Electric Vehicles

Monday, June 01, 2009

Obituary for GM (General Motors Corp.)

Today GM declares bankruptcy. My prediction of 25 years ago comes true. Who would have ever thought GM would go bankrupt? Only me? and I got laughed at for at least 24 years. I am not happy about this because of what it will do to the many men and women who worked so hard and were so dedicated to GM’s success. But it takes more than just hard work and dedication to compete in a very competitive world. It takes leadership to do the right things and do them not only right, but better and better the next time, and the next time. GM has been missing that leadership for 30 years, probably more.

GM has lost $88 billion since 2005. Does that sound like a company that knows what it is doing? Will the bailout or bankruptcy solve these problems? NO! The core problems still remain. The financial people in the President’s Auto Task Force, in GM, and in the investment world do not know anything about product and manufacturing and can not fix what they can not see. Money is only part of the solution. What is GM going to do differently tomorrow? For example, the last straw of stupidity was selling off GM’s European Opel operations (except for 35%) to auto parts supplier Magna and the Russians. What is GM going to do for small car platform engineering now? North American operations gave up on this in the 90’s. Ex-CEO Wagoner also sold off every other company relationship GM had, Fiat, Suzuki, Isuzu, Fugi Heavy Industries (Subaru), all for short sighted cash. The other “asset” GM has eliminated is the Balance Sheet liability of people. Again, for short term cash. But when you sell off your experience, skills, and knowledge, you have very little left. Only a financial person would do this.

What are the core problems? The main one is lack of a visionary with leadership who understand the execution of car programs. Leaders see the next program and see the need to build culture to do the next, and the next and the next better and better for lower and lower costs, faster and faster to production times and with higher and higher quality. This does not happen by accident, but by a thoroughly diligent leadership and a knowledge based organization that builds that thinking into its culture and encourages it. GM did not have this commitment for the 25 years I worked for the company (1971-1996). I saw the company try to build this in the era of Project Centers (1977-1985), but almost the opposite occurred and it got worse, until I gave up on GM’s management and left (not retired, but walked out the door.) Without this leadership to build core competencies in all areas, GM continues to struggle to do car programs. The mode of operation is to use money instead of knowledge and expertise. For example, rather than having a team that has done hundreds of hoods and can do the new one in hours or weeks, GM spends years and makes mistakes over and over because the learning is never captured because the engineers and designers just move on to something new that they have never done before either. This is very expensive and does not yield world class. GM solves its problems with money. If one person can’t do it, put 5 on it and if they make mistakes pay money to redo or retool or retest until it is right, just don’t run out of time.

What is GM going to do with $50 billion of our taxpayer money? Do they need that much? I can’t imagine how they could spend that much money. Can a smaller GM pay that back? Are they simply trading old inflated debt for new taxpayer debt? Even at 5% interest, $50B creates $2.5B in interest per year. And even if this is a shell game to get Wall Street to over value GM stock to “buy” the Government out, it will only collapse again. A successful company needs to be rock solid and stable to its core. GM has burned up $18B of our taxpayer money and what has been the result? Bankruptcy? It is paying for mostly overhead and inventory to build some small amount of product and probably lawyers and accountants. Is it an investment in the future? Financial people usually do not see the future beyond paying tomorrow’s bills. This is not the way for the future. Where is the leadership to build a new GM? No where in sight.

How much would Toyota need to do 5 new car programs, as GM may need to do? $5B maybe, but certainly not $50B. It makes no economic sense. I am sorry but I do not see a survival plan for GM. Henderson is no different than Wagoner before him and Jack Smith and Roger Smith before them. These guys probably made good CFO’s but they do not have the leadership skills to move the company in new directions. They can’t because they do not have the understanding of product development and manufacturing from a global corporate stand point. They only know how to ask, “What do you need?” and add up the numbers and grumble. Old traditional ways do not die without some one challenging the numbers and suggesting new ways and creating new organizational structure and culture. Who is going to do this? Is there anyone left?

Is GM doing anything right? As an electric vehicle enthusiast, the Volt sounds promising but GM is spending way too much money on this program. Just like the EV1 program I worked on, they spent money wildly, to the tune of $1B to do the EV1 program. The result was about a 1,000 cars built and then they killed it, crushed the vehicles and made everyone including suppliers hate them. Most of the people were retired out but a few remained. When Bob Lutz stands up and says proudly, "we are spending over a half a billion dollars a year on development," you know something is wrong. The Volt was announced in January 2007 at the North American International Auto Show in Detroit to be GM’s future. GM continues to promise delivery by the end of 2010. The product really can not be done that fast due to the battery testing required before putting into production. Battery pack testing will take at least 5 years of testing in its final state before production. GM keeps changing everything as they learn about the battery, and that resets the 5 year clock. I suspect, the bankruptcy will delay the program launch which is good if they keep working on the development. But then GM announced that they will ask DOE for another $2.6B for two Volt derivatives! Why do they need so much money? Did any one ask and challenge them who knows anything about this business? GM’s financial numbers may be the best they have, but they are way too high and require a new way to doing things.

Sorry GM, but the dinosaur is starting to freeze to death and die. Let him go and for certain something will be reborn. Will it be an American car company? Probably not. Ford will continue to grow because they have a technical guy leading and a good plan that has been in place for a while. They see the future and know how to address it....themselves. I do not know about the Fiat and Chrysler deal. Fiat is getting far more than it wants or needs to make a stand in the US market. Fiat probably does not understand how Chrysler is organized nor what its culture is --- neither did Daimler and we know what happened there. What Fiat needs is far less than what Chrysler will “sell” them in the “New Chrysler.” Fiat needs a couple of assembly plants to build small cars, small engineering staff to do testing, purchasing staff to source parts, manufacturing people to run the plants and some small number of dealerships with distribution to sell products.
I am sorry for GM and its people, its dealer, its suppliers, its stockholders, but when death comes, we must move on. We now have to look to the future, not the past.



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