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Aaron

Great and thoughtful post, Bob.
While the Big Three are begging for government dollars, Nissan and Toyota are seizing the moment offering 0% financing from their own cash. I have heard that the conversion rate from Scion purchasers (typically younger) to another Toyota (as they mature) is setting industry records. the big three are dying on the vine, $25B would be a bandaid on a terminally ill patient.
Do you think the French would take Detroit back?

more

Bob, your key mistake is assuming GM is a car manufacturing company.

Warren Buffett put it right -- GM is a health care & pension benefits company with an auto manufacturing business on the side. And clearly Wagoner, Nardelli, etc. showed up in D.C. last week with no clear plan or vision, but hopeful of a handout.

GM's big liability is all its old retirees. It's a large private social benefits provider, and you gotta respect GM for honoring its obligations and continuing to extend benefits to its retirees when it would be economically convenient to nix them.

Bankruptcy will continue to leave the car manufacturing arm of GM/Ford/Chrysler in its current state of ineptitude and result in benefits being cut/eliminated for hundreds of thousands of employees.

One way or another somebody's going to get screwed in all this. GM retirees, taxpayers, bondholders, shareholders, and UAW members all need to line up for a game of Russian roulette.

Dan

Bob

As co-author of an older but still vital book ("Driving Fear Out of the Workplace") on speaking up, I am not at all surprised by your observations, and continue to say what I have been trying to say for about twenty years now: American organizational failure is a product of people not being able to speak up and not being listened to when they do -- by managers and executives who have succeeded through their very insensitivity to reality. It's astounding really the invisible sense of privilege that's at work here. Bailout or no bailout you won't convince these folks that they caused anything. They go their way as wealthy, self-enclosed victims, asleep in the common belief that someone up the system or down the system or outside the system did this to them and they are simply innocent. You can't make people take responsibility or accept that integrity may be larger than their superficial view of it. It has to come from something that lives outside the culture of such workplaces and is on the inside of the person. It has to come from a desire to know self, a burning desire that is much stronger than the pride in getting a free car. Thank you for this fabulous post.

Michael Sporer

A culture like this is impossible to penetrate...that is until an earthquake changes that culture!

B Frank

"What has hurt GM the most is that its fundamental tenets made it smug. Alfred Sloan and Charles Wilson had been highly innovative people who always asked, 'What is the right question?' Their successors knew all the right answers."

- Peter Drucker, Concept of the Corporation's 1983 epilogue

Alex Rose

Nice take on things.

I have to believe Alfred Sloan would be embarrassed that GM had an executive of such low calibre like Wagoner, especially as CEO.

To that end, I think one of two things should happen with GM.

Either break it up so each brand is independent and autonomous, or, nationalize GM until it can stabilize. Either way, the current management must go.

Also, workers should have more of a voice in this.

Jay Godse

US Government should not bail out the auto industry. Only a bankruptcy and restructuring will enable the removal of the cultural elements that keep executives out of touch from their customers.

The auto industry won't die. Anybody who buys up the assets and liabilities of GM et al will make the sensible business decisions such as increasing collaboration, rationalizing brands, and engaging customers. Also, Toyota, and Honda have plenty of production capacity in North America to meet demand.

Personally, I own a 1997 Saturn SL1 and a 2000 Toyota Sienna. Both vehicles have been a pleasure to own compared to previous GM/Chrysler vehicles, but the Saturn has been the most pleasant to own. It just works, and didn't cost an arm & a leg to buy, and maintenance is reasonable.

My Saturn experience tells me that GM has what it takes to excel in the auto industry, and compete head-to-head with the best Japanese car-makers.

Bob Sutton

I want to thank everyone for the remarkably thoughtful and constructive comments. They aren't making me feel any better, but it is interesting to read about the nuances that so many of have added. Jlee, I found your experiences to be especially troubling because, if a way can't be found to motivate a smart young person like you, then the autos are on deep trouble. Matt, I found your so called dirty trick to be one of the smartest interventions I have ever heard of -- talk about creating conditions where leaders face the brutal facts!

