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

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

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1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Strategic Investments

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10%

Market Value

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.”

Does Bureaucracy Materialize Out of Nowhere?

Critical Thinking In ActionEntrepreneur Bureaucrat1. Adapt & Change - Status quo and rules2. Risk taker - Status quo and rules3. Contrarian - Follow the herd4. Focus on what matters - Doing my job

1. Bias toward action - Keep your head down2. Customer focus - Internal focus3. Problem solver - Problems?? What

problems ?5. Emphasis on big picture - Doing my job

1. Start at the end6. Spread the wealth - Conserve the wealth

1. Big pie thinking7. Lead with personality - Lead with position &

policy8. Benefits of conflict - Avoid conflict play

politicsEND

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

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 MattersBias Toward Action

Focus on What MattersCreate Value

HR, Internal audit, Purchasing– evaluated by external clients

Emphasis on Big Picture

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

Create Wealth vs. Maintain Wealth

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