Business World – WSJ.com — How to Save Detroit And $50 Billion:
The Holman W. Jenkins, Jr. column “Business World” in the WSJ is normally a good read. Last week, he wrote about the proposed bailouts (um, assistance) that automakers are looking to get from the federal government (up to $50 BILLION in loans… that's $50,000,000,000). Or, you could think of that sum as being roughly 3400 times Rick Wagoner's annual compensation (about $14.4M in 2007). Holman wrote:
“It must infuriate the auto makers how readily their critics attribute their problems to their own incompetence.”
I'm part of that gaggle of writers and bloggers who place blame on the shoulders of GM's management (and Ford's and Chrysler's). If that's infuriating to them, oh well, they can handle it. Dragging their feet on implementing Lean (truly modeling themselves after the Toyota Way) was just one major error their collective management teams have made over the past decades.
Jenkins lists of the typical excuses or external factors that can be pointed to for the challenges of the Detroit Three in North America.
“Not only did history saddle them with a UAW labor monopoly that their foreign competitors have managed to avoid.”
To be fair, “history” doesn't sign contracts. None of those union contracts were signed with a gun to the head of Detroit Three management. Buying labor peace in the short-term (through generous contracts, including UAW retirements after 30 years) has proven expensive in the long-term. You can probably blame both management AND the union for short-term thinking (“keep the plants running” and “get as much as we can in this contract”). Going further back, automakers treated their workers pretty badly. Earlier in Ford's history, workers were day laborers and were often spied upon or beaten by Ford's hired goons. And it's a wonder why they ended up with a union?
Jenkins makes other points that I'd tend to agree with, such as the impact of CAFE mileage standards and other government interference in the automotive market.
But the one line that jumped out at me was this:
“It flies in the face of human and business realities to imagine that, generation after generation, Detroit hired idiots while Toyota recruited geniuses — though that's the usual explanation of Detroit's troubles.”
Now in my first reading, I thought Jenkins was parroting the idea that Detroit hired idiots…. and I was about to get angry with him. Then, on a second, more nuanced reading, I realized he was actually saying that the idiots are the ones who think the Detroit Three are “full of idiots.” Jenkins is right to point out that the “usual explanation” is not at all true.
I know, first-hand from my two years in GM, that there weren't many idiots running around (on the white collar or blue collar sides). What you had was a broken management system, mainly.
Jenkins' column reminds of the Toyota expression that goes something like this:
“Toyota gets brilliant results from average people operating perfect processes. Toyota observes that competitors get average results from brilliant people operating broken processes.”
“Average people” doesn't mean dummies, far from it. Toyota is very selective in its hiring. But along the “brilliant people” theme, I'd guarantee there are far more graduates of MIT, Harvard, and other top business schools in GM, Ford, and Chrysler (as a percentage of total employee counts), than there are at Toyota. There's tons of raw brain power, especially at the top of the companies. These top leaders aren't idiots either. They just subscribe to the wrong approach to management…
As in many settings (including hospitals), the problem is the process, not the people. As Henry Ford said, “Workers get along under any management system.” In a bad management system, no number of brilliant people working really hard can lead to success against a superior business system, like Toyota's. Before you blame the people, look at the system. As Dr. Deming always said, the system is top management's responsibility.
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Absolutely right that history doesn’t sign labor contracts.
I remember 25 years ago after the Japanese automakers surged ahead in quality and efficiency and the big 3 automakers preached that they had received their wake-up call and were no longer going to let short term market expectations drive their decision making. Then in the early 90s Detroit was actually on verge of making a substantial challenge to Japanese quality but instead cashed it in on unsustainable labor agreements and hostile supplier negotiations.
Going back the same 25 years and the Korean car company Hyundai had acres and acres of crappy new products rusting in the fields because no one wanted to buy their low quality stuff. Fast forward to 2008 and with the exception of pick-up trucks and full-size SUVs the big three would sell their right arm for Hyundais portfolio of products. What did Hyundai do during the same 25 years that the big three didn’t do? .
I don’t know nearly enough about the UAW contracts and other labor issues that the Detroit 3 have to manage. What I do know is that Detroit doesn’t make enough cars that people want to buy. Period. And that can’t be blamed on the UAW or anyone else.
GM hires more MBAs and more Harvard MBAs each year than any other company in the world.
In North America, Toyota hired its first Ivy League graduates in the late 1990s / early 2000s.
Hardly anyone in Japan has an MBA, much less from a top tier business school.
Draw your own conclusions…
There’s an interesting
commentary
in yesterday’s Detroit Free Press that says what I couldn’t say better.
GM was cocky during its days of dominance, he [Bob Lutz] recalled, and then oblivious to the rise of its rivals. “There was this general lack of awareness of what was going on,” Lutz said of GM in the 1960s and ’70s, “and a general lack of respect towards competition.
“The attitude at General Motors was, if you will, simply a reflection of the attitude of the whole United States, and you could argue that the whole country has since sort of gone into relative decline and we’re forced to rethink our place in the world,” declared Lutz, GM’s vice chairman of global product development.
[…] In other words, GM has been rethinking its place in the world. Wagoner is to unveil the 2010 plug-in electric Chevrolet Volt vehicle design today to make that point.
GM, at 100, is well past its glory days of bigness and bluster. That’s a good thing.
Its future is anything but certain, but the boss still has plenty of fire in the belly.
When I watched GM’s 100 year celebration yesterday, it was a global broadcast, and Chairman Hu was among the guests present in China. You can bet that China is rooting for its home team as they did during the Olympics; here in the U.S., too many people like to kick its home team when its down (down in the U.S., but not in China or most of the regions around the world).
In the interests of full disclosure, I am a GM employee and Mark Graban’s father (and proud of both).