100 Days of New GM: Management

[Bravada]

Originally Posted by aldw

If the DuPonts were still controlling GM things might have been better off than what going on now.

That's actually a very wise thing to say!

[MonaroSS]

Originally Posted by vcs2600

Thank you for hammering on this point.

One side-effect of the 'quick bankruptcy' is that many GMI posters (not necessarily MonaroSS) went right back into "business-as-usual" mode of praising GM management strategy and blaming all issues on external forces (Consumer Reports, California, lack of patriotism, etc etc), as if it never happened. Now that GM has recieved a massive capital injection and had their major contentious issues resolved, it's no-excuses time. Either GM management executes, or they don't.

I am no apologist for GM Management, but mgescuro's view is unsupportable. Just one bad CEO and a compliant Board can destroy any company, even if the rest of Management are the best people you can find. To assume that all GM Management have agreed with the CEO is ridiculous. Take right now. Bob Lutz has to bite his tongue because he reports to Fritz, but do you think Bob agrees that large Cadillacs should not have RWD chassis and that something like the Sixteen should not be built? Hell no. But according to mgescuro's theory Fritz should be sacked and Bob also as if Bob replaced Fritz he would continue Fritz' policy of no RWD for large Cadillac’s. Well that's simply BS.

Even years ago I was talking to Bob about GM bankruptcy when Wagoner was denying it could ever be a possibility. Just because the boss thinks one thing does not mean their underlings agree with it, but mgescuro thinks otherwise.

Here's some of what I said on this site in November 2005 and then January 2006...

Think about what I say and remember I was saying it in 2005.

Originally Posted by MonaroSS

GM will go bankrupt; it's already in the works and being paid for right now. It's already past the point of no return. The restructuring costs to fix GM are too high.

However, you don't just let a company as big as GM go bankrupt. It will be too violent for the markets. So you spread the cost over the whole world's financial markets over time via various instruments that act like ‘insurance’, which are loss distribution mechanisms, i.e. the loss is distributed to you and me.

A Conservative government will never use tax dollars to perpetuate such a union structure as at GM. The cost of labour is the single biggest thing that needs restructuring in the US - everyone knows that - so nobody will do anything to prevent the demise of the UAW and it's deals. Bankruptcy will see to that.

But who else suffers in a Bankruptcy, is what the government is really concerned with. The shareholders and the bondholders! You have to let those people have enough warning of the pending doom so that the little old granny investors are shaken out without too much loss. They should be gone or selling out now. But for every seller there is a buyer. The people buying now are the risk takers who can afford the risks and hedge their positions.

In other words, by letting the death of GM as we know it take a year or two to unfold in a very public manner before Bankruptcy, then there should be no one left holding stock or bonds who aren't fully hedged, which means the billions of losses are already covered and have actually been paid for already via millions of small losses in profitability of financial transactions as the hedging instruments move the markets. So millions of ordinary people (you and me) via their life’s investments are paying for the GM bankruptcy as we speak and have been paying for a while.

Isn’t the world a wonderful place?

Just as well there are lots of us to spread the losses over, and still allow those at the top to make even more money.

Start planning for GM II. (Remember I said this in 2005. Should have said New GM )
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Originally Posted by MonaroSS

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I know all the GM fans here want GM to do well and build great cars, but the answer may not lay with better product.

Instinctively many people here have said either that GM is or will soon be building competitive vehicles or that their problems would be over if only they did build better vehicles. I'm sorry to say that such simple notions are somewhat naive. Why? Because GM's problems are 'structural', which means that things they have little control over at this time are sending them under financially.

The biggest problem is this: GM currently loses money (goes deeper into debt) with nearly every car that it sells. So improving product with makeovers that sell more cars, or improving PR so that they sell more, will just send GM into the hole even faster.

What they need to do is to build each car 'cheaper' so that they can make a profit on each sale OR sell each car for 'more money' so they make a profit on each sale. Now some will say that GM can sell each car for more money if they only built better product that people want. Sounds like an easy fix. Except it isn't.

GM needs to increase the price per car by thousands of dollars in order to sell in the black. However, given the price points of the competition, GM could, even if their cars were better than the competition in every way, very easily price themselves out of the market. And that doesn't include the extra cost per car that needs to be recouped for engineering development and product line retooling to improve each car. It's a tricky business to spend money to enhance a product and make more profit than the cost of the enhancement. Ultimately of course that is what GM has to do over 10 to 15 years time in order to compete.

Unfortunately, the human energy and commitment to make a best in class vehicle is so great that you can only do one or two product lines per year, otherwise you are spending too much on engineering and product development staff and resources. And that's what you need avoid to keep costs down. So this fix isn't going to turn GM around in a year or two.

So the other easy fix is to cut costs. The cost of parts from Delphi is one problem as Delphi has similar 'structural' problems to GM that prevent it from lowering its cost of parts manufacture. Abandoning Delphi for cheaper Chinese parts then is a possible solution until you look at GM’s guarantee of indemnity to cover Delphi’s UAW legacy costs. That cost of something like $15 Billion would counteract any cost cutting from cheaper foreign parts.

Another problem is 'over capacity' where there are simply too many people, plant and resources being paid for than is required to make the number of GM cars that the public demands. Here it sounds like the easy thing would be to lay off people and close plants, and that is what GM is doing where it can. But it doesn't work in all cases. These type if fixes are hard to find and take a lot of human effort and commitment to improve productivity. Of course GM needs to do just that over a 10 to 15 year timeline to stay competitive, but again they won't turn GM around in a year or two.

This then leaves us with the UAW, wages, healthcare and legacy costs as a major contributing factor to GM’s structural problems. And these problems can theoretically be changed overnight. However, it would legally require bankruptcy to achieve OR each UAW worker suddenly acquiring the wisdom of a Seer and voluntarily agreeing to the necessary changes. And I just don’t see that happening. Not that blue collar workers don’t have the intellect to understand the problem, but they have been socially conditioned to put their common sense to one side and always believe that management is pulling some fast one to trick them.

So that leaves bankruptcy as the only significant enough structural change available to turn GM around.

[vcs2600]

That was a very insightful take on the situation, Monaro. Great posts. And I apologize if I hit you with the "apologist" brush. (Actually I haven't seen you do that, more commenting on the general tone here).

Originally Posted by MonaroSS

Take right now. Bob Lutz has to bite his tongue because he reports to Fritz, but do you think Bob agrees that large Cadillacs should not have RWD chassis and that something like the Sixteen should not be built? Hell no. But according to mgescuro's theory Fritz should be sacked and Bob also as if Bob replaced Fritz he would continue Fritz' policy of no RWD for large Cadillac’s. Well that's simply BS.

One thing to realize is that Lutz's job as Product Czar is to push for the absolutely best products possible. Or even if they're impossible.

But Lutz is also a good businessman, and if he were personally responsible for profit/loss of these models, we have no idea if he would approve them. He may well think the figures don't add up given GM's financial position and other priorities.

There's a deification of Lutz fitting into this narrative of "Car Guys versus Bean Counters", but I think a lot of that is overblown. In the end he's still an organization man and an executive, and considering he's back at GM after quitting, he must be on-board with the product plan. A lot of MG's frustration simply comes from knowing that GM is in a box and what he thinks they need is simply not possible.