Matt

Bob,
Thank you for a thoughtful and insightful post. Everything you describe mirrors my experience with a part of GM in the early 90s. I was doing some consulting with a division of GM and told them the best ideas, in fact no ideas, were getting heard. The managers to a person told me that wasn't their culture. During an offsite I had the opportunity to design part of the program. It was an age-old prioritization game called Survival on the Moon: you've crash landed on the moon, 200 clicks from the mother ship, with 25 items you have to rank in the order of their importance in surviving the trek to the ship. You do it individually, then as a group, in order to make the point that "we" is smarter "me". (There is a right order, provided by NASA.) I constructed the table rounds cross-hierarchically, so one table might have a vp and a lowly staffer. Then I played a dirty trick: I gave the lowest ranking person at each table the answers ahead of time, saying that when it came time for the group ranking, their job was to everything in their power to convince the table they had the right ranking, short of revealing that I had given them the answer. Not a single table (about 15 tables of 10) got the right answer. Then I had the ringers stand up. Got to catch all the managers red-faced.

I spent 8 years inside Toyota as a fully retained advisor to the University of Toyota. It is the antithesis of everything you describe.

Matthew E. May
matthewemay.com
Author, The Elegant Solution: Toyota's Formula for Mastering Innovation

Nick

As a former auto industry employee (at Ford) who's now in high tech, just about everything you said resonates with me. The entrenched culture of navel gazing and established pecking order (with the 'old guard' at the top) was really frustrating for someone like me who had a lot of passion and excitement for the auto industry.

At some level, I think allowing these companies to go into bankruptcy may force them to think much harder about what to change, but I have little faith in the established leadership to make the right choices.

Nils Davis

Basically my rule of thumb is, if Bob Sutton says they should go, they should go.

Excellent article. Thanks for taking the time to put it all down. However, "Getting rid of them and instituting an intense program of cultural and organizational change strikes me as the best way to save the company," just doesn't seem like it can work. I think we (Congress) can put conditions on the bailout, but I'm not sure we can be as detailed as you recommend, which means it probably won't work.

Instead, we may have to spend the money just to bridge the employees through unemployment for a while and to fund some auto startups.

Another very interesting article on Detroit from this week, which I think ties into your point:

* Detroit's Six Mistakes and How Not To Make Them by Umair Haique (http://discussionleader.hbsp.com/haque/2008/11/detroits_6_mistakes_and_how_no.html)


Frederic Lucas-Conwell

This GM situation is embarrassing. Bob you can find reasons anywhere for this failure, including inappropriately taking jets. There is however just one question that other comments highlight: How is it possible that our system is incapable of having smarter CEOs for these companies sooner? We know it takes just one person to ruin a company (or a country). It will take just one to make it successful again.

jlee92

Ever since I was a kid, my childhood dream was to design cars. I showed a natural proficiency for mechanics, so I majored in mechanical engineering and received undergraduate and graduate degrees at MIT and Stanford respectively. While at Stanford, I signed up for a summer internship with Ford at one of their plastics plants in Ohio. The recruiter told me I would get a full hands-on experience in manufacturing. Instead, I spent 3 months being the group’s typist because I could type documents on a computer at 4x the rate of the other old boys there. That’s how they used an eager engineering grad student. Still determined to chase my childhood dream, I decided to extend my internship another 3 months when I found a position to work at Ford’s HQ in Dearborn in their chassis engineering group. There, I saw the reality of the culture. White collar workers who are there purely for a paycheck, not to make something great. The thought of working late was inconceivable, because work can always wait, but their need to veg out at home could not. There was no concept of actually having better quality than the Japanese and no emotional response to always being ranked below a competitor. To sum it up, everyone was completely satisfied and comfortable with mediocrity.
Union workers felt that having relatively high pay, low skill jobs (where pay was based purely on seniority and not on ability) was a right, not a privilege or reward. When I was testing brake rotors, I was told I may not touch any tools or perform any work myself, as this would threaten job security of union workers, so I ended up doing a lot of waiting for someone to turn a few bolts.
I also quickly realized that there was no path towards promotion for me as an American born Asian. When I was introduced to someone, I could see the stress in their face for fear that they would not understand how to pronounce my name or understand my thick accent. Then relief to find out my name is “Joe” and I have no accent.
I went back to Stanford to complete my master’s degree, and have been working for high tech companies in Silicon Valley ever since I graduated. My original childhood dream was crushed by the reality of Detroit, but I have since found great satisfaction working at companies that have created technologies that are in computer and consumer electronics products that you are probably using every day to make your life easier, more productive and more enjoyable.

