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What Happened to GM?. GM History. 1950’s - Half of all cars in the US. I’m Not Piling On. GM History. 1980 - 853,000 to 284,000 worldwide. 1 st Q 2009 Passenger cars. Toyota 19.4% GM 15% Honda 12.4% Nissan 10.2% Ford 10.0% Hyundai 6.2% Chrysler 5.2% Mazda 3.4% BMW 3.2%
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GM History • 1950’s - Half of all cars in the US
GM History • 1980 - 853,000 to 284,000 worldwide
1st Q 2009Passenger cars • Toyota 19.4% • GM 15% • Honda 12.4% • Nissan 10.2% • Ford 10.0% • Hyundai 6.2% • Chrysler 5.2% • Mazda 3.4% • BMW 3.2% • VW 3.2% • Kia 2.6% • Subaru 2.6% • Volvo 0.8% • Saab 0.2%
JD Power Top 10 Reliability 2004 • Buick145 • Lexus 145 • Cadillac 162 • Mercury 168 • Honda 169 • Toyota 178 • BMW 182 • Lincoln 182 • Subaru 192 • Jaguar 197
Focus On What MattersBMW • “We don’t make automobiles [we make] moving works of art that express the drivers love of quality.”
Honest DesignWorld Cars • Porsche • VW Beetle • Volvo • BMW • Jeep • Benz
Bureaucracy & the Status Quo • Risk taker to Risk avoidance • Cash poor to Cash comfortable • Contribution to Playing favorites • Opportunities to Problems • Marketing & sales to Finance & bean-counting • Momentum to Inertia • Working to Meetings • END
100 • Market Value • 50 • 0 • -50 • -100 • Strategic • Investments • 0% • $ Billion • -150 • -200 • -250 • -300 • 10% • -350 • -400 Market Value versus Cumulated Strategic Investments at General Motors$167 Billion or $332 Billion
Ross Perot on the Subject • From 1980 to 1985 GM spent $45 billion in capital investments but only increased worldwide market share by 1%....... • "For the same amount of money, we could buy Toyota and Nissan outright, instantly increasing market share to 40%.” • Gorilla dust
GM Highlights • Planned obsolescence (lack of real competition) • “No money” in small cars (calculate with certainty) • Fuel economy legislation in 80s (unintended consequence) • Same design centers (status quo and lack of diverse opinion) • Competition between design departments • Competition is the best motivator (beliefs) • Avoid failure • Bring in “paid renegade” • De Lorean fired at GM • Iacocca fired at Ford • Focus on financing cars (avoiding difficult issues)
GM Highlights • Corporate Culture • Car guys and bean counters– no marketing • Stability over conflict • Continuity over disorder • Status quo over change • 50 year old decision making structure • Conformity over rebellion • Caught unprepared at the oil crisis of ‘73 • Robot automation
1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”
1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”
1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”
Sequel: Fuel Cell 9/2006 Due 2010 • “Leapfrog the Japanese” • “A Game Changer”
Volt: Electric Car 12/2006 • “A game changer” • “Beat the Japanese at their own game”
Now • Lost 72 billion in last 4 years – no heads rolled • Bob Lutz to save the day – global product development • Tom Stephens, who runs the company's power-train unit • Carl-Peter Forster London, Germany and Greece BMW, Opel • Market Cap November 2008 • GM = 1.2 Billion • Toyota + Honda = $146.3 Billion
Ask Rick Wagoner why GM isn’t more like Toyota. (69/70) • “We’re playing our own game – taking advantage of our own unique heritage and strengths.”
Critical Thinking In Action Entrepreneur Bureaucrat • Adapt & Change - Status quo and rules • Risk taker - Status quo and rules • Contrarian - Follow the herd • Focus on what matters - Doing my job • Bias toward action - Keep your head down • Customer focus - Internal focus • Problem solver - Problems?? What problems ? • Emphasis on big picture - Doing my job • Start at the end • Spread the wealth - Conserve the wealth • Big pie thinking • Lead with personality - Lead with position & policy • Benefits of conflict - Avoid conflict play politics END
Fighting the Status Quo Easiest Things To Do in Business • Witch hunts • Cut costs • Beat up dealers/suppliers • Have meetings • Protect turf • Avoid mistakes by avoiding action • Random acts of management
Fighting the Status Quo Bad Rules • Rules do not create ethical organizations • Salary limitations • No raises over 10% • Can’t go above pay grade 16 without supervising people • $40,000 commission dispute • The new inventory stickers • Minimum order $100 • Across the board budget cuts • Approve capital purchases • Control vs. incentives
Risk Taking • Total US Stock Market • 1982 value = $1.2 Trillion • Return 1982 to 2007 13.3% • Theoretical 2007 value $28.2 Trillion • Actual value $18.7 Trillion • Lost to market timing $9.5 Trillion • NASDAQ • 9.6% Return 1973 – 2002 • 4.3% Actual average return to NASDAQ investor • Zweig, Jason, Money Magazine, December 2007, page 76
Contrarian • Michael Bloomberg • “Luck is preparation meeting opportunity.” • “To a contrarian like me, constant advice not to do something almost always starts me down the risky unpopular path.”
Focus On What Matters • In 1998 Daimler bought Chrysler for $36 Billion • Nine years later they paid $680 Million for some one to take it
Focus On What MattersBias Toward Action • Daimler concentrated on cost cutting and production • Daimler • Committees, meetings, and binders • Competing kingdoms • Overlapping models • Long lead times • Dealers pitted against Chrysler and each other • Too much cost cutting
Focus On What MattersBias Toward Action • Private equity takes over Chrysler • Private equity concentrated on marketing and quality • CEO reviews cars and barks out orders — no more binders or meetings • 7 days to fix quality problems • Old CEO took a demotion to stay • Attracted talent from Lexus and Toyota • Cut 4th quarter 2007 production by 14% • 100,000 fewer vehicles • $1 billion lost cash flow • 7 minute phone call with the owners
Focus On What MattersBias Toward Action • Private equity takes over Chrysler • Customer focus • Hired “Chief Customer Officer” • Dealer is customer too • Stopped pitting dealer against dealer • Tripled goodwill allowance to dealers • Lexus dealers are the most profitable
Focus on What MattersCreate Value • HR, Internal audit, Purchasing– evaluated by external clients
Lead With Personality • Influence Skills • “It doesn’t matter what you say– it matters how you make people feel.” • Message needs to motivate– change thought and behavior • “Our mission is to unlock shareholder value.” • Cranium: CHIFF, Clever, High-quality, Innovative, Friendly & Fun • BP: “No dry holes.”
Lead With Personality De-motivation • Lou Holtz at Notre Dame, “It’s not my job to motivate my players…” • Should you treat everyone equally?
Conflict Is Underrated • “Where all think alike, no one thinks very much.” • Walter Lipman • Need for diversity • Run off renegades
Applications • Learn to start with the end in mind and work backward to ensure that all efforts are productively applied. • Rage against bureaucracy and the status quo. • Examine decisions and analysis from the contrarian point of view. • Make work fun. • Facilitate creativity. • Ensure a “share the wealth” organizational attitude. • END
ApplicationsJack Welch Bureaucracy Busting • Leader sets the tone • Problems • Processes • Titles • Avoid conflict • Presentations– one-way communication • Unsafe to take a chance
ApplicationsJack Welch Bureaucracy Busting • Be relentless and outrageous • Celebrate impassioned boundaryless people • Love the people who hate meetings • Encourage managers swing for the fences • Create a culture of excitement • END