| 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".
|
