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Both
Visteon and Delphi have been in the news lately as each has
either discussed or actually exercised some of its take back
privileges with its respective former parent.
Both
companies follow their parents' lead by saying they are
looking for relief from high labor costs. Delphi sustained
losses in three of its six years since being spun off from GM
in 1999, including a $4.8 billion loss last year. Visteon has
suffered similarly, if somewhat worse, during its brief
history as a sort of separate entity of the leaky umbrella
otherwise known as Ford. Meanwhile GM and Ford have offered an
"Employee Discount" sale with great sales results.
Unfortunately, the great sales are exacerbating their losses.
The response heard is that it's clearing out excess inventory
so they can crank up capacity again for 2006. You have to ask,
"Why?"
Those
of you schooled in root cause analysis know the "Five
Why's" approach. Briefly, it means to keep asking "Why?"
until the explanation given, or discovered, is the root cause.
My five year old grandchild is already an expert at asking
"Why?" He also knows that Grand Dad will continue to
struggle to come up with another answer long after Mom has
exclaimed, "Because I said so!" A child's
persistence can reveal some interesting, albeit occasionally
offbeat, answers.
If
a five year old can do it, why then can't Delphi's, Visteon's,
GM's, and Ford's management get past even the first "Why's?"
response: labor and health care costs. Let's try to help them.
As
any mother knows, the barrage of why's is usually preceded by
a statement. For example, let's assume somebody at Ford or GM
says, "We are losing money." The magnitude of the
loss and the accuracy of the statement for each of these
companies should amplify the ensuing crescendos of "WHY?"
Why
# 1: "Why are you losing money?" - "Because
our labor and benefit costs are too high." Many analysts
and automotive veterans stop there. But let's go further.
Why
# 2: "Why are the labor and benefits costs considered
to be the reason for the huge losses?" - "Well",
they might say, "because we always blame our problems on
labor costs." Review the history of any domestic
automotive company for the last fifty years if you don't
believe me.
Why
# 3: "Why do you always blame labor costs when you
helped create the very 'problem' in the first place?" -
After some soul searching they could say, "Because we
don't know any other way to manage the business than what our
forefathers thought us." Henry Ford, not Toyota, created
JIT (efficient mass production). He, Sloan, McNamara and a few
others established efficiency goals tied to work centers,
capacity utilization at the expense of inventory, and passing
on labor costs to the consumer.
Why
# 4: "Why don't you know a better way to manage"?
- Even more soul searching might reveal, "Because the
domestic automotive industry is notorious for being closed
minded and incestuous about how to run automotive companies."
Look around and see how many automotive suppliers have hired a
30+ year veteran of Ford or GM (or of a supplier to Ford or
GM) as a consultant to help them solve a problem. If they're
so good, why are GM and Ford in such trouble?
Why
# 5: "Why are you unwilling to be open and accepting
of others' ideas?" - Digging very deeply, they might
confess, "Because even though the world is passing us by
and we're afraid of failure, new things are scary."
Let's
see how many why's it took to get to the root cause: closed
minded management that resists new thinking not steeped in
automotive culture because they don't know how to deal with
the changing economy and are frightened by the prospect of
change. Son of a gun! It only took 5. It's amazing how the
process works. Maybe GM and Ford need five year olds to ask
the tough questions they've not answered to date. The
challenge then is what does management do about it once
they've gotten to the root cause?
There
was an interesting announcement recently. Microsoft hired a
Wal-Mart veteran to be its No. 3 executive, behind Chairman
Bill Gates and CEO Steve Ballmer. B. Kevin Turner, a top
executive at Wal-Mart, was named Chief operating Officer at
Microsoft, placing him in charge of sales. He will oversee
Microsoft's sales and marketing unit in addition to the
company's information technology and fulfillment operations.
Mr. Turner's experience as both an IT savvy customer as well
as his connection to the end user experience for Microsoft
products bodes well for Microsoft as it grapples with new
customer choices such Linux and other open-source software
that has pressured Microsoft in recent years. Mr. Turner's
appointment is an indication that Microsoft is obviously
asking the tough questions and is not afraid to answer them in
a creative, contemporary way.
If
you are struggling with getting your costs down and your
service up, don't hesitate to keep asking the really tough
questions of yourself. And, if you sense you are stuck in a
"this is the way we've always done it" rut, try
something else even if it means risking the challenge of being
creative.
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