you know, somebody screws up and causes it. Centralizing the decision making is one more example of wrong thinking. Bernie Ebbers, who says he didn't have a clue about financial matters, made the decision to swap out the drinking water because he was in charge. Mr. Wagoner claims it won't slow down GM's already notorious slow decision making process. So, instead of tapping the creative resources of many in tackling a problem that affects them all, Mr. Wagoner, and others in other similarly troubled businesses, has chosen to disregard that resource and disrespect his people in the process.

The world is changing for all of us. The problems seem bigger and develop faster, sort of like a postulate to my dog-year theory: seven years of the past is equal to one year in the future. Said another way, what took seven years to develop only takes one year to unravel. Because of this, traditional management theories and traditional business models don't work as well anymore. Whether you are GM or Gus's Sheet Metal, becoming more competitive requires new, holistic solutions. The traditional "wells" may be running dry but there are other, deeper, and better "wells" like integrated supply chains and demand based business models that many can tap to realize better, sustainable results.