While Karen De Coster has been talking about this issue for years (1 2), Bloomberg put together a concise primer detailing the hits and misses that culminated into its recent capitulation.
Source link: http://archive.mises.org/9093/what-happened-to-gm/
What happened to GM?
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Good read. It’s amazing how dismissive top brass was to shifting demand preferences. I only wish that the Bloomberg authors talked more about the UAW’s death grip on Detroit. Otherwise it was a well assembled piece.
The sad story of the demise of GM has been available for a few years now for those who have eyes to see. Just google “Porter Stansbury GM”. Mr. Stansbury wrote a series of fake letters from the chairman of GM over a few years to point out the wayward path of GM while many just laughed at him.
Anyone remember Edward Deming? He was one of an army of young men sent to Japan after WWII to teach Japanese manufacturers statistical process control (today called Six Sigma). He stayed longer than anyone else and the Japanese created an award, calling it the Deming Award. It honors companies that best follow his methods.
Deming returned to the US and began teaching at a college. Back in the 80′s, Ford heard about him through a 60-minutes episode and invited him to speak at the company. That began a 10-year career for Deming advising US manufacturers how to immitate Japanese manufacturing. He lasted well into his 90′s doing that. Afterwards, I saw him interviewed on TV and asked if he had helped US manufacturing. He said no. He said the companies would invite him, listen to his advice, pay him his $10,000 fee and go back to business as usual. Everyone wanted the perception of quality without putting in the hard work. I’m pretty sure he advised GM.
Detroit’s problem has always been its corporate culture. They’ve never thought long-term. They almost never look beyond a 3-year horizon. I know a former Chrysler exec who worked in Detroit in the 80s. He said upper management would praise managers for innovative ideas and then tell them they had 3 years to make a profit or they were out. The Bloomberg piece indicates Wagoner was thinking the same way. Many of these problems could have been dealth with years ago if the Big 3 had ever shown an interest long-term thinking.
David Halberstam wrote a whole book, entitled
The Reckoning, on the collapse of the American auto industry. He tells of a Ford analyst, who told a group of Ford vice-presidents, what the Japanese fuel-efficient cars were going to do to them. So they fired him.
There are about to be some more corporate casualties in this ongoing economic crisis. If you have not been paying attention to the economy, then it’s high time you start.
GM’s Problems started with the Nixon price controls, thats when the bean-counters found out you could increase the bottom line by “De-contenting” the cars,IE; taking things off to increase margin. From then on it was a combo of this thinking welded to Wlaa Streete constant mantra of “More and more R.O.I. that destroyed the company.
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