G.M. Lays Its Future on Washington’s Doorstep

“Danger Will Robinson! Danger!”
http://www.nytimes.com/2009/02/27/business/27auto.html?_r=2&ref=business

We need to have our own little Robby robot for just this type of warning. GM goes into bankruptcy… Let’s look at facts, they are outsourcing and off-shoring most of their labor already. How much is still an American company? More Toyota and Honda cars are manufactured here than Ford, Chrysler, and GM combined. The Unions have strangled not only GM but it’s suppliers to the point that they cannot be competitive. I was watching the Discovery Science channel and the really interesting innovations for electric and hydrogen powered vehicles was from France. France? Why are we not the leaders of innovation? Have we lost our ability to compete? Are we too far gone? We have the ability to compete again, but we need to shed our illusions and begin dealing with reality. President Obama is doing what he and his party have been espousing for many years, a highly involved government with influence and the muscle to back it up. He has maintained his election promises and is poised to expand. Let’s face facts; GM (while in general much better run than Chrysler) has placed itself on the verge of disaster. With a bloated bureaucracy and a rigid structure they reflected a government entity in many ways. New ideas had to submit a form for approval, had to pass a standards committee.

This is nothing new but merely a reflection upon an organization that has lost its focus on the primary mission. When were they going to build better faster, more fuel efficient, greener cars? They gave up the lead thinking that being the biggest meant being the best. Bill Gates at Microsoft was always accused of being paranoid; now look at Microsoft in the market.

I started to think about how much creativity 19,000,000,000 or 19 billion dollars could buy. That pays 200,000 people 95,000 dollars up front. This is only for 6 months for GM. This tells me that most of their employees are making more than 95,000 per year, and that utilities, IT and other expenses are equally high. It does not sound like a place where creativity or innovation would be allowed to flourish. There have been many books written about this danger and how the larger the organization the less productive and the more bureaucratic in nature (explains many of the issues facing our government). This bureaucracy degrades the quality and ability to generate new innovative products. Many companies have tried to institutionalize innovation such as 3M, GE, and Apple. Although, I believe Apple will struggle once Steve Jobs disappears from the scene as he is such a huge force within the company and the industry. GM does not have a Steve Jobs, they do not even have daring leadership. The GM story is about playing it safe and showing acceptable numbers, “Meeting expectations”. This is dangerous for not only companies but people. If you always take the safe and easy route you do not grow. Companies are the same way. All of the automotive companies in the US, and a few that have started down that path. Microsoft will be where GM is currently if they do not do some drastic changes, like separating the OS from and applications business. Going to war with European regulators, and the US anti-trust groups has proven that they cannot play the political game, so in order to use the 42 billion dollar war chest they either must pay dividends or go on a buying spree. Now is not the time for timidity, but for bold action that goes contrary to playing it safe. While I disagree with the use of funds I have to admire the president for taking large steps. I just hope they are not off the end of the cliff. That is the danger with large bold steps, sometimes you fail boldly and miserably. On the upside your success is written up and studied. Have faith be bold and things will work out. Do not give up on the little failures as these are really lessons for your success. The only failure is when you stop trying.

GM and Chrysler got comfortable, got lazy. Management and the board voted themselves large salaries, and the unions used that to negotiate wages far and above where the rest of the world. Because of this we are funding investments that will come under more and more pressure, and without the tough skills of bringing the company back on their own, they will continue to fail. Tata is waiting in the wind with the purchase of Jaguar to expand. India does not have anti-trust regulation and they will be happy to attend a fire sale. GM and Chrysler should take the companies into chapter 11, and reorganize if they want to survive. They may still do that, but I do not know if they will have the courage to transform themselves into companies that will be able to compete in the global market. While GM has Opal and other subsidiaries, they do not behave as a single company, nor do they play together well. Chrysler has similar issues with their subsidiaries. Instead of off-shoring the engineering groups maybe they should create global engineering groups that collaborate, not just chase the lower salaries.

Nineteen billion, enough to pay 200,000 people $95,000. We need to think about our investments. That could take us to the moon, develop hydrogen fueled vehicles, or install solar panels on every house in America. Should the tax payer save a failing company, or something that has a future? If GM and Chrysler can turn things around then they have earned the right to survive and they will be stronger, leaner, and better able to survive the future. Time to get off the laurels and get busy.