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GM's
recent disclosure of a loss, followed by the announcement of
their interest in selling the financing business reminds us of
the "What are you thinking" question posed in an
earlier newsletter. Selling the proverbial cash cow seems as
wrong thinking as it can get. Management's response to their
troubles suggests the problem has gotten too big and too
complex. Already, there's talk of a governmental bailout, as
one ex-manager puts it, to prevent a "societal"
problem. Sounds a lot like Mitsubishi, doesn't it?
So,
let me get this straight. Since society can be harmed by bad
decisions made by bad managers, society should bail out those
same said bad managers who will likely continue to make bad
decisions.
Several
knowledgeable industry leaders were recently quoted outlining
three strategies for GM:
1) Pressure the U.S.
government for legislation to reduce the company's health care
obligations;
2) Persuade the United Auto workers union to
accept deeper benefit cuts.
3) Improve GM's cars and
trucks.
What do these strategies tell us about GM? The
first two have a historical basis. Acrimonious relations in GM
created a climate that often led to intense and sometimes
bloody, negotiations between management and labor. GM's
appeasement of labor wasn't, in my opinion, so much a
reawakening of the value of its people as it was the belief
that they could pass on the costs to the public, which they
did. Now we're being asked to perpetuate past managements'
mistakes by paying for something we've already paid for.
The
third strategy is confusing. Do the industry experts mean
better quality? GM has a well-deserved reputation for
quality-built vehicles. Do they mean more productively built?
GM is regarded as a very efficient producer with reasonably
low labor content compared to the industry. It sounds a lot
like "Same old, same old". Hopefully what they meant
is build cars and trucks the public wants to buy. Now that is
a novel idea.
Building
cars and trucks the public wants to buy has been difficult for
GM of late. GM has over 100 days of cars and truck on dealers'
lots. They've reinstated rebates and other incentives, now
some of the highest in the industry. Meanwhile, GM's capacity
utilization looks like one of the lowest in the industry.
Let's
consider another strategy for GM: declare bankruptcy, jettison
half their capacity, drop a third of their brands, and focus
on building cars and trucks that consumers want. Couple this
new focus with a rapid flexible build-to-order operations
system that creates the supply chain flexibility that can
economically adjust to changes in consumer preferences.
Finally, get Michael Dell to run it. Society and the
automotive industry will be better for it in the long run and
the GM that emerges be stronger than ever. Whatever happens,
it won't be "same old, same old".
*Journal
of Operations Mgt., April 1998; Koste, Malhotra / Definitions
of Flexibility Dimensions
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