Ironically, the One Thing that GM Got Wrong with Futurama was That There Will Be No GM In the Future (Image Credits: Wired Magazine)
The rise and fall of kingdoms, empires, and cultures provides the hills and valleys that make human history so rich and topographically interesting. When I am bored, I often contemplate what the world would be like without Rome and her successors. For an engineer such as myself, this is clearly a flight of fancy. Any classicist or historian will tell you that it is a logical impossibility. I cannot even fashion a sentence without somehow giving heritage to the Roman Empire and her language. The fact is, though, that Rome reached her apogee a couple of thousand years ago. There is little doubt in my mind that the average Roman citizen, poor though they may have been, believed that they were living in the greatest, most invincible society in the world. It wasn't until several centuries later, when Rome was a shadow of her former glory, that her people could look back and realize how good they had it and how much they had lost in the interim.
On Monday, General Motors declared bankruptcy and the Rome of our time fell. I have written at length in this blog about the cataclysmically stupid and utterly appalling management at Detroit's major automakers. In the wake of Monday, 'I told you so' hardly seems justified from someone of so humble a station as myself. We, as American and global citizens, cannot begin to fathom how the collapse of General Motors will ultimately affect the American and world economies. However, there are several lessons to be learned by burgeoning, multi-national empires out there (Exxon, Apple, Google, I'm looking at you) and for the automotive industry as a whole:
1) Greed kills companies
Companies exist to provide a service. At one point in time, for GM, that meant selling cars. From the post-war years to well into the 1980s, though, GM began to expand into finance. Car companies realized that, rather than simply selling you the car, they could loan you the money and then you would still be paying them years on. It was a brilliant scheme, but it also opened the door to a world that GM had no business entering. Rather than focusing on building cars that people wanted to buy, GM began expending its energy on financial services.
Yes, companies exist to make money. Car companies are, and must, be different. GM's failure is categorical proof that having a management structure that knows little to nothing about the detailed ins and outs of developing a car for market does not work. Selling 'widgets' may be fine at business school; it isn't fine in 'grown-up land.'
It's easy to point fingers at the GM's brass and blame them for the failure, however, there's was not the only sin. A rigid and completely unreasonable union structure also hamstrung GM from restructuring its expenses. To accuse unions of being greedy seems almost like super-fascist right wing claptrap. The fact is, it isn't. The UAW and the AFL-CIO are massively powerful, massively wealthy and influential organizations. They are as much a big business (or big-time interest) as any of the car companies whose workers they represent. Workers out of work are workers that can't pay union dues. It doesn't get any simpler than that.
2) Unwillingness to Change Kills Companies
Neither GM nor its opposites in the unions were willing to wake up and realize that it's 2009 and not 1909. GM believed that because it had once been the world's biggest automaker that it could continue to be the world's biggest automaker (even after Toyota surpassed GM in sales). Meanwhile, the unions stuck to the Gilded Age line that whatever is good for business must be bad for the workers. If GM needs to cut redundant divisions, well that must be bad for the workers. The unwillingness to compromise on perception on either side is what brought GM to the dead end that it has reached. Trouble is, once the company goes into the can, who is going to pay the workers? Where do the workers work when the company sinks?
It is a microcosm of the state of affairs in the United States, and the world as a whole, that people don't want to sacrifice short-term convenience for long-term security or even gain. For example, climate change mitigation strategies require sacrifices now to secure the future. Similarly, the UAW saw GM still as the monolithic, invincible strongman that once defeated the Nazis with sheer manufacturing power, rather than wheezing, arthritic spectre of its former glory that it had become. Neither side blinked; now we have to file the accident report. I won't follow this digression any further.
The ultimate takeaway is that both GM and the unions were living in 'fantasty-land.' If this saga were a teen movie, GM would be clinging to its past glory like the former high-school quarterback star who still shows up on Friday nights to try and recapture some of the magic, the unions were the kids who got bullied and never forgave Joe Quarterback. GM used to be able to tell American consumers what they wanted to drive. Somewhere along the line, Americans realized they had a choice. Rather than responding to demand, GM kept making demands with blinders on to the rest of the market. The best way to miss what's in front of you is to be looking in the rear-view mirror; ironically, GM forgot that.
3) Bankruptcy is not a means to an end, it is an end
The above quote comes from Douglas Fruehling at The Washington Business Journal. It doesn't take an MBA to see the truth of the statement. GM's public image was already heavily tarnished by substandard product. If you've driven a late '80s-early '90s Chevy, GM, Pontiac, or Buick and have felt that ghastly vinyl then you know what I'm talking about. It's no surprise why American stopped buying GM. Now, the company is heading into receivership (however accelerated). However slim, however trim, however sleek GM emerges from this extreme makeover, only diehard 'bow-tie' (e.g. Chevy) men will go back to her. GM is going to have to do things the hard way; she's going to have to come out with a dynamite car that revolutionizes the marketplace. Government is not known for innovation nor radical new solutions. Stodge will beget only stodge.
Postscript:
If you are interested in climate challenge, I highly recommend this free book. I especially recommend it if you are tired of seeing sensational journalism or 'greenwashing' in the media, and what to see a sensible presentation of the facts. It is mathy enough to satisfy scientists and engineers, but accessible to the average reader.
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