Sam Thornton

As to the "creative destruction" crowd jawing for bankruptcy, Bob, I have a theory. They know this will never happen so they'll never be accountable, but it's a great hook on which to hang their usual schtick of no taxes, no regulations, and -- especially important -- no labor unions. Plus, it fits in with their usual divide and conquer strategy: big, evil corporations vs. the little guys who pay the taxes. All baloney, of course, but who's counting?

Pete Abilla

I can't, with any credibility, comment on GM or Ford. But, having some familiarity with Chrysler -- I would bet some bailout money on them.

Chrysler is privately owned by Cerberus, a Private Equity firm. I respect Cerberus and I'm sure they have deployed armies of Lean Manufacturing and Six Sigma folks to help Chrysler. Moreover, Chrysler has hired several very well-respected ex-Toyota folks.

The big misstep is with Nardelli -- perhaps get rid of him and put Jim Press in charge. Jim Press understands the Gemba and, in my estimation, Jim Press would not have flown on a Private Jet to beg for money.

Being in the Gemba keeps you connected to humanity. The Private Jet was symbolic of being "out of touch" -- which can be a thread in an organization's structure that can pervasively and negatively infect every part of the company.

I'd bet bailout money on Chrysler, put Jim Press in charge. I'll remain silent on GM and Ford, but I pray and wish the best for the people impacted any upcoming changes in those companies.

Kevin Rutkowski

This post is an interesting overview of what Ford says they've been doing to remain viable for the long term. http://www.lctmag.com/news/news-story.cfm?id=2468

I've been pleasantly surprised by people who aren't from Detroit and who have no connection to the auto industry telling me how much they love the Edge, the Flex, and the Focus. I hope that Ford can survive regardless of what the Federal government does.

Kevin Rutkowski

I wonder how similar the management is for Ford and GM. I think there are a lot of similarities, but Ford may have taken some good actions to change sooner than GM. That includes hiring a CEO who is not from the auto industry.

A person I know who retired from Ford about 10 years ago told me that he was frustrated because Ford hired a lot of smart young people, but they would not give these hires much responsibility. Ford was very much run on a seniority system rather than a merit system. This was also evident during layoffs in the 80s when layoffs for white collar workers were primarily decided by seniority rather than any other factor.

I have a lot of friends and family who live in Detroit, and I'm very sad about what is happening there. I hope that the automakers can make the changes necessary to be viable for the long term.

Thomas Friedman also had an interesting take on the situation which included blaming Representative John Dingell, who lost his chairmanship this week. http://www.nytimes.com/2008/11/12/opinion/12friedman.html

Cyril

Very good post, and very good demonstration.
That could become a rule : Listen or be doomed !

Kevin Wheatley

Just a small comment, your note about Toyota only having two brands shows how well they have split their marketing/branding... see http://en.wikipedia.org/wiki/Toyota#Operations

for an example.

My take on this whole situation is that no handout should be 'free' i.e. without suitable conditions. I'd suggest that one of the big players asking for the handout be dissolved and the money that would have gone to them be used to employ the now jobless in something more sustainable/beneficial.

This would show the others that the threat implied by the conditions of the handout will be enforced.

Anonymous

Wow. Great post. On behalf of random internet people everywhere, thanks for taking the time to type it up.